Thanks Dave!

[DisneyCrafter]

While I haven't "adopted" all of Dave Ramsey's theories I have put into practice his Debt Snowball and I'm proud to say that because of it, we have 3 of our 5 debts paid off! It really does put you in the right mind set to accomplish it! I've added a second job and DH found a better paying job, so we're getting it done!

What has Dave done for you?!

Oh and I'm implementing the envelope system beginning this budget period (it starts today). I get paid in cash for one of my jobs and I want to put money away for vacations but it's so easy just to swipe that Debit card, now I'm hoping I'll be able to talk myself out of a lot of impulse purchases because the extra $$ can go towards traveling!

 

[mrudman]

We start doing a modified DR about 18 months ago...

At that time, I started an envelope system, which is still going strong (cannot tell you how much I LOVE it, wish I had started years ago).

I always dreaded getting the mail, because we'd get those huge bills (house insurance, car insurance, etc).. and always had to scrounge for the money.

Following the envelope system, we now put money into about 12 different envelopes each month... including the insurance mentioned above, trash, nursing license, car licenses, christmas fund, vacation fund, etc, etc.... just divided the bill by 12, so when the time comes for the bill to arrive in the mail, the money is sitting there.

Then any leftover money from the basic monthly bills, and also filling the envelopes, is our money to spend until the next paycheck.. and once it's gone, it's gone.

We also now have a 2k emergency fund set up, that is such a relief.. first time we've ever had an actual savings account.

Plus, we had bought a camper in July of 2009 (about 3 months before we started his system).. and I wanted to get it paid off as quickly as possible.

So, on top of what we were doing above, I was putting as much extra as I could each pay toward the Visa, and proud to say that I paid off a 14k camper in 19 months this past February,

Now that money we were putting toward the camper is going toward DH's car we bought this past Fall, and hoping to have that paid off in 11 months.

Then we'll be debt free other than our house,

 

[Gr8t Fan]

We, too, have beed following a modified DR plan and have only 10 more mortgage payments to go and we'll be 100% debt free!!!!!!!!!!!

After that we'll do some home remodeling that we've been putting off and DH will finally get to fix his 1964 Ford Galaxie. We figure 6-8 months of living high on the hog (although our frugal selves will probably win over and it will be more like 3-4 months), and then we need to redirect the excess to our IRA's and start stockpiling some more $$ for college for our oldest DD, who will be a sophomore in HS. She will be followed into college 3 years later by our 2nd DD, two yeas later by our 3rd DD and 7 years later by our DS.

 

[2disneyboys]

We also are Dave followers..while I don't agree w/ ALL of his principals, He has helped change our life and lives of many members of our church.

We are 36 years old, debt free except for our house, have 4 months of our EF built up (goal is to have 1 year), have continued our 401k / IRA deposits etc and are well on our way to a nice retirement! We plan to have our house paid off in the next 4 years (that will be 10 years early!) and then we can focus funds towards our boys' college expenses..(my oldest will be 11 this year) I wish I had discovered him (dave) back in our 20's, however, I don't know that I would have been receptive then.. I think people (some, not all!) have to make some "wrong choices" and live with the consequences, before they can see the value in some of the info that Dave and other financial planners have out there.

we have talked up his program and other programs I have read up on to other family memebers who just hem haw around about it.. our response is fine.. in a few years when we are in our early 40's w/ a paid off house and well on our way to a nice real retirement, I don't want to hear any "must be nice" type comments cuz you had access to the same info we did!

Edited to add... congrats to you all for the hard work in getting where you are now... it takes dedication, but the "temporary pain" is worth the permenant peace!!!

 

[DisneyCrafter]

I love reading your success stories! I'm 24 and DH is 27, and I'm so happy that I decided to look into budgeting or else I would have never found Dave!

mrudman, the first two times we got the car insurance bills in the mail, I wasn't prepared. In fact, when the house insurance bill came along, I was in tears b/c our loan officer screwed up and that money was supposed to be included in our escrow but he never did the paperwork! That is really when I said ENOUGH and began budgeting. While I don't have an envelope set up for that, I do have a sub-savings account on our checking and every month, a set amount goes into it and when BOTH the car and home insurance bills came in the mail last month, we'd pay both in full with no problems! I also started putting in an extra $35/month for our oil changes. Now, no worrying about coming up with $100 every 3 months for 2 oil changes, it's already taken care of!

We have just over 1K in our EF and our ultimate goal is 6 months of income. Right now, we put $300/month into it.

DH has been putting away a percentage of his income into retirement as soon as he began work after college and we already have a nice amount between the mutual fund and a roth ira. Yesterday, I was listening to 2 ladies at work tell me that they take the money from their retirement funds for things such as windows, their daughters' wedding, a granddaughters' prom, etc. It's sad to hear, especially since they are both pretty close to the age of retirement.

Gr8t Fan and 2disneyboys, how amazing that you will both have your houses paid off in the near future! As soon as we get the 2 remaining CC's paid off, we're tackling my student loans! With over 50K, it's definitely disheartening but I know that if we work hard (and pray, a lot!) we can make that number shrink quickly.

It's easy to feel overwhelmed at times, especially because of my student loans and the fact that both of our cars are getting close to the end of their run. It's encouraging to know that we are working towards something and even if it takes something like paying off another debt this month to give us motivation-so be it!

The biggest DR theory that we DON'T follow is not vacationing until you're debt free. What about everybody else?

 

[2disneyboys]

I love reading your success stories! I'm 24 and DH is 27, and I'm so happy that I decided to look into budgeting or else I would have never found Dave!
(snippped for space)
The biggest DR theory that we DON'T follow is not vacationing until you're debt free. What about everybody else?

Well, I can say we have vacationed while we had debt, but we vacationed "appropiately" The vacation I would take today (I mean last week as we just got back from WDW!) is a little more extravagant than one I took last year as last year we had small credit card debt left, and this year, thats done and we are chipping away at the mortgage.

The biggest DR theory that we don't follow is the theory that once you have enough cash, you don't need credit. I think this ideal of his is a little outdated. I don't mean that you "have" to have credit card debt or anything like that, but you do NEED to make sure you have decent credit SCORES, as that impacts lots of aspects of your life (cost of your auto & home insurance, some people's jobs, etc) so I don't agree w the ideal that you never "need" credit.. you just never need to carry "debt".

I also think Dave can be a bit "extreme" and while DH& I were not in a bad financial place (our biggest mistake honestly, was "wasting" extra money each month AFTER all the bills were paid rather than making some or most of that "extra" money work for us...), I could see how someone who was in a terrible financial situation would have to take his ideals to the letter and to the extreme in order to have a hope of recovery and financial freedom.

It sounds like you have come into his teachings @ a good time in your life and I think it' just awesome of the future you are going to be able to build by working together with your eyes on your future, not just on today!

 

[Gr8t Fan]

It's easy to feel overwhelmed at times, especially because of my student loans and the fact that both of our cars are getting close to the end of their run. It's encouraging to know that we are working towards something and even if it takes something like paying off another debt this month to give us motivation-so be it!

The biggest DR theory that we DON'T follow is not vacationing until you're debt free. What about everybody else?

We vacation every year too, definitely something we refuse to give up unless we absolutely have to. In fact, I promised our kids that we could stay at a deluxe resort at WDW once our mortgage is paid off, but I priced it out and I simply can't do it. They're very nice, but not worth the price difference to me and thankfully our kids agree. We're going to spend the extra on something that we haven't done yet, probably Discovery Cove.

It's normal to feel overwhelmed at times, and even to fall off the wagon here and there, but stay the course and soon you'll be 100% debt free too. In fact, you've got a great headstart considering you're in your early 20's. You know how the old saying goes, "if I knew then what I know now". Suffice it to say that DH and I would have been 100% debt free a LONG time ago if we'd taken our finances seriously in our 20's.

 

[bumbershoot]

Congrats!


We're modified as well. We were doing it full-bore, but we had bought (financed) DVC just before finding DR, and chose to not sell it. Since we have it, we're using it. Therefore, we're traveling still.

But travel is hugely important for me and DH; we didn't do any vacation-type travel from Oct '09 until Dec '10, and we were going a tad bit insane...DH travels for work, but when he's working he's working, not sight-seeing...so even though he gets to travel, it's possible he was even MORE frustrated than I was, because he was being tempted by cool sights that he just couldn't go see.

After this trip in September, though, we're buckling back down on paying off DVC. It's been embarrassing to enter in the minimal principal payments for it to whatsthecost.com and to watch our estimated payment date get a month away each month (I'd started the estimation with a snowball of our car payment (now paid off 2 years early, thanks Dave) the absolute extra I made sure to pay on the car, and some extra, so we are supposed to be putting quite a bit towards DVC and we just aren't). So as soon as we get through all this (it isn't just vacation we're saving for, but DH is taking classes online, and there are other things cropping up) it's back to the grindstone!

What's amazing is that it's actually my husband who is chomping at the bit to get back to paying off DVC (our only debt). He was loving watching the balances come down (when we also had car, etc), and that is extremely different from who he was just 2 years ago....

 

[tweedlemom]

Congrats!
We are debt free, except for the mortgage. Feels good!

 

[Jeff_G]

so I don't agree w the ideal that you never "need" credit.. you just never need to carry "debt".

So other then using a credit card and paying it off every month what situation would you need credit and not be going into debt?

Dave showed me how easy it will be to pay off the mortgage in a few years.

After reading his book a l realized a $0 balance credit card with a high limit is NOT a substitute for an emergency fund!

I tell my money what to do from now on, rather then find out what it did on its own…

 

[bumbershoot]

I tell my money what to do from now on, rather then find out what it did on its own…

Dangit, I knew I was missing something from my response. That has been THE biggest benefit we've gotten from DR. Knowing how to do this.

 

[DawnM]

Well, we started a DR type program (Crown Financial) 5 years ago. Here is what we have done in those 5 years:

1. Paid off student loans and car loans.
2. Paid cash for all purchases since.
3. Moved our 30 year mortgage to a 15
4. Saved over 6 months in our Emergency Fund
5. Started a college fund for the kids
6. Have several sinking funds going (computer replacement, car replacement)


We have done all of the above while still going on vacation every year to Disney. That was something I would NOT give up.

However, we do Disney on the cheap, far cheaper than most on this board would feel comfortable with. The last few years we have not been as cheap, but we plan to get that way again. We budget $1,500 for a full DIsney week, including gas/transportation, dog sitting, and food. We get SkyAuction condos off site, eat most of our own food, and get homeschool YES tickets. We still love going to Disney, even on the cheap!

Dawn

 

[gatormom2tots]

Love his program!!!!!

Like most, we do a modified program.

We do still take a vacation (just got back from a rather large and expensive one) BUT the difference is we paid it in cash. First time ever....

Feels good knowing we are no longer reliant on cc for "emergencies". I don't think we have used them in almost a year.

 

[HHSTigerFan]

Dave showed me how easy it will be to pay off the mortgage in a few years.

And others will show you how foolish it is to pay off your mortgage early...

 

[Jeff_G]

And others will show you how foolish it is to pay off your mortgage early...

Go ahead and give your arguments for your side, this is going to be fun...

 

[HHSTigerFan]

Go ahead and give your arguments for your side, this is going to be fun...

4.5% mortgage (with possible tax deductions) vs investing the cash in a market thats returns 8%... I realize Dave doesn't like to use math much, but hard to ignore.

 

[Jeff_G]

4.5% mortgage (with possible tax deductions) vs investing the cash in a market thats returns 8%... I realize Dave doesn't like to use math much, but hard to ignore.

Perhaps you should read his book then you would understand the system, paying off your mortgage is the second to LAST step in his plan AFTER you are already investing 15% of your income for retirement. On top of that most people are able to pay off the mortgage within a few years of reaching this step. For me it will take a total of 2 ½ years to get rid of the 30 year mortgage, not the end of the world as far as investing timelines. In that 2 1/2 years many investments would not reach the 8% mark (5 to 10 years is really required) however I will be saving 80k to 100k in interest.

As far as tax deductions go you are paying a bank interest to avoid sending a much smaller amount to the IRS?? Example if you have 10,000 of deductible mortgage interest and you are in the 25% tax bracket you save 2,500 off of your taxes. So you are giving a bank 10,000 to avoid sending the IRS 2,500? If you want to continue to get the 2,500 deduction just make a 10,000 charitable donation.

The biggest thing the math is not able to take into account is risk. With a paid off house I will have almost no risk should I lose my job, I will not have to worry about losing my house which is a very real risk these days.

Once you have no debt including your mortgage you will have your entire income to invest. Having already maxing out my 401k and Roth IRAs it only makes sense to eliminate the last remaining debt the mortgage.

Also take the time to calculate what is your 8% investment going to be worth after taxes and inflation? You will always need a house to live in…

 

[HHSTigerFan]

As far as tax deductions go you are paying a bank interest to avoid sending a much smaller amount to the IRS?? Example if you have 10,000 of deductible mortgage interest and you are in the 25% tax bracket you save 2,500 off of your taxes. So you are giving a bank 10,000 to avoid sending the IRS 2,500? If you want to continue to get the 2,500 deduction just make a 10,000 charitable donation.

I read the book, got nothing out of it other than "pay off credit card debt", didn't need to read a book to figure that out..

And just awful math in your example above, the tax deduction is further reducing the cost of borrowing cheap money.. So rather than the real cost of borrowing being 4.5%, it might be 4.25%... how many 5 year periods of time in the history of the S&P 500 has the market failed to return 4.5%? Doesn't Dave like to toss around the 8% figure when trying to talk about expected rate of return when investing? Borrow money at 4.5% and invest at 8% is a bad thing?

 

[fbb]

The biggest thing the math is not able to take into account is risk. With a paid off house I will have almost no risk should I lose my job, I will not have to worry about losing my house which is a very real risk these days.

Once you have no debt including your mortgage you will have your entire income to invest. Having already maxing out my 401k and Roth IRAs it only makes sense to eliminate the last remaining debt the mortgage.

Also take the time to calculate what is your 8% investment going to be worth after taxes and inflation? You will always need a house to live in…

Good post.

Why not invest what you would pay extra on the principal, just in case worst case scenario happens and you lose the house anyway after already making great progress towards paying it off?

 

[Gr8t Fan]

I understand the arguments on both sides, but for us, no amount of tax deductions and/or investment income will equal the feeling of having a 100% paid off house!