The Dave Ramsey Plan

[ducks-and-bucks]

Luckily she doesnt have any debt... and now that ive really buckled down shes jumped on board with me. I over heard her say the other day "oh he will kill me if I bought that its not in the budget"..... haha.

[Charles]

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!!!!

That's awesome...You're doing great.

Isn't it a great feeling to see positive results from your plan?

[TexasBob]

Congrats to those that have made it work. I only have a limited knowledge of his plan, but at some point does he ever admit it makes sense to have debt? A car at 0%???- why in the world would i give up cash over that? Even given the low rates on a mortgage. I guess I just have a hard time living with everything for tomorrow. You have to be smart but you also have to enjoy. A plan to be debt free in X years sounds awesome, unless you only make year X-2.

[BULL21]

Congrats to those that have made it work. I only have a limited knowledge of his plan, but at some point does he ever admit it makes sense to have debt? A car at 0%???- why in the world would i give up cash over that? Even given the low rates on a mortgage. I guess I just have a hard time living with everything for tomorrow. You have to be smart but you also have to enjoy. A plan to be debt free in X years sounds awesome, unless you only make year X-2.

To each his own, but why oils it make any sense to have debt. I everything is paid off and your future finances are looking good, you could use your paycheck to spend in things to enjoy. I don't understand why people like payments. To me it makes no sense.

[Charles]

Congrats to those that have made it work. I only have a limited knowledge of his plan, but at some point does he ever admit it makes sense to have debt? A car at 0%???- why in the world would i give up cash over that? Even given the low rates on a mortgage. I guess I just have a hard time living with everything for tomorrow. You have to be smart but you also have to enjoy. A plan to be debt free in X years sounds awesome, unless you only make year X-2.

Because when you finance "things" you usually spend more than you should.

What happens when you finance 'things" and something happens in the unforeseen future that causes you to not be able to pay for those "things".

I'm debt free now, except for the house and but had been in debt for all of my adult life. I can say I enjoy the debt free plan way better than the debt plan. Now if I want to buy something I can, if I'm willing to depart with my cash.

[Deb]

Amen. While I have limited control over how the gov't handles their money, I have COMPLETE control over my own.
Don't ask something from the gov't you don't practice yourself.

As to the steps:
1) $1,000 in the bank (baby emergency fund)
2) Debt Snowball (pay off debts, smallest to largest, excluding house)
3) fully funded emergency fund of 3-6 months expenses
4) 15% of paycheck towards retirement
5) College fund for kiddos
6) Pay off house early
7) Build wealth and give a bunch of it away!

I am debt free. Please school me on step #7.

[skyhawk]

I am debt free. Please school me on step #7.

Awesome!

Once you have your kid's college funded or out of the way, and your house is paid off, you can max out Roth (or traditional if you don't qualify for Roth) IRAs, invest in real estate (if that appeals to you), etc. beyond the 15% you started in step 4.
As for giving, in addition to the 10% tithe that always comes off the top (assuming a Christian belief here), you have the ability to be a blessing to those in need, in your immediate community, or around the world in ways you could not if you owed a bunch of money to the bank.

We are still working on paying off the house, but even now we are able to give as God lays things on our heart more than we could before. When all of your income is free to do whatever you choose with it, it is quite liberating, and the choices you have are many...

Dave recently launched the follow-up to Financial Peace called the Legacy Journey that speaks exactly to step 7. You might check into that and see if it interests you. It talks about leaving an inheritance, giving, and how the bible views wealth building (in a society that likes to demonize it).

[Deb]

Awesome!

Once you have your kid's college funded or out of the way, and your house is paid off, you can max out Roth (or traditional if you don't qualify for Roth) IRAs, invest in real estate (if that appeals to you), etc. beyond the 15% you started in step 4.
As for giving, in addition to the 10% tithe that always comes off the top (assuming a Christian belief here), you have the ability to be a blessing to those in need, in your immediate community, or around the world in ways you could not if you owed a bunch of money to the bank.

We are still working on paying off the house, but even now we are able to give as God lays things on our heart more than we could before. When all of your income is free to do whatever you choose with it, it is quite liberating, and the choices you have are many...

Dave recently launched the follow-up to Financial Peace called the Legacy Journey that speaks exactly to step 7. You might check into that and see if it interests you. It talks about leaving an inheritance, giving, and how the bible views wealth building (in a society that likes to demonize it).

No kids here. House payed off a few years ago. We host an archery tournament once a year benefiting the benevolence fund at our church. My tithe is the first thing payed. Will the Legacy Journey be helpful to someone with a VERY limited income?

[skyhawk]

No kids here. House payed off a few years ago. We host an archery tournament once a year benefiting the benevolence fund at our church. My tithe is the first thing payed. Will the Legacy Journey be helpful to someone with a VERY limited income?

I honestly don't know, as I have not been through the LJ yet. I suspect it is targeted to people with quite a bit of wealth, but the concepts would apply no matter what your income.
At the end of the day, whether we are tasked with managing a little of God's money or a lot, if we are listening to His direction, and following His plan (contained in the Bible), whatever we give will be multiplied beyond what we can imagine, and will recieve a blessing.

I love that you combine a passion (archery) with your giving. People need to realize that there is not a limited number of ways to give.

[TXTECH]

I want to be up front...i work in financial services.

I have been through FP and have facilitated it several times at church.

Dave is good and makes lots of good points, but everyone IS different and not all programs, plans, strategies work the same for everyone.

Example: had a client cancel his whole life policy per Dave. That policy was gaining in cash value more than double what he paid to it each year. Paid $3500/year and was increasing in cash value $7200. Projected to gain $7350 the next year. Cancelled it because "that's what Dave said". He had this policy for over 20 years. Applied for term and was declined by all companies due to health reasons. Fortunately he agreed to keep the whole life policy in place until the term was in force...which, as I mentioned, was declined. So he now has some old term that will terminate in a few years AND a permanent whole life policy that will grow in both death benefit and cash value every year and stay with him as long as he lives. Oh and he has a 6 year old....so most likely will want and need life insurance for more than just a few more years (when the term drops off).

Not that whole life insurance is right for all....but my point is you can't make blanket statements and expect it to be the right strategy for everyone.

Best take aways are: have a plan - budgetary snowball, live within your means, the borrower IS slave to the lender, and get life and disability insurance in place first. From there you can take steps to investing and living life like no one else!

[skyhawk]

What happens to all that cash value when he dies?
In most cases, the insurance co keeps it, it does not go to the beneficiary.
And he NEVER tells anyone to drop whole life before they get other insurance in place, and if they cannot get it, he tells them to keep what they have. But in general, it is a horrible product, and he is not the only financial advisor who thinks so.

[Codie]

What happens to all that cash value when he dies?
In most cases, the insurance co keeps it, it does not go to the beneficiary.
And he NEVER tells anyone to drop whole life before they get other insurance in place, and if they cannot get it, he tells them to keep what they have. But in general, it is a horrible product, and he is not the only financial advisor who thinks so.

The ONLY insurance product on the market that gaurantees that your loved ones will be taken care of when you die is a horrible product?

I would MUCH rather put my money towards something that I know is going to pay for itself many times over than throw my money down the drain with a bunch of term life insurance that I know myself or my family has a HIGH chance of never seeing a dime out of. If you think whole life insurance is a bad thing to own for everybody then you have been blinded by Dave Ramsey. There are plenty of scenarios out there where whole life makes SO much more sense than term life insurance. Mine being one of them (30yrs young and able to purchase whole life insurance for my entire family for $160/month compared to $80/month for term life insurance) - now WHY in the world would I want to save $80/month and get term life insurance when I know the chances are GIANT that myself nor my wife/kids will ever see the benefit of that $80/month before the term ends (at which point I would be 50-60yrs old and my chances of being healthy enough to get new life insurance coverage are MUCH less than they are now while I am young)? I WOULDN'T - I spend the extra $80 and KNOW %100 that when I die or my wife dies the surviving spouse and the kids are not going to be put into financial struggles to make it on 1 paycheck.

I am glad that the man helps a lot of people out of financial debt and respect him for that, but his "whole life insurance is the devil" metality is the main reason that I don't take much of what he says for fact because that mentality is "in fact" not true at all (especially used as a blanket statement for all people) the same way that me saying "whole life insurance is the best product on the market and that EVERYBODY should have some" would be false.

[BULL21]

The ONLY insurance product on the market that gaurantees that your loved ones will be taken care of when you die is a horrible product?

I would MUCH rather put my money towards something that I know is going to pay for itself many times over than throw my money down the drain with a bunch of term life insurance that I know myself or my family has a HIGH chance of never seeing a dime out of. If you think whole life insurance is a bad thing to own for everybody then you have been blinded by Dave Ramsey. There are plenty of scenarios out there where whole life makes SO much more sense than term life insurance. Mine being one of them (30yrs young and able to purchase whole life insurance for my entire family for $160/month compared to $80/month for term life insurance) - now WHY in the world would I want to save $80/month and get term life insurance when I know the chances are GIANT that myself nor my wife/kids will ever see the benefit of that $80/month before the term ends (at which point I would be 50-60yrs old and my chances of being healthy enough to get new life insurance coverage are MUCH less than they are now while I am young)? I WOULDN'T - I spend the extra $80 and KNOW %100 that when I die or my wife dies the surviving spouse and the kids are not going to be put into financial struggles to make it on 1 paycheck.

I am glad that the man helps a lot of people out of financial debt and respect him for that, but his "whole life insurance is the devil" metality is the main reason that I don't take much of what he says for fact because that mentality is "in fact" not true at all (especially used as a blanket statement for all people) the same way that me saying "whole life insurance is the best product on the market and that EVERYBODY should have some" would be false.

Why would you need to by life insurance for your kids? Life insurance is not to be used as a life long investment, it's to take care of your family in the event of your death. The goal of a 20-30 year term policy is safety while you work to get financially stable. He doesn't suggest that you have it for inheritance for your children.

[Codie]

Why would you need to by life insurance for your kids? Life insurance is not to be used as a life long investment, it's to take care of your family in the event of your death. The goal of a 20-30 year term policy is safety while you work to get financially stable. He doesn't suggest that you have it for inheritance for your children.

the same reason my kids wear Nike shoes and I never did growing up - I want them to have it better than I did. If I can get them started and already have a small life policy sitting there ready for them when they get out of college and are getting married and starting families to get them ahead of the ballgame then that is my choice (not to mention if something happened to one of them It is much easier to cover those funeral expenses with $10-$15/month than a lump sum of $10,000). I don't plan on leaving this world debt free (I plan on worst case scenario, not best) and I dang sure don't plan on leaving this world and passing on my possible debt to my children. It is called responsibility and leaving the chance for me to pass away and pass my debt on to my children is not a chance I am willing to take. I don't have ANY intentions of any of our life insurance making anybody wealthy. I have dreams of owning a high fence crossbow and rage broadhead only ranch with pea gravel feeding stations. It is going to take a lot of money to afford that venture and I am going to guess that unless the lord blesses me beyond my imagination that I am going to be 50yrs old before I can make it happen. I am not about to take the chance that I take on a large amount of debt at 50yrs old with a term life insurance policy that is out of its term or close to it. All it would take for them to decline me for more insurance to protect my family would be some bad cholesterol and high blood pressure. Whole life works perfectly for me, it is not there as an investment for me, it is there as piece of mind for me to know that my wife and kids WILL be taken care of in a Worst case scenario (whether that be tommorrow or 60yrs from now). I buy life insurance for what it is, protection for my family, NOT an investment. Maybe I am wrong but I promise it wouldn't be the first time or the last

[BULL21]

the same reason my kids wear Nike shoes and I never did growing up - I want them to have it better than I did. If I can get them started and already have a small life policy sitting there ready for them when they get out of college and are getting married and starting families to get them ahead of the ballgame then that is my choice (not to mention if something happened to one of them It is much easier to cover those funeral expenses with $10-$15/month than a lump sum of $10,000). I don't plan on leaving this world debt free (I plan on worst case scenario, not best) and I dang sure don't plan on leaving this world and passing on my possible debt to my children. It is called responsibility and leaving the chance for me to pass away and pass my debt on to my children is not a chance I am willing to take. I don't have ANY intentions of any of our life insurance making anybody wealthy. I have dreams of owning a high fence crossbow and rage broadhead only ranch with pea gravel feeding stations. It is going to take a lot of money to afford that venture and I am going to guess that unless the lord blesses me beyond my imagination that I am going to be 50yrs old before I can make it happen. I am not about to take the chance that I take on a large amount of debt at 50yrs old with a term life insurance policy that is out of its term or close to it. All it would take for them to decline me for more insurance to protect my family would be some bad cholesterol and high blood pressure. Whole life works perfectly for me, it is not there as an investment for me, it is there as piece of mind for me to know that my wife and kids WILL be taken care of in a Worst case scenario (whether that be tommorrow or 60yrs from now). I buy life insurance for what it is, protection for my family, NOT an investment. Maybe I am wrong but I promise it wouldn't be the first time or the last

Lol good luck with your crossbow, high fence, pea gravel venture

Like I said earlier, to each his own. If you want to put money back for your kids, a Roth IRA would be much better(take that $80 in savings and invest. Will make more money) If you had 30 year term policy worth 6-10 times your annual salary, you would be at least 60 when it expires. Your kids should be on their own by then. If you did have debt, your wife would be covered if you pass. Unless your kids are cosigners, they will never take over your debt.