Dave Ramsey question

[kacaju]

I am getting so excited about being *debt free* except the house that I feel like I overlooked something.

The Orthodontist!!

We owe (after I pay them tomorrow) $2200.
I make monthly payments of $150. I have been doing this for what seems like forever since this is for dd#2. I made the last payment on dd #1 a little over a year ago and the very next month I had to start paying for dd#2.

As I said I pay monthly and I do not get charged interest on it.

So.... once I pay of the last cc, do I quickly pay this off, or should I declare ourselves *Debt Free* and work on building up the emergency fund??

Since we first were paying for dd#1 and now dd#2 this is just in my budget as a monthly expense.
Thanks...

 

[kaismahma]

IMO I would start the emergency fund if you have not done so and pay a little extra on the ortho bill. After you have a at least one full month of your emergency fun funded then focus on the remaining ortho bill. When the ortho bill is paid in full go back to building more of an emergency fund. Best of luck! It is a good feeling.

 

[stitchlovestink]

okay, first let me say that I am somewhat familiar with Dave Ramsey and some of his principles, but I have not read his books or done his program. But for me, what does not make sense is why would one prepay a bill that is interest free when you can put the money into your emergency fund and actually earn interest on it. I know that the rates are very low, but you still are getting paid something on the extra money you are putting into the acct. Are you going to get any benefit for prepaying the orthodontist's bill except the possible satisfaction of knowing that it is paid in full? For some, I'm sure that would be reason enough, and they are not wrong. But for me, I'd rather make the interest on that extra money than to pay it off in full with no tangible financial benefit.
Maybe a good compromise might be to add an extra 50% to your payments so instead of paying $150 a month, pay $225. That would be the equivalent of making an extra payment every other month. Then take an additional money (over the $75 extra your putting towards the ortho bill) and put that into your emergency fund. Kinda the best of both? Just a thought....
Good Luck w/ your decision, I'm sure you'll make the right one for you!

 

[PinkRhombus]

okay But for me, what does not make sense is why would one prepay a bill that is interest free when you can put the money into your emergency fund and actually earn interest on it.

Our basic savings account (which is what you need your emergency fund in because you have to be able to access it immediately and without penalty) has had an average balance between 5K-7K the last couple of years.

In 2008 we made $2.90 in interest
In 2009 we have, so far, made TWENTY-SIX CENTS


Pay off the bill.

 

[javamoma]

We are debt free via the Dave Ramsey plan and I can tell you it is awesome! I would make sure you have 1 month's salary in savings and then pay off the bill. I would also change my saving account to a higher interst one like ING. We earned $680 in interest last year. That's a lot more than a typical back and it's still a totally liquid account.

 

[MinnieNurse]

I am not very familiar with Dave Ramsey but would love to learn more. I did look at the website, but was not sure what you need to start the program. Any advice would be appreciated.

 

[TnTWalter]

Pay it off....the $250 per month soon x 2 that you're paying whether 0% or whatever is still money out instead of into savings...get 'er done.

Congrats on working so hard!

Dreading my turn with the Ortho....hoping we'll get a pay cash upfront discount...you never know!



His baby steps are listed on his website...

http://www.daveramsey.com/etc/cms/baby_steps_2867.htmlc

 

[gilby]

Order the total money make over and read it. It sure got me motivated. I have paid off all but 2 CC's and one loan since reading the book in march. We think twice on purchases and ask each other What would Dave Ramsey say if we want a purchase an item. We are selling item on ebay and using that toward on cc. Boy its an eye opener. You don't need a cc to survive a debit card does the same thing only difference it you pay for the item upfront and no interest.
Good luck. I listen to him several times a week when I need to boost when I feel frustrated.

 

[secretpantssam]

I agree with putting some of the extra money in an ING account and just paying more to the bill. This way you're doing both at the same time. It's still not going to take you long to pay off your ortho bill, but you can earn a few bucks with the bank account while you do it!

 

[Chicago526]

It's probably six of one and half dozen of the other. I don't think there is a "wrong" answer here. Do what feels best to you. Given the economy, I'd probably put it in savings and pay the minimum on the ortho since it's interest free, myself. Once you send the money to Ortho, you can't get it back. But if you save it, you have it for a rainey day.

But if paying it off makes you feel better, then that's what you should do. Just be sure to save that $150 payment once it's paid off, so you build your savings faster.

 

[Praying Colonel]

I am getting so excited about being *debt free* except the house that I feel like I overlooked something.

The Orthodontist!!

We owe (after I pay them tomorrow) $2200.
I make monthly payments of $150. I have been doing this for what seems like forever since this is for dd#2. I made the last payment on dd #1 a little over a year ago and the very next month I had to start paying for dd#2.

As I said I pay monthly and I do not get charged interest on it.

So.... once I pay of the last cc, do I quickly pay this off, or should I declare ourselves *Debt Free* and work on building up the emergency fund??

Since we first were paying for dd#1 and now dd#2 this is just in my budget as a monthly expense.
Thanks...

I believe Dave would say that you're not debt-free until you've paid all debts, and even an interest-free debt is a debt. So you should pay off the ortho and then start the next baby step.

 

[HeyIt'sMe]

I believe Dave would say that you're not debt-free until you've paid all debts, and even an interest-free debt is a debt. So you should pay off the ortho and then start the next baby step.

Yep. In his Total Money Makeover book when he talks about listing all your debts (besides the mortgage) he says list everything you owe --- even if you owe your Mom money!

 

[wall*e2008]

I would keep making the payment for the simple reason that the orthodontist still has a reason to complete the treatment. If you pay him off and then he goes bankrupt, you would still need to get the treatment completed.

 

[sylvenmaid]

It depends on how much you can throw at it monthly to make it go away. Can you pay it off in say 2-3 months? Then I would just pay it off and then start your emergency fund. That's just me. It feels great that when bills do come up then we have the cash to pay them in full right then and there. We have to work on getting our emergency fund back up again. We had to spend a little over $2K on different repairs in the last 2 months. It was just one thing after another. It was great not having to stress about how we are going to pay for them.

 

[kittychatalot]

My hubby and I did FPU at our Church and it changed our life! ( if you are following Dave's method...) What you need to do is list all your debts from smallest to largest, including and home equity lines of credit and mortgage. these are all debts. then attack them smallest to largest. it does not matter what the interest rates are, attack smallest to largest. when you pay off a debt roll that payment in to the next highest debt payment so by the end you are really attacking that debt!
Good luck!

 

[christyhud]

You might check with your ortho and see if you could get a discount if you paid the remainder early. I know we got a discount by paying it all up front - don't know if they would do it now part way through treatment but it never hurts to ask.