Dave Ramsey?

mrskimm09 · May 2014

Anyone try the snowball method?

Thoughts?

We are about $2000 in debt and I want to get ahold on it before it, well, snowballs... no pun intended.

athlete010688 · May 2014

There are several people that try the snowball method. I'm in the process of re-aligning our budget and hoping to start snowballing our debt soon. We don't have that much debt tho.

You're only $2000 in debt? That's great, and I would think you should have that paid off relatively quick!

smbenevides1989 · May 2014

I'm currently in the snowball method. Is this a mixture of debt?

In a mixture of debt, DR has you start with the smallest total balance and start paying that off first while paying the minimums on the rest. Once you pay off the smallest, then take whatever amount you were paying and add it to the minimum payment on the next debt. So you are doubling and tripling your payments as you go down the line until you reach the biggest one.

Sisugal · May 2014

Track all spending. Then decide where you can cut back.
List your debt by either amounts of debt or by interest rates. Then choose one of two plans -1) pay off by highest interest first or by 2)smallest debt amount first.
Throw all available extra funds found from your cutting back and excess available after necessities are paid to the chosen debt and pay minimums on the remaining debt. Continue til it is paid off then direct those fund to the next debt on your list.
Works every time it is tried.
Good luck.

strickland8052 · May 2014

What are your interest rates like? In my opinion, I think that the snowball method is great if the interest rates are all around the same and higher than 0%. However, if you have one CC that is 0% interest and another that is 15%, I think it makes way more sense to pay off the 15% first. The 0% interest isn't "costing" you anything, but the 15% is costing you....well... 15%.

brij2006 · May 2014

We are on baby step #2 of Dave Ramsey's Total Money Makeover.

My thoughts are that you need to do all aspects of his plan and live your life on his plan in order for it to fully work. We've been doing it since December and have paid off $15k in student loans. It's so worth it!!!

athlete010688 · May 2014

strickland8052 said:

What are your interest rates like? In my opinion, I think that the snowball method is great if the interest rates are all around the same and higher than 0%. However, if you have one CC that is 0% interest and another that is 15%, I think it makes way more sense to pay off the 15% first. The 0% interest isn't "costing" you anything, but the 15% is costing you....well... 15%.

This is definitely my philosophy! We have a couple of debts that are 0% financing. One is for a furnace we had to replace...the only reason we have that credit card was because it was 0% for 12 months. We had the money to pay for the furnace at the time, but would have wiped out our savings account. Our other is a medical bill that is 0% for 18 months. Our two interest-bearing loans is for the vehicles (one will be paid off in June/July), and the other we just re-financed to 2.39%. I'd much rather pay the one that has the interest rate first.

lifeonthehill · May 2014

H had $33,000 in student loan debt we started paying off last April. If we had followed the DR plan exactly the way we were supposed to we would have been debt free on June 1st. Our relationship obviously comes first so we agreed to pay off half the debt and then save 3-6 months of living expenses then go back to the loans after to ease his mind.

Today we agreed that whatever debt we have left on the 31st of December will come out of the 3-6 months living expenses and we will then work on rebuilding it. I wish H had been much less stubborn and allowed us to follow the plan as directed. IT WORKS! Do it. $2,000 in debt is nothing compared to a lot of the people on this board. You should be able to move through it pretty quickly.

mana8503 · May 2014

We paid off $15,000 last year using the snowball, and this year we will pay off another $7,500. We are on the last debt, my student loan and are paying 5 times the amount due per month, plus my extra pay this month (I get 3 pays instead of 2). Its an amazing feeling. I can't wait to move onto building our efund.

KatieCutie05 · May 2014

We're on Dave Ramseys plan too and i think its really great. you don't have much debt so you will get to babystep 3 in no time. The snowball may/maynot even apply to you all that much with that little debt unless you have a really low income. but seeing that your still talking about it going up means your still using the credit card. So the main thing you need to do is cut up the card, get on a written budget, and vow to never go into debt for anything ever again (well except a house) .

My husband and I have been on the DR plan for about 10 months now and its great. We got all our credit cards paid off and we have no reason to need to use them again because we know where our money is going which is honestly the best part. and in ten months we lowered our debt by 17k which really isn't that much looking at the big picture.

hoffse · May 2014

I'm probably less than lukewarm toward Dave Ramsey. A lot of his stuff was written when interest rates were substantially higher than they are now (pre-financial collapse), so some of his advice really needs to be updated. He also went bankrupt himself before writing all of his stuff. I recognize that he's writing from the perspective of "what I have learned," but still. People have different relationships with money, and going bankrupt means that your relationship with money was really terrible at one point. And sort of like fixing an addiction, there are things you have to do to stay on the straight and narrow once you have recovered from bankruptcy to make sure you never get to that place again. I think that DR is really great for people with a crippling amount of debt (any kind) or who have such a bad relationship with money that they basically need an intervention. I just think his methods are sort of extreme for people who do not fall into one of these two categories.

All that said, the his snowball method works fine - and it's a technique that a lot of other financial advisers suggest (though I think the term "snowball" is DR's word). I just think the priority of where your money should go is somewhat different than what DR would say. For me, personally, it's:

1) Credit card debt

2) Small e-fund ($3k-$5K)

3) Retirement - getting Roths fully funded each year and getting at least 15% of your gross income

4) Split between student loan debt and emergency fund until e-fund covers 3-6 months of expenses (for people with unstable jobs) or all of your insurance deductibles at once (for people with stable jobs)

5) College savings (if applicable)

6) Wealth building

With interest rates this low, I would not pre-pay on a mortgage, even though it is a "debt." DR is pretty anti debt-financing, but it's actually a way to make a lot of money if you do it correctly. Every now and then I read blog posts from people who say they bought their house cash because they followed DR's plan, and I just have to shake my head at the tens (hundreds?) of thousands of dollars they lost by doing that.

Just my $0.02.

brij2006 · May 2014

alyssa32713 said:

H had $33,000 in student loan debt we started paying off last April. If we had followed the DR plan exactly the way we were supposed to we would have been debt free on June 1st. Our relationship obviously comes first so we agreed to pay off half the debt and then save 3-6 months of living expenses then go back to the loans after to ease his mind.

Today we agreed that whatever debt we have left on the 31st of December will come out of the 3-6 months living expenses and we will then work on rebuilding it. I wish H had been much less stubborn and allowed us to follow the plan as directed. IT WORKS! Do it. $2,000 in debt is nothing compared to a lot of the people on this board. You should be able to move through it pretty quickly.

Ditto all of this! Many people follow his plan in bits and pieces, then get discouraged with it and stop. In order to successfully do his plan, you have to follow every bit of it.

mrskimm09 · May 2014

Thanks everyone. Yes I know $2000 is nothing compared to some people. We were much worse before but after many months we only have $2000 left. We just didn't do the DR snowball before. Again, thanks!

Wulfgar · May 2014

We don't use the debt snowball since if we did, I would not have enough time to save up for retirement. We do pay extra on debts and attack any credit card debt quickly when we have emergencies above what we have in our emergency fund.

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