Dave Ramsey: tell me about your experiences

sweetsunnyc

H and I are in a tight financial spot and we are sick of living with so much debt. I had posted a few weeks ago about cashing out a 401k, but have since decided against it. When it comes to paying off debt, I keep being referred to Dave Ramsey and his methods. I know that several ladies on the board have used his methods before and I would like to hear about your success stories. At this point, I feel like out debts are too high to ever pay off and I am feeling a little hopeless. I would like to hear about how it has worked, or Not worked for that matter, for you. TIA!

minirella

First off, I have not been to the Dave Ramsey class; however, my FIL is a big advocate for it, has gone numerous times, and my husband learned some of the methods growing up.

The one thing that we do is the envelope system. We keep envelopes for home taxes & insurance, home maintenance, vehicle maintenance, vehicle insurance, vacation, Christmas, new baby, miscellaneous and others that I'm forgetting. My husband takes $200 out of each paycheck ($400 per month since he is paid biweekly) and divides a set amount of money into each of those envelopes. We take the amount we know we need (for example, vehicle insurance is $700 year and we divide it by 26 and that amount or more (we usually round up) will go into that envelope). Any extra money we get (longevity pay, bonus, income tax return, spending account reimbursements) goes into the envelope system if needed or pay bills before we pocket any.

It has worked great for us. We typically have enough cash to pay for big ticket expenses up front. My vehicle ended up needing $800 worth of body work and we didn't want to go through insurance and we were able to just pay it all in cash using some miscellaneous money we had put away.

That's really all I know and the DR method we use. It has worked for us.

Mustardseed2007

When we first got married DH and I took the online course together - we watched the webinars together and everything. Our church had a class but we didn't go to that.

We paid off a ton of in debt in 18 months and in another year we saved enough to put 30% down on a nice house in a very nice neighborhood. We currently have only our mortgage debt. It was really helpful to us in getting serious about paying off debt and keeping a budget in the mean time.  We did that all before having kids, so it was much easier than

We didn't follow his plan 100% though. We did not get a 15 year mortgage, we did not cancel our credit cards (though we don't use them except for online purchases and we always pay them off immediately after using them).

As I said before, though, our mortgage is our only debt, our mortgage payment is only about 15% of our take home, and we are saving for retirement and saving for our kids colleges. Listening to him was a good motivator, even if I didn't do 100% of what he said.

ETA: We also have a huge emergency fund which is such great peace of mind in case we ever had a job issue. It also encouraged us to get term life insurance, although I'm current under insured and need to fix that....it just helped me learn a little about very important things that I kind of knew were important but didn't know much about. Plus getting rid of the debt. Huge help on that.

mlee116

We started the debt snowball plan in January and its been very successful for us.  Our goal was to focus on things other than the mortgage and my student loan debt, so we listed all of our other debts and started tackling the smaller ones first (you can find out more about this plan on his website).  

We didn't have a ton of debt, but we had a lot of little things that we just couldn't seem to kick and this plan definitely helped us stay focused and disciplined.  Since then, we've paid off: DH's vehicle, a few thousand in medical bills, a new washer/dryer we put on a store credit card and a personal loan. We also saved up a pretty good down payment for a new to us car and built up our e-fund.  

ETA: We did have to take out a small car loan for the new-to-us car, but since its so small, we are able to pay a good bit extra each month and we should have it paid off very early.

Now that we've paid all of those things off, we are trying to build up our savings accounts and retirement funds.  I also hope to tackle my SL debt soon, which luckily I don't have a huge amount left (around $10K).  Although its not always fun to be fiscally responsible, its amazing how good it feels to scratch each debt off our list!

Mustardseed2007

The majority of the debt I paid off was student loan debt. Yeah the interest rate was low, but in our case it was a major payment and a major burden hanging over our heads. I'm so glad it's gone.

2chatter

I found the snowball super motivating.  I had a lot of big debt (like a 10K credit card my exh ran up in my name and I didn't know about....).  I also had misc "little things" like a few K in property taxes (that I thought had been paid), other secret cards, the end of a car note, etc.  I cherry picked the small ones then applied those payments to the big ones and they all disappeared as if by magic.  If you or DH is good with excel you can totally run the numbers over time to see how it will play out.

sweetsunnyc

Thank you everyone- do you all recommend getting the book or doing the online course? And good to know about the student loans and mortgage. Honestly, our mortgage is the only sensible bill that we have at this point and our student loans, car payments and credit cards are out of control.

I appriciate the advice!

mommaoftrips

I am not sure you NEED someone's plan. What it comes down to it - setting-up a spreadsheet. Get your last 6 months worth of expenses (bank statements, credit card statements, all bills) and put it into a spreadsheet.
Put them into categories - fixed expenses (these things you have to pay and have no control over). The luxury stuff - is where you drill-down and really look at your spending. I would assume that most people don't realize how much they eat out.
After, you have done this - come-up with a reasonable and realistic budget and stick to it. Look at how you are doing each week so you can track how much you still have left in your categories.
You might also consider - looking at different credit cards while doing your budgeting - some have 0% for a year - so look at a credit card with the highest interest and transfer the balance over to a 0% but pay this down during that year. Call all your credit cards and ask for your interest rate to be lowered.

You and your husband have to be on the same page, you have to have some frank discussion, that also include long range goals. Good-luck.

IrishTraveler

What Dave does best is motivate people. You don't need to spend a dime to do his Baby Steps. It can all be found online. His Baby Steps work because they give you momentum and a starting point. Being in debt is overwhelming, and if you don't know where to start, most people never will. We've been debt-free except for a mortgage since 2007 thanks to Dave. I won't ever go back to having consumer debt if it's within my power to avoid it. We're saving for retirement, have an emergency fund, and our kids have college funds.

jlaOK

We successfully did Dave Ramsey's plan.  I bought the Total Money Makeover book and listen to his show in the afternoons, but agree that you don't need to buy any of his products to be successful.

The basic premise of his plan is that success in paying off debt is 80% emotions and 20% math.  This is why he wants you to pay off debts smallest to largest so that you get some small victories before tackling the huge mountain.

We were able to pay off $50k in 2 years and @socialmediamommy around $30k of that was student loans.

I am a huge fan of his and believe in his program.  We sacrificed and lived on very little for 2 years but are now 100% debt free and that peace of mind can't be matched.  A huge part of our success was using cash envelopes.  You can't overspend when they money isn't in the envelope.  We still use cash for everything but gas and probably will continue.

lifeinthedreamhouse

You should listen to Dave's radio show. Download the app and you can listen or watch for free. You can also listen to past shows. I love hearing the debt free screams because you hear from real people what their debt was, what their income was and how long it took them to pay it all off. It is so inspiring to hear people with less income and more debt than I have because then I know that if they can do it, so can I.

Mustardseed2007

socialmediamommy said:

Mustardseed2007 said:

The majority of the debt I paid off was student loan debt. Yeah the interest rate was low, but in our case it was a major payment and a major burden hanging over our heads. I'm so glad it's gone.

That's how I feel, so that's good to know. I'll have to look into it more if the plans actually do help with student loans too. 

Yeah Dave Ramsey treats student loan debt the same as other consumer debt.

mae0111

minirella said:

The one thing that we do is the envelope system. We keep envelopes for home taxes & insurance, home maintenance, vehicle maintenance, vehicle insurance, vacation, Christmas, new baby, miscellaneous and others that I'm forgetting. My husband takes $200 out of each paycheck ($400 per month since he is paid biweekly) and divides a set amount of money into each of those envelopes. We take the amount we know we need (for example, vehicle insurance is $700 year and we divide it by 26 and that amount or more (we usually round up) will go into that envelope). Any extra money we get (longevity pay, bonus, income tax return, spending account reimbursements) goes into the envelope system if needed or pay bills before we pocket any.

We don't have much consumer debt at this point (paid off all loans and large CC debt several years back, so just left with a car payment and mortgages), but we use a modified version of the envelope system.  We have a "high interest" (not high anymore) savings account, and it takes us a few days to get the money out, so we're less likely to touch it.  I transfer money to the account, and track it on a spreadsheet with several categories - emergency fund, gifts (birthday and christmas), vacation, kids expenses (camps, lessons, big purchases), new car, taxes and insurance, oil (BIG bills in the cold NE winter), and house repairs/furniture.  I have a set $$ amount for some, percentages for others.  We always pay cash for big ticket items (well, CC to earn points, then pay off immediately), and never run up debt around Christmas. 

sweetsunnyc

Thank you so much for the motivation and positive stories ladies! I downloaded the podcast app last night and listened to Dave, plus I have been on his website a few times. It's great to hear the success stories because our debt, at this point, feels so overwhelming.

A lot of it is emotional too- I feel like we're somehow "poor" if we don't have cable, or go out to eat or have a bigger home. I need to get over it, because my bills are making me miserable.

Thanks again!

banks81

sweetsunnyc said:

Thank you so much for the motivation and positive stories ladies! I downloaded the podcast app last night and listened to Dave, plus I have been on his website a few times. It's great to hear the success stories because our debt, at this point, feels so overwhelming.

A lot of it is emotional too- I feel like we're somehow "poor" if we don't have cable, or go out to eat or have a bigger home. I need to get over it, because my bills are making me miserable.

Thanks again!

If it makes you feel better, I am one of the few of my friends who HAVE cable!  I've found a lot of people are moving towards Netfliex or Hulu or just not watching as much TV in general.  So, unless it's something you really want to have, I wouldn't bat an eye at getting rid of it!

MommaP12

Cable for life.  We love sports and I need my HGTV!

mexicolombiana

So, I'm a bankruptcy lawyer and the Chapter 13 Trustees here in Chicago offer the Dave Ramsey video as a way to complete a required Financial Education Course before you get your discharge, so he's legit.

I will say that if you're good with numbers it's mostly motivation.  It's really not necessary.  Just do a budget, cut out unnecessary expenses and pay off your high interest credit cards first. 

I don't think any debt management seminar will help with my student loans and mortgage debt. I just pay what what I can.  It's a joke to think I can "pay off" my student loans.  I pay the bare minimum under IBR and it'll be forgiven in 20+ years or whatever. 

Also I think some kind of student loan legislation will pass in our life time maybe making student loans dischargeable in bankruptcy or some kind of debt forgiveness plan that will benefit a lot of people. 

KL777

I think what DH and I did when we first got married was a Dave Ramsey technique.  It's called the snowball effect.  We started with the smallest debt and paid that off first, then took that now available payment, and added that amount to the the payment of the next biggest debt.  We kept doing that until the last debt was paid.  I think we did this for almost two years and became debt free minus our mortgage, one car loan, and one student loan.

kikimeemee

I'm a diehard Suze Orman fan and had never heard of Dave Ramsey. Thanks for introducing him to me! I've just started listening to his daily podcast. I'll be using him in addition to my lady, Suze.

Hubby and I are a bit different with our money concerns. Our only debt is our house and we obsess over our 401ks and Roth IRAs. We max out our Roths (every year) and think we will almost max out our 401ks this year but only bc we had a rare guarantee of salary in my hubby's job. I can't get over the feeling that we can never put away enough into retirement just to get by when we are retired some day.

I don't know how to stop worrying about it...

kmh2201

The thought of paying off debt is actually exciting to me.  While I don't follow Dave Ramsey's plan, I do like the concept of snowballing debt.  We're going to pay off DH's car in December with our daycare flex spending reimbursement, and then put that payment amount onto my car loan.  After my car is paid off, we can start applying that money to our mortgage.  DH and I both recently were promoted, so we now have additional money to work on paying down debt and build up our savings.  One savings account I want to build up is a non-IRA savings account.  I don't care if it only accrues $20 in interest each year--at least it won't fluctuate with the stock market.