The Dave Ramsey Plan

[Charles]

It's awesome reading all the success stories of the folks living a debt free life style.

To those of you still working towards "debt free" keep it up. No matter how tough it gets I promise you, it's worth the effort and sacrifices.

[Joshua Flournoy]

He would tell you that if you can't put a minimum 20% down and pay it off in 15 years, then yes continue to rent.

A house is not always a blessing if not bought smart.

I agree with a lot of what DR says, although, like others here have already mentioned, most of it is just plain old common sense which apparently a lot of folks are lacking. I pay off my one (business) credit card every month, have never paid a cent in interest. Have never bought a new car in my life. However, in regards to the question about renting or buying, I've done both, and I will say that the years I rented an apartment and rented a house are years that I consider to be some of the most "wasteful" of money that I ever spent, simply because that rent money was going towards nothing. Is it possible to make an un-wise house purchase? Of course! But if you can make a wise purchase on something you can afford, knowing what I know now, I would buy over renting any day of the week, and I wouldn't be looking for a 15 year loan, either, I'd be looking for as long as possible at the lowest interest rate possible. Any person with half a dash of common sense can make a higher rate of return on their money than what they're paying on their home mortgage at today's low rates. I don't like debt in general, but home debt is one kind of debt I can live with when I know I can take that extra capital and use it to make a much higher return. And that is exactly what I've done pretty much my whole adult life.

[Throwin Darts]

I wonder how many of Dave's followers are using all free cash flow to retire sub 4% mortgage debt while not maxing out tax advantaged accounts such as 401ks and IRAs.

Each person has a limited opportunity to contribute to these accounts. If they have earned income from employment for 40 years, then you get 40 opportunities to take advantage of these accounts. Once you miss a year, you never get it back.

At today's marginal income tax rates, it would be tough math to justify missing out on tax deferred growth of traditional IRAs and 401ks and tax free growth of Roth IRAs to save the tax adjusted cost of a mortgage at today's rates.

[Mike D]

I wonder how many of Dave's followers are using all free cash flow to retire sub 4% mortgage debt while not maxing out tax advantaged accounts such as 401ks and IRAs.

Each person has a limited opportunity to contribute to these accounts. If they have earned income from employment for 40 years, then you get 40 opportunities to take advantage of these accounts. Once you miss a year, you never get it back.

At today's marginal income tax rates, it would be tough math to justify missing out on tax deferred growth of traditional IRAs and 401ks and tax free growth of Roth IRAs to save the tax adjusted cost of a mortgage at today's rates.

Investing is part of his plan and it comes at the same time as Paying the house off early. He says to max Roth IRAs and invest the rest in traditional Roth or 410k up to 15-20% of your income. Anything that's left over after investing goes to pay the house off early.

[skyhawk]

I wonder how many of Dave's followers are using all free cash flow to retire sub 4% mortgage debt while not maxing out tax advantaged accounts such as 401ks and IRAs.

Each person has a limited opportunity to contribute to these accounts. If they have earned income from employment for 40 years, then you get 40 opportunities to take advantage of these accounts. Once you miss a year, you never get it back.

At today's marginal income tax rates, it would be tough math to justify missing out on tax deferred growth of traditional IRAs and 401ks and tax free growth of Roth IRAs to save the tax adjusted cost of a mortgage at today's rates.

I know you are never going to be convinced, but if a Dave follower is paying off their mortgage before investing for retirement, they are not following his plan (step 4 vs. step 6).

[ducks-and-bucks]

I got another step further this weekend!!!!!! Sold my airboat! Thousands of dollars in debt GONE!!! Freed up $400 a month to go to student loans! Plus im down to where one paycheck a month covers all the bills and more and my second check all can go to paying stuff off asap! At this rate I should be sitting much prettier in the next few months to come!! We are excited.. lesson learned the borrower is always slave to the lender!!!!

[Sparzo]

Good job ducks n bucks! Keep it up.

[STGS]

I got another step further this weekend!!!!!! Sold my airboat! Thousands of dollars in debt GONE!!! Freed up $400 a month to go to student loans! Plus im down to where one paycheck a month covers all the bills and more and my second check all can go to paying stuff off asap! At this rate I should be sitting much prettier in the next few months to come!! We are excited.. lesson learned the borrower is always slave to the lender!!!!

Well done and congratulations. No debts is a wonderful feeling.

[skyhawk]

Great job! You are a GAZELLE, dude!

[ducks-and-bucks]

Haha! Trying to be!....

[Outback]

Hey now, we can't have TOO many people buying used Dave Ramsey cars and trucks. Some of you guys gotta be the first owners of my future vehicles!

[Outback]

I know you are never going to be convinced, but if a Dave follower is paying off their mortgage before investing for retirement, they are not following his plan (step 4 vs. step 6).

Great point. The steps must be done in order or it could be really bad.

Step 1: $1,000 In An Emergency Fund
Step 2: Pay Off All Debt With The Debt Snowball
Step 3: Save 3 To 6 Months Expenses In Savings
Step 4: Invest 15% Of Income Into Roth IRAs And Pre-Tax Retirement Plans
Step 5: College Funding
Step 6: Pay Off Your Home Early
Step 7: Build Wealth And Give!

[Target-panic]

Great point. The steps must be done in order or it could be really bad.

Step 1: $1,000 In An Emergency Fund
Step 2: Pay Off All Debt With The Debt Snowball
Step 3: Save 3 To 6 Months Expenses In Savings
Step 4: Invest 15% Of Income Into Roth IRAs And Pre-Tax Retirement Plans
Step 5: College Funding
Step 6: Pay Off Your Home Early
Step 7: Build Wealth And Give!

I skipped to step 2 to step 6 early, becauise I was tired of dealling with the mortgage company shuffle. I didn't own but $17,000 on that mortgage, but it was sold to 3 differnent holders and making sure the insurance was right, the property had 3 buildings, etc. What a circus!!!!!!!! I now control 100% of the equity in the property.

[Mike D]

I got another step further this weekend!!!!!! Sold my airboat! Thousands of dollars in debt GONE!!! Freed up $400 a month to go to student loans! Plus im down to where one paycheck a month covers all the bills and more and my second check all can go to paying stuff off asap! At this rate I should be sitting much prettier in the next few months to come!! We are excited.. lesson learned the borrower is always slave to the lender!!!!

Awesome man. Stick with it! It's worth it.

[BikiniBowhunter]

We do/did DR. Have fallen off the wagon and need desperately to get back on.
We paid off all our debt and spent a lot on other things that were going on the time all while I stopped working to be a stay at home mom. Now we have another car payment. Every time I look at that car I cringe. We are faulty in other areas as well. So my advice ain't worth a hill of beans right now.

A suggestion though is to pray for your GF. She needs to be on the same page with you about BOTH your and her debt. If she wants to get married I recommend learning what her debt is before you get married. It is darn scary to learn after the big day that your new spouse in way in over their head.