Becoming debt-free with Dave Ramsey’s plan

Recently, I had a conversation at work with a co-worker of mine about getting out of debt. He introduced me to Dave Ramsey. I never heard somebody who made so much sense before when it came to personal finance. I have to say that listening to the audio book “The Total Money Makeover” has literally changed my life. The first time I listened to it, I was just sitting there kicking myself as he was calling out all the stupid financial blunders I’d committed like everyone else out there without even thinking about it.

I listened to it once. Then, I decided to listen to it a couple more times. Each time I listened, I seemed to not feel as much regret as I had used to feel. This is when I started the “baby steps” and completed my emergency fund within one month. Not only that, but I will have five credit cards paid off next month. They don’t have very large balances, but I feel excited about this impending accomplishment. I really grasp the concept of what the debt snowball really does in changing a person’s behavior when it comes to managing money.

Family and Finances

My family was never educated in the area of personal finance. I now find myself in regular debates with family members about some of the foolish expenditures that we have made over the years. I argued with my brother over what a rip-off and scam payday/car title loan businesses are. My favorite debate is on rent-to-own businesses. Those take the cake with their 1800-percent interest or whatever it is.

I never actually went as far as to get payday loans or buy stuff from rent-to-own places. My main problem was credit cards. The kid inside me always said, “I want it now!”. The kid usually won and I ended up getting a bunch of junk that I really didn’t need for 27-percent interest. After doing this for awhile, I ended up with around $10,000 of credit card debt. I had to stop and look around. It sure didn’t look like I had $10,000 worth of stuff. Eating out, gambling, and just spending money vicariously didn’t help the situation. I tried looking for solutions to this problem. I went to my bank for a debt consolidation loan to get lower interest. Well, it turns out that you can’t get a debt consolidation loan if you’re in debt. Your credit score won’t be high enough if you have a high debt-to-income-ratio. I felt lost until I discovered Dave Ramsey.

I actually have a plan now and I don’t have a feeling of hopelessness anymore. All of my debt will be paid off in 13 months and I can’t wait for that day. It gets me excited just thinking about it. My advice to anyone looking at starting Dave’s program or something similar to it is to ignore the opinions of those around you. Odds are if you are like me, then all of those around you are engaging in negligent behavior with their money. They have that feeling of hopelessness that I had not too long ago. Get focused! Start a budget and stick to it.

I think that it’s essential that people start becoming more financially responsible and start teaching their children how to manage money from an early age. There is growing trend of people just buying a bunch of stuff for their kids just so they’ll leave them alone. Well, this is why we have so many people in debt nowadays. We were taught as children that it is okay to just go out and buy as much stuff as you can right now. I think if people stopped and realized what they are doing with money as well as how their kids are emulating that behavior, that they would change their habits. Well, I know I have and even though I’m just getting started, I feel pretty good right now.

This article was written by CPF reader Jason Brow.

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  1. Dustin | Engaged Marriage

    I am a big Dave Ramsey fan also. Our family paid off around $58,000 in debt and called into Dave’s radio show last February to announce our new freedom to the world. The impact that financial freedom has had on our marriage and our family’s well-being is simply awesome.

  2. Ken

    You can’t go wrong with Dave Ramsey’s advice. Good to hear you have the goal to be debt free.

  3. CherylNH

    Good job on your article! I, too, am a fan of Dave Ramsey. We have paid of $15,000 in 18 months. We have changed our plan a bit as well, which would be out of line with Dave’s plan.
    My husband was layed off from his job. We were fortunate enough to know it was coming in advance which is why we went nuts getting out of debt!
    We still have a student loan of $12,000 and a personal loan of aprox $2500. We have decided not to pay those off early at this time. The money that was going on our debt snowball. We have put a hold on Baby step 2 and moved onto Baby step 3- a fully funded emergency fund of 3-6 months.
    In the summer of 2010, the personal loan will be fully paid off based on our current monthly payment. My husband, if he is not able to secure work by then, we be off unemployment and on early social security. This will reduce our income again, so we will need the emergency fund to get us through a time to make whatever changes we will need to make. We think going to baby step 3 is the way to go.
    In addition, we have not put anything toward retirement, which I still have about 20 years to save for. We are also putting 10% of my income toward that so we are not in this reduced income situation again when I retire!

    Dave’s Plan was exactly what we needed to really look at our income/expenses in detail-together as a couple. It has helped us achieve debt reduction we would never have actually realized without a plan.

  4. John S.

    We must be the exception to the rule, as I’ve never seen or heard of anyone using Dave Ramsey’s system that (seemed to have) much debt compared to their yearly income – even Dustin at $58,000 seems small, given that two car loans could easily equal this amount. Tack on student loans for undergrad and graduate school, credit cards, and other loans (not to mention a mortgage), and WHAM! your debt goes into the stratosphere.

    I could never get through on the phone line to speak with Dave about this issue; if you get a chance to listen to his program, pay attention to the debt amounts, and ask yourself if the debt seems to be large compared to the average household income (approximately $60,000).

  5. RE Ramcharan

    There’s nothing wrong with Dave Ramsey’s plan. But making it work requires that you already have a substantial income and that Nothing Bad happens to you for at least a few months.
    If neither of those fits, the baby steps will remain nice ideas.

  6. Buddystips

    I admire Dave Ramsey’s way of doing business…he always cuts straight t0 the point and his Steps are practical approaches to debt reduction and debt elimination. I do have a difference of opinion with him on putting debt elimination as a top priority ahead of savings. I belive you should do both at the same time. For example, I have heard him advise someone with a 401K match program to forget the match and put all of the funds against the debt…until the debt is eliminated, then renew the match program. Time is your friend in savings and investments…so the longer you take to begin saving the less time you have to accrue investment benefits. In the exmple above, if the firm you work for matches say the first $3,000, it makes no sense not to put at a minimum the $3,000 into the 401K to receive the match…a 100% return on your money. Hence the difference of opinion. I endorse doing both…aggressively reduce your debt (I mean aggressively!) and save at the same time (Establish a good automatic savings program which is tax deferred preferrably). You get the benefit of time for your investment, a tax break and a steady path to debt reduction. I know there are opinions for both sides….this is mine. Dave Ramsey has helped millions discover financial planning…no small feat!