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Dave Ramsey Baby Steps


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  #1  
June 30th, 2011, 07:11 AM
JessP's Avatar Lovin life and family
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Real Debt Help - Get out of debt with Dave Ramsey's Total Money Makeover Plan - daveramsey.com

So I found this site and thought I would share. Its a new method he has developed.

Baby step #1 Have $1000 in an emergency fund.
Baby step #2 Pay off debt with the snowball effect.
Baby step #3 3-6 months expenses in savings.
Baby step #4 Invest 15% pre tax income into retirement funds.
Baby step #5 College funding for children.
Baby step #6 Pay off home early.
Baby step #7 Build wealth and give.

I will make other posts regarding these steps to see where everyone is and how you are working on them. There are many methods to paying off debt this is just one. More to follow .
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  #2  
June 30th, 2011, 09:08 AM
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I don't follow Dave Ramsey, but I do follow Larry Burkett who was a mentor to Dave Ramsey. Their methods are fairly similar. We are working on number 1 and number 2.
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  #3  
June 30th, 2011, 09:38 PM
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I have not heard of Larry Burkett I will look him up. I hope to post different methods each week and people can pick the one that works best for them. We are working on 1 and 2 as well.
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  #4  
July 1st, 2011, 08:44 AM
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I just started reading his book. I am excited to get started. I have never heard of his mentor either
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  #5  
July 1st, 2011, 12:40 PM
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We're kinda all over his steps, but on purpose.

We didn't pay off our student loan debts in our snowball because their interest is only half of the interest rate on our mortgage, so it would make more sense to pay more on the mortgage first.

We have 4.75 months of expenses saved.

We are contributing 6% of hubby's income towards our retirement and lucky that his work contributes another 9%.

Our kids have savings accounts and any money they receive as gifts goes in there.

Last year we re-fied our mortgage to a 15 year mortgage, cutting off ~7 years of the original 30 year mortgage. But, we hope to move in the next few years, so we may actually extend things in the long run, but this is not our forever home.
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  #6  
July 1st, 2011, 07:02 PM
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We are also kind of all over his steps. We've chosen to put off step 3 maybe indefinitely because my husband is military and job assurance is pretty solid, but we will have other forms of savings that we can tap if we HAVE to. Our credit card debt is less than $1000 right now (and only that high because we just had to get a new washer and dryer). It'll be paid off before the end of the year easily. Other than that we have one car note and it's got a year and a half I think left on it (we do make over payments)

Hubby has a retirement plan with the Army (his next reenlistment will be indefinitely since he will already have over 10 years in) so we're using that money to put me through school

the girls have savings accounts, though not as stocked as I'd like. They exist and are accruing interest.

We rent since we're military so paying off our house isn't in the cards
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  #7  
July 1st, 2011, 10:03 PM
Happy Song's Avatar Nicole
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Baby step #1 Have $1000 in an emergency fund.
Baby step #2 Pay off debt with the snowball effect.
Baby step #3 3-6 months expenses in savings.
Baby step #4 Invest 15% pre tax income into retirement funds.
Baby step #5 College funding for children.
Baby step #6 Pay off home early.
Baby step #7 Build wealth and give

OK even though our situation right now sucks we have been through this and done it. We did cheat, we sold our house before the market tanked paid off our debt and bought our house in full.

I completely agree with Getting out of debt but I completely disagree with the order of his steps. This is the same as when we were started doing this six seven year ago but the world has completely changed. Real estate is not the investment it was, 401Ks retirement fund and wall street have really lost a lot of money. College educations cost are rising at such a horrific clip that if you really want to put your children through college you need to take the money you are saving for that and build wealth. A 401K is giving your money to someone else so they can build wealth and you get the pennies left over.

Any way once you get past the first three steps, it isn't a one size fits all and we each need to tailor it to fit our needs.

any way I am somewhat of a doom sayer and we have a lot of our weath sitting around in cold hard food, ducks, and land.
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  #8  
July 2nd, 2011, 06:24 AM
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Quote:
Originally Posted by Happy Song View Post
A 401K is giving your money to someone else so they can build wealth and you get the pennies left over.
I have to disagree about this. Yes, you could certainly invest your money elsewhere, but there will never be guarantees with returns on investments. Personally, I'd rather invest in a 401K where a company matches so much of the money because that's FREE MONEY to also be invested.
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  #9  
July 2nd, 2011, 08:55 AM
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Originally Posted by ~Kris~ View Post
I have to disagree about this. Yes, you could certainly invest your money elsewhere, but there will never be guarantees with returns on investments. Personally, I'd rather invest in a 401K where a company matches so much of the money because that's FREE MONEY to also be invested.
I agree with the no guaranteed return, but 401k's seem really scary to me right now. even with matching my friends and family are all ending up negative in their 401k's in the last 2 years.

I tend to be more conservative. CD's are my preferred. I know the return is low, but it is guaranteed. Money Market is about as risky as I get

Quote:
Originally Posted by Happy Song View Post
Any way once you get past the first three steps, it isn't a one size fits all and we each need to tailor it to fit our needs.
It's definitely not one size fits all, but his methods have reason and a lot of people feel like they don't know where to start when it comes to paying off debt. This is a very reasonable plan for those people and for people like my family where it doesn't make total sense we have a guide to look at an say "what of this works for us, and what can I change". But the snowballing is very smart and most people wouldn't think to do that on their own.
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  #10  
July 2nd, 2011, 09:26 AM
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Originally Posted by C&K'sMama View Post
I agree with the no guaranteed return, but 401k's seem really scary to me right now. even with matching my friends and family are all ending up negative in their 401k's in the last 2 years.

I tend to be more conservative. CD's are my preferred. I know the return is low, but it is guaranteed. Money Market is about as risky as I get


Retirement plans are meant to be a long term investment, they will have ups and downs. Even with things going in the pooper the last few years, our contributions are ony about 30% of what in in our retirement account. The rest is employer contribution and growth. You won't get a return like that from a CD.

Now is a really good time to be investing in retirement (provided you have a decade+ of working). With things low, it's like buying things on sale.
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  #11  
July 4th, 2011, 06:38 PM
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And, too, most 401(k) plans have an option for you to be in charge--if you are a very conservative investor and prefer guarnteed investments, you can choose things like bonds and CDs in your 401(k) and you still get the benefit of the employer matches I've never let the company handling my 401(k)s be in charge of where my money is invested and have chosen investments I am comfortable with and even when the stocks plummeted, I never lost enough to put me in the negative--I always had more in there than I had invested
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  #12  
July 7th, 2011, 07:50 PM
Happy Song's Avatar Nicole
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Quote:
Originally Posted by ~Kris~ View Post
I have to disagree about this. Yes, you could certainly invest your money elsewhere, but there will never be guarantees with returns on investments. Personally, I'd rather invest in a 401K where a company matches so much of the money because that's FREE MONEY to also be invested.
Well not all 401K's are company matched. Plus sometimes you have to be with the company long enough to be "vested" before the money is yours anyway. Plus often times the company match is in the stock of the company not in your 401K where the risk is spread out.
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  #13  
July 8th, 2011, 03:17 PM
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Well not all 401K's are company matched. Plus sometimes you have to be with the company long enough to be "vested" before the money is yours anyway. Plus often times the company match is in the stock of the company not in your 401K where the risk is spread out.
While that may be true in some cases, most people still benefit from 401Ks. Your blanket statement made it sound as if 401Ks are crap. If that were the case, I doubt they would be around as much as they are.
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  #14  
July 17th, 2011, 04:49 PM
Happy Song's Avatar Nicole
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Quote:
Originally Posted by ~Kris~ View Post
While that may be true in some cases, most people still benefit from 401Ks. Your blanket statement made it sound as if 401Ks are crap. If that were the case, I doubt they would be around as much as they are.
I do believe that 401Ks are crap. But if they work for you, that is great. There are a lot of things that benefit other people that are still around because they benefit them not you. So I believe your reasoning to be faulty, plus that you could come up with a more concrete example of why it work and is a strong asset.

We are all told the same thing, get in early, diversify, and hold out though the dips.

My distaste for 401K's comes from my years as a debt collector speaking to people what had already retired and were living on their retirment savings.

Trading horses midstream here treasury bills were considered one of the least risky investments and here the US governement is at risk of defaulting on it's debt.

Quote:
I have to disagree about this. Yes, you could certainly invest your money elsewhere, but there will never be guarantees with returns on investments. Personally, I'd rather invest in a 401K where a company matches so much of the money because that's FREE MONEY to also be invested.
I honestly do not believe that there any free money in the world. The "match" is more of a bribe to keep you at the company to be vested. also when you do seperate from the comany that money that was vested needs to be rolled over and I believe that I lost a lot of value in that transaction. I personally think that the monies selv invested by the company actually benefit the company in holding up the stock value as being unable to be sold. Again that means the FREE MONEY is only yours on paper.

Another serious disadvantage to Dave Ramsey's steps is not all jobs come with 401K options. As a farmer/small business owner/worker my husband has not had the 401K option availible for years now so those with a less traditional job are kind of left floating on how to handle the "how to invest" question. Even in the full verson of the book it is pretty dumbed down.
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Last edited by Happy Song; July 17th, 2011 at 06:52 PM.
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  #15  
July 18th, 2011, 03:24 PM
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We are on #3 technically, however we're doing 12 months worth of bills in savings and not 3-6. But we are also contributing to our son's college fund as well as our retirement funds at the same time. So we're combining a couple of steps at the same time.
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  #16  
July 20th, 2011, 01:23 PM
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We are in step 3 We love Dave!
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