Has anybody had success paying of debt with Dave Ramsey’s theory? My wife and I finally open and honestly discussed out financial and debt situation. I started listening to the Dave Ramsey podcast, and he seems to have a common sense approach. I was looking to see if people have used his theory with success.
We are not debt-free yet, but we are on the Dave Ramsey plan. We are paying off more of our debt now, with me staying home, than we were when I worked before kids, just from learning how to budget and developing some discipline we didn’t use to have. I don’t worry about having enough money anymore - I know where it all goes. If nothing changes in our situation (no raises and no catastrophes), we’re looking at about four years to being debt-free - which is about four years sooner than we would have been when were were only paying minimum payments. Ours is entirely student loans. I am looking for a few ways to supplement our income further as I’d like to be debt-free by 30.
I am curious to see how people feel once they do pay off the debt. Saving for retirement and for children’s education seems daunting, but we’re not really in a position to do that yet (although my husband has mandatory pension contributions.) I know Dave Ramsey has ideas on that too.
Recently started and I love it. Listen to his show whenever I can. Read his Total Money Makeover book as well if you haven’t already.
I did something pretty similar, its worked. Ultimately its a lifestyle decision. Live below your means. Read the Millionaire Next Door as well. Learn to understand the difference between wealth and income. Most of the folks you think of as rich are simply high income high spenders with little wealth and often plenty of debt. People with actual wealth live well below their income levels, and because of this lifestyle choice which allows them to create wealth it become who they are. They continue this lifestyle even when they have gobs of money.
Yes, my wife and I have been on the plan since around 2008, and have been completely debt-free aside from the house mortgage for several years now. We should have the house owned free and clear within the next year or so. It’s a great feeling of accomplishment and teamwork.
My best advice is to try to listen to Dave every day on the radio if he happens to play in your area of the country, or you can catch his radio show online. I used to listen to Dave when I lived down South every day because he played right around rush hour, and he sure was motivating and keeps you focused on the plan. Once you are debt-free, it’s so much easier to stay out of debt and there are fewer steps to follow.
At our stage, it’s all about paying off the house, building for retirement, and saving for college for the kids. We’ll have at least 25 solid years of saving for retirement with no debt hanging over our heads.
It does take a rather unusual mindset to follow Dave’s program, but it is well worthwhile. His lecture series on CD and his books and radio show will keep you on track if you apply yourself.
My husband and I mostly followed Dave Ramsey’s plan (via FPU) as far as getting our debts paid off and “emergency fund” built up. However, we didn’t go quite as extreme as others on his plan do–for example, except for our anniversary, we ate meals made from scratch at home, but we didn’t eat just rice and beans even once for dinner! Still, over a year and a half, we got rid of our debt, including medical bills, paying for our two (used) vehicles with cash, and paying off our house a full two years early (had a 15-year mortgage). And my husband and I both have life insurance now.
After the house was paid off, we pretty quickly allowed ourselves to fall back into being lazy about budgeting and savings. We actually haven’t done a budget in quite a while… so, even though we still don’t have any debt, after a couple of unexpected expenses and having another child, we don’t really have much in savings anymore, either.
We really should start up again. In our experience, it does work–but you have to keep at it.
We paid off our debt doing the Dave Ramsey debt snowball (probably somewhat over $26k, counting everything–credit card debt, car, student loan, etc.). It felt like it took forever at the time. I think it took about a year to pay off the credit cards, a year or so for the car, and I forget how long for the student loans–probably around 2.5-3 years total. It felt very slow and painful at the time, but it’s long gone now. We sold a lot of little stuff on ebay and Craigslist.
We followed the baby steps, paid off all of our debt, saved an emergency fund, saved a house downpayment (we did get help from in-laws) and bought our house a year ago with over 20% down. I started reading Dave Ramsey and listening in 2006 and we finally bought our first house last year. We are currently on Baby Step 4 (not quite there with the 15%!), and hope to start Baby Step 5 next year. We’ll be fudging a little on this, because my husband’s employer contributes 10% of income to retirement plus a little from us and we’ll be starting the kids’ college without getting to a full 15% going to retirement, but college is coming on very quickly (6 years from now) and we haven’t saved a dime for it yet, so it seems a good idea to at least get a running start on it.
The key to doing the Baby Steps is the monthly budgets, doing a budget meeting with your spouse and doing a fresh budget every month.
We still use credit cards for convenience (which is obviously not the full Ramsey), but pay them off every month.
I hope to be a Financial Peace coordinator in the next year or two.
Another modification (or in other words “wimpification”) of the DR plan that we did is that our house (which is at the outer edge of our comfort level with two kids in private school and a third headed that way in a few years) is on a 20-year mortgage, not a 15-year mortgage. DR recommends the 15-year. The 20-year is still dramatically better than the 30-year and I get warm fuzzy feelings looking at the amortization chart for it.
We’ve been debt-free for so long that it just feels normal.
Don’t worry about the retirement and the kids’ education yet, because you’re not there yet.
As I’ve mentioned elsewhere, I’m kind of dying over the pink carpet (pink everything, actually) in our house, but my husband and I have reached an agreement that starting next year, any funds saved over the $10k a year target for college may be used for home improvements. Problem is, we’ve never saved anything for the kids’ college, so I don’t know if I will collect on that deal this decade, but at least it’s a theoretical possibility. In 6 years, at least we’ll know how the college lottery has worked out for us–if our oldest were to go to school in town, I think I could probably de-pink the house pretty fast.
Regarding college, should definitely explore junior colleges as an option as well as public colleges. Helps even more if the kids continue to live at home while attending college. It should be a goal to graduate the kids from college with as little student loan debt as possible, that could very well be the best gift parents can give their kids. Many people taking on student debt have no idea just how much debt retards family formation down the road.
I’m fortunate, but I know so many who are not and who have not developed the discipline. With discipline, one has a better chance to face the out of their control events in their lives. In my experience, it seems that single women/mothers are more susceptible than men to money issues, but that is not to say there aren’t a lot of men who make financial messes of their own lives.
Although they are also careful to save rather than spend all of what they make, people with actual wealth tend to figure out lines of work that net a higher return than the median income. A very frugal lifestyle on a very modest income rarely makes anyone wealthy. Hetty Green lived like a miser while she took her place among the titans of Wall Street, that is true, but she also started her investment career as an heiress who was bent on leaving her children and her children’s children financially endowed to the greatest extent her toil and wit could provide.
That is not the point, however. The point is to be in a position to eat your own bread and have something left over for charity because you are temperate in how you spend and modest in how you live. That is true for everyone. We have to remember, after all, that the Lord said, “Amen, I say to you, it will be hard for one who is rich to enter the kingdom of heaven. Again I say to you, it is easier for a camel to pass through the eye of a needle than for one who is rich to enter the kingdom of God.” Matt. 19:23-24
Is this because it is wrong to have private possessions or to educate one’s children or to save for one’s old age? No. It is because it is hard to accumulate great wealth without the wealth owning you in the end. If wealth that doesn’t belong to you owns you, and puts you into debt, that is obviously worse, but it is important that we don’t go from being owned by our foolish use of someone else’s wealth to being owned by a overly obsessed or possessive view of our own.
Do not take that to mean that I think anyone here is being self-centered by wanting to be free of the slavery to debt. I mean only that wealth is a subtle lure, particularly to those who have been in bad financial straits, and we all have to be wary of giving it pre-eminence where it ought to be a servant.
It worked well for me.
Granted, my debt was much smaller so it didn’t take nearly as long as it would for other people. I didn’t have credit card debt and my student loan debt was manageable.
I used the snowball technique and was easily able to start with some smaller medical bills and move my way up towards paying back some taxes I owed and, eventually, the larger student loan payments and my car.
My husband and I started our marriage nearly debt-free, with the big exception being our mortgage. We have an emergency fund, savings and are actually talking about our retirement plan and college plan for the kids in greater detail.
Right now we are “poor” college students. I refuse to take out any loans to pay for school. I’m lucky we have grants and the GI Bill.
Once we’re totally done with school we can get better paying jobs (hopefully) and start working hard at paying the mortgage down early and getting very serious about retirement.
I do recommend Dave Ramsey’s program but I think it could be tough to see the light at the end of the tunnel if you have a lot of debt and it would be easy to get bogged down and frustrated.
I think it takes patience and time.
My husband and I have been married for 35 years.
Throughout those years, financial freedom gurus have come and gone in the Christian world. When we were first married, everyone was jumping on the Larry Burkett bandwagon. Then it was the Ron Blue bandwagon. And now it’s the Dave Ramsey bandwagon.
In 1988, my husband and I had been married for 8 years, and we got the family involved in the sport of figure skating.
By 1990, we realized that it was impossible to try to be debt-free and pursue figure skating. So we deliberately climbed off the debt-free bandwagon and have never looked back. We are in debt today and it doesn’t really worry us.
If families followed any of the above gurus, no one except wealthy people would get involved with figure skating. For years, the sport was at least 25% or more of our income, and even today, it’s around 15% of my husband’s income.
This is so out-of-line with any of the “debt free gospel” guidelines. I can just hear Dave Ramsey condemning this. We’re not listening to him.
We simply believe that there are some things in life that are more important than being debt free. Figure skating is one of those things. We will get to the end of our life and probably be poor, but we will have decades of fantastic experiences to remember.
We are frugal with our figure skating budget. When the girls were growing up, they often shared competition dresses. We never bought the videos or photos, and we never bought the skating stuffed animals and jewelry and other doo-dads for sale at competitions. We drove almost everywhere instead of flying (except when the girls travelled overseas as part of Team U.S.A.).
And I would say that the sport paid off for the girls. Both of them coached through college and made much more money (around $35/hour) than they ever would have made working at the dorm cafeterias. And they had friends and a social network at the rinks that made the transition to college and new living locations easier.
My younger daughter has coached since she was 16, and is now 28. She is currently coaching one of the top synchronized skating teams in the United States. It took her and the other coaches 10 years to get the team to this point. What a great journey it’s been! Her goal is to be part of the coaching team that coaches Olympic synchronized skating teams someday. #whynotsynchro
My older daughter is still working on passing all her Ice Dance tests (she has three dances to go), and she earns her ice time (ice costs around $10/hour at most rinks) by coaching. She chooses to get ice, not money, for coaching. She’s a stage manager, and it’s nice for her to have coaching as an additional income, and if the theater world dried up, she could probably get more coaching work for money instead of ice.
Other than the figure skating, we live a pretty simple life. Figure skating families often say, “My new kitchen is down at the skating rink,” and that’s exactly how we have lived over the years–poor at home, moderate at the rink.
We personally do not think that “living debt free” is consistent with pursuing the sport of figure skating (unless you have a very high income, e.g., Gracie Gold’s father is a heart surgeon).
So we don’t listen to Ramsey or follow his teachings. I would challenge him to work with families involved with figure skating–I think he would probably throw up his hands in despair and give up. In his world, ordinary families with ordinary incomes would never get involved with figure skating or any of the activities that cost money (e.g., organ lessons and competitions). But that’s not an option. So I challenge him to come up with an option for regular-income figure skating families and other families who decide that they want to pursue an activity with passion. I don’t think it’s possible
Thank you for all the responses. Finally at 36 we are open and being honest about our finances. We need to pay down the credit card debt, and student loans. It is scary, but we need to change our life. We have spent so much time trying to keep up with the others around us, and seemed to be living for appearance. Debt is my only worry, and the only stress upon our marriage.
I think that if an adult wishes to finance a lifestyle with debt they should be free to do so. As long as financial institutions are willing to give out easy money I can’t begrudge anyone their share. What I think Dave Ramsey points out is that with the money you lose to interest payments and fees you could have the lifestyle you enjoy while not burdening yourself and your family with debt in your old age. And that is what happens often times when you aren’t financially responsible. It isn’t the person who has racked up the debt who most often has to pay the piper; often times it is their children that are left shouldering the responsibility.
And you do have to be really cautious about what the true cost of debt will be to you in your old age. For example my in laws financed their love of gambling, which probably came to 25% of their income, and never took any responsibility for saving for medical or retirement. Now that their health is gone they have to count on strangers for their care. Unfortunately for them they will have a not-so-comfortable retirement in section 8 housing. If they had known the true cost of the debt maybe they would have prioritized differently and delayed their lifestyle by a few years. They could have still had their gambling once they took care of business.
As others have said, it is ultimately a life-style change. As to the technical details of Ramsey’s system, in particular the debt-snowball: you will find people who are critical of it because it does not guaranteed the least expensive way of paying off debt. Technically they are correct, and I have read Dave Ramsey admit to this. However, the system makes a lot of sense from an practical standpoint. It is easy to manage, it builds momentum.
But most importantly, it gives you quick success at the beginning. When one is still struggling with the change in lifestyle, one needs to feel it is working.
It is an excellent approach!!! If you focus on minimizing interest costs, you will end up failing.
I followed all of DR’s baby steps and paid off the mortgage on my home much faster than I ever thought possible. I don’t have children, but I have one modest income, and I saved for my niece and nephews’ college. Thanks to DR, when I became too ill to work for about 6 months followed by another couple years where I was too ill to work full-time, I had plenty of money set aside and frugal habits which allowed me to weather that time with no financial worries. I even finished paying off my mortgage during those 6 months I was bedridden.
I don’t say DR’s plan is the only one to teach you to live within your means, but it is one that worked for me. And I like Dave’s style - he’s blunt and outspoken which appeals to me, but many may find off-putting. Financial stress seems to be a leading cause of stress in marriage and of divorce, so getting your financial life in order seems a wise idea. The Bible also mentions many times that debt is a bad thing, so I think taking the Lord’s financial advice is beneficial.
I pray all who have debts will one day enjoy the freedom of no debt…no credit cards…it’s a good feeling to just have household bills…food…electricity…gas…cable/phone/internet…good luck to all of you:)
Yes–if it’s a lot of debt and a long road (4-5 years), I wouldn’t literally recommend “beans and rice,” as a lot of people won’t make it. But if they have beans and rice occasionally (Fridays for instance) and stay out of restaurants, that’s really good enough.
When we were doing it, at some point I just lost my test for lousy mid-range restaurants of the Applebees type–they’re really expensive for what you get.
Oh, and some things just need to be sold if they are not worth 2-4 years of self-denial to keep.