Dave Ramsey/Snowball

[edk35]

I told my brother about Dave Ramsey. I have not read his book but I do watch him on tv. occasionally. He has seen him on t.v. he said a few times. Then I sent him information people have posted on Dis. about it. and some older posts I searched to kind of explain it. HOWEVER.....I am not sure myself since I have never used his program. We tend to pay off our credit cards within a month or so if we can't pay it off that month. Of course we do have a mortgage and two vehicle loans... so maybe we should.

OKAY...so let me see if I have this right. He has a savings so the emergency fund is taken care of. HOWEVER his live in girlfriend of many years doesn't work anymore due to health issues so he has credit card debt. Long story. He is NOT behind in payments but he feels he is GETTING NO where fast. I kinda explained the snowball and he too had researched that a bit online.

So my brother will list his debts in order of least amt. owed to most owed. RIGHT?!! Then he pays more on the smaller debt and pays min. on the other 4 right??? He has already asked me about the changing min. payments each month. Now this is where I wasn't sure what to tell him. Your min. payments change each month as you pay down your balance or if you charge more onto your balance then of course the min. goes up. SO...say he pays min. plus 100 more on lowest amt. of debt card and then min. on the other 4 what happens the next month when those 4 min. balances change and go down?? Even if they are just a few dollars difference does.... he pay THOSE MIN. AMTS. or the original amt. that he paid the previous month?? Does that make sense?? OR does he total up the difference in the min. amt. totals he paid last month and add that to the smaller debt that he paying 100 over the min. payment each month? I hope this makes sense??? THANKS. Oh I did tell him to GET HIS BOOK TOO.

 

[scribega]

The way I do it is to pay the same amount for the non-snowball cards. So if my min amount on a card is $25 than I pay $25 this month and next month even if the min goes down to $24. This way it is just easier to keep track each month:
Card 1 - $100 (snowball)
Card 2 - $25
Card 3 - $35
Card 4 - $45

This is a good spreadsheet to see how long it will take to get paid off by doing the snowball.

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

 

[Caitsmama]

Have him get the book - or buy it as a gift for him. It will help with the process.. but you are basically right.

 

[edk35]

Have him get the book - or buy it as a gift for him. It will help with the process.. but you are basically right.

GOOD IDEA

 

[PrincessBelle09]

I would definitely suggest he buy The Total Money Makeover. It will help with the process and can clear up any questions he might have. It is also loaded with great success stories of average people and couples/families living on one income paying off huge amounts of debt in a relatively short time by buckling down and sticking to a budget. It could really help with your brother's motivation and allow him to that if he seriously cuts back to up his payments, it is possible to get rid of those payments.

Is his emergency fund over $1,000? Dave suggests that when trying to get out of debt, $1,000 is all that should be put aside for emergencies and everything else should go to paying off the debt as quickly as possible. Once the debt is paid off, then the extra money that was going towards the debts gets put in the bank until the three to six months living expenses emergency account is fully funded.

As for the minimum payments, I believe (someone correct me if I'm wrong) that he should continue paying whatever the current minimum is. Of course, the minimum should not be going up because once you start the debt snowball, those cards needs to be cut up. The main difference of Dave's plan is that he focusing on changing the heart and behavioral problems that cause us to spend more than we make because of the "I want it now" mentality and therefore build up debt and not prepare for life's little disasters and our future.

Obviously, I am on the Ramsey plan and absolutely love it. Good luck to your brother and I highly recommend picking up a copy of the book for yourself as well.

 

[lovesmurfs]

The way I do it is to pay the same amount for the non-snowball cards. So if my min amount on a card is $25 than I pay $25 this month and next month even if the min goes down to $24. This way it is just easier to keep track each month:
Card 1 - $100 (snowball)
Card 2 - $25
Card 3 - $35
Card 4 - $45

This is a good spreadsheet to see how long it will take to get paid off by doing the snowball.

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

Giving your example, I would just pay minimums on 2-3-4 and put the extra $ on Card 1. If Card 2 goes down to $24 next month, I pay $24 to Card 2 and $101 to Card 1.

I'd definitely recommend getting him the book. I have it on CD (iPod), read by Dave, and it's really great to hear it in Dave's voice.

 

[edk35]

I would definitely suggest he buy The Total Money Makeover. It will help with the process and can clear up any questions he might have. It is also loaded with great success stories of average people and couples/families living on one income paying off huge amounts of debt in a relatively short time by buckling down and sticking to a budget. It could really help with your brother's motivation and allow him to that if he seriously cuts back to up his payments, it is possible to get rid of those payments.

Is his emergency fund over $1,000? Dave suggests that when trying to get out of debt, $1,000 is all that should be put aside for emergencies and everything else should go to paying off the debt as quickly as possible. Once the debt is paid off, then the extra money that was going towards the debts gets put in the bank until the three to six months living expenses emergency account is fully funded.


As for the minimum payments, I believe (someone correct me if I'm wrong) that he should continue paying whatever the current minimum is. Of course, the minimum should not be going up because once you start the debt snowball, those cards needs to be cut up. The main difference of Dave's plan is that he focusing on changing the heart and behavioral problems that cause us to spend more than we make because of the "I want it now" mentality and therefore build up debt and not prepare for life's little disasters and our future.

Obviously, I am on the Ramsey plan and absolutely love it. Good luck to your brother and I highly recommend picking up a copy of the book for yourself as well.

He has well over 1000 in the emergency fund. That is what bugs him..he has money he can apply to the debt. but he says it makes him nervous not having money in savings. I think he needs THE ENTIRE PROGRAM.

Well they have also decided to get married sooner than later so girlfriend can get on his health insurance. That is what kinda started this mess.... the medical bills. SO there is a A LOT happening right now.

 

[bumbershoot]

I highly recommend that he spends some time on the livinglikenooneelse.com message board (you can just type llnoe.com). Real people using the system.

Also, daveramsey.com has lots of free content, articles and such, to check out.


Biggest part will be to STOP using those cards entirely. And also developing a household budget.

Not sure what I would do in a situation where the minimum payments would change, but I have found that when something is eliminated from my monthly budget, I will apply it to the snowball instead of just finding other uses for it. Like I had an "envelope" for clothing for each of us, but later realized that I'd rather just slow the snowball and buy clothes with that, instead of having to wait for the envelope when DH or DS needed some clothes NOW...or last year I was paying car/renter insurance AND saving so that I could pay car/renter insurance 6/12 month premiums in one fell swoop, and once that was done, I had that second bit of money freed up. So now I include the bit towards DH's clothing and that extra 70 towards the snowball.

So I imagine I would just see the amount I was putting towards the debt in the first month (all minimums plus what I could towards the first debt), and just keep on paying the same in total, even as the minimums fell...but I'd probably put those extra dollars towards the first debt in line. Probably what I would do.


llnoe.com, free content on daveramsey.com....both served me better than Total Money Makeover (which I checked out from the library), but I'm glad I did read it anyway.

 

[PiperPizzaz]

It is VERY nerve wracking to take savings down to $1000 but, if you are serious about getting out of debt you will do it. What made me feel better was we did still have access to our credit cards so if something did happen it could just go on there. Does that make sense?
I recommend getting Total Money Makeover. You can probably get it from the library.

 

[edk35]

I have forwarded this to him. He said the hard part will be to RELEASE THAT SAVINGS ACCT. I won't put how much he has in there.. but it is over 7000. He is NOT behind in bills at all, but it seems something always comes up and he is not where he thought he would be I guess. So all the information is in his hands now. THANKS SO MUCH for the help.

 

[PrincessBelle09]

I think that what really helped me start wanting to put any and all extra money towards debt and not keeping it in the bank was the thought that, because of the debt, whatever money I have is not really mine. I actually owe that much and then some to credit card companies and student loan lenders. The debt is still putting my cash assets in a negative balance. Putting it in those terms is super motivating and might help your brother with letting go of the extra savings.

I also suggest signing up for something like mint.com, a free online personal money management tool from Intuit. It allows the user to add in all online banking and credit accounts and will automatically tally that total cash worth, or lack there of. Checking that balance every day is a good "gazelle intensity" booster.