Getting out of Debt

[H D]

Is anyone else doing the Dave Ramsey plan to get out of debt?



I've been working on this most of the year, and I can highly recommend his simple, common sense plan. It does require you to be honest with yourself and practice restraint. I'd like to know if anyone else has experience with this?



If the plan keeps going as it has, by the time I get married in June, I will have nearly $20k paid since April this year. That includes my truck! And I promise you, I ain't making much. It was very satisfying to call Discover and tell them I'm finished with their robbery. My VISA is next week and a family loan by the end of the month. Then, my fiance's credit card and a student loan by the end of the year!



I know some people will say I'm not accounting for the "emergencies" that always pop up in life and I'm being unrealistic or it won't work for everyone. Don't worry, got that covered, too. I just had to give up excuses and realize that being debt free was more important to me than eating out and the other stupid stuff I wasted money on.



I don't expect to get many yes's, probably more "you're unrealistic" responses. I do enjoy hearing other people's experiences with getting out of debt, though. Has anyone else done it in another way?

 

[Tom Schindler]

Never heard of the Dave Ramseys Get out of debt plan.



I used my own plan. Never get into debt in the first place. I was very fortunate to have never had it happen to me. I know it can happen to anyone.





Tom

 

[Kevin Palmer]

Not familiar with the Dave Ramsey plan either, but if it is working for you, great...



I somewhat recently got divorced after 24 years of marriage. When I left the house, I took 48 grand of debt as well as some other monthly bills and only had a state refund check of $137.00 to my name.



I did use our "mutual" debit card for 2 months for fuel until I could get my checks deposited to my new account and what not.



I then got three 0% interest cards and put all of my debt onto them. One was smaller than the others so I concentrated on that one first, then paid off the second before the year was up. Knowing I would not cover the third one before the year was up, I got a forth 0% card and did a transfer balance to the new card giving me a year to pay off 18 Grand.



Every time I would have ANY extra money, I paid on the card. There were times I paid 5 or 6 times within the month on the same card.



I has now been less than two years and I have paid 100% of the debt I left with.



I mention the cards for one reason, with the plan you describe, it sounds as though you are canceling your cards. I would NOT do that for the simple fact that it WILL affect your credit score.



Lets say you have a card you owe zero on (as in your case I am sure that you owe nothing) and you keep the card. Your credit worth will be increased by the amount you CAN charge on the card. Quite simply, you are worth more (financially speaking) to keep the card as compared to closing the card. If you close it, your CREDIT worth WILL lower.



In my case, I put a fuel or food charge on each of the cards I opened and pay them off within the month to keep them active. So I own nothing to them, but they are increasing my CREDIT worth. In the event you do NEED credit, this will play heavily in your favor.



Regardless of what and how you do it, congrats on progress...

 

[EddieS'04]

I have been out off debt for more than 10yrs. I use a cr card to buy and pay it off monthly. I also get 4% back, gas, groceries and pharmacy. 2% on everthing else. Got the card thru my union.

I have paid cash for the last 4 vehicles. House has been paid for. That is the reason I was able to retire when I was 56. Im now 60. Hopefully my '04 trac will last until some off my savings mature.

There is one plan gone wrong. That is my wife was 13 yrs younger. She was going to work 10 more years and retire as a school teacher. We divorced summer of '09. I had to rethink my $$ strategy. Im good though. Drawing disability and will have my pension soon.

It does feel good to not worry about the bills. Also living more sensable $$ wise. I found Im just as happy not having the newest and biggest things. I never was one to keep up with the Jones'.

 

[Robert Caffyn]

I married an older woman with the plan that she will die first and I can collect all the insurance, pensions and savings that she has. It will settle all my debt and my girlfriend can move in!! Woo hoo. Bob

 

[Kevin Palmer]

Well, Bob,,,



I must admit I do like the way you think...



I am going in the reverse direction. My girlfriend is 31 and I am 46... Hmmmm

Somethings are worth the money.. LOL

 

[Richard L]

In today's world, being debt free is more of a myth than an achievable goal. But eliminating credit card debt is the most significant factor in reducing your debt load. As soon as you stop paying the credit card's high interest rates, you quickly realize just how much it's costing you and how much more you can save when you simply pay cash...for everything! Another problem is just paying the minimum payment on credit card bills. It has been shown that it can take as long as 30 years to pay off the credit card bill if you only pay the minimum payment...Longer if you keep charging on that card !!!



If you cannot control your credit card addiction, you are far better off cutting up all your credit cards so you are not temped to keep using them.



It's true that the more access to credit you have the better your credit rating is...to a point, but you do not have to have credit cards to have a good credit score. You only need to have access to credit or a line of credit.



Also, I think the tide is turning agains credit card companies. Some of the Credit rating companies are lowering the credit rating where there are a lot of credit cards (even if they are unused) Remember, that every credit check is a strike against your account and credit rating companies can deduct points if you have applied for credit too often which can offset the value of having more credit available to you.



If you have trouble controling your credit card spending you will start using the cards until they are maxed out and then start charging on the next card until it's maxed out, etc. The simplest solution is limit the credit card accounts you have and don't open any more...that automatically puts a limit on you uncontrolled credir card spending.



If your goal is to be truely "Debt Free", then why do you care what your credit rating is?? If you think you need to maintain a good credit score, to buy a house or car in the future, then you are defeating the purpose of trying to be debt free. In my mind, Debt-free means you pay for everything in cash, and have no need for credit cards or loans of any kind, and your credit score is insignificant because you will never need credit again.



It's really more important to have a good credit rating for employment or insurance purposes since more and more employers are checking the credit rating of potential employers. They are not looking at the credit score or the number of credit cards you have as much as they are looking that you are financially responsible in paying your bills and are not having severe financial difficulties. People who steal from their employers are often having financial problems and are delinquent in paying their debts. People who are in severe financial problems are more prone to committ Insurance Fraud, etc



I have an excellent credit rating and purchased a new home earlier this year, and retired at the end of July. At 64 years old, I really don't care much about my credit rating since I don't need to buy anything on credit. If I want or need something, I can pay cash for it. If I cannot afford to pay cash, I don't buy it.



I do use a gas credit card and my American Express card but always pay off the full balance on every billing cycle and never have to pay any interest or finance fees. More often than not, if the purchase is less than $300 I will simply use my Debit Card.



Wealth or net worth is NOT the absence of debt but is having more equity or value in assets than in debts or liabilities. So I don't consider a home mortgage a debt as long as you have enough equity that the value of your home exceeds the loan balance and you have a good low fixed interest rate. The big problem with the economy now was caused by mortgage lenders carelessly qualifying people for loans they could afford. Many people bought into the variable rate interest loans and when the rate went up and/or they got laid-off, the bottom fell out. They could not sell the house because the loan was upside-down and they owed more that than what the property was worth. That drove down the real estate values and the snowball began to grow.



Car loans are another problem. Most people need a car but have little or no money to put down on the vehicle because they cannot save any money for all the credit card debt. They buy vehicles with little or no money down and endup with an upside-down loan. They trade that vehicle in on another vehicle and the difference between the trade-in value and the loan balance just gets rolled into the loan on the new vehicle making the new loan upside-down...That just crazy !!



Some people actually borrow more money just to pay the debts they cannot afford to pay now??? Is that insane or what??



My personal opinion is that our schools are failing to teach any kind of Personal Finance to students in Junior High and High School...How can we expect them to grow into responsible adults when they do not even know how to manage their own finances.



...Rich

 

[Kevin Lang]

Remember, that every credit check is a strike against your account and credit rating companies can deduct points if you have applied for credit too often which can offset the value of having more credit available to you.

Which still makes no sense to me. Some jobs want to check your credit when you apply.

If your goal is to be truely "Debt Free", then why do you care what your credit rating is??

I was thinking the same thing.

My personal opinion is that our schools are failing to teach any kind of Personal Finance to students in Junior High and High School...How can we expect them to grow into responsible adults when they do not even know how to manage their own finances.

Today's math classes rely 100% or thereabouts on the calculator. If a personal finance class is taken in HS (which is completely optional, and used to avoid having to take a "harder" math class), all one does is perform exercises from a book, utilizing a calculator and MS Excel.

My points being to firstly corroborate what you said, and secondly to claim that it is impossible for public schools to teach correct personal finance.



Though even if the schools did teach personal finance correctly, could it outweigh the bad examples set by the parents, who wallow in debt and buy everything on credit, without the cash to back it up? :throwup:

 

[H D]

In today's world, being debt free is more of a myth than an achievable goal.

I do not believe that at all. Spend less than you make, and I believe it can be done. There are lots of examples. My grandparents are one. I know a couple in their early 30s that own their home outright and are entirely debt free. Our wedding photographer is debt free. Dave Ramsey takes calls daily on his radio show of people calling to tell him that they have become debt free using his plan. It can be done. I will be one of them. I've been surprised at how fast debt pays off when you start snowballing your payments and get your priorities straight.



I canceled a Discover card with a 15.99% interest that I only put a few hundred dollars of college books on a couple times. I don't like the company and refuse to own their product. It will not hurt my credit score significantly to cancel a $4k card. I had it noted that it was canceled at my request and have it in writing. I will not cancel my other card, which I've had for 8 years and has a very low limit (at my request), or my fiance's. And as mentioned, credit cards will now be less important on credit scores. I do use my credit card to pay my monthly tithe to the church and make online purchases such as hotels, etc.



My credit score and my fiance's are nearly perfect with the only exception being our age and length of credit history. That will increase even more in the next 8 months as we pay off a lot of debt and in the coming years as we age (obviously). I'm not worried about credit scores at all and if I don't get approved for a house, which is the only thing I plan to ever borrow for again, then I'll just agree that I can't afford that house or that lender. Whatever, no big deal. I will also do a 15 year mortgage, no way I will make an exception to that.



I've never had a problem with credit card usage. Less than $800 after 5 1/2 years of college...I did significantly better than my peers. My fiance did some credit card spending in college, but nothing severe. My debts are my ST, which will be paid off by June and some student loans. If I had to do it again, I probably wouldn't have borrowed for the ST. I'm too in love now, though. Luckily I already owe less than its worth. The student loans...eh, my parents didn't pay for my college, as they shouldn't. I'd probably work more and take longer to finish, but what's done is done. I'll pay for it now.



I really wish personal finances were taught in school, but who would teach it? The teachers are in the same situations as the parents of their students. I am actually going to pitch teaching a Financial Peace University class (a Dave Ramsey program) if I apply to teach at one of the local private schools next year. Dave Ramsey's program is based on Biblical financial teachings and would go really well with it being a Christian school and the obvious need for it this economy.

 

[Carey Frennier]

Most government jobs require a good fico score. Their thinking is if your score is low, you're more likely to be bribed and thus corrupted.

 

[Richard L]

KL,

Which still makes no sense to me. Some jobs want to check your credit when you apply.

An potential employer can check your credit rating without it being a strike on your credit, since the credit check is not to obtain more credit.

Though even if the schools did teach personal finance correctly, could it outweigh the bad examples set by the parents, who wallow in debt and buy everything on credit, without the cash to back it up?

Sad but very true.



Hugh:

Spend less than you make, and I believe it can be done

I agree 100%. A wise person once told me the secret to wealth, "It does not matter how much money you make, It's about how much money you keep".



My statement that being Debt Free is more of a myth than an achievable goal, does not mean it cannot be done, but in today's world that is nearly impossible to achieve. Yes, there are some exceptions, but most people who are debt free are the very wealthy, the homeless, the hermits, or retired.



If a person has no debts, and they are not wealthy or retired, they probably don't have much if any assets either?



My point is that there is really nothing wrong with having some debts, as long as you can subtract the debts from your assets and have a positive networth. And you must have enough liquidity to pay your debt when due. The problem is when people suddenly lose their jobs and now they don't have a plan or the money to pay their debts when they are due. That just means they had too much debt even though they could pay all their debts while they were working and they had not reserve cash or even a plan on how to pay their debts if they ever lost their income.



...Rich