Anyone follow Dave Ramsey? Plus a few questions...

[micah_mae_]

We're about to start the baby steps again..we've fallen off the wagon and went through our efund and accrued medical bills. The first time we used it we paid off all of our debt except the car so I feel pretty good about that.

Also, how much does everyone put into savings per month? Do you use a bank, save cash somewhere at home or a combination? Do you have a mutual fund or invest in stocks or something?

[mama to B]

I kind of follow him.. Kind of... I already have my 1000$ EF and am working on a 5000$ one, not really as much as he says but thats my goal. I also am putting a small amount of money away for DD for school. Right now I put no matter what 75$ into savings and 25$ into dds account this comes out automatically 75$ into my TFSA and 25$ into her RESP. I also put an extra 100 into another account which I have on my bank card, I keep 500$ in there and anything extra get transfered to my TFSA. Any extra money gets put into there so far this month I've been able to put in 400 extra ontop of my 75 and 100. I also save all my change, doesnt seem like a lot but I saved over 1000 in the last year in change! I just recently added 500 of it to my TFSA and the last week of december I will go and deposit most of it and add some of it to my new computer fund! I think I would just put away as much extra as you can and still be comfortable.. I'd first on a EF if you don't have one.

[micah_mae_]

Yeah we're starting over completely. No new cc debt or anything, just med bills. And our efund is gone. Getting too low for comfort..it'll be easier once January comes around though, we'll be done paying for all the stuff that killed us these last few months (#2's birth, #1's birthday party, Christmas, etc).

[lavatea]

I plan on following a modified version. Right now we're barely squeaking by so really there's not extra to put toward an EF (had to borrow just to pay Nov rent and will be doing the same for Dec; no clue how Jan will get paid). I start my new job in Jan, though, so I hope to get going in Feb.

My plan:

$1000 EF

start snowballing while beefing up EF simultaneously (prob a 1/2 and 1/2 arrangement)

I also intend to start retirement and kids' college funds

I know Dave wants you to work the steps one at a time, but I'm just not comfortable putting off saving for retirement and college funds. We have a lot of debt so it would be a long while if we worked the steps in order. Also, quite a bit of our debt has gone to debt collectors and I'm not currently paying. To me it doesn't make sense to resurrect all of that before starting to save. I do intend to eventually pay all of those debts off, but our credit is shot already (and I don't really care about cleaning it up b/c it will probably be a while before we'll be ready to get a mortgage - and I don't plan on using credit for anything else, except maybe a car..I know, I know, get a beater) so I don't see the hurry on snowballing those bills.

[mtm]

A lot of people on the Getting out of Debt thread follow DR. Come join us!  We are on bs4 so we put a bit into savings/sinking funds (2-3 per cent of income) but most of our money goes to retirement and college funds (building up to 15 per cent of income). We keep some cash readily available at a local bank and our ffef at ing who had the best rates back when we were in bs3. the bulk of our ffef is in laddered gic's (canadian guaranteed income things). Dh and I have mutual funds in our rrsp (retirement) and he owns company stock where he works.
 

[micah_mae_]

I'm so overwhelmed about the whole investing thing. *sigh*

[lavatea]

Originally Posted by micah_mae_ 

I'm so overwhelmed about the whole investing thing. *sigh*

Do you have any specific questions? The whole process is overwhelming, but maybe if we talk out the steps it will help us all??

[micah_mae_]

Well I really don't know anything about it. I know that mutual funds are supposed to be pretty safe and that's about the extent of my knowledge.

[laohaire]

Your overwhelm motivated me to answer, though I am not a subject matter expert here.

Back when I was 20 years old, I had a really good job making really good pay for a 20 year old. My boss mentioned I should probably invest some of that money. I asked her for more info and she referred me to someone else in the company who was her friend and knew about investing. I asked him about it and it was always like "sure, sometime we'll talk" but it never happened. My mother didn't know a thing and my father wouldn't help. I felt totally overwhelmed and stuck and didn't invest anything, not even a 401(k) at the company. A couple years later I met the man who would be my DH, and I learned his mother had made some good financial choices and had a portfolio that she partly lived off of (semi-retired). I asked her what her suggestions were - at the time I had $8k left. She said it wasn't enough to do anything with. SIGH. I spent that $8k during college on pizza and books (ok, and also a trip to China). What a frikken waste.

I am responsible for the fact that I blew the money - I could have researched personal finance, bought books, consulted a professional, whatever. But I do feel like a lot of people kind of let me down too. Don't let this happen to you.

Get a book from the library or buy one. Personal Finance for Dummies is a good way to get started - just because it's so unintimidating. If you are literate, you can read it and get a sense for your options. From there, read more based on what seems to make sense for you.

In the meantime, sure, put your money in a mutual fund or something if you want.

However, I must add this food for thought, and the disclaimer that my opinion is NOT a popular one. I think that regular people investing in the stock market at this time in history is not a good idea. They will tell you that historically, stocks have earned 10%, which certainly does beat any savings account you could possibly find. However, I think it's a little misleading - you can't count on making 10%. You can't even count on just breaking even. Your skill, your resources, the amount of money you can parlay into stocks all make a huge difference. And the economy makes a huge difference. Now might be a really great time to buy, since things are depressed. But that assumes things will go up again - and I'm not at all confident that we're going to see an 80's style boom again in my lifetime. Anyway, this is not advice for you because it's just my personal opinion, but I felt compelled to answer and wanted to throw this out as a thought. What to do with money if you're not investing it? Pay off debt, save it, turn it into nonmonetary resources that will hold their value. So there is my extremely unpopular view.

[micah_mae_]

Thank you for that! We have certainly wasted a ton of money. :( I will do some researching. What kind of nonmonetary resources do you mean? Gold?

[mtm]

where are you on the baby steps? I'd really focus on paying off debts once I had the baby emergency fund (I like 2000, but most do 1000) and not worry about where to invest down the road. Just put your ef somewhere safe for now, I just use a basic savings acct for that. Worry about what to do with your savings (ffef, bs 4 and 5) when you get there otherwise it gets overwhelming.

[pwit]

I don't follow him but just listening to his radio show is so inspiring.  When I hear him instead of feeling poor I feel like I'm super smart for not having cable, car payments, new from store clothes and toys.  I know whenever I hear his radio show I am motivated to spend less.  I probably should download some shows and listen to them in the car whenever I'm driving to the store!

[micah_mae_]

I should see if I can get his show here!

[laohaire]

Originally Posted by micah_mae_ 

What kind of nonmonetary resources do you mean? Gold?

I'm not sure myself yet, actually. Gold is something a lot of people are investing in right now. I'm not. Since we are headed for a jump in inflation (due to the significant amount of money printed by the treasury this year) I'm looking to buy useful things that will cost more later. Not fun things, useful ones. Like, we filled up our oil tanks. We'll probably buy a wood stove. I'm stocking up on my pantry. Things like that. Not panic things, but things that we would just definitely use no matter what, and which will almost certainly cost less now than they will in the future. But if you have any debt you can pay down within the next, say, 12 months - I'd go all out on that first. That's a guaranteed return, you know? And when you're done, it frees up your income so you are liable for less, and also can save more.

[puffingirl]

I really love Dave.  I listened to his audiobook for Total Money Makeover and DH and I (mostly me) began working the baby steps.  We paid off my student loans, our car, got our emergency fund and started putting away more for retirement and college for DD.   We really need to refocus because we haven't been setting money aside for when our older car finally needs to be replaced and I so don't want to take on any more debt again. We are debt-free, except for the house, and I want to keep it that way.  But we also have to put more into my retirement savings--I work part-time and put less in mine than DH does through his work.  But I know that we wouldn't have gotten this far without getting on some sort of plan together and the baby steps really worked for us.  It was hard but really worth it. 

[lavatea]

*Sigh* I just sat down and did a lot of figuring and refiguring. When I start working, we are going to be breaking even. Very little extra or breathing room. DH is more than likely going to quit his current job (don't see any way around it without paying for childcare) but may be able to get a part-time one (once I complete orientation and get on my night schedule). If he can work a part-time job that will help some, but I'm pretty discouraged.

[fierrbugg]

Originally Posted by micah_mae_ 

I should see if I can get his show here!

You can get some of the older TV shows on hulu.  Especially helpful if you can't find the radio show or to supplement it. 

http://www.hulu.com/the-dave-ramsey-show 

[sarah1122]

I was in the same boat about seven months ago...trying to figure out the best way to invest our "extra" income in retirement and college funds and things.

Then I read Total Money Makeover and realized I wasn't ready to invest because we don't actually have "extra income"...we had debt to pay (to the tune of over 50K) and not enough money in savings.  I think its wise to hold off on investing until you have your debt paid and 6 months of living expenses saved up.

We have our savings in a high yield saving account with Sallie Mae.  Its been great so far and super easy to electronically transfer the money into your checking account when you need it.  The rate kind of stinks over all (1.4%), but is better than most others out there....plus there is no market risk so I know our emergency fund is safe and sound.

[gumshoegirl007]

I love investing our money, even though all we have to invest is retirement savings.  I work in the non-profit sector and will likely never have a pension plan, so we ensure that I'm stocking enough away for the future.  We had paid down all of our debt in September, but then we needed a new roof and decided to take a family vacation.  That should all be paid off before I go on mat leave.  All this will leave us to do is beef up our emergency savings.

On investing, we use a couch potato strategy.  Read more here - http://www.moneysense.ca/2006/04/05/couch-potato-portfolio-introduction/ or http://www.moneysense.ca/2009/11/01/investing-the-complete-couch-potato-roadmap/  or http://www.moneysense.ca/2009/02/01/investing-how-i-became-a-couch-potato/

You can google the plan as well.

Basically, the theory is that you can never beat the market over the long-term, so don't try.  You probably don't have the investment knowledge or skill to pick great stocks (stay away from gold as you're likely too late!!!).  Mutual funds can be very expensive.  Financial advisors if you have less that $100K are also too expensive.  Invest in ETFs (exchange traded funds) which invest in the entire market by mapping an index.  ETFs generally have low MERs (management expense ratios which is how much it cost you to be in a fund).  All you do is determine your risk tolerance, when you'll need the money, and you can set the percentage allocation, pick your ETFs and re-balance once per year. We also use a discount brokerage so we pay $4.95 per trade (low trading fees are key when you're not investing a substantial amount of money, and I also only make 1 purchase per quarter to keep this cost down - if you trade too much you're paying too much in fees which could make mutual funds more attractive).  My portfolio is now 10% cash/GICs, 15% bonds, 30% Canadian equity, 20% US equity and 20% international equity.  Within each of those categories, I hold 1-3 funds, mostly iShares and Claymore.  If you're American, you have access to Vanguard ETFs and I'm completely jealous (the currency exchange doesn't make them affordable for me to hold).

I came across this last year when we were following the Gail Vaz-Oxlade - http://www.gailvazoxlade.com/ - school of debt reduction and I began to read more about investing.  I read years worth of Money Sense (Canadian) and Money (American) magazines that I borrowed from the library to get a hold on financial and investing information.  For myself and my family, the Couch Potato made sense and has been great thus far (we're up 10% for the year!).