Debt help

lacofdfireman

Lil-Rokslider
Joined
Dec 22, 2016
Messages
101
Location
St. George, UT
Beans and Rice, Beans and Rice. The only time you should see the inside of a restaurant is if you are working there. Dave Ramsey quotes. I did the Dave Ramsey program. I had $180k in consumer debt. I was living the good life. Nice cars, RV, Boat etc. Then I decided that I was tired of living paycheck to paycheck. To get rid of the $180k in debt I had to reprioritize my life. Sold my house in 2019 and used the equity to pay off a large chunk $70k off of my debt. Sold the RV and got out from my partnership from my boat. The other 2 partners I had in the boat bought me out. The house equity, RV and boat being sold took me down to $60k in debt. I worked all the OT I could handle and in a year we were debt free. So now I am 100% debt free and don’t own a house. Selling in 2019 has literally lost us about $400k in equity in our home as we’ve been renting ever since we sold. Super depressing but we’ve been saving for another house. Currently just short of $100k in the bank with zero debt and make it no problem between paychecks. So much less stress now besides looking back and wondering why we sold our house. We sold it to get our debt snowball in motion because we were literally living paycheck to paycheck and had we not we might still be in huge debt so in a way I’m glad we did it but it’s also hard to realize you sold your home at the absolute worst time. But I could have never predicted the housing market doing what it did.

Just do the Dave Ramsey plan. Best debt program out there in my opinion.


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lacofdfireman

Lil-Rokslider
Joined
Dec 22, 2016
Messages
101
Location
St. George, UT
I've listened to a few Dave Ramsey radio shows but never followed his program.

I'll say this, if he recommends paying off small debts with low interest rates prior to bigger debts with high interest rates, I disagree with him.

First step, ditch car payments if you dont need em and pay the maximum amount you can towards credit cards where the interest is killing you. If you can transfer credit card debt to something that has a period of no or low interest, I'd definitely do that.

Why would disagree with paying off the low interest rate smaller amount of debt first. Dave’s reasoning is 100% correct. Always pay off your smallest debt first regardless of the interest rate. It’s all about the snowball. A snowball starts off small and grows. If you owe $15k on a Car at 5% and $3k on a medical bill at 4% why would you pay off your car first. The theory is you pay off your medical bill that was coming you $200 per month then once it’s paid off put your $200 a month towards your next highest debt. Your car in this case.

Just wondering why you disagree?


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TxxAgg

WKR
Joined
Dec 27, 2019
Messages
1,999
Why would disagree with paying off the low interest rate smaller amount of debt first. Dave’s reasoning is 100% correct. Always pay off your smallest debt first regardless of the interest rate. It’s all about the snowball. A snowball starts off small and grows. If you owe $15k on a Car at 5% and $3k on a medical bill at 4% why would you pay off your car first. The theory is you pay off your medical bill that was coming you $200 per month then once it’s paid off put your $200 a month towards your next highest debt. Your car in this case.

Just wondering why you disagree?


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It's just math.
 

EastMT

WKR
Joined
Dec 19, 2016
Messages
2,872
Location
Eastern Montana
It's just math.

Yes the % is easy math, but they aren’t playing math. They are playing psychology and the fact that a huge percentage will give up starting with the largest. Starting with the smallest hence baby steps is about changing your debt lifestyle and mentality.

Paying off a $500 bill that’s been hanging on is encouraging, motivating, by the the time you get to the big one you want more, feeds the hunger.

Your math is correct, but it’s not about math, it’s about % success after decades of studying the process that wins the most.
 

TxxAgg

WKR
Joined
Dec 27, 2019
Messages
1,999
Yes the % is easy math, but they aren’t playing math. They are playing psychology and the fact that a huge percentage will give up starting with the largest. Starting with the smallest hence baby steps is about changing your debt lifestyle and mentality.

Paying off a $500 bill that’s been hanging on is encouraging, motivating, by the the time you get to the big one you want more, feeds the hunger.

Your math is correct, but it’s not about math, it’s about % success after decades of studying the process that wins the most.
I know that. I just answered the question he asked.
 

ixous

FNG
Joined
Apr 12, 2021
Messages
12
Another vote here for Dave Ramsey. It’s a common sense plan that works, but only if you’re “all in”.


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Joined
Dec 30, 2014
Messages
8,184
Why would disagree with paying off the low interest rate smaller amount of debt first. Dave’s reasoning is 100% correct. Always pay off your smallest debt first regardless of the interest rate. It’s all about the snowball. A snowball starts off small and grows. If you owe $15k on a Car at 5% and $3k on a medical bill at 4% why would you pay off your car first. The theory is you pay off your medical bill that was coming you $200 per month then once it’s paid off put your $200 a month towards your next highest debt. Your car in this case.

Just wondering why you disagree?


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It was covered already but it’s basic math. The “snowball” theory is to help people psychologically stick with it but by not paying the highest interest first it ends up costing you more in the long run.

I’d rather do some math and take the route that costs the least and pays it off first.
 

BLEE

FNG
Joined
Jan 15, 2021
Messages
21
I believe the fundamentals of Dave Ramsey's Financial Peace can help all folks who are having financial issue. If you are high net worth, then a good wealth management oriented CPA should be included.
 

MattB

WKR
Joined
Sep 29, 2012
Messages
5,415
Why would disagree with paying off the low interest rate smaller amount of debt first. Dave’s reasoning is 100% correct. Always pay off your smallest debt first regardless of the interest rate. It’s all about the snowball. A snowball starts off small and grows. If you owe $15k on a Car at 5% and $3k on a medical bill at 4% why would you pay off your car first. The theory is you pay off your medical bill that was coming you $200 per month then once it’s paid off put your $200 a month towards your next highest debt. Your car in this case.

Just wondering why you disagree?


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I would disagree because it is objectively not the best way to get out of debt the fastest. That is mathematically inarguable.

Paying off the highest interest rate debt first is the fastest way to get out of debt as you can use the interest savings to pay off principal on other debt.

I believe the reason Ramsey recommends paying off the small debt first is his target market is people with low financial self-discipline and/or those who seek immediate gratification. Fast wins are likely more effective in keeping those sorts of people on the program, even if it sets them up for being on the program longer.
 
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peterk123

WKR
Joined
Sep 7, 2020
Messages
457
Location
Montana
Getting out of debt is one of my favorite subjects. We have a an interesting problem in this country. It is not an income problem, it is a spending problem. I had this pounded into my skull as a child because my parents were immigrants (legal) from a communist country. We never bought anything we did not need or could not pay for cash for. Need does include some things to have fun with.

I am self employed. When the mess hit in 2008, we depleted all of our savings, including IRAs. That included taking the 10% penalty (don't get me started on this). My home equity went through the roof. As soon as I started to make some money again, I focused on getting rid of the home equity. During this time frame, I never carried a credit card balance. I also never had cash; never. Every penny I made paid went to the home equity. Why? Reduced interest costs. Reduced interest costs meant more cash for me. More cash for me meant more cash toward the home equity. You get it..... diligence pays off. We never took fancy vacations. Only the past three years have I started to fly on a plane. And I'm 53. Only now am I willing to spend a week in places like Montana. Even those are done on the cheap because we like to camp.

My wife and I go out to eat maybe three times a year. We prefer our home cooked meals. People drop a couple hundred bucks a week on dining out. It is insane. Two drinks at a restaurant pay for a bottle of your favorite hooch in the liquor store. Do you go to Dunkin Donuts every morning for your coffee? Or maybe one of those fancy coffee shops? Guess what, that is at least $1500 of after tax money you just spent for brown water. My point is, it is the little things that really add up and get you. It is not necessarily the one time purchase. Be honest with yourself and find out the recurring "little things" you are wasting money on.

This Covid crap and lockdowns here in Massachusetts have been great. It let us test out what retirement would be like. I laugh, our lives have not changed at all because I do not hit restaurants, bars or stores. We hang around in the woods, ponds and rivers and cook our own food.

It takes discipline but it can be fun too. I rebuilt in ten years and I think my wife and I have enough to pretty much call it quits. We are not rich by any means but I think we will be able to get by. Health insurance is the killer though. It is a $30,000 per year problem. No worries though, I am sure Biden and Harris have my back (sarcasm). Actually, I probably will have to work part time but I am okay with that.
Someone reacted to this post so I had to re-read what I wrote. It's been 9 months since I wrote this. So what has changed? Well, we did what I was thinking about in my last paragraph. We are done. Retired. This covid bull$hit was the last straw. Sold the house in Massachusetts for way too much money. Bought a townhouse Montana around the time I wrote the above. Bought the one next door to it two months later. So I have managed to simplify my life even further. The home I am in is much smaller than the one we were in for 25 years (not that it was large). My real estate taxes are less. My home insurance is less. My utilities are less. Someone who knew me well heard I was retiring and offered me a 20 to 25 hour per week job working remote for something I did in a prior life. In addition to a salary, they picked up my health insurance, so that problem was nicely resolved. I have zero debt and pocketed the cash from the sale of our home. I can actually go out to eat now whenever I want. Better yet, I can treat my kids (who are now adults) to stuff that they would never get for themselves. As long as we stay healthy, all the "sacrifices" will have been worth it.

What are my days like? Get up at 5:30 Mon-wed and work on the computer until 1:30 doing something I thoroughly enjoy. Keeps the brain firing. Afternoons are spent on Townhouse renovations, mountain biking and fishing. Next year hunting will be mixed in.. Thurs-Sun are spent doing some renovations, mountain biking, fishing, rafting, camping or hiking. Soon as the snow flies, skiing gets added.
 

BroncoAZ

FNG
Joined
Sep 6, 2021
Messages
50
I made some of these mistakes in my 20’s that took most of my 30’s to dig out of. I was working hard, but for minimal money. In 2001 my old man leased me a new F-150 for my last year of college with the plan being I could take over the lease when I started working. It was $234 per month, but started me down the wrong path. Before I knew it I was 30 years old and $120K+ in debt and the wife was taking on $75K for law school. I paid back every cent, but it took me until I was 35 to do it. The wife’s law school took another few years while I started investing for retirement.

I never heard of Dave Ramsey until after I was paid off, basically I did the same thing as his plan except we kept newer cars with payments. I was driving 65K miles per year for work so I couldn’t afford car problems, I also had a car allowance from my employer that required something less than 6 years old.

Nothing will lower your blood pressure more than being debt free. Make the changes.
 
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