Getting Out of Debt with DR, Oct 2009 - Page 8

[_ktg_]

Originally Posted by annettemarie

Does anyone here do a price book? I used to have one but it kind of got away from me.

what this is? Is it software or like an actual notebook?

[Sarah8Jane]

Originally Posted by Selesai

So, I was trying to decide how to get a handle on my finances and I thought that maybe DR is the way to start, even if I don't follow his plan entirely.

We have $2000 in cash (savings, the min I'm comfortable with)
We have $1200 in CC debt and $2100 in a line of credit.

The biggest issue is what to do with our huge education debt. $100k of it is at 2.5% interest, so I am not worried about it. I do worry about the $18k at a variable with Sallie Mae and the $70k at a variable (currently 6%). I AM NOT PAYING ANY OF THESE RIGHT NOW, which freaks me out. I also don't contribute to retirement. We have suffered a huge salary cut in the last year and we're just trying to keep it together.

So, I don't care about paying off my house, but I want to know what to do with the "high" rate student loans, particularly because they are so high. I anticipate being able to pay off the $3200 consumer debt in the next few months, but generally we don't have more than a few hundred dollars to throw at debt each month, and even that is tight.

Thoughts?

I think you're starting off with the right perspective, pay off the consumer debt first, and commit you not going back in debt. Then you should have a little more breathing room for the student loan payments.

I do think you may need to get your income up or your lifestyle down. I know the economy is terrible and you've had a tough time this year, but it's going to be really difficult to pay off $188,000 SL if you can only put a few hundred dollars toward debt each month.

DR says you can put debt that is more than half (is that right?) your annual income into step 6, so you could just focus on the $18k loan and save the $170k for later. You could (try to) bust out that $18k quickly and then move on to the FFEF.

I wouldn't worry about Retirement right at the moment. I'd want to get some traction on the SL first.

Yes, join us, even if you need to tailor the plan to work for you.

[Sarah8Jane]

Originally Posted by Keeta

Anyway, yeah. It's been super educational, and I'm glad that I started the project. I just take my receipts and enter them into a spreadsheet when i get home, noting the quantity/type, and if it's organic or on sale, etc. After a few months I'm hoping to have a better idea of what to buy where, what counts as a good sale/price, etc.

The difficult thing with this is that you only have the numbers for what you've bought. You still have to compare prices on things where ever you shop.

In the past couple years, food prices have fluctuated alot, so I find that my price book is out of date in a month. (In my area we also have seasonal price differences, winter is more expensive than summer)

It's bad maybe, but, I buy most non-perishables at Costco, unless there's an item on super sale at the grocery store. All perishable are bought at the grocery store when they're uber cheap. Not the coupon queen method, but it works for us.

[annettemarie]

Originally Posted by _ktg_

what this is? Is it software or like an actual notebook?

It's a little purse-sized notebook for me.

What I do is, one each page, I write something I buy often.

So "Milk, 2%"

Then I write the prices for the different stores. I generally get a good feel for where it's cheapest, but if there's a sale or I have coupons, I can easily look and see if it's really less expensive.

I have mild OCD, so my notebook is actually a bunch of index cards on a key ring. That way I can alphabetize them. For a while, I thought about color coding them as well, but I was able to talk myself down.

[annettemarie]

Hey, this might sound crazy, but I've found myself venting/sharing/laughing a bit about FPU/money stuff on Facebook, and it's been helpful when others going through it have talked me down or laughed with me. If anyone wants to friend me over there, I'm Annette Bransby Frontz.

[Deir]

I'm really obsessed with this now! Is this the first flush of falling in love or is it here to stay?

Dh is reading the book and we are getting psyched. I really think given our income and natural frugality- we can kick out our consumer debt quick. I'd love to get the cc's paid way down by the time babe #3 arrives in March.

[annethcz]

Originally Posted by Deir

I'm really obsessed with this now! Is this the first flush of falling in love or is it here to stay?

It's probably just the first flush of love. BUT, just like marriage, if you keep working at it, it gets easier as time goes on. You'll probably make mistakes along the way (or MANY mistakes if you're like me), but it's worth the effort invested

[annethcz]

Originally Posted by annettemarie

I have mild OCD, so my notebook is actually a bunch of index cards on a key ring. That way I can alphabetize them. For a while, I thought about color coding them as well, but I was able to talk myself down.

I LOVE this idea! I've tried actual notebooks before, but it never seems to work well.

Do you alphabetize by main category... ie Hummus, Red Pepper and Flour, white bread? More examples please

[annettemarie]

I just alphabetize in whatever way makes sense to my twisted brain. And if it stops making sense, I can just move it!

[Belia]

Originally Posted by Sarah8Jane

DR says you can put debt that is more than half (is that right?) your annual income into step 6, so you could just focus on the $18k loan and save the $170k for later. You could (try to) bust out that $18k quickly and then move on to the FFEF.

I didn't think that was what Dave Ramsey says. I thought only a home equity line/second mortgage could move between BS2 and BS6. In other words, if a HEL is less than half of your income, it goes in BS2. If it is more than half of your income, it goes in BS6.

All non-house debt automatically goes into BS2 regardless of the amount.

[Maluhia]

Annette - LOVE the idea of the index cards, the only upgrade for me if there is an iPhone app for that I can live in peace and spreadsheet harmony

[RoadWorkAhead]

Originally Posted by Belia

I didn't think that was what Dave Ramsey says. I thought only a home equity line/second mortgage could move between BS2 and BS6. In other words, if a HEL is less than half of your income, it goes in BS2. If it is more than half of your income, it goes in BS6.

All non-house debt automatically goes into BS2 regardless of the amount.

This is constantly debated. Whatever Dave says, it would be foolish in my book to wait such a long time for an FFEF. DR isn't expecting you to spend a decade on BS2 in reality, but $188k in loans is a lot for a job that is not making 6 figures to begin with so there has to be some adjusting.

[annettemarie]

Victory! I had a $40 automatic renewal for Scholastic Printables show up on Friday. I didn't think they'd give me my money back, since it was technically my fault, but I called and got $39.88 reimbursed. Yay!

[annettemarie]

I do miss having my Paypal for Ebay though.

[Selesai]

Originally Posted by RoadWorkAhead

This is constantly debated. Whatever Dave says, it would be foolish in my book to wait such a long time for an FFEF. DR isn't expecting you to spend a decade on BS2 in reality, but $188k in loans is a lot for a job that is not making 6 figures to begin with so there has to be some adjusting.

See, this is where DR has always frustrated me. Yes, we have a lot of school debt, and were I to do it over again I would not take out as many loans. That being said, my degree is unobtainable without debt, in general, and has a high earning potential. The fact that we got stuck in this economy at a job paying less than I earned when we made a lot of big financial decisions (buying the house, a car, etc) is an aside. Also... I never specified my income level.

My point is that not all educational debt is evil... I don't feel like having $90k in variable rate student loan debt is the same as having $90k in credit card debt.
Additionally, anyone with low, fixed-rate loans like some of ours are would be better off not paying them off... inflation is higher than 2.5%, for instance. The desire to pay off early would be psychologically based.

I also agree that I am not interested in waiting years and years to build a large emergency fund. So after we pay off the consumer debt, I'm not sure what I'll do, since I want us to have more in savings as well.

Has anyone BTDT?

[annettemarie]

He's a little inconsistant on it too, I've found. He says "No student loans! No student loans!" but then last week the video was all "If it's between funding your kids' college and funding retirement, because you can't get loans for retirement and don't want to eat cat food.

[RoadWorkAhead]

Originally Posted by Selesai

See, this is where DR has always frustrated me. Yes, we have a lot of school debt, and were I to do it over again I would not take out as many loans. That being said, my degree is unobtainable without debt, in general, and has a high earning potential. The fact that we got stuck in this economy at a job paying less than I earned when we made a lot of big financial decisions (buying the house, a car, etc) is an aside. Also... I never specified my income level.

My point is that not all educational debt is evil... I don't feel like having $90k in variable rate student loan debt is the same as having $90k in credit card debt.
Additionally, anyone with low, fixed-rate loans like some of ours are would be better off not paying them off... inflation is higher than 2.5%, for instance. The desire to pay off early would be psychologically based.

I also agree that I am not interested in waiting years and years to build a large emergency fund. So after we pay off the consumer debt, I'm not sure what I'll do, since I want us to have more in savings as well.

Has anyone BTDT?

Maybe you should look for someone you agree with for financial advice. Financing isn't 1 size fits all. Its not strictly psychological to pay off debt, its safety. And in an economy where most investments made negative returns last year and inflation is technically 0, I would prefer to not have debt of any kind b/c its not worth the worry and longterm cost. Not all financial gurus agree on that. You might prefer Suze Orman or whoever.

[annettemarie]

Is it twisted that my kids like to listen to the DR CDs for fun?

[p1gg1e]

I'm actually pretty sure he said you move onto the FFEF IF it would take you more then 2 years to be DF or the debt is more then your income is in a year.

IF you own a home or have an older car and you have hit a stage where you have a large debt but want to keep going. Make a bigger BEF so like $3500 or so this would be better then nothing and can fix a roof issue or car replacement if needed.

[p1gg1e]

Originally Posted by annettemarie

He's a little inconsistant on it too, I've found. He says "No student loans! No student loans!" but then last week the video was all "If it's between funding your kids' college and funding retirement, because you can't get loans for retirement and don't want to eat cat food.

His point is though that your kids can work BEFORE they go to school and after...also that 50,000 a year school may not be a good choice if you only have $10,000 saved or less... you gotta work hard!