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Any Dave Ramsey followers out there? I picked up his new book, The Total Money Makeover, and so far it's been a great read.



ramseesforever


http://www.brownmoose.com
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Any Dave Ramsey followers out there? I picked up his new book, The Total Money Makeover, and so far it's been a great read.

I agree with most of Dave Ramsey's philosophies and methods. I tend to blur the lines between his 7 steps, and bump a couple of them up. Overall, though, it's one of the best books about reigning in your finances and taking control.

-Agg97
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If I recall correctly he mentions nothing about a freedom account during the debt payoff period.

I remember him saying to build efund up to 1,000 and then start slaying the debt.

Any truth to this?

Safe who stands corrected.
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If I recall correctly he mentions nothing about a freedom account during the debt payoff period.

I remember him saying to build efund up to 1,000 and then start slaying the debt.

Any truth to this?


Pretty close. He has never said "freedom account" because I don't think he thinks it is a necessity. He talks about eating "rice and beans and beans and rice" so sacrifice is very important. You are not "free" until you are out of debt. I did not have a freedom account when getting out of debt. I just knew that if I took money from the snowball for whatever reason that it would slow delay my progress of getting out of debt.

About the e-fund, that's what he says, but some people misunderstand it to mean that you don't pay on your minimums until you have the $1,000 e-fund and that's wrong.

Fred
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The office that I work at is a Dave Ramsey Endorsed Local Provider. Obviously I think well of his philosophy.
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I also thought it was a excellent read. But, I have serious problems with his snowball method. Killing the lowest amount of debt regardless of interest rate would cost a fortune in finance charges over time compared to the snowballing the highest interest rate.
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You forget about the psychological portion of paying something off though. It is a quick win...that sustains someone and lets them know that yes...I can do it.

It is not more expensive if the person feels better about where they are going and follow through. Eating away at larger bills may cost less, but there is no "rush" or victory had by that. Many people need the boost of paying something off early to sustain any momentum.
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Another reason to consider paying off a small CC debt first is to (hopefully) get better BT offers and more Yeses to requests for lower rates.
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This is an very close to my situation when I started with TMF in march.

Card 1 $6000 at 2.99$ minimum payment $120
Card 2 $22,000 at 8.9% minimum payment $440

Total CC payments I could make at the time was $800

Using Dave Ramsey method in snowball calculator I get.

Start $28000
Snow $240
41 Months
Total payment $32,409 card 1 would be paided off in 8 month

Using call it Suze orman method.

Start $28000
Snow $240
40 Months
Total payment $31,809 card 2 would be paided off in 38 months

Ramsey method would cost me $600 in the long run but I would have a minidance 30 months earlier and one more month until total CC debt free dance.

What am I doing. I went with TMF Method.

Broke up Card 1 and Card 2 with as many BTs at 0% as I could find. Used both suze, daves and TMF to find $1550 a month for CC payments eating a lot of soup. Now Thankfully all the CCs are at 0% so I pay only minimums on all my 3 cards now and putting the rest of the monthly CC payments in a ING account. I have $2500 in there now this will grow to over 7K by end of years. So instead of paying finance charges I will be making around $15 a month in interest and no finance charges no 40 or 41 month. 13 months sounds better

I whole heartedly agree with Ramsey's energy on killing debt I am a fan but I am also a fan of Suze (what is it with those eyes?) Orman and mostly TMF. Dave snowball method for me is too costly and comparing it to what I have learned on TMF its down right expensive if you still have a strong FICO sore for BTs.
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I am NOT in the Dave Ramsey "camp"... My brother is helping others and he had the materials. Having heard of him, I took a look at them.

I guess the envelopes are something anyone can understand, but I find them too restrictive, almost like a childhood allowance.

I am much more in line with Suze Orman. An example would be to invest in a company 401k program up to the match, to take advantage of the 50% or more return from the match. The snowballing approach Suze recommends is in line with that of TMF as well, that you pay off the highest debt first.

The only reasons I see for paying off a smaller debt (with higher APR) first:
1. You'll get a quick success, like in 6 months to a year max.
2. You're in a situation with poor cash flow, and getting rid of the payment will help with cash flow.
3. You can't keep track of the bills and find yourself paying bills late.

- Lan
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I guess the envelopes are something anyone can understand, but I find them too restrictive, almost like a childhood allowance.

The envelopes are just part of budgeting. You don't have to use them but its a technique to enforce your budget, which helps you free up cash (by spending only what you plan) to tackle debt. Budgeting is a big part of the Ramsey technique, and often overlooked.

The only reasons I see for paying off a smaller debt (with higher APR) first:
1. You'll get a quick success, like in 6 months to a year max.
2. You're in a situation with poor cash flow, and getting rid of the payment will help with cash flow.
3. You can't keep track of the bills and find yourself paying bills late.


These are right on. For someone who is out of control with money getting that quick success early helps them keep going. Ramsey makes a big point that these recommendations are behavorial in nature (particularly #1) not the cheapest way to go.

I am much more in line with Suze Orman. An example would be to invest in a company 401k program up to the match, to take advantage of the 50% or more return from the match. The snowballing approach Suze recommends is in line with that of TMF as well, that you pay off the highest debt first.

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Trying again with the tags in the correct place.

I guess the envelopes are something anyone can understand, but I find them too restrictive, almost like a childhood allowance.

The envelopes are just part of budgeting. You don't have to use them but its a technique to enforce your budget, which helps you free up cash (by spending only what you plan) to tackle debt. Budgeting is a big part of the Ramsey technique, and often overlooked.

The only reasons I see for paying off a smaller debt (with higher APR) first:
1. You'll get a quick success, like in 6 months to a year max.
2. You're in a situation with poor cash flow, and getting rid of the payment will help with cash flow.
3. You can't keep track of the bills and find yourself paying bills late.


These are right on. For someone who is out of control with money getting that quick success early helps them keep going. Ramsey makes a big point that these recommendations are behavorial in nature (particularly #1) not the cheapest way to go. He's all about cash flow :)

Joe
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If Dave Ramsey is so damned stupid to put himself $180,000 in debt, why in hell would I care about how he got out of it?
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