anyone use the Dave Ramsey method??

[Debbie]

What are these envelopes that some of you posters are speaking of?

Well, I don't know anything about Dave Ramsey but what I have seen here. When I was a little girl....many decades ago....my Mom and Dad had a grey box. In that grey box were envelopes marked: groceries, gas, utilities, clothing etc. When Dad brought home the paycheck, the envelopes got filled. When the bills came in, the envelopes got emptied. When there was no money, there was nothing to spend.

I use Quicken to budget, and I pretty much "envelope" my bills.

I don't know if DR's advice is similar to Dave Bach's Automatic Millionaire, but the key is to pay yourself first. ie retirement doesn't wait.

We have a show up here in Canada called "'Till Debt Do U$ Part" with Gail Vaz-Oxlade Gail doesn't use envelopes, she uses jars. Same principle. When the money is gone, there is nothing to spend.

BTW, I do envelopes when I go to Disney. $100 a day, marked say-Monday, Tuesday,.....Saturday. Each day I take out the money. When the money is gone, there is no money to spend. If there is money left over, it goes in the next day's envelope.

 

[Leshaface]

Well, I don't know anything about Dave Ramsey but what I have seen here. When I was a little girl....many decades ago....my Mom and Dad had a grey box. In that grey box were envelopes marked: groceries, gas, utilities, clothing etc. When Dad brought home the paycheck, the envelopes got filled. When the bills came in, the envelopes got emptied. When there was no money, there was nothing to spend.

I use Quicken to budget, and I pretty much "envelope" my bills.

I don't know if DR's advice is similar to Dave Bach's Automatic Millionaire, but the key is to pay yourself first. ie retirement doesn't wait.

We have a show up here in Canada called "'Till Debt Do U$ Part" with Gail Vaz-Oxlade Gail doesn't use envelopes, she uses jars. Same principle. When the money is gone, there is nothing to spend.

BTW, I do envelopes when I go to Disney. $100 a day, marked say-Monday, Tuesday,.....Saturday. Each day I take out the money. When the money is gone, there is no money to spend. If there is money left over, it goes in the next day's envelope.

Thanks for replying!

That's a great way to divide your money among different areas. Whenever I charge things, I don't ACTUALLY see what I'm spending, but if you're using the envelope method, this allows you to see where you're money's exactly going!

 

[minnie1928]

I got the Total book from the library just to see what everyone is raving about. Some of it doesn't work for me- I definitely spend more when I have cash. Like I carried very little cash in Disney to reduce impulse purchases. I knew if I bought us sodas on credittoo many times, I'd see it on Mint and regret it later. Once the cash is gone, I don't get that same feedback, it's easier to just blow it, kwim?

I'm totally the same way...I put my spending money in cash and I run through that fairly quick. But, other expenses go on my credit card (I budget $x per month to various categories, so I already have the money when I make the purchase) and those are more painful transactions.

I also don't agree with paying off the house before retirement/college. I live in a very high cost of living area. Realistically, we won't be able to do it. However, I can invest money for retirement/college and let that appreciate. I understand the whole "don't pay interest on the house thing" but the accountant in me is wondering why I would payoff a loan with an after tax interest rate of about 3.5% when I could invest the money and get a much better return. Saving for retirement also reduces my taxable income, so there's that to factor in too.

 

[Miss SD]

Dave doesn't say to pay off the house before saving for retirement/college. He says to put away 15% of your income toward retirement, then start saving for college. (I haven't heard him be that specific about college savings.) Any money left above and beyond that should be used to pay off the house.

I live in a costly area, too, and I disagree with his saying to take out a 15-year mortgage that doesn't eat up more than 25 percent of your take-home pay. That's not realistic here. I can see how that works for most people where houses are $200,000 or so. That's not the case here, even in the current real estate market.

 

[donalduck]

Dave doesn't say to pay off the house before saving for retirement/college. He says to put away 15% of your income toward retirement, then start saving for college. (I haven't heard him be that specific about college savings.) Any money left above and beyond that should be used to pay off the house.

I live in a costly area, too, and I disagree with his saying to take out a 15-year mortgage that doesn't eat up more than 25 percent of your take-home pay. That's not realistic here. I can see how that works for most people where houses are $200,000 or so. That's not the case here, even in the current real estate market.

Move out of California that state is going under anyway.

 

[donalduck]

If listening = mocking then yes I am......

I like you ICF.

 

[Balt ravens fan]

We're Debt Freeeee "Freedom!" .. (just a little qoute for all you Ramsey fans)

anyway ... saving for College is before house in his plan .. Here are the steps from his web site:

Baby Step 1
$1,000 to start an Emergency Fund
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen. Learn more

Baby Step 2
Pay off all debt using the Debt Snowball
List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first. Learn more

Baby Step 3
3 to 6 months of expenses in savings
Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund. Learn more

Baby Step 4
Invest 15% of household income into Roth IRAs and pre-tax retirement
When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth. Learn more

Baby Step 5
College funding for children
By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now. Learn more

Baby Step 6
Pay off home early
Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments. Learn more

Baby Step 7
Build wealth and give!
It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It's really the only way to live! Learn more


We are on Steps 5 and 6 Can't wait for Step 7!

 

[thistle922]

We have a show up here in Canada called "'Till Debt Do U$ Part" with Gail Vaz-Oxlade Gail doesn't use envelopes, she uses jars. Same principle. When the money is gone, there is nothing to spend.

They show that here in the US, on CNBC...I freaking LOVE Gail! She's awesome. We DVR it every week.

 

[bettymae1121]

I do wish he'd up his baby emergency fund amount. $1k doesn't cover a whole lot anymore. For a single person it's probably fine, but for a couple or a family, I personally feel that more in the emergency fund is a good idea. I know the idea is to start paying of debt ASAP and the more you need in your emergency fund, the longer it takes to start, but it doesn't do you any good if a $1.5k or $2k bill comes a long and not only wipes out your fund but forces you to put the rest on one of those dreaded CCs. I say save up a bit more first, and THEN go full tilt boogie on the debt snow ball.

Speaking of the snow ball and the debate over smallest balance vs. highest rate first. While purely on the numbers, it makes more sense to pay the highest rate first, if paying a few small balances the first few months gives a person the confidence and positive feed back to keep going on the debt pay down, then in the long run the person is better off. We're talking about changing bad habits and human behavior, sometimes number crunching needs to take a back seat to get the job done. Besides, if it bugs a person that much, they can always just modify their own plan and just pay the higher interest first. It's not not DR is going to show up at your front door one day and slap your hands!

 

[Miss SD]

Move out of California that state is going under anyway.

Making friends and influencing people.

 

[dizkids]

We're Debt Freeeee "Freedom!" .. (just a little qoute for all you Ramsey fans)

anyway ... saving for College is before house in his plan .. Here are the steps from his web site:

Baby Step 1
$1,000 to start an Emergency Fund
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen. Learn more

Baby Step 2
Pay off all debt using the Debt Snowball
List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first. Learn more

Baby Step 3
3 to 6 months of expenses in savings
Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund. Learn more

Baby Step 4
Invest 15% of household income into Roth IRAs and pre-tax retirement
When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth. Learn more

Baby Step 5
College funding for children
By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now. Learn more

Baby Step 6
Pay off home early
Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments. Learn more

Baby Step 7
Build wealth and give!
It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It's really the only way to live! Learn more


We are on Steps 5 and 6 Can't wait for Step 7!

Interested here as well. Are these steps on the website as well as a book and if so which book? Thanks!

 

[Caitsmama]

Yes, they are on his site -- i saw them yesterday.

I also found the podcast, and listened on my way to work today, and will listen to the rest of it on my way home.. i enjoyed it.

 

[Leshaface]

Question about Step 5...what if you won't be saving for a college fund? What would you put that money towards then? Your retirement or mortgage?

 

[bas71873]

OK, so I have a few questions about DR's "baby steps". BTW, I am going to check out his book this week at the library so I can get my head wrapped around this before I decide if it's right for our family or not. See my ?'s w/in your quote (in bold) and I hope someone can answer for me

Along with my questions below, am I supposed to forgo any and all "saving" until after all debt is paid off? I don't know that I'm comfortable with that. As you can see, we already have an emergency fund, and living expenses, and we do contribute to IRA's and DD's college fund. I'm not sure I could stop those.

Also, am I suppose to cut out all activities? Examples, DD's dance and swim lessons?

I realize the whole point is belt tightening, but no one has spoke on DR's take on "entertainment" and anything other than paying living expenses and paying off debt?

TIA for any clarification I can get!

We're Debt Freeeee "Freedom!" .. (just a little qoute for all you Ramsey fans)

anyway ... saving for College is before house in his plan .. Here are the steps from his web site:

Baby Step 1 - We have this covered (and a little more). My ? is, do you keep this in a totally seperate account? $1,000 to start an Emergency Fund
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen. Learn more

Baby Step 2 - Sounds simple enough, although we really don't have any debt other than the house, 1 car and a 0% interest loan for the new flooring we put in the foreclosure we bought last summer (30 months to go on that).Pay off all debt using the Debt Snowball
List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first. Learn more

Baby Step 3 - Again, we have this covered already 3 to 6 months of expenses in savings
Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund. Learn more

Baby Step 4 - We do invest in IRA's, but not the full 15% right now. Plus, I didn't think you could invest 15% in IRA's? I thought it was capped at around $5/6K a year??? I love to know otherwise if I'm missing something here.Invest 15% of household income into Roth IRAs and pre-tax retirement
When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth. Learn more

Baby Step 5 - We have a 529 set up for DD6 and put $$ in that automatically each month. She also has a basic savings account that $$ goes into each month.College funding for children
By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now. Learn more

Baby Step 6 - That would be so nice wouldn't it. Only 29 years to go Pay off home early
Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments. Learn more

Baby Step 7 - Again, a goal to have.Build wealth and give!
It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It's really the only way to live! Learn more


We are on Steps 5 and 6 Can't wait for Step 7!

 

[donalduck]

Hey bas71873 I quess you could make a entertainment category. I never did. I never wanted to spend any money on entertainment because I wanted to pay off my credit cards fast as I could. The whole thing what Dave saids is Live like no one else so later you CAN LIVE LIKE NO ONE ELSE. He is right. Now because I paid the price to win and paid off all of my credit cards I don't care how much I spend on entertainment or anything else. I never worry about it anymore because I AM DEBT FREEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

 

[mimicat]

Absolutely - actually listening to him as I write. Two more car payments and will be debt free except for mortgage using his method. It works if you are motivated.....rice and beans....beans and rice. Give it a try.

 

[donalduck]

Yep I am glad I am not that only one here that thinks CASH IS KING. congratulations on almost being DEBT FREEEEEEEEEEEEEEEEEEEEEEE

Absolutely - actually listening to him as I write. Two more car payments and will be debt free except for mortgage using his method. It works if you are motivated.....rice and beans....beans and rice. Give it a try.

 

[bas71873]

Hey bas71873 I quess you could make a entertainment category. I never did. I never wanted to spend any money on entertainment because I wanted to pay off my credit cards fast as I could. The whole thing what Dave saids is Live like no one else so later you CAN LIVE LIKE NO ONE ELSE. He is right. Now because I paid the price to win and paid off all of my credit cards I don't care how much I spend on entertainment or anything else. I never worry about it anymore because I AM DEBT FREEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

OK. I get that. But I don't want to deprive my daughter of her dance lessons. Just not something I'm willing to give up. And it's already budgeted for in my day to day budget anyway. I have been tracking ALL of my spending this month so that I can actually see where my discrestionary spending is and work on that. I've done really good this month, but there are areas for improvement.

But as to my other questions, with regard to my accounts that I have already set up for IRAs, 529, etc. Does DR suggest NOT contributing to those at all until all debt is paid for? Again, just don't know if I can go that far???

I need to go check out that book

 

[ICF]

Yep I am glad I am not that only one here that thinks CASH IS KING. congratulations on almost being DEBT FREEEEEEEEEEEEEEEEEEEEEEE

I have no debt except my mortgage either and we know my feelings on your evil CC's!

 

[minnie1928]

But as to my other questions, with regard to my accounts that I have already set up for IRAs, 529, etc. Does DR suggest NOT contributing to those at all until all debt is paid for? Again, just don't know if I can go that far??

And that's one of the reasons some people do what they call a "modified Dave Ramsey". They find the pieces that they are comfortable with and use those.

While we were paying off our debts, I continued to invest in my 401k in order to get my employer match. I didn't think I should let free money sit on the table, so I modified my plan to work for me. I also use credit cards to earn rewards (please don't flame me donaldduck...we already agreed to disagree on this), but I pay them off every month. I think the important thing is to find a plan that you can stick with...if it's too harsh, you won't want to stick with it.