Dumping Debt and Building Wealth w/Dave Ramsey *October* - Page 7

[llamalluv]

Originally Posted by Kavita

I think I'm going to jump in here. I will admit that I haven't read much Dave Ramsey (and truthfully his personality kind of grates on me from what I have experienced ) but I get the gist of the plan and think these are some sound financial principles, nonetheless.

Then you can't post here. You can only post on this thread if you LURVE him and want to have his babies. Just kidding.


Can I make some suggestions? (I'm gonna, you can just ignore them if you don't like them.)

Read at least one of his books. The Total Money Makeover is a very quick read, and explains WHY he has those baby steps in that order. You are doing a lot of things out of order, and that is why you are struggling. For instance:

We were out of debt and had savings, now we've eroded a lot of savings and built up some debt over the past year. DH has been doing the finances for the last couple of years (I did it the whole time before) and while he's very conscientious about paying the bills, I think that it really takes both people being on the same page and communicating a lot and both being knowledgable and informed and in agreement about their finances to manage family finances well. Unless one person just does it all and hands down a spending budget to the other person and/or a personal allowance, which isn't agreeable to either of us. So we're getting back into communication about our finances and working on it together. I think we've strayed away from it because we've had some conflicts about money and financial matters, and those have played themselves out in the way we have handled our money in the last year with bad results.

You are both adults. Surely you can figure out a way to write a budget, give input, and decide TOGETHER how you want to spend your money.

Anyway:

BS 1: Baby Emergency Fund: Done, basically. We have the money, right now we're just reshuffling where we're keeping it and changing how we do our bookkeeping. So I closed one savings account at our bank, transferred the $ into checking, and started an emergency fund savings account at an online bank with a hundred dollars. Once the account is verified and we balance the checking account, I'll deposit the rest of the $ in there.

Baby E-fund is $1,000. If you have $1,000 setting aside just for emergencies, then, yes, it is done.

BS 2: Pay off Debts: I need to check the exact status of this but right now we owe about 10,000 on one credit card. (Again, DH does the bill payments and is tracking the balances, so unless I ask him I'm not sure about exactly what's going on off the top of my head.) We just took another $5,000 out of savings and paid off another card. I think we'll be paying another $4,000 or so from our savings to the 10,000, which should leave us with a total debt of around $6000 and about $1000 in emergency savings. I'm also going to try to get a 0% balance transfer or a lower interest rate. It's at 7.9%, so it could be much worse, but then again, any interest paid is too much!!

This really concerns me. It seems like you kind of don't really know what is going on. Do you have a filing system for the bills? My husband and I keep all of our statements in a drawer, and anytime DH wants to know what we owe, he can go to the drawer and see what our balances are. Or he can consult my Super Nerd Spreadsheet to see what we owed last month, what we've paid so far, and what we currently owe and will be paying this month.

BS 3 & 4: Since DH started this job (1 1/2 years here) he's been putting 25% or so of income into an employer matched retirement plan. We're realizing that this has been good to catch up a bit since we don't really have enough retirement savings, but it's leaving us too cash strapped. We just started DD in preschool this fall and that is expensive (but saving my sanity and allowing me to do a bit of part-time work, so it's a good trade off in the long run but doesn't leave us with enough $ for the variable expenses and savings.) So we're actually going to dial back the retirement to 15% so we can start paying off the debt and start accruing more emergency savings again.

You said it yourself - you are cash strapped due to retirement savings. The recommendation is 15% AFTER you have paid off your debt and saved up 3-6 months E-fund. This is out of order, big time. The time to dial UP the retirement savings is BS 7, when you have all the kids through college and the house paid off.

BS 5: College funding: Not yet. Some of our savings was earmarked for her but we're going to use it to pay off debt and then start a separate account for her and start paying it back. Although my DD does have an account started by her grandparents, so that's something, and DH's work has him in a university setting so if he's still in a similar boat our kid(s) can get free tuition where he works. Still need to save for her, though.

Do not feel guilty about this. It is not as though you can't pay cash as you go for your kids' college. You can also send them to a community college for a few years, which is much cheaper. You can also encourage your child to keep those grades up and earn scholarships, and to get summer work to help pay for her own college. (My husband and I both completed college degrees while working).

BS 6: Pay off house early: We do have a 30 year mortgage, and don't want to be tied in to a higher monthly payment for a 15-20 year loan. But once we have adequate emergency savings (and for me right now I'm thinking that 6-9 months of expenses are a better target, given the economic times and the fact that it would likely take that long for DH to find a new job if he lost his job) we'll start making an extra payment or two a year toward principle, which will in effect be similar to a shorter mortgage term. We already have a good chunk of equity in the house and I think our mortgage is fairly reasonable, so that's a positive.

Setting your payment up on some type of autodraft will help you make those larger payments with extra principle systematically, and more importantly, automatically.

[Kavita]

Originally Posted by llamalluv

You are both adults. Surely you can figure out a way to write a budget, give input, and decide TOGETHER how you want to spend your money.

This really concerns me. It seems like you kind of don't really know what is going on. Do you have a filing system for the bills? My husband and I keep all of our statements in a drawer, and anytime DH wants to know what we owe, he can go to the drawer and see what our balances are. Or he can consult my Super Nerd Spreadsheet to see what we owed last month, what we've paid so far, and what we currently owe and will be paying this month.

Okay, this is the third time that I've tried to respond to this--hopefully now I'll be able to actually finish and post, since it's 3 am and my DH and DD are asleep.

In response--yes, theoretically we SHOULD be able to set up a budget. We are working on it right now and I think that we will be able to get things under control. However, it's not like people are born knowing how to budget, and we're certainly not the only married couple with conflicts about money. We have some budgeting challenges and some communication problems, so between the two of those it's frankly not been that easy to set up a budget because discussing money issues often exacerbates conflict between us and we end up fighting. Should we be able to have calm, rational discussions about money without blame, guilt, finger-pointing, regret, anger, control issues, confusion? Of course. Mature and healthy and happy couples should be able to do this. Apparently, though, we are not one of those couples!! And we all know that about 50% of married couples are NOT successful at resolving their conflicts either, and end up divorced--and since all research indicates that money is one of the most common sources of conflict between couples, I think it's safe to say that it's just not totally smooth and simple for everyone to manage their money together. People have different strengths and weaknesses. This is one of our weaknesses, and I'm admitting that quite frankly. We're working on it though. It's just a little bit difficult right now.

As far as not completely knowing exactly what's going on--you're right, I don't have a complete handle on it at any given moment. This is one of the major reasons for conflict right now between us, in fact. I used to keep meticulous track of our finances and I was the one who paid all the bills, did the checkbook, made payments toward debt and put money away into savings, etc. I used to give him regular and detailed reports of what was going on, both written and verbal, and at any given time it would take me five minutes max to figure out how much money we had and how much debt we had. I had a little box for recepits to be recorded and a file for recepits that needed to be saved. I had a folder for bills to be paid and a place on the desk where I kept that, and then a folder in the file cabinet for paid bills. In the months after DD was born, I had a harder time keeping on top of doing the finances quite as regularly or promptly with a new baby (she was a kind of high-needs booby baby, now she's a kind of spirited booby preschooler) and after I missed payment due dates on two bills (for the first time in our marriage, btw) DH insisted on taking over with the finances. He doesn't do it like I did it, and in fact he doesn't do it in a way that I think makes very much sense, and he hasn't kept track of things in a way that's very transparent. I don't mean that he's funneling money to a secret offshore bank account that I don't know about--I mean he is just not always doing things in a way that is organized so that it's obvious to somebody else or that I can immediately figure it out without asking him all the time, and if I ask him to do it my way he feels like I'm being bossy or controlling. For me to figure out exactly precisely where we stand right now, it would take a lot more effort, and too much of the info is on some program on his iphone or in a pile somewhere or in his briefcase or in his head. I've sort of stepped out of it and let things go for a while to avoid conflict. But it's totally insane because I am actually the one that does most of the spending on all the variable expenses--groceries, clothing, gifts, household items, etc. I need to know where we stand EVERY DAY to be able to manage the household and personal spending well. So yeah, we need a budget, because the situation as is has been running us into the ground. DH has realized this and we've started to work on this together. A couple of months ago I started stepping back in, and asking him for written reports on how much $ we had, how much we owed, etc. And to stop keeping bills and such in different places, and to put them where I can look at them too. I think he's amenable to going over to more joint control of the finances, shipping DD off to a sitter for a couple of hours and sitting down together and paying the bills and handling the paperwork of bills, filing, budgeting, etc. We did a bit of that today while DD was napping, then she woke up very fussy (she's sick) and needing attention, and that pretty much ended that for the day.

The last this is in relation to DD and the college thing. I don't think I was very clear about that--the reason I feel guilty is not that we're not saving for college right now--it's that I had an account that I set up for her in her name that was money given specifically to her by my parents/ILs with the intention of starting a savings account for her, I presume with the intention that it would be the beginnings of a college fund. But it was money to be set aside for DD--I think DH and I added a thousand dollars to it at some point when we had some more money, but mostly it was gifted by the grandparents, and DH's sister gave us $500 for her too, and it was not money that was ever intended to be part of our financial picture. There was about $4000 in her account when we moved across the country (last summer) and had to close our accounts at that local bank. When we set up accounts at our new bank, I lumped that in with $6000 of my own savings into an investor's deposit account in order to make the minimum 10,000 deposit and get a much higher interest rate. Of course, over the past year with the economy being how it is, the rate has gradually dropped and at this point it's barely earning any interest now anyway, and now we've ended up accumulating some debt. We closed that account and are shifting gears and sort of starting over, and we are putting her part of the money too toward our debt with the intent of putting it back asap. It makes the most financial sense and it's not like she's losing much in potential interest anyway, in fact she'll end up ahead if we're in a better financial position within a year and can start more aggressively funding her college once we're out of debt again. I just feel like a schmuck because I'm essentially raiding her piggy bank and taking a loan from my two year old to pay off our credit cards! I decided that I'm going to set up an online account dedicated to her and fund it with a token amount, like $50 or so, just to kind of keep it in the forefront that we eventually need to pay this money back into dedicated savings for her. I also thinking about considering this as one of our debts and paying it as such once we get the credit card paid.

As far as reading TMM, I am going to get it from the library. But I thumbed through it at the bookstore the other night and then I remembered why even though I know he has good financial advice I don't totally feel the Dave Ramsey lurve--it's the religious aspect. We are not Christian and so it just doesn't mesh with my own personal religous/spiritual worldview and in fact that tone feels a little alienating. (I know, I know--then what am I doing on the Dave Ramsey thread, right?! lol!) I hope I'm not offending anybody here. Like I said, I'll read it, and I think I can just take what I can from it and focus on the financial advice.

Anyway, glad to be here with y'all, onward and upward!! :-)

[Virginia884]

Hello all! Popping in for a little update.

DH and I are moving across the country next week. We used our EF to pay our security deposit on a new apartment. Thank God we had that! Except now we need to build it back up.

I paid off a CC, too! Got rid of my second in two months. Now we have three left (about 8K... YIKES!) but we can do this, especially with the better jobs we both took.

We will have to step back from the debt snowball for a bit, as we'll be short a paycheck this month with the switch in jobs. I'm looking forward to getting back in the groove, though.

[Juvysen]

Congratulations Virginia884!

[mtm]

Good job Virginia!

Kavita, I ignore the religious aspects of TMM and don't particularily like his investing and insurance advice but I don't think he can be beat for his common sense approach to getting out of debt and how to prioritize your money once out of debt. I hope you and your dh can get on the same page money wise, it will make it much easier for you.

[thenaturefreak]

Originally Posted by Kavita

The last this is in relation to DD and the college thing. I don't think I was very clear about that--the reason I feel guilty is not that we're not saving for college right now--it's that I had an account that I set up for her in her name that was money given specifically to her by my parents/ILs with the intention of starting a savings account for her, I presume with the intention that it would be the beginnings of a college fund. But it was money to be set aside for DD--I think DH and I added a thousand dollars to it at some point when we had some more money, but mostly it was gifted by the grandparents, and DH's sister gave us $500 for her too, and it was not money that was ever intended to be part of our financial picture. There was about $4000 in her account when we moved across the country (last summer) and had to close our accounts at that local bank. When we set up accounts at our new bank, I lumped that in with $6000 of my own savings into an investor's deposit account in order to make the minimum 10,000 deposit and get a much higher interest rate. Of course, over the past year with the economy being how it is, the rate has gradually dropped and at this point it's barely earning any interest now anyway, and now we've ended up accumulating some debt. We closed that account and are shifting gears and sort of starting over, and we are putting her part of the money too toward our debt with the intent of putting it back asap. It makes the most financial sense and it's not like she's losing much in potential interest anyway, in fact she'll end up ahead if we're in a better financial position within a year and can start more aggressively funding her college once we're out of debt again. I just feel like a schmuck because I'm essentially raiding her piggy bank and taking a loan from my two year old to pay off our credit cards! I decided that I'm going to set up an online account dedicated to her and fund it with a token amount, like $50 or so, just to kind of keep it in the forefront that we eventually need to pay this money back into dedicated savings for her. I also thinking about considering this as one of our debts and paying it as such once we get the credit card paid.

Don't feel too badly, if the money helped your family stay afloat then it was worth spending. At one point in time my parents ended up doing the same thing and they worked hard afterward to repay the same amounts back to our savings as soon as they could. None of us holds it against them, it was just a necessary decision at the time.

[Dmitrizmom]

I'm doing a happy dance ladies! The interest rate on my credit card dropped. . . they cut it in half! This is going to make snowballing the debt so much easier and faster.

[Jilian]

Kavita, that is a great idea. If you will be paying her back it doesn't matter. She is not missing out on interest and in the long run it will make her family more financially secure. Don't feel bad. Dave always says to take care of your finances before the college fund for the kids. Being financially secure is a nice gift to give your children then they won't have to worry about you when they get older.

[p1gg1e]

We are taking DR class right now and are NOT Christian. I still like the wisdom of the scriptures he lists but like other meetings (LLL) I take what I need and leave the rest behind

DH got a flat tire and with our left over gas money we bought a used tire for $30 TOTAL! at a local tire place..so we didnt need to touch the EF :

I cant wait to get the EM DONE and start on the snow ball.....I want to be a gazelle!

[Contrariety]

Woot! Because we waited until we had the money instead of using the EF to fix our Jeep, we got the part salvaged at a shop DH has connections with for a whole 1/3 of the cost at all the other junk yards around! Yay! That means I get to put that money into the EF, and we are *finally* half way to having the EF done!

Unfortunately, we have christmas, tuition, and text books to start thinking about already. I swear I'm doing Christmas on the cheap, homemade 100% this year. I want to get it done and over with, but I'm mostly baking a ton of stuff, so I have to wait. I think I'll save at least a few hundred this way.