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Old 01-28-2012, 09:59 AM   #1
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Talk to me about Dave Ramsey & the debt snowball

DH and I are planning on starting a debt snowball once our tax refund comes. We want to knock out two big payments right away, then roll those over to knock out the rest.

Talk to me about how it works, helpful hints, etc.

Links and info about budgeting too please - 'cuz once we knock out these debts *knock on wood* we won't have to live paycheck to paycheck anymore.

(posted this in off topic earlier and was pointed this way, so if you see this twice that's why )

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Old 01-28-2012, 10:38 AM   #2
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You should pay your smallest debt first no matter how small. Then take what you were paying on that plus what you are paying on 2nd smallest debt into that debt. Then take what you were paying for those two plus what you are paying on the third highest until all debt is paid. You shouldn't keep paying a small debt and try paying off larger debt first according to DR
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Old 01-28-2012, 10:40 AM   #3
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You should also be current on all current bills and have $1000 in ef before snowballing
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Old 01-28-2012, 10:51 AM   #4
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Re: Talk to me about Dave Ramsey & the debt snowball

paying the small one first and then snowballing that money to the one with the highest interest rate. You want to pay the ones that your paying the most interest on. We are paying off our car right now, and then snowballing all the money in to my husbands student loans cause he has the high interest rate on his, and I am still in school. We should have his paid off when I get my BA in Oct. Then we will move that 400 that was the car loan money and his loan money on to mine. Then we can have mine paid off in 3 yrs. We are also planning on any tax money after this year going right to loans, so we in 3yrs the only debt will have will hopefully be a house.

Good luck to you and getting all your debt paid off.
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Old 01-28-2012, 11:23 AM   #5
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Originally Posted by jenbengtson
paying the small one first and then snowballing that money to the one with the highest interest rate. You want to pay the ones that your paying the most interest on. We are paying off our car right now, and then snowballing all the money in to my husbands student loans cause he has the high interest rate on his, and I am still in school. We should have his paid off when I get my BA in Oct. Then we will move that 400 that was the car loan money and his loan money on to mine. Then we can have mine paid off in 3 yrs. We are also planning on any tax money after this year going right to loans, so we in 3yrs the only debt will have will hopefully be a house.

Good luck to you and getting all your debt paid off.
I thought dr says pay smallest ones to big ones no matter the interest rate ?
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Old 01-28-2012, 11:27 AM   #6
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Re: Talk to me about Dave Ramsey & the debt snowball

http://www.daveramsey.com/new/baby-s...FY9X7Aodzkhlhg

this has all the steps in order. We are on Baby step 2 right now as well.
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Old 01-28-2012, 11:30 AM   #7
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Re: Talk to me about Dave Ramsey & the debt snowball

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Originally Posted by jenbengtson View Post
paying the small one first and then snowballing that money to the one with the highest interest rate. You want to pay the ones that your paying the most interest on. We are paying off our car right now, and then snowballing all the money in to my husbands student loans cause he has the high interest rate on his, and I am still in school. We should have his paid off when I get my BA in Oct. Then we will move that 400 that was the car loan money and his loan money on to mine. Then we can have mine paid off in 3 yrs. We are also planning on any tax money after this year going right to loans, so we in 3yrs the only debt will have will hopefully be a house.

Good luck to you and getting all your debt paid off.
That is how some snowballs work, but not Dave's, which is what the OP asked for. Dave is very much of the opinion that most of getting control of your finances is behavioral conditioning, so unless 2 debts are very close in size, he says to ignore interest rate. It's more important to keep the wins going so you stay motivated. List your debts from smallest to largest except the house and any HELOC or student loan that is as much or more than your annual income, pay minimum payments only on everything but the smallest, and then attack the smallest with a vengeance, putting every spare dollar towards it until it's gone. Then take the money you were putting towards the smallest debt and attack the next smallest and so on.

Dave's plan is based on EXTREME levels of focus. Focus every spare dollar cutting everything as far back as you can bear to getting a small emergency fund, then attacking the debts smallest to largest, then fleshing out the emergency fund to 3-6 months of expenses. It's gonna hurt, but it's short term and if you can stick with it the gains are enormous. He councils people to live like no one else for now, cutting everythign down to nothing, so you can live like no one else later, having no payments and being able to really grow your wealth.
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Old 01-28-2012, 11:40 AM   #8
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Quote:
Originally Posted by Computermama

That is how some snowballs work, but not Dave's, which is what the OP asked for. Dave is very much of the opinion that most of getting control of your finances is behavioral conditioning, so unless 2 debts are very close in size, he says to ignore interest rate. It's more important to keep the wins going so you stay motivated. List your debts from smallest to largest except the house and any HELOC or student loan that is as much or more than your annual income, pay minimum payments only on everything but the smallest, and then attack the smallest with a vengeance, putting every spare dollar towards it until it's gone. Then take the money you were putting towards the smallest debt and attack the next smallest and so on.

Dave's plan is based on EXTREME levels of focus. Focus every spare dollar cutting everything as far back as you can bear to getting a small emergency fund, then attacking the debts smallest to largest, then fleshing out the emergency fund to 3-6 months of expenses. It's gonna hurt, but it's short term and if you can stick with it the gains are enormous. He councils people to live like no one else for now, cutting everythign down to nothing, so you can live like no one else later, having no payments and being able to really grow your wealth.
And it works. We had over $10,000 in debt with four loans 18 months ago. Wr now have one cc left and owe $5000. We should have this paid off in 10 months. All that is remaining is our $45,000 mortgage after that which will get paid off fast.
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Old 01-28-2012, 12:04 PM   #9
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Re: Talk to me about Dave Ramsey & the debt snowball

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And it works. We had over $10,000 in debt with four loans 18 months ago. Wr now have one cc left and owe $5000. We should have this paid off in 10 months. All that is remaining is our $45,000 mortgage after that which will get paid off fast.
Yep, March 2010 we had $17k in debt and not a dime of savings. Now we have no debt and $3k in savings and it's going up all the time. I expect we'll have 3 months of expenses in our emergency fund by march, either before we get our tax refund or with it, and then we can start really saving for our house downpayment (we're renters). I can't begin to tell you how good it feels to be debt free!
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Old 01-28-2012, 12:42 PM   #10
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Re: Talk to me about Dave Ramsey & the debt snowball

Thank you mamas!

I made the list of our debts from smallest to largest, and with our tax refund we'll be able to knock out all but the 2 biggest CC's, car payment, and mortgage. And it'll save us $150/month more than what we planned originally.
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