Financial Peace University and getting out of debt

[Wanda Van Winkle]

Since I'm past forty and not yet fifty [loud clearing of throat], the R word looms large all of a sudden in my mind. Perhaps because I've been in different jobs the last couple of years, teaching part-time and working at the bank. I dearly want to get out of debt and try to pay off our house before I retire.

Now we are paying our bills fine; don't get me wrong. We are like many Americans who pride themselves on paying their bills on time, but also like many who have some debt accumulated. But if you handle money well, or have listened to financial tapes, or gone to classes at college to learn about finance, you know that paying interest really eats at your income.

Have any of you used Dave Ramsey methods, either through the class or just by hearsay or renting the tapes?

We haven't gone to the classes, but I've listened to several tapes about getting out of debt.

We just paid off ONE credit card! YAY!

But our credit cards have high interest.

Have you been successful at lowering your interest while you are paying off a card? Or have you used some other financially sound method for getting rid of the card, and not a come-on by "credit consolidation" people?

I hope to pay off all debt except the house, and then start paying as much extra per month toward the house as we had been paying monthly on the other bills.

It's fun to rein in on the spending, too! Amazing how much you DON'T have to spend. That part's pretty easy for me, anyway, having been a single mother for nine years.

Thanks ahead of time for your ideas!

[Alisa Stoll]

My mother-in-law has the tapes and is a firm believer in his methods. One of our board members has a strong burden in this area and he went through the class so that he could teach it at our church. Our financial advisor was the teacher of the course the board member took. Oh the board member had used my mother-in-law's tapes to teach a previous class on finances.

So I'd say go for it - class if you can and tapes if you have to.

Alisa

[Belinda Y. Edwards]

i haven't heard of this guy. Sounds interesting.

[Bob Evans]

We are in the middle of debt reduction. I beleive Ramsey says pay your debts off lowest to highest and use the amount you would pay each month and snow ball it on to the next one.

We have reduced credit card debts, canceled land lines and use cell phones, used no interest deals to buy new frunitre and appliences. We still have a ways to go but it is a liberating experience to actually see your monthly expendatures decrease, your retirement fund grow, and you ability to support the kingdom grow to a greater proportion

[Houston Thomas]

Dave Ramsey gives practical financial advice. His system for getting out of debt (the debt snowball) is built upon militant budgeting and cash only spending with a psychological effect built in. Here is how it works: make a list of all debt, arrange debt by amount owed, Cut up your credit cards, only spend cash, budget your cash, and apply all extra money toward paying off debt. For Dave Ramsey that means no 401(k) contributions, college saving, etc. until debt is payed off. (I don't necessarily agree with this)

When you go to payoff your debt you pay minimum payments on everything except your smallest amount owed. To that, you pay all of your extra money. When you have payed off that debt, you apply that payment to the second smallest amount owed, etc. Thus, paying off your debt snowballs and you start to feel momentum.

It's a decent system of debt reduction. I would read "The Total Money Makeover" before I bought any tapes. It outlines his methodology. I would also recommend just listening to his financial advice. Too often he links Christianity and prosperity.

[Dave McClung]

....Too often he links Christianity and prosperity.

I listen to Dave a lot. I don't think he improperly links Christianity and prosperity. What he links is Christianity with a frugal life style. He doesn't think it is good stewardship for Christians to live on credit, buy new cars, or spend money lavishly. I find myself in agreement more often than not.

The only area where I consistently disagree is on the value of a college education in a private Christian school. He looks at education solely on a mathmatical basis and does not place value on the character building aspects of attending a school like the Nazarene schools. Other than that, I generally agree with him.

While Linda and I don't strictly follow his plan (we don't have credit card debt), we agree and live with the principles he presents. I have recommended his program to a number of people who are carrying credit card debt. His plan makes sense.

For those who aren't familiar with what we are talking about, his plan is:
1. Become aware of where you are spending your money -- every cent.
2. Eliminate unnecessary spending.
3. Use the money from the eliminated spending to eliminate your debt by paying down the debt with the highest interest first. If all are at the same interest rate, then pay the smallest off first.
4. A key assumption is that you won't create any new debt!!
5. The only debt he thinks is proper is a purchase money mortgage for an appropriate home for your family -- one that you can clearly afford.
6. He agrees with tithing.

In case you are interested, the areas where Linda and I don't follow his principles are fairly simple:
1. We buy new cars rather than used because we tend to drive our vehicles for a long time. My truck is 10 years old, and we just replaced Linda's 11 year old car. For people who like to change cars often, I agree with Dave that buying a used car is best.
2. We don't keep track of every expenditure. For many years, I did, but found that for our purposes a once a week review is adequate. If we had credit card debt, I would follow his plan.

One area of savings that is mentioned by most of his callers is "eating out." The first time people keep track of all of their expenses, the one area that surprises them is how much they are spending eating out as compared to eating at home.

There is one additional principle that I wish that Dave would emphasize more. Young people need to hear that early sacrifice leads to later luxury. When Linda and I finished high school, we sacrificed for 16 years!! We basically followed the principles that Dave Ramsey teaches. Most of our friends were buying new cars, houses and furniture while we were living on a shoe string. The early sacrifice layed the foundation for a very comfortable life style later in life. We are now enjoying the benefits of the early sacrifice. Many of our friends who acquired debt early in their life have never gotten out of debt.

[Wanda Van Winkle]

Thanks, everyone.

I agree with the "eating out" principle, too. We've saved bunches already. I take my snacks and lunch to work--even iced tea--all the time now, which I did not do in the past. Like I said, the cutting spending is easy. And we haven't added to our credit cards in quite some time--even though I haven't been committed to the pay of the debt before I retire thing until now.

I HAVE listened to the tapes--checked them out at the library--and know his plan.

We took the path of paying of the lowest balance first.

I understand the principle of adding what we paid on THAT credit card to the next one.

What I'm curious about is if anyone has found a different method of getting away from the higher interest while paying off the debt.

Again, thanks for the conversation.

By the way, I was chatting with an acquaintance in a difference section of work a couple of weeks ago. She was considering quitting her job. I asked if she really needed the money. [It's a secondary part-time job.] She said, "Oh, no, we just owe on our house." I told her that was my new goal. She said she had been using the Dave Ramsey method for two or three years and had just paid off her last large credit card last week! It's nice to meet someone who has actually done it. Her husband had her physically take the check to the place, rather than mail it, to give her the satisfaction.

It's an interesting journey. I wish I had stayed out of debt, but it's only been the last few years. Some things I would have done differently, like paid off hospital bills (several surgeries between us in the last six years) on a monthly plan; we put them on a credit card...that was not too bright! Live and learn.

By the way, my son still remembers a business class at SNU that opened his eyes to financial stability. He was a poor, hardworking young man in the old-fashioned way, from the time he could work and all through college. I have some regrets about my kids not being able to be as social as they could have, but they are good citizens paying their own way now. When they did get out of college and get really good jobs, they applied some of the principles they had learned there.

[Wanda Van Winkle]

We are in the middle of debt reduction. I beleive Ramsey says pay your debts off lowest to highest and use the amount you would pay each month and snow ball it on to the next one.

We have reduced credit card debts, canceled land lines and use cell phones, used no interest deals to buy new frunitre and appliences. We still have a ways to go but it is a liberating experience to actually see your monthly expendatures decrease, your retirement fund grow, and you ability to support the kingdom grow to a greater proportion

It's great, isn't it? The first couple of months that we did it, several things happened that discouraged me. The plumber had to come out, the monitor went out on the computer, etc. ACK! But I decided to look at it this way: because we had already started on the path of better stewardship, these things didn't cripple us--we just didn't pay as much extra on the balances as we had planned that month.

I'd appreciate your prayers as I seek a better full-time job. The one I'm in now was simply a move from my part-time job to a full-time one in the same place, at night. I would like a day job that pays better than this one.

Although I can teach college level, the chance of getting full-time with only a masters degree is slim; most of the colleges have thousands of adjuncts who have been there much longer than I. So I will just teach as an adjunct while working elsewhere part-time.

And even adjunct teaching does not work with this job. I had to turn down a noon class at SNU because that's like the middle of the night for me. As a matter of fact, I should be asleep right now, but the barking dog awoke me!

[Houston Thomas]

Dave,

Here is my problem with Mr. Ramsey. If you listen to his show or read his materials (and I know you do!) he very often talks about accumulating "piles of cash." I mean, he really talks about it a lot as the reward of following his financial principles.

As I read through my bible I don't really see any talk about accumulating "piles of cash." It is my understanding that if the Lord gifts a person with vast resources they are to manage them for the Lord's glory. Sort of like Wesley's maxim of "make all you can, save all you can, give all you can."

I think that Mr. Ramsey would agree with this principle. But, that is my problem with him. He doesn't talk or write about managing resources for God's good work. He talks about accumulating it. And without that important second step he is feeding right into the American capitalistic sickness - the accumulation of wealth for wealth's sake.

At least that's my opinion. I very well could be wrong.

[Wanda Van Winkle]

Houston,

I understand your view.

But the principles he uses for getting out of debt in the first place, and not getting into it again, seem sound.

Once people get through that part of the program, what they do with their extra money is their business. They don't have to continue to follow that aspect of Ramsey's plan. If you aren't paying $500 per month in interest and extra spending, you will have that much extra to give back where you see fit.

David Bach has written several books that resemble Dave Ramsey; as a matter of fact, it sounds like the same person. They all focus specifically on "getting rich": Smart Women Finish Rich, Smart Couples Finish Rich, etc.

I just don't want to approach old age with debt of any kind. I'd like my house paid off and be able to live off my income. Since I'm starting late at this project, I couldn't finish rich, anyway--not on my income :)

[Dave McClung]

...What I'm curious about is if anyone has found a different method of getting away from the higher interest while paying off the debt...

There is a better way, but Dave doesn't recommend it because if a person doesn't exercise discipline he or she can end up even deeper in debt.

Assuming that the person owns a home, the "better way" is to take out a home equity loan to pay off the credit cards, cut up the credit cards and apply the amount that you would have paid on the credit cards to pay off the home equity loan. Home equity loans have a lower interest rate than credit cards and the interest is deductible for income tax purposes.

The risk is that a person will take out the home equity loan and continue using the credit cards.

[Ann Smith]

A way I have used is to take advantage of 0 percent interest credit card offers. That way I can apply more cash to the principle, thus reducing the actual debt sooner. The thing you have to look out for with these is that if you are late with a payment, your interest will go up the next month and subsequent months. You also have to keep track of when the offer is up. I have one now that I am going to take advantage of. I figure I will be able to cut my debt in half by the time the year expires.
Ann

[Dave McClung]

Dave,

Here is my problem with Mr. Ramsey. If you listen to his show or read his materials (and I know you do!) he very often talks about accumulating "piles of cash." I mean, he really talks about it a lot as the reward of following his financial principles.

As I read through my bible I don't really see any talk about accumulating "piles of cash." It is my understanding that if the Lord gifts a person with vast resources they are to manage them for the Lord's glory. Sort of like Wesley's maxim of "make all you can, save all you can, give all you can."

I think that Mr. Ramsey would agree with this principle. But, that is my problem with him. He doesn't talk or write about managing resources for God's good work. He talks about accumulating it. And without that important second step he is feeding right into the American capitalistic sickness - the accumulation of wealth for wealth's sake.

At least that's my opinion. I very well could be wrong.

What Dave talks about is "financial freedom." He knows from personal experience what it is like to live heavily in debt.

My own definition of financial freedom , and I believe Dave Ramsey would agree, is the ability to respond to prompting of God toward charity without falling short of one's obligations to others. Dave's focus is on achieving financial freedom.

I do believe that there is a need for more discussion about how one best exercises their financial freedom. It has been my observation that most members of the clergy are ill equipted to discuss financial freedom, because they have not accomplished it themselves.

Jesus used a parable about "talents." If that parable doesn't teach "accumulation", then I don't understand the parable. My understanding of the principle is that we are required to maximize the return on the assets that God has entrusted to us and be prepared to deliver all of them to him as he requests. For some, like the "Rich Young Ruler", God requires delivery of everything immediately. For others, like the 10 talent servant, God gives additional assets to invest. The important thing is that we be prepared to respond instantly when God makes a call on the resources that have been entrusted to us. If we obligate all of our income to the payment of debt, we don't have the financial freedom to respond when God calls.

For those who reach financial freedom, the choice becomes "give now" or "give more later." God helps direct that choice.

[Marg Webb]

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There is one additional principle that I wish that Dave would emphasize more. Young people need to hear that early sacrifice leads to later luxury. When Linda and I finished high school, we sacrificed for 16 years!! We basically followed the principles that Dave Ramsey teaches. Most of our friends were buying new cars, houses and furniture while we were living on a shoe string. The early sacrifice layed the foundation for a very comfortable life style later in life. We are now enjoying the benefits of the early sacrifice. Many of our friends who acquired debt early in their life have never gotten out of debt.
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We agree with you Dave. We are now living very well. We use to be the poor couple in the group.:)
Wrong address, used car, clothes nearly out of date.
I like the statement, "enjoying the benifits of the early sacrifice".