*The Dave Ramsey 'Baby Steps' Thread*

[RoseGold]

If math was the main factor, would anyone go into debt to begin with?

Because I needed my degree and a car? Just because I didn't have money, didn't mean I didn't know math.

Not taking the 401K match is like taking a salary cut because it sounds cute to a guy on the radio. It's one of his least persuasive arguments IMO, which is why he usually screened for it.

 

[ThereYouSeeHer]

It doesn't make sense not to match. That's free money, and you're reducing your taxable income.

Not taking the 401K match is like taking a salary cut because it sounds cute to a guy on the radio. It's one of his least persuasive arguments IMO, which is why he usually screened for it.

Dave has said he does NOT want you unplugged from retirement investing for long (generally not longer than a couple of years). He wants people to get rid of non-mortgage debt as quickly as possible, so all that money is freed up for long-term wealth building. His millionaire study showed that most self-made millionaires achieved that status due to their tax-advantaged retirement accounts. He is big on this point and a strong advocate for company matches and retirement saving.

 

[barkley]

Dave has said he does NOT want you unplugged from retirement investing for long (generally not longer than a couple of years).

and yet his own website reads under 'how the debt snowball works'-

• Now, keep doing this same method until you cross off the very last (and largest) debt on your list. This could take you 18 months, or it might take you six years. The point is—you’re doing it! No matter how long it takes, you’ve made the commitment to become debt-free, and you’re going to see it through. We believe in you!

so he IS saying to forego that matching free money for retirement from an employer for however long it takes to pay off one's debt. that's allot of free money and tax savings down the drain.

 

[ThereYouSeeHer]

and yet his own website reads under 'how the debt snowball works'-

• Now, keep doing this same method until you cross off the very last (and largest) debt on your list. This could take you 18 months, or it might take you six years. The point is—you’re doing it! No matter how long it takes, you’ve made the commitment to become debt-free, and you’re going to see it through. We believe in you!

A rogue writer! Six years is not consistent with Dave's teaching over the years, and it also contradicts his own website where he specifically mentions saving for retirement:

"If you cut your lifestyle, take a second job, and stay laser-focused, you will get out of debt. Once you’re debt-free (and have your full emergency fund in place), you’ll more than make up for taking a year or two off from investing."

so he IS saying to forego that matching free money for retirement from an employer for however long it takes to pay off one's debt. that's allot of free money and tax savings down the drain.

Remember, not everyone would be missing free money or tax savings for these reasons:

1. Some employees do not have company matches. They are deciding between paying down debt now or putting hundreds of dollars in a retirement account for later, without any extra money being added to it.

2. Some employees do not have enough money in their budget to receive the full match. If someone is still getting out of debt and building an emergency fund, they may have $100 a month that could be diverted. If their employer matches 50%, this would only get them an extra $50 a month. That original $100 could be better utilized for Baby Steps 1, 2, and 3.

3. Some employees may not be contributing to a pre-tax retirement account. If someone is contributing to a Roth, then there are no tax savings for current paychecks.

4. Some employees have a long enough time horizon to recover. If someone is still years away from retirement, they can make up for any missed years, particularly if they were to continue with the baby steps.

 

[RoseGold]

Gosh, Dave was such a regular part of my life for so long. He was less angry then and had no "personalities" to cross-promote, and he was actually good on the radio. You could listen to the radio on a web browser, whenever you wanted, it was amazing! I graduated six figures in debt, and it always turned me off when Dave told everyone to apply to scholarships all weekend or just join the military to go to school.

When I stopped listening, he had doubled down on this very stupid maxim and was saying that all the time. And the thing is I generally agree that the 10K state school is good enough for your degree most of the time, but that isn't what he said. He didn't even want you to borrow for that school.

He took a call from a kid going to med school, I remember thinking that I hope this kid has smarter people in his life than this moron on the radio. Dave did a whole show on how you could get whoever to pay for your school and then work where they say for X years, and I was like wow, this guy is really that dumb. I get that it's one size fits all on the radio, I really hope that kid going to med school got that.

The stuff with the medical negotiation I actually used, when I helped a friend with no insurance once. It was a life-saver. Honestly, it was incredible. And the debt collection, used that a couple times too for shady debt collectors.

But once you get past the baby steps, it's time to leave. His "investment plan" is well, do some googling.

 

[ThereYouSeeHer]

Gosh, Dave was such a regular part of my life for so long. He was less angry then and had no "personalities" to cross-promote, and he was actually good on the radio. I graduated six figures in debt, and it always turned me off when Dave told everyone to apply to scholarships all weekend or just join the military to go to school.

When I stopped listening, he had double down on this very stupid maxim and was saying that all the time. And the thing is I generally agree that the 10K state school is good enough for your degree most of the time, but that isn't what he said. He didn't even want you to borrow for that school.

He took a call from a kid going to med school, I remember thinking that I hope this kid has smarter people in his life than this moron on the radio. Dave did a whole show on how you could get whoever to pay for your school and then work where they say for X years, and I was like wow, this guy is really that dumb. I get that it's one size fits all on the radio, I really hope that kid going to med school got that.

The stuff with the medical negotiation I actually used, when I helped a friend with no insurance once. It was a life-saver. Honestly, it was incredible. And the debt collection, used that a couple times too for shady debt collectors.

But once you get past the baby steps, it's time to leave. His "investment plan" is well, do some googling.

Yeah, we are currently going through the process of how to get our children through college without utilizing debt. After reading "Debt Free Degree", we came up with a plan that included community college (which would be free or close to free), followed by online schooling (which saves on room and board). However, that plan may be changing based on various factors.

I have to laugh about the non-stop scholarship-search emphasis. Maybe we'll come around, but it's not something we're relying on right now.

There are employers who will pay for college, and it is a very real benefit. Even some colleges, if you work full-time there (sometimes 30 hours is full-time), you get free or significantly reduced tuition. I loved when I heard Dollywood is offering free college tuition for employees starting on day 1 of employment. I think we are seeing a shift where students and parents are standing up against school debt. I believe schools (and employers) are already wisening up and changing their recruitment, tuition, and scholarships. Institutions are realizing they will collapse if they keep the status quo, and employers are realizing they need to do more to attract workers.

 

[RoseGold]

Yeah, we are currently going through the process of how to get our children through college without utilizing debt. After reading "Debt Free Degree", we came up with a plan that included community college (which would be free or close to free), followed by online schooling (which saves on room and board). However, that plan may be changing based on various factors.

You know your kids. And you know this could be very short-sighted. It's not like the choices are the 40K private school or join the military. State school and board isn't THAT expensive. I understand why he drew this line, I get it. Not everyone should be in college at all. But I think you know your kid better than he does.

And missing out on the college experience, making those connections, by living at home, is the last place I would pinch money. The whole point is to get to know people you'll know the rest of your life. In some careers, and in life in general, this is as important as the degree.

 

[ThereYouSeeHer]

You know your kids. And you know this could be very short-sighted. It's not like the choices are the 40K private school or join the military. State school and board isn't THAT expensive. I understand why he drew this line, I get it. Not everyone should be in college at all. But I think you know your kid better than he does.

And missing out on the college experience, making those connections, by living at home, is the last place I would pinch money. The whole point is to get to know people you'll know the rest of your life. In some careers, and in life in general, this is as important as the degree.

We are definitely considering all angles, as it keeps evolving. It went from not wanting to go to college, to wanting to go, as long as it isn't the state school, haha!

I totally understand. Although living on-campus isn't a must-have for us, it's still something we're aiming for, if we can afford it. It's quite the balancing act!

 

[RoseGold]

Looks like he has his daughter on a lot now, she was a rare guest back then, it was even before her book.

She was a real drag on the show, because she was nowhere near his radio ability. To be fair, there aren't many people who are. I find the new personalities to be un-listenable.

I think Dave did a lot of good for a lot of people, maybe he should have exited gracefully.

 

[kathy884]

Pre-pandemic I used cash a lot for purchases and any credit card charges tracked in a spreadsheet making sure I had the funds set aside. I just did this to make sure I was being reasonable about what I purchased and didn't overspend. I switched over to card only for everything during COVID and just review spending online every weekend and found my spending was almost exactly the same, but I was just earning more Southwest frequent flyer miles.

I think though for anyone who might have a tendency to overspend, the advice to not use cards is probably beneficial.

 

[barkley]

A rogue writer! Six years is not consistent with Dave's teaching over the years, and it also contradicts his own website where he specifically mentions saving for retirement:

"If you cut your lifestyle, take a second job, and stay laser-focused, you will get out of debt. Once you’re debt-free (and have your full emergency fund in place), you’ll more than make up for taking a year or two off from investing."


Remember, not everyone would be missing free money or tax savings for these reasons:

1. Some employees do not have company matches. They are deciding between paying down debt now or putting hundreds of dollars in a retirement account for later, without any extra money being added to it.

2. Some employees do not have enough money in their budget to receive the full match. If someone is still getting out of debt and building an emergency fund, they may have $100 a month that could be diverted. If their employer matches 50%, this would only get them an extra $50 a month. That original $100 could be better utilized for Baby Steps 1, 2, and 3.

3. Some employees may not be contributing to a pre-tax retirement account. If someone is contributing to a Roth, then there are no tax savings for current paychecks.

4. Some employees have a long enough time horizon to recover. If someone is still years away from retirement, they can make up for any missed years, particularly if they were to continue with the baby steps.

'rogue writer'? it's DIRECTLY from ramsey's website-https://www.ramseysolutions.com/debt/how-to-pay-off-debt publication date 7/14/22.

i'm bowing out of this thread-i personally didn't choose to bow at the alter of ramsey to become debt free and yet somehow it worked out fine. imho-he's got some good advice but some not so good as well as out of date.
in closing i will point out-the man makes a significant portion of his income off the financial challenges and hardships of others by hawking costly books and seminars, and collecting considerable initial training costs, continuing monthly fees (into 5 figures per year per participant according to some sources) and upwards of 30% commissions to be designated a 'ramsey endorsed local provider' or 'smartvestor pro' so take it with a grain of salt when relying on their recommendations for local financial professionals and do your own research b/c you might just find someone far superior who chooses not to go INTO debt just to get ramsey's stamp of approval.

ttfn

 

[RamblingMad]

You gotta pick and choose what works best for you when following any of these people.

 

[ThereYouSeeHer]

'rouge writer'? it's DIRECTLY from ramsey's website-https://www.ramseysolutions.com/debt/how-to-pay-off-debt publication date 7/14/22.

i'm bowing out of this thread-i personally didn't choose to bow at the alter of ramsey to become debt free and yet somehow it worked out fine. imho-he's got some good advice but some not so good as well as out of date.
in closing i will point out-the man makes a significant portion of his income off the financial challenges and hardships of others by hawking costly books and seminars, and collecting considerable initial training costs, continuing monthly fees (into 5 figures per year per participant according to some sources) and upwards of 30% commissions to be designated a 'ramsey endorsed local provider' or 'smartvestor pro' so take it with a grain of salt when relying on their recommendations for local financial professionals and do your own research b/c you might just find someone far superior who chooses not to go INTO debt just to get ramsey's stamp of approval.

ttfn

No worries. I understood it was from Ramsey's website, but he has multiple employees who write his articles, and I was joking one of them went rogue. This has happened before where someone has called in to point out an error on his website, and he has been like, "It will be removed before this call even ends."

I get that he's not for everyone. He runs a business just like anyone else, and I have spent a pretty penny on books and products from other financial gurus, too.

Debt freedom is great, no matter how you attain it, so best wishes for continued success!

 

[RamblingMad]

No worries. I understood it was from Ramsey's website, but he has multiple employees who write his articles, and I was joking one of them went rogue. This has happened before where someone has called in to point out an error on his website, and he has been like, "It will be removed before this call even ends."

I get that he's not for everyone. He runs a business just like anyone else, and I have spent a pretty penny on books and products from other financial gurus, too.

Debt freedom is great, no matter how you attain it, so best wishes for continued success!

Best to listen to a lot of different point of views and then sit down with a spreadsheet and figure it out.

 

[ThereYouSeeHer]

As we head into the most treacherous of shopping seasons (kicking off with Black Friday), here's some humorous wisdom from a classic SNL skit....

Be careful out there and be wary of marketing tactics like, "90 days same as cash" (cash is the same as cash!)

Stick to your budgets, and "Don't Buy Stuff You Cannot Afford!"

 

[ThereYouSeeHer]

It's my favorite time of the month--budget changeover! I love it because if budgets were a struggle this month, you get to wipe it clean and start over! Or, if you had a great month, you can carry that momentum going forward.

So, close out those November budgets and set a new one for December.

No one wants to spend January cleaning up December's mess, so let's finish the year strong!

 

[MomToOne]

And missing out on the college experience, making those connections, by living at home, is the last place I would pinch money. The whole point is to get to know people you'll know the rest of your life. In some careers, and in life in general, this is as important as the degree.

I'm not a huge Dave Ramsey fan, but living at home during college is not the end of the world. I did it, and had plenty of experiences and met all the same people as if I lived on campus. I partied just as hard as anyone, worked on campus thanks to knowing a professor who lived down the street, and spent lots of time hanging out in the dorms with friends - I didn't miss anything great in my eyes. In fact, my friends were constantly wanting to come home with me to do their laundry or get a decent meal cooked by my Mom LOL

 

[ThereYouSeeHer]

I'm not a huge Dave Ramsey fan, but living at home during college is not the end of the world. I did it, and had plenty of experiences and met all the same people as if I lived on campus. I partied just as hard as anyone, worked on campus thanks to knowing a professor who lived down the street, and spent lots of time hanging out in the dorms with friends - I didn't miss anything great in my eyes. In fact, my friends were constantly wanting to come home with me to do their laundry or get a decent meal cooked by my Mom LOL

I agree. And if we decide on community college, there is still a campus experience. If we decide on online degrees, we can still visit the college for special events. Plus, even if college weren't in the picture at all, then having a job has its own benefits of real-world experience and meeting others.

With most things, I think it's whatever you make of it!

 

[pigletto]

I agree. And if we decide on community college, there is still a campus experience. If we decide on online degrees, we can still visit the college for special events. Plus, even if college weren't in the picture at all, then having a job has its own benefits of real-world experience and meeting others.

With most things, I think it's whatever you make of it!

The University my son just went to literally has a team dedicated to off campus students. They planned special events for them for frosh week. They have dinners, movie nights, an office to come in and discuss concerns or sign up for meet ups. They are very active in engaging the off campus community.

Plus you can’t help but meet people in your program as you go along. By second year around here everyone is off campus anyway. Then you have clubs to join to meet people as well. I think there are many opportunities to meet people without living in residence.

I certainly wouldn’t let it be too huge of a concern. I’d be far more concerned with the crushing amounts of debt students get saddled with and the stress and worry that brings them for years and years.

 

[ThereYouSeeHer]

Just passing along a link to a net worth (consumer equity) worksheet. I recommend filling it out on January 1st and then saving it to compare with next January 1st: Worksheets.

If your net worth is negative, you owe more than you own. If you have a positive net worth, and you still have debt, don't get comfortable just yet! Debt is a liability and introduces risk into the equation. Stick with the Baby Steps and completely eliminate that debt!

Remember, net worth is not a reflection of personal value and is not something to obsess over. However, there are three practical reasons why knowing your numbers is beneficial:

1. Financial Wellness: Your net worth is a picture of overall financial health. Year over year, it can be helpful to see any progress or setbacks as you work on reducing liabilities and increasing assets.

2. Purchasing Cars: Depreciating assets (like cars) should be a small percentage of your overall net worth. Dave recommends purchasing only used vehicles (with cash) while your net worth is still under $1 million. If your net worth is over $1 million, you can purchase a new car (with cash) because you are better able to absorb the immediate depreciation once you drive it off the lot.

3. Umbrella Insurance: Once your net worth passes $500,000 and you approach the million mark, it is time to consider Umbrella Insurance. Car and homeowners insurance can only cover so much. Generally, you will need to increase or max-out the coverage on your cars and real estate before an umbrella policy can be added.