Anyone here doing a modified Dave Ramsey program?

[Like2Plan]

I've never done the DR plan, but at times I have taken a look at which steps I have completed. I like the simplicity of the plan. I think it is a really good starting point for someone who is trying to figure out how to get started on changing their financial outlook.

I have some philosophical differences, too. I also use my CC for everything for the points, for convenience and for safety (a CC is easily replaced and I don't have to carry a lot of cash around). I don't think all credit is bad. I have used 12 month zero % CC offers to pay off the last year of our mortgage effectively changing secured debt to unsecured debt. (I did this without a transfer fee by charging the household expenses on the new card and using the money I would have used to pay the card in full over to the mortgage-then pay the card off in 12 months with what would have been the mortgage payment. ). I also have done this on the last year of our car notes, too.

While our goal has always been to reach the point at which we can pay for a car using cash, I do not have a problem with financing a vehicle for 4 years. Over 29 years, we have incrementally gotten closer 'til we recently reached our goal--we made our last car purchase using cash. It felt really good to be able to do that.

I think DR is good in that it opens your eyes to other ways of doing things--you don't have to be in debt. And, I love the part about reaching your goal and living like no one else.

[cherryblossom]

Dave Ramsey dislikes credit cards because it makes people overspend. For years, I would put all our expenses on the credit card and pay in full... just for all the free rewards. However, I could never understand why after paying off the credit card in full each month we never managed to have enough left over for savings (Hmmm)! After losing my job and opening more credit cards to cover our expenses, I realized that had I been saving money (i.e. an emergency fund) I wouldn't have had to turn to credit cards. Now we are trying to climb out of the debt hole that credit cards eventually hope we all fall into one day.

[Wino]

Dave Ramsey dislikes credit cards because it makes people overspend.

I agree with the sentiment, but I'd like to change the wording slightly " ... because it allows people to overspend" too easily.

I will never give up my credit cards. Sorry, Dave, but I've had debit cards not work in some of the places I've gone; I've had credit cards not work, too. I carry at least 4 pieces of plastic, plus have a "secret compartment" where I keep cash when I travel.

Why do I do this?

One word: experience.

There's nothing worse than being in some heaven-forsaken country that has dirt roads, and no way to get money or to pay for something. In Indonesia, I once had to drive 20 miles, past at least 2 dozen ATM machines to find the one type of ATM that worked with the one card I had that I could get to work at all. I've also had at least three cards eaten by ATM's for no reason whatsoever. In each case, I had to get a new card when I got back to the US. I hate the ATM's that are not "insert and remove" and instead grab your card and feed it in. The first time I try it, I'm petrified that I'll have another ATM that just doesn't like my card... or rather, likes it so much that it keeps it.

[Tree0164]

I love Dave Ramsey and his baby steps structure however I have done a modified Dave Ramsey. Striving to live within your means is the biggest thing I take from him.

1. My baby emergency fund was $2k while we were paying off credit card debt.

2. I paid off the highest interest rate credit card rather than the lowest amount. I still got the same satisfactions and I was playing the balance transfer game

3. We have 12 months of emergency fund instead of 3-6 months My husband was laid off in 2009 for over 8 months. He was the primary breadwinner. I work from home and my income is part time. I like that security plus my husband job is based on commission.

4. I did purchase a credit on credit in 2005 after being debt free. It really hurt me to do that but in 2009 we bought our car in cash.

5. I have credit cards. I use them for online purchases and if we travel. Paid off within 30 days. I will usually will go right into the online banking and pay it off.

6. I have no idea what our credit score is but I would say it is decent or really good.

[disneysteve]

Dave Ramsey dislikes credit cards because it makes people overspend.

Sorry but this just isn't true. Credit cards do no make you spend anything. You (generic you - not you specifically) choose what to spend. It doesn't matter how you pay. You can overspend with cash, check, debit or credit if you aren't paying attention.

We went out to dinner tonight. We had planned for the past couple of days that we would go out tonight. It wasn't a spur of the moment decision. When the bill came, I pulled out my Visa card, as always. The restaurant was particularly busy and short-staffed so we waited a while but nobody came to take the credit card. So I took back my card and left cash so we could get out of there. Guess what. Dinner cost the exact same amount paying cash as it would have if we had paid with credit. The only difference is I lost out on the reward points.

I just got my auto insurance bill this morning. I will go online in the next few days and pay the bill with my credit card. Guess what. The premium amount is exactly the same whether I pay by credit or mail in a check.

Our cell phone bill gets automatically charged to our credit card each month. So does our landline bill, cable bill, alarm company bill, Netflix, newspaper and magazine subscriptions. Guess what. Every one of those bills is exactly the same amount no matter how we pay.

Why should I have to write a check or do an online payment every month for each of those bills? And get nothing in return? Instead, they all get billed to Visa. I make one monthly payment. And I collect hundreds of dollars in rewards every year on spending that I'd be doing anyway.

Sorry, the whole "credit cards make you overspend" is a crock.

[maat55]

Sorry but this just isn't true. Credit cards do no make you spend anything. You (generic you - not you specifically) choose what to spend. It doesn't matter how you pay. You can overspend with cash, check, debit or credit if you aren't paying attention.

We went out to dinner tonight. We had planned for the past couple of days that we would go out tonight. It wasn't a spur of the moment decision. When the bill came, I pulled out my Visa card, as always. The restaurant was particularly busy and short-staffed so we waited a while but nobody came to take the credit card. So I took back my card and left cash so we could get out of there. Guess what. Dinner cost the exact same amount paying cash as it would have if we had paid with credit. The only difference is I lost out on the reward points.

I just got my auto insurance bill this morning. I will go online in the next few days and pay the bill with my credit card. Guess what. The premium amount is exactly the same whether I pay by credit or mail in a check.

Our cell phone bill gets automatically charged to our credit card each month. So does our landline bill, cable bill, alarm company bill, Netflix, newspaper and magazine subscriptions. Guess what. Every one of those bills is exactly the same amount no matter how we pay.

Why should I have to write a check or do an online payment every month for each of those bills? And get nothing in return? Instead, they all get billed to Visa. I make one monthly payment. And I collect hundreds of dollars in rewards every year on spending that I'd be doing anyway.

Sorry, the whole "credit cards make you overspend" is a crock.

I have to disagree. You are not the average person. Dave uses proven studies for this advice, not his personal experience.

[disneysteve]

I have to disagree. You are not the average person. Dave uses proven studies for this advice, not his personal experience.

I agree that I'm not the average person but I still disagree with the premise.

It all depends on what you use your credit card for. I listed a bunch of fixed expenses that I charge to my credit card. The amount of those charges doesn't change no matter how I pay. That survey Dave loves to quote says that people spend 18% more when using a credit card. I assure you my auto insurance bill is not 18% higher if I charge it vs. writing a check. Neither is my cell phone bill, my newspaper subscription, my alarm fee, etc. Dinner with my family is also not 18% higher. It costs what it costs and not a penny more. We wouldn't order different food because we paid with a credit card.

What really doesn't make sense to me is Dave is so focused on having a budget (which I agree with completely). So if his followers are sticking to a budget as he teaches, then it shouldn't make one bit of difference how they pay their bills. If you budget $50 for groceries, why does it matter if you hand the cashier a $50 bill or a credit card and charge $50? Money is money. The form of payment doesn't matter.

[TheMom]

What really doesn't make sense to me is Dave is so focused on having a budget (which I agree with completely). So if his followers are sticking to a budget as he teaches, then it shouldn't make one bit of difference how they pay their bills. If you budget $50 for groceries, why does it matter if you hand the cashier a $50 bill or a credit card and charge $50? Money is money. The form of payment doesn't matter.

I switched from credit for everything to cash for somethings, like groceries. For me, I hate to track my spending. Hate it. So, having cash and seeing I have no more is much easier for me. I know I've hit my budget for groceries when that slot in my wallet is empty. I don't have to remember to add up receipts to see where I am. I dd spend more on some things when I used credit.

But, I do continue to use credit for gas, fixed expenses, online, and a lot of others. I don't use it at restaurants because once we are done, we are ready to go and I don't want to wait.

[maat55]

[QUOTE]

It all depends on what you use your credit card for. I listed a bunch of fixed expenses that I charge to my credit card. The amount of those charges doesn't change no matter how I pay.

This is a key difference between those who do not pay more and those who do. I only use my card for specific uses, while most people do not.

That survey Dave loves to quote says that people spend 18% more when using a credit card. I assure you my auto insurance bill is not 18% higher if I charge it vs. writing a check. Neither is my cell phone bill, my newspaper subscription, my alarm fee, etc. Dinner with my family is also not 18% higher. It costs what it costs and not a penny more. We wouldn't order different food because we paid with a credit card.

Personally, I believe that it is likely that peoples overall spending will be more if they have access to more funds than is planned to spend. I am just as likely to spend more when I use a card or cash when I have more than I need. It is likely that you and I do not budget a specific amount when we go out to eat or clothes shop. I think the survey might be based on specific shopping and between having a card or a specific amount of cash.

I will say that I am more aware of how much cash I have in order not to run out, which might detour my spending in some cases.

Take going to the grocery store. Let's assume we have a limit of 100 dollars. Well, it is much more likely the shopper will go over if he/she has a CC or more than 100 dollars cash in hand, but if the shopper only has 100 dollars and nothing else, it is likely they will spend a little less.

What really doesn't make sense to me is Dave is so focused on having a budget (which I agree with completely). So if his followers are sticking to a budget as he teaches, then it shouldn't make one bit of difference how they pay their bills. If you budget $50 for groceries, why does it matter if you hand the cashier a $50 bill or a credit card and charge $50? Money is money. The form of payment doesn't matter.

It comes back to what level of determination they have towards their budget. IMO, the only way to really make sure you do not spend more than planned is to only take a specific amount of cash.

DW and I did this when we were first married. Our budget was so tight(we did not have CC's) that we used a calculator at the store. I just do not see the majority of people being this disciplined, but I could be wrong.

[H.C.M1]

If you are completely down and out and your finances are a wreck, then DR is the way to go. But for people with a more advanced understanding of finances and investing that have their finances in order, DR starts to become less and less reliable a source for advice.

Hi everyone, usually just read this board, but do not post. Had to respond to this one. Dave Ramsey changed my life.

I wasn't a total wreck ( well compared to most people I Know), but I had no clue about money. Came from a family where my parents worked hard and paid their bills, but never saved a dime. They had great credit and were never late on any payments.

I know it is hard for some people to understand, but some people, just really have never been taught how to deal with money. Before DR, I thought only people with great jobs had savings account.

Anyway, to the orginial point, I do a modified plan. Once I realized I didn't want to go into debt anymore increased my EF. I also do the rewards cc...and do NOT spend more money using it. Ofcouse pay it off at the end of each month.

Oh and I also still care about my credit score.

[dawnwes]

You have to find the plan/method that works for you.

We did a DR type program, but we too modified it to fit our needs.

Dawn

[mgkimsal]

We wouldn't order different food because we paid with a credit card.

I know *plenty* of people who *do* exactly that though. Both in high-end restaurants and at fast-food joints. Fast food places all accepting credit cards makes is very easy to rationalize getting the larger size, or an extra bag of fries, or whatever.

In a fast food place, I *generally* just get a cheeseburger and a cup for water. Once, I had a cashier say "wow - is that it? I wish I could only eat that much!" I said - "it's not that hard, just get a cheeseburger. if you're still hungry 10 minutes later get something else.". A woman behind me butted in and said something like "oh, no one eats like that!" and proceeded to order about $8 of stuff - just for herself. And put it on plastic.

Now... granted - it may have been a debit card vs credit card, but I have *0* doubt in my mind that the acceptance of plastic everywhere has led to many (most?) people buying more than they would have done had they had to carry cash with them.

It's *not* that your food costs 18% more. It's that you *buy* 18% more. And you buy in more places that have 'convenience' associated with the purchase, also inflating the price.

If you've got all the cash to pay off credit card charges at the end of the billing cycle, fine. Many people don't. Even those who do might find that they've made many frivolous purchases they wouldn't have made with a 'cash only' system.

Yes, the DR plan isn't for everyone, but it does force you to consider your habits. I use debit cards for most purchases for convenience, and we have an approximate loose budget for most monthly expenses. I use actual credit cards for some purchases, and when traveling overseas. If it was stolen, it's going to be easier to deal with the mess on credit vs debit charges. That's my primary reason for keeping/using credit cards - we only use it a few times per year, but I feel safer with it when we do use it. People who travel overseas multiple times per year are also not typical Dave Ramsey listeners/readers, so that's on of my DR adjustments.

[daveymck]

What's the end?

I've only been listening to hime for a few months. I've gotten inspired, and have kinda joined into his system with all of step 1 finished, had some money saved up for a down payment on the next house we wanted to buy, which has now been used to pay off the rest of our personal debt (one cc and my student loan). Now we've structured our budget to get step 3 done, and we're already halfway there as it is. After that we'll resume saving for a down payment.

I guess my question is, after all this budget configuring and examining our income vs what we do with it, where does it end? I understand the point of saving for retirement, that's fine. But you pay off your car loans, get your cc paid off and either stop using them or pay them off like they're a cash account (me too, by the way. Don't understand his beef with Amex, it always has to be paid off every month anyway...), rid yourself of debt, fill up the rainy day fund. Ok, got all that. Check.

Then you take 15% and stock it away for retirement. And never ever touch until retirement. I understand that, perfectly well. Now you're down 85% of your original operating budget. Kids' college saving- what, say 2% monthly?
83%
Well, Dave tithes...
73%
Now, you're supposed to pay extra on your house and get it done earlier. Only you have less money to do so than before, so the going there will be slow.
And here's my giant question mark- WHAT IF, AT ANY POINT IN HERE, YOU NEED TO BUY ANOTHER VEHICLE. Where, in the operation, do you save up for that? 'Cause Dave says debt is dumb, don't you dare take a loan on that next vehicle, you dumb, stupid, moron!!!
Well, how do you cover that, then? Even if you buy the cheapest, decent, nice car down at the used car lot. Does Dave recommend you have a stash of 8-10k sitting around somewhere for such non-qualified financial emergencies? (not qualifying for withdrawing from the emergency fun, I mean) Where did you save for this, so far???

So you go through all the steps. You have no payments, just got done with everything.
You're not paying on a house any more, that's cool. You're contributing to the kids' college funds, and saving your 15% for retirement. Let's say you're 40, long ways to go there until you withdraw. You're tithing, or at least paying something to your church or favorite charity.
Now, while you were in the grocery story filling your e-meals grocery list, your beater car Dave told you to get gets totaled because the 747 flying overhead at 39,000 feet dumped its lavatory waste, which did its own snowball attack as it fell through the atmosphere, directly on your vehicle.

You have:
your emergency fund- which, according to Dave, is not accessible in this scenario, so you don't really have it.
nothing else!!! Can't withdraw from your 401(k), IRA, or 529 plans without penalty, and Dave also says you should never touch those unless you're avoiding bankruptcy or foreclosure. Not the case here.
And since, up until this point, you've been GAZELLE INTENSE on attacking your mortgage, while also paying yourself first with retirement savings and 529/ESA plans, YOU HAVEN'T SAVED A DIME OUTSIDE YOUR UNTOUCHABLE EMERGENCE FUND, you have no savings to buy such an item.

So how do you buy it if you can't finance it? And a car is only one example. What if you wanted to go on a vacation. When can you begin saving money towards that?

I guess this is my major struggle, mentally, with his system. But, for me, credit card and student loan payments were not really ever that big of a deal to come up with. Yeah, I've had pretty high balances before. He says get rid of debt, and then take those payments you were making and invest them. Then what? Is that included in your 15% towards retirement, or just a general want/need fund, or what?

And if you've got answers, like maybe I've just missed something in the book, lemme know. I could just be off. I'd love some guidance here, cause I do get inspired by the folks calling in. Being free of any payments sounds great to me. Sure does. It's just the time between initially becoming payment free and then being able to cover larger purchases with savings that I don't get. I guess you just hope nothing happens.

And when does this really get fun? Cause it all sounds like perpetual sacrifice to me.

[mgkimsal]

I would say having your car damaged by a falling object counts as an emergency.

It gets fun once you have a paid off house and car, are paying towards retirement, and you have money left over. You decide what to do with that money. Have fun with it. Not sure what's so hard about the concept.

And I don't think he would suggest paying every single dime you have on debt 100% of the time. A) you should get to a point where you don't have debt and B) he's told callers to go out and have some fun with money, but budget it, and if you can afford it in the budget in the first place.

[bjl584]

I've only been listening to hime for a few months. I've gotten inspired, and have kinda joined into his system with all of step 1 finished, had some money saved up for a down payment on the next house we wanted to buy, which has now been used to pay off the rest of our personal debt (one cc and my student loan). Now we've structured our budget to get step 3 done, and we're already halfway there as it is. After that we'll resume saving for a down payment.

I guess my question is, after all this budget configuring and examining our income vs what we do with it, where does it end? I understand the point of saving for retirement, that's fine. But you pay off your car loans, get your cc paid off and either stop using them or pay them off like they're a cash account (me too, by the way. Don't understand his beef with Amex, it always has to be paid off every month anyway...), rid yourself of debt, fill up the rainy day fund. Ok, got all that. Check.

Then you take 15% and stock it away for retirement. And never ever touch until retirement. I understand that, perfectly well. Now you're down 85% of your original operating budget. Kids' college saving- what, say 2% monthly?
83%
Well, Dave tithes...
73%
Now, you're supposed to pay extra on your house and get it done earlier. Only you have less money to do so than before, so the going there will be slow.
And here's my giant question mark- WHAT IF, AT ANY POINT IN HERE, YOU NEED TO BUY ANOTHER VEHICLE. Where, in the operation, do you save up for that? 'Cause Dave says debt is dumb, don't you dare take a loan on that next vehicle, you dumb, stupid, moron!!!
Well, how do you cover that, then? Even if you buy the cheapest, decent, nice car down at the used car lot. Does Dave recommend you have a stash of 8-10k sitting around somewhere for such non-qualified financial emergencies? (not qualifying for withdrawing from the emergency fun, I mean) Where did you save for this, so far???

So you go through all the steps. You have no payments, just got done with everything.
You're not paying on a house any more, that's cool. You're contributing to the kids' college funds, and saving your 15% for retirement. Let's say you're 40, long ways to go there until you withdraw. You're tithing, or at least paying something to your church or favorite charity.
Now, while you were in the grocery story filling your e-meals grocery list, your beater car Dave told you to get gets totaled because the 747 flying overhead at 39,000 feet dumped its lavatory waste, which did its own snowball attack as it fell through the atmosphere, directly on your vehicle.

You have:
your emergency fund- which, according to Dave, is not accessible in this scenario, so you don't really have it.
nothing else!!! Can't withdraw from your 401(k), IRA, or 529 plans without penalty, and Dave also says you should never touch those unless you're avoiding bankruptcy or foreclosure. Not the case here.
And since, up until this point, you've been GAZELLE INTENSE on attacking your mortgage, while also paying yourself first with retirement savings and 529/ESA plans, YOU HAVEN'T SAVED A DIME OUTSIDE YOUR UNTOUCHABLE EMERGENCE FUND, you have no savings to buy such an item.

So how do you buy it if you can't finance it? And a car is only one example. What if you wanted to go on a vacation. When can you begin saving money towards that?

I guess this is my major struggle, mentally, with his system. But, for me, credit card and student loan payments were not really ever that big of a deal to come up with. Yeah, I've had pretty high balances before. He says get rid of debt, and then take those payments you were making and invest them. Then what? Is that included in your 15% towards retirement, or just a general want/need fund, or what?

And if you've got answers, like maybe I've just missed something in the book, lemme know. I could just be off. I'd love some guidance here, cause I do get inspired by the folks calling in. Being free of any payments sounds great to me. Sure does. It's just the time between initially becoming payment free and then being able to cover larger purchases with savings that I don't get. I guess you just hope nothing happens.

And when does this really get fun? Cause it all sounds like perpetual sacrifice to me.

I'd argue that DR's advice shouldn't be taken as gospel. Most people will find that some modifications will need to be made. You should have a seperate account for things like a replacement car, vacations, Christmas, etc. in addition to your emergency fund. I honestly don't know if DR advocates that, but you should have one. And, if your beater car gets wrecked, and it's your only transportation, then to me that qualifies as an emergency. I'd say it would be ok to dip into the EF to fix it or to buy a replacement.