Dumping Debt and Building Wealth with Dave Ramsey - AUGUST - Page 4

[mamimapster]

Start of August:
BS 0-done
BS1 1,000 to start an Emergency Fund --DONE!!
BS 1.1- Adoption 500/2200-sent 1st pmt, in court 8/8-600/2200 as of 8/12
BS2 Pay off all debt using the Debt Snowball

HBSC Cc-141.00 (paid 50.00 on 8/10)
Elan Cc-2362.92/2319.92
Working Assets Cc-3800/3700
Citi-7800/7720
Student Loans 39,000( Pie in the Sky!!)

BS3- (3-6 mos)looking forward to working on this.
BS4-15 percent of household income to retirement-not yet.
BS5 College funding for children-not there yet.
BS6 Pay off home early-Ditto
BS7 Build wealth and give! Invest in mutual funds and real estate-ditto[/QUOTE]

[rosie_plus_one]

Budget Map

Has anyone seen this product?

Someone took a checkbook register, and created columns on the right hand side for different budget categories. When you record a transaction (let's say a check for $25 to Safeway for groceries) you not only record that your account is less $25, you also record it as coming out of your "Groceries" category. It keeps a running total of all your budget "envelopes" while leaving all the money in your checking account.

I thought it was the coolest idea in the world, so I designed my own in excel. If anyone is interested, I'd be happy to email it to you. I'm not sure how to get it lined up right to print both sides of the page, so I'm just printing them out and glueing them together.

Anyways, I've fallen off the wagon so to speak, but this little project has really boosted my interest in the program again, and I feel like it will solve one of the major shortcomings we had - doing a written budget that looked great, and then being out in the stores spending money and not keeping track of what was going on.

We technically should be back on building the emergency fund, as it's down to $700 but I am tempted to leave it like that until my financial aid money comes in and then replenish it.

[llamalluv]

Originally Posted by jennykilbo

Question for you guys, where do you fit in adequately funding a health savings account, if you have one? Particularly if we are looking at 2-3 years before even starting the FFEF, or contributing to IRA's... I really want to prioritize the debt snowball, so I was planning contributing only the approximate amount that we spent on medical stuff last year. Or to pay down debt faster, should I just rely on the $1k EF and hope nothing out of the ordinary happens to me and dh (new dd will have separate kid's insurance so her costs will be more predictable.) All opinions are appreciated!

Are you talking about an HSA tied to an insurance plan? Or just savings for health care costs?

The first I would list as a monthly expense, and put it into the budget. But if it's the latter, that would go under BS3

[llamalluv]

We got one of our reimbursement checks from the union today, YAY! $367 to the credit card. (I'm hoping the other one $264 will be in tomorrow's mail....) DH's payday is Friday, and we will put another chunk on the cc then.

Or maybe I will go out of turn and drop it on the car loan to bring it under $10K.

[Purple*Lotus]

I hope that everyone is having a good day today

I am so happy that the heat is letting up here so that we wont need the window AC for much longer. We will save money that way too

[Mommy&Will]

Originally Posted by BetsyS

At first, he was all about financing a new car. But, yesterday, he told me he thought that he'd buy something with cash, then save money to upgrade it to something nicer.

This is a HUGE step. I'm so excited to see him on board.

Have you seen DR video about driving free cars for the rest of your life? Its pretty motivating:

http://www.daveramsey.com/etc/lms/drive_free/

[Mommy&Will]

Originally Posted by llamalluv

Are you talking about an HSA tied to an insurance plan? Or just savings for health care costs?

The first I would list as a monthly expense, and put it into the budget. But if it's the latter, that would go under BS3

I would list HSA as a monthly expense.

But, I would also include a monthly allotment toward medical/health needs. Its a Murphy thing for me. Plus the fact that we seem to always go thru our medical expense fund (our co-pays, cost of dentist out of pockets, eye glasses, etc.) Our medical expense fund is actually our flex fund thru dh's work. Which we seem to have already blown thru this year (trip to ER for ds).

To me, a medical expense shouldn't be an "emergency" (unless an obviously trauma type situation with lots of expenses) - its expected for us to at the very least have dentist costs and visits to dr. for ds' asthma meds. Dh got poison ivy like I've never seen before and that was a dr. visit. Stuff like that. All this little stuff adds up and the next thing you know you've wiped out your baby emergency fund (we have insurance thru dh's work but we have an out-of-pocket deductible and co-pays). Nope - keep it separate. If you haven't used it by the end of the year than move it into your debt snowball.

[mtm]

dh is riding his bike to work a lot this month giving us an extra 20 a week for the cc, yay dh! If the weather stays nice he'll be able to do it until late October.

[llamalluv]

Originally Posted by Mommy&Will

I would list HSA as a monthly expense.

But, I would also include a monthly allotment toward medical/health needs. Its a Murphy thing for me. Plus the fact that we seem to always go thru our medical expense fund (our co-pays, cost of dentist out of pockets, eye glasses, etc.) Our medical expense fund is actually our flex fund thru dh's work. Which we seem to have already blown thru this year (trip to ER for ds).

To me, a medical expense shouldn't be an "emergency" (unless an obviously trauma type situation with lots of expenses) - its expected for us to at the very least have dentist costs and visits to dr. for ds' asthma meds. Dh got poison ivy like I've never seen before and that was a dr. visit. Stuff like that. All this little stuff adds up and the next thing you know you've wiped out your baby emergency fund (we have insurance thru dh's work but we have an out-of-pocket deductible and co-pays). Nope - keep it separate. If you haven't used it by the end of the year than move it into your debt snowball.

I, too, would list "Medical Costs" on the monthly budget, but she said something about "savings" which to me, indicated it was not neccessarily for ongoing or recurring bills, like doctor, dentist, vision, etc. I was thinking more along the lines of catastrophic illness, planned surgeries, obstetrical care, etc.

[Mommy&Will]

Originally Posted by mtm

dh is riding his bike to work a lot this month giving us an extra 20 a week for the cc, yay dh! If the weather stays nice he'll be able to do it until late October.

That is so great - he's saving money, gas, the environment and getting exercise.

DH and I need to have another brainstorming session on where to bring squeeze out more $$.

[Jilian]

I am trying to prioritize my debt snowball and have a question: We will have our cc debt paid off this month, our next lowest balance is my student loan @ $3xxx, then after that one of DH's student loans @ $6xxx and then our car @ $11xxx. Does it make more sense to skip over the two student loans (good debt) and go right for the car loan? I am thinking of doing that. The two student loans have a monthly payment of $50 each where the car is $268, so if we were to pay it off it would free up a lot more money. What would all of you do? We're not in a position to buy a new home so our credit score isn't really much of a concern yet but do we do want to buy within the next 5 yrs or so.

[Mommy&Will]

Originally Posted by Jilian

I am trying to prioritize my debt snowball and have a question: We will have our cc debt paid off this month, our next lowest balance is my student loan @ $3xxx, then after that one of DH's student loans @ $6xxx and then our car @ $11xxx. Does it make more sense to skip over the two student loans (good debt) and go right for the car loan? I am thinking of doing that. The two student loans have a monthly payment of $50 each where the car is $268, so if we were to pay it off it would free up a lot more money. What would all of you do? We're not in a position to buy a new home so our credit score isn't really much of a concern yet but do we do want to buy within the next 5 yrs or so.

My inclination is to stick with Dave's plan of paying smallest to largest. Really, is there any "good debt?" You will knock those little ones out faster, give yourself an emotional boost and then have a nice chunk going to the car.

Perhaps thouhgh things to consider: is there a large difference in interest rates? Is there any chance of becoming upside down on the car? Or what if you SOLD your car, bought a beater for a couple years until all debt has become knocked out. You could get a really nice car (and really not a beater!) for $5,000. Then you accomplish all your goals that much faster.

[Mommy&Will]

QOTW: Have you identified the NERD and FREE SPIRIT in your relationship?

Do you understand your partner's approach to finances? When dh and I learned about the characteristics of NERDS and FREE SPIRITS, it helped us understand each other so much more.

And the biggest key also was dh learning about my SECURITY GLAND.

Does your partner understand the need to take care of the SECURITY GLAND? If not, look it up in one of Dave's books. It was an eye opener for my dh. And now he is the nerd in the family. Very weird.

[Sarah8Jane]

Originally Posted by Jilian

I am trying to prioritize my debt snowball and have a question: We will have our cc debt paid off this month, our next lowest balance is my student loan @ $3xxx, then after that one of DH's student loans @ $6xxx and then our car @ $11xxx. Does it make more sense to skip over the two student loans (good debt) and go right for the car loan? I am thinking of doing that. The two student loans have a monthly payment of $50 each where the car is $268, so if we were to pay it off it would free up a lot more money. What would all of you do? We're not in a position to buy a new home so our credit score isn't really much of a concern yet but do we do want to buy within the next 5 yrs or so.

What are the interest rates on the student loans vs. the car loan? If there's a significant difference I would be tempted to go for the highest interest loan next.

[excitedtobeamom]

In regards to paying off the student loans vs. the car, I would pay off the students loans. Student loans can never be bankrupt where as a car can be sold. I also think worse care scenario. If you had a huge loss of income you would be better off with the student loans gone because they will always follow you. You could also do what another poster said and sell the car. You would be debt free really fast!

[Purple*Lotus]

My DH is the nerd and I am the free spirt. I wish I could be more nerdy though!

[Jilian]

Originally Posted by Mommy&Will

Or what if you SOLD your car, bought a beater for a couple years until all debt has become knocked out. You could get a really nice car (and really not a beater!) for $5,000. Then you accomplish all your goals that much faster.

I don't think this is an option for us. When we downgraded from our van we were pretty set on buying a Honda or Toyota and the only one we could find in the $5,000 range had over 100,000 miles. I need a reliable car because we often have to travel really far for DS2's cardiology appointments. Our insurance only covers the office that is 90 mins away : DH also works long hours so I don't know what I'd do if I broke down so far away. I do have AAA but last time I needed them they took over 90 mins to get to me!

[llamalluv]

Originally Posted by Jilian

I am trying to prioritize my debt snowball and have a question: We will have our cc debt paid off this month, our next lowest balance is my student loan @ $3xxx, then after that one of DH's student loans @ $6xxx and then our car @ $11xxx. Does it make more sense to skip over the two student loans (good debt) and go right for the car loan? I am thinking of doing that. The two student loans have a monthly payment of $50 each where the car is $268, so if we were to pay it off it would free up a lot more money. What would all of you do? We're not in a position to buy a new home so our credit score isn't really much of a concern yet but do we do want to buy within the next 5 yrs or so.

Good debt? There is no such thing. All debt is bad. Some debts allow you to do things that increase your employment marketability, some provide you with a place to live, some provide you with transportation, and some provide you with a wicked awesome home theater system. But so does MONEY. What you have to figure out is your balance between debt and the time you are willing to put off purchases.

[llamalluv]

Originally Posted by Jilian

I don't think this is an option for us. When we downgraded from our van we were pretty set on buying a Honda or Toyota and the only one we could find in the $5,000 range had over 100,000 miles. I need a reliable car because we often have to travel really far for DS2's cardiology appointments. Our insurance only covers the office that is 90 mins away : DH also works long hours so I don't know what I'd do if I broke down so far away. I do have AAA but last time I needed them they took over 90 mins to get to me!

Have you looked in the last 3 or 4 months? Used car prices have taken a nosedive lately.

And a Honda with 100K miles on it is only middle aged.

[lalaland42]

Originally Posted by Jilian

I am trying to prioritize my debt snowball and have a question: We will have our cc debt paid off this month, our next lowest balance is my student loan @ $3xxx, then after that one of DH's student loans @ $6xxx and then our car @ $11xxx. Does it make more sense to skip over the two student loans (good debt) and go right for the car loan? I am thinking of doing that. The two student loans have a monthly payment of $50 each where the car is $268, so if we were to pay it off it would free up a lot more money. What would all of you do? We're not in a position to buy a new home so our credit score isn't really much of a concern yet but do we do want to buy within the next 5 yrs or so.

I am in a similar position and I am hitting the car loan before the student loans. Couple of reasons for this. Loans are easy to defer if I get laid off. They are also forgiven if I die or are disabled. They also have the lowest interest rate.

For me, it wouldn't be a huge incentive to pay off the student loans off first so I am swallowing it and paying off the car. Dave Ramsey would say pay off the student loans first and if it would help you stay motivated, I agree. I am doing it a little different.