Dave Ramsey Questions

[JDUCKY]

So one SHOULD be penalized for being far more financially responsible than those who take out interest loans to allow someone ELSE to get rich?

No, I still think it is flawed.

Dawn

A credit score is not a right, it's a privilege and it's managed by those companies who take the risks. If someone wants to pay cash for everything and not worry about maintaining their credit file, then there's no reason for a company to assume they're a safe risk.

 

[DawnM]

Yes, however, if the person has had a good job and decent income for over 10 years and has not used a CC I would say they are a good person to take a risk on!

I do plan to "play the game" and keep a cc even if I don't need it and use it for small purchases, and I hope to never need credit for large purchases again, but I have 3 kids heading to college and may indeed need it in the future.

But again, this isn't something I need to worry about at the moment. We still have 14 years left on our house loan. We hope to move and get a house we can pay off ASAP, but that will depend on our ability to sell this house and in this market, who knows?????

Dawn

A credit score is not a right, it's a privilege and it's managed by those companies who take the risks. If someone wants to pay cash for everything and not worry about maintaining their credit file, then there's no reason for a company to assume they're a safe risk.

 

[tlbwriter]

I don't agree with FICO being used to determine is fiscally responsible as shuffling loan and credit card balances is not an accurate predictor of trustworthiness and good judgement.

It would be interesting to see an actual study on this. Apparently employers are assuming that people who are irresponsible or use poor judgment with money are more likely to be irresponsible or use poor judgment in other areas, are more likely to embezzle or skim, more likely to have issues that keep them away from work or distract them on the job, etc. But is that true, or is it a stereotype? I mean, it could easily work the other way - the person who is barely hanging on by their fingernails may be the one who never misses a day of work because they're terrified of losing their job, and who volunteers for overtime because they really need the money...

Anyway. I agree with the person above who said it's very easy for DR to claim you don't need a credit score. Self-employed millionaires can get along just fine without a credit score. Average working people, not so much.

 

[JDUCKY]

Yes, however, if the person has had a good job and decent income for over 10 years and has not used a CC I would say they are a good person to take a risk on!

That's very easy to say from our own viewpoint but to some bank or lending institution that doesn't know you from the next person and is putting up potentially thousands and thousand of dollars, they want to see proof of the ability to repay a loan or maintain a revolving credit account.

It's just business.

I do plan to "play the game" and keep a cc even if I don't need it and use it for small purchases, and I hope to never need credit for large purchases again, but I have 3 kids heading to college and may indeed need it in the future.

But again, this isn't something I need to worry about at the moment. We still have 14 years left on our house loan. We hope to move and get a house we can pay off ASAP, but that will depend on our ability to sell this house and in this market, who knows?????

Dawn

Good luck with that! Just stage it as best you can. Makes a big difference in this day and age!

We're paying an extra $100/mo. toward the principal and will also add an extra full payment against the principal each year. Should knock a good 7-10 years off the loan and save a ton in interest.

 

[bored]

Partial DR follower here. Owe nothing but mortgage and won't in the future if I don't have to. I do still have my disney visa and use it for everything to get the rewards points. Have never paid a dime of interest and won't. If I don't have cash in the account the credit card doesn't come out. Have over $500 in disney points for my Jan. trip. I use credits cards the proper way so Dave and I disagree on that one.

 

[padawans]

Partial DR follower here. Owe nothing but mortgage and won't in the future if I don't have to. I do still have my disney visa and use it for everything to get the rewards points. Have never paid a dime of interest and won't. If I don't have cash in the account the credit card doesn't come out. Have over $500 in disney points for my Jan. trip. I use credits cards the proper way so Dave and I disagree on that one.

Yes I am like you I have 3 credit cards that I use for everything and I do mean everything. I set limits just like I would if I was paying cash. I plan on using my rewards to pay for most of christmas presents. I moniter my accounts and pay them off every 2-4 weeks. Contrary to what Dave Ramsey thinks there are actually people in this world that know how to use credit cards responsibly.

 

[DawnM]

Yeah. We have sold 3 other houses so far and done fairly well in the past. We thought this would be an easy cosmetic fixer in a nice area. But we didn't plan on the market being a big issue.

Unfortunately, this one is the most expensive we have ever bought. We will probably take a loss if we want to sell no matter how much staging we do.

We can't afford extra payments per year right now, with DH's pay cut and loss of bonus money, but we do have a 4.37% interest on a 15 year loan that we refied last year from a 30 year loan at 5.5%, so essentially we are already paying a lot more and saving tons of interest.

Dawn

Good luck with that! Just stage it as best you can. Makes a big difference in this day and age!

We're paying an extra $100/mo. toward the principal and will also add an extra full payment against the principal each year. Should knock a good 7-10 years off the loan and save a ton in interest.

 

[AmberHeartsDisney]

We are 100% debt free but i DO use my disney visa card and we only buy what we have CASH for. I use the card to get $ for Disney. but we always pay it off at the end of the month or weekly. Not everyone has the self control to do that.

 

[NJDisney]

Does DR have a website?

I have watched his call in show a few times and find it interesting. It is tough to write everything down but I guess this is the first painful before it gets better.

 

[DawnM]

Did you have a mortgage? How long did it take you to pay it off?

Dawn

We are 100% debt free but i DO use my disney visa card and we only buy what we have CASH for. I use the card to get $ for Disney. but we always pay it off at the end of the month or weekly. Not everyone has the self control to do that.

 

[999ghostslover]

great thread!
As you can see from my PTR title I am a big Dave fan. I am loving his podcasts right now. Great motivation. We have paid down a lot of debt this year. I am due to get a big chunk of an inheritance this Christmas and 100% of it will go toward snowball. My husband and I will be car payment free for the first time in 11 years (our whole adult lives). Once you get that snowball rolling it is amazing. I can't wait to scream I'm Debt Free. I plan to do it from the deck of the Disney Dream sometime in 2012.

 

[Tink-aholic]

Does DR have a website?

I have watched his call in show a few times and find it interesting. It is tough to write everything down but I guess this is the first painful before it gets better.

DR does have a website (daveramsey.com), but I enjoy the site already mentioned on this thread (livinglikenooneelse.com or llnoe.com). Lots of people in every stage of the program over there, posting their real budgets and what works for them. No judgments there, because most people there have been there.

Good luck.

 

[NJDisney]

thanks. I certainly will check these sites out. I would love to really look into this but my time is limited so it makes it tough

 

[amylynne01]

Your emergency fund is for emergencies not mortgages or car loans. You should have a line item in your budget for saving for your next car and for home improvements. Your emergency fund should be for things like covering your deductibles if you are in an accident or a tree falls on your house, not for buying your next car or for remodeling your bathroom. The main reason for having an emergency fund is to cover basic expenses in case of a job loss, disability, or medical emergency.

But shouldn't your emergency fund cover mortgages and car payments if you lose a job or become unable to work? A place to live is necessary, and I know for me that moving out and selling is not an option. The price of my house is below what I owe (a lovely gift from the falling house market), so I literally have no choice but to continue to pay or foreclose. My thought is that my EF should cover all necessary monthly expenses including mortgage, food, electric, insurance, etc - things like cable, cell phones, new clothes, haircuts, etc would go out the window. Then if something happens where I need to pay a deductible, I can use my EF and replace the money used.

 

[999ghostslover]

But shouldn't your emergency fund cover mortgages and car payments if you lose a job or become unable to work? A place to live is necessary, and I know for me that moving out and selling is not an option. The price of my house is below what I owe (a lovely gift from the falling house market), so I literally have no choice but to continue to pay or foreclose. My thought is that my EF should cover all necessary monthly expenses including mortgage, food, electric, insurance, etc - things like cable, cell phones, new clothes, haircuts, etc would go out the window. Then if something happens where I need to pay a deductible, I can use my EF and replace the money used.

Absolutely, there are two parts to the emergency fund. The first is the $1000 in the bank. That is to cover a deductible, a major bill, an immediate emergency. You should work at gazelle intensity to get that part of it funded. Then snowball the debt. Sell stuff, get a second job, do it as quick as possible, then you get 3-6 months of expenses saved up (you already have that first $1000). That is a fully-funded emergency fund. It is not fully funded until you complete that part (baby step 3).
Suze Orman used to be very like Dave but after all of the craziness in the last 24 months she now says that you should fully fund your emergency fund first. Both plans have merit and both have down sides. You can always call or email Dave about your specifics. Since you are upside down in your mortgage he would probably still tell you to do the debt before the fully-funded emergency fund. But you may not like his reasons (because you could move and the bank would approve a short-sale). Good luck!

 

[amylynne01]

Absolutely, there are two parts to the emergency fund. The first is the $1000 in the bank. That is to cover a deductible, a major bill, an immediate emergency. You should work at gazelle intensity to get that part of it funded. Then snowball the debt. Sell stuff, get a second job, do it as quick as possible, then you get 3-6 months of expenses saved up (you already have that first $1000). That is a fully-funded emergency fund. It is not fully funded until you complete that part (baby step 3).
Suze Orman used to be very like Dave but after all of the craziness in the last 24 months she now says that you should fully fund your emergency fund first. Both plans have merit and both have down sides. You can always call or email Dave about your specifics. Since you are upside down in your mortgage he would probably still tell you to do the debt before the fully-funded emergency fund. But you may not like his reasons (because you could move and the bank would approve a short-sale). Good luck!

Got ya. We have the initial EF of $2000 (DH was not happy with only $1000). We're working on debt right now. If we ABSOLUTELY had to, we could sell our house, but we would need money to actually close (at least $10,000), so that's where we'd be stuck. We're certainly not in danger of foreclosure, just not making headway in any direction.

We talked about funding our EF first or paying off debt first. We decided that paying off debt was more important since we are paying interest on that money that we've borrowed. But we're going to double our EF once we pay off our cc and 1 student loan - DH feels "naked" without the support of an EF.

 

[999ghostslover]

Got ya. We have the initial EF of $2000 (DH was not happy with only $1000). We're working on debt right now. If we ABSOLUTELY had to, we could sell our house, but we would need money to actually close (at least $10,000), so that's where we'd be stuck. We're certainly not in danger of foreclosure, just not making headway in any direction.

We talked about funding our EF first or paying off debt first. We decided that paying off debt was more important since we are paying interest on that money that we've borrowed. But we're going to double our EF once we pay off our cc and 1 student loan - DH feels "naked" without the support of an EF.

No doubt. It is a very humbling feeling. We backed out of employee stock plan and that made us feel very naked. We just use it as motivation to get to baby step 4.