A couple questions for Dave Ramsey fans

[Jenny in GA]

I have read Total Money Makeover cover to cover, and we have been working the "Baby Steps" for a few months now. I like the concept, but a few things confuse me and/or mildly irk me.

 

The beginning steps make sense. Pay off debt. Eat rice and beans, forego buying new furniture, etc to do it. Then once that's done, use that money toward funding your emergency fund. Then when that's finished, use that money for the next step.

 

Here's where I get stuck. The next step is to put 15% of your income in a retirement. There is no mention of what to do if you can't spare that amount of money (I can't imagine how we could, even without debt.)

 

But my main question is ... how and when does that Step Four ever end?? :confused:

 

With the other steps, there was a clear end, where you "finished" and could move on to the next step. But how do you move on to Step Five, saving for college? Where is that extra money for Step Five supposed to come from, and when are you supposed to get it?

 

Then same thing with Step Five. When are you "done"? I guess you're not supposed to move to the next Baby Step and pay off the house until all your kids have finished college?? :confused: That seems like an awfully long time to move through this financial plan.

 

And along the same lines ... how long, exactly, are you supposed to eat beans and rice, forego anything "extra" or nice, like family vacations, decent furniture, etc? I can understand doing that for a year or two while you're frantically paying off debt. But if I have to wait til we have no debt and a huge emergency fund and be saving 15% and be saving regularly for college and have our house paid off ... well, in the first place, I don't know how it's possible to ever even do that; I don't even know where that money would come from, and unless I missed something, he doesn't seem to tell you. It's just, "Put 15% away for retirement, then also find some more money to put away more for your kids' college, and then also find some more moeny to pay off your house early."

 

Hello, of course I would like to do those things, and know I should do them, without you having to tell me. But your book doesn't tell me how it's possible!

 

But in the second place, if we waited to get through all the Baby Steps before we could take family vacations, it would literally be too late. My kids would be grown by then.

 

Anyway, maybe I am missing something. Please help me out! Again, my biggest concern is how/when you can move from Step Four to Step Five, and then to Step Six. If you're lucky enough to be able to do Step Four, there is no money left to ever do Step Five or Step Six.

[Carrie12345]

Well, technically he does give advice for how: increase your income.

 

Whether that's possible or not is going to vary by family.

[Just Kate]

Steps 4 and 5 can be done simultaneously. While you are doing them, you can also move onto step 6. I think that retirement comes before college savings because it is more important. As to when you stop those steps? Well, I'd say you will probably always save for retirement, as I don't know anyone who feels they over saved there. For college, you save until you feel like you have saved enough.

[kroe1]

Dave Ramsey, and other similar programs, basically teach that if one can't afford a particular lifestyle, then don't live it.

 

I rarely had a vacation growing up, and I turned out just fine. The entire concept of baby steps helps one to understand that vacations, cell phones, internet, and cable tv are not necessities. If one can't afford it, so be it.

 

Living off of rice and beans can sustain life for years and years and years.

 

I know that's not what you want to hear, but that's the way it is. Our American mindset of what is a necessity is totally warped from our grandparents' and great-grandparents' idea of necessities. My DH's parents lived through various "potato" famines while growing up in Ireland. They are now in their late 80's and still alive and kicking and driving.

 

:)

[Jenny in GA]

Well, technically he does give advice for how: increase your income.

 

 

That isn't useful or helpful to me. I don't need a book or a financial expert to tell me that we could have more money if we somehow made more money. Well, gee, no kidding.

 

(No offense to you, it just irks me that that's all he has to offer.)

[Jenny in GA]

Steps 4 and 5 can be done simultaneously. While you are doing them, you can also move onto step 6.

 

But how? That is my point. We don't have the money to do Step 4 alone; how could we possibly do Step 4 and Step 5 and Step 6???

Edited October 18, 2012 by Jenny in GA
Because punctuation matters

[Jenny in GA]

 

I rarely had a vacation growing up, and I turned out just fine. The entire concept of baby steps helps one to understand that vacations, cell phones, internet, and cable tv are not necessities. If one can't afford it, so be it.

 

 

"Rarely" implies (to me) that you had at least one or two, of some sort.

 

I disagree that cell phone and internet are not necessities. I need the internet for my job, and I would not feel safe driving alone without a cell phone. (Even if I didn't have a cell phone, that would free up about $8/month, hardly enough to make saving for retirement possible!)

 

But now re-reading your post ... are you basically saying that deciding to follow Dave Ramsey means never taking a vacation of any kind, never eating anything for dinner other than rice and beans, never going to the movies or eating out or buying furniture, etc, etc, for 20+ years?

 

Because if that's what the program is all about, that's fine. But then we have to re-think if this is something we want to commit to doing. It seems like a lot to ask of people. To say, "Well, immigrants lived like that generations ago!" doesn't make it more of an acceptable lifestyle to me.

[Carrie12345]

That isn't useful or helpful to me. I don't need a book or a financial expert to tell me that we could have more money if we somehow made more money. Well, gee, no kidding.

 

(No offense to you, it just irks me that that's all he has to offer.)

 

That's why I said "technically" and added that it's not possible for everyone.

With my dh's crazy hours, it wasn't possible for either one of us to carry a second job. We just try to cut back expenses as much as possible and sell stuff when opportunities arise.

 

I completely understand the frustration, but math is math, and money has to abide by math laws!

[Carrie12345]

"Rarely" implies (to me) that you had at least one or two, of some sort.

 

I disagree that cell phone and internet are not necessities. I need the internet for my job, and I would not feel safe driving alone without a cell phone. (Even if I didn't have a cell phone, that would free up about $8/month, hardly enough to make saving for retirement possible!)

 

But now re-reading your post ... are you basically saying that deciding to follow Dave Ramsey means never taking a vacation of any kind, never eating anything for dinner other than rice and beans, never going to the movies or eating out or buying furniture, etc, etc, for 20+ years?

 

Because if that's what the program is all about, that's fine. But then we have to re-think if this is something we want to commit to doing. It seems like a lot to ask of people. To say, "Well, immigrants lived like that generations ago!" doesn't make it more of an acceptable lifestyle to me.

 

Yes, that's basically how the program works. We're more "DR-light", which means we will not see the same results as those who go hard core. But we are making progress, which is more than I can say for what we were doing before!

[thessa516]

Steps 4 & 5, and generally 6 are all done at the same time.

 

You set up to have 15% of your income going to retirement. Check. You're done. That 15% coming out won't stop coming out until you retire. If you don't have the 15%, then you work with what you have. Put in the extra you do have available.

 

If you have no extra money in the paycheck after Step 4, then the kid's college doesn't get financed by you. Dave says to take care of your retirement before you fund college. If there's not extra money after Step 4 or 5, then the house doesn't get paid off early.

 

In regards to vacation, you budget for it in your monthly budget after the debt steps. It can be anything from a Disney vacation to a "Staycation". Whatever is appropriate for your income level.

 

---

 

ETA: I must be a slow typist. Lots of info added after I started typing. :) It is my personal belief that after you complete the debt steps, then you ease into more of a lifestyle you can reasonably live with. The food budget gets raised a bit, you add vacation to your budget, a sinking fund for furniture, etc. It may be VERY modest, but it's more about your personality. Dave says he'll never eat tuna again because of his rice and beans (and tuna) years. For you, you might decide that your rice & beans are just fine but you must have some getaway time.

Edited October 18, 2012 by thessa516

[Mommyof4ks]

It basically comes down to how badly you want to retire well, pay for your kids' college, and get your house paid off. I am not being snarky; I am serious. Those are not priorities for some people, and that is ok. His whole plan encourages people to look at what is important to them and make their money do what they want it to. We are doing steps 4-6 together at the moment. When the plan was written it was assumed that people were getting annual raises, and the extra was to go to the next step, but with the economy many people are not getting raises or at least not as fast as the prices of goods are going up, so any plan is going to be more difficult right now.

[Momma2Many66]

We have been following Dave Ramsey for the last 4 years. We only have one wage earner in our family which is my husband. We have 6 chldren but only 4 still living at home and under 18. My husband brings home about 2 thousand dollars per month ( after taxes, medical/life insurance and pension plan are deducted).

 

We don't live "high off the hog", but we are debt free ( no credit cards, no car loans and a very small mortgage left on our farm) and can put away savings. We have an emergency fund already filled with 6 months pay and we have sinking funds to cover house repairs, car repairs/ used car replacement, appliance replacement fund, ectera.

 

We shop super carefully, I spend 100 dollars per week on groceries for our family of 6. An extra 25 per week on Health and Beauty needs and cleaning supplies, paper products. All together my grocery bill is 500 per month. We have no cell phones, no cable satelite tv and no we do not take exspensive vacations. We go camping for cheap instead.

 

We traded in cable tv for netflix streaming at $ 7.99 per month. We have landline only and my husband has an emergency cell phone (only for emergencies for 10 dollars a month). We buy all clothing at thrift shops, yard sales and Goodwill except underwear and socks.

 

We eat only 2 meals a week with meat (chicken typically which can be used for 2 to 3 meals) and eat fish once a week. Beans, soups, pasta and veggie meals are eaten the other 4 days of the week. We don't drink sodas or juices and instead drinks LOTS of water. Milk is only used for cooking in small amounts. We eat LOTS of fruit and veggies and I freeze enormous quantities from our spring, summer and fall gardens. We make green smoothies daily and I bake most of our snacks from scratch.

 

We live small but we do have money in a retirement fund ( 6 % plus 6 % match), and we are paying down the mortgage slowly but sure and steady. My husband works as a landscaper for a college so college is free for our children if they wish to attend.

 

Since we have only one income and only one wage earner because I "choose" to stay home and homeschool my children, we understand that it will take us much longer to complete the 7 Baby steps. It is something we are willing to do to reach the "finished plan" evenutally. If I was working we would have much more money, but right now my children are only young once, so we are riding this "season of life" out until they are grown and on their own. Once they are all grown, we will have plenty of time for me to work fulltime again and enjoy nice vacations and some extras in our life. For now, we are enjoying this season of our life that we are in and finding ways to make it on our simple income.

[bethben]

We don't have debt, have the "required" emergency savings and are at about 6% putting money into a retirement fund. BUT, if we need something that we have savings available for, we don't follow his advice. For example, we needed different flooring for our son in a wheelchair. Technically, according to Dave Ramsey, we didn't have that money, but it needed to be done, so we did it. Also, due to the wheelchair issue, our home being paid off is more important because we are not able to live anywhere if the economy really tanks- a cheapo apartment does not work with wheelchair bound children.

 

Beth

[SunnyDays]

It's a good solid plan, but is still bound by the laws of math. :) You still have to work within the amount of income you make. A household who makes $50k a year is going to work the plan much differently than someone who makes $150k a year... and yes, the latter still may need help getting out of debt because they've been wasting money and not working within priorities.

 

OP, in your case, it may mean you decide to fund retirement, then skip the college step. Or it may mean you put what you can to retirement and college, and accept that you'll be paying on your house the full 30 years. In the end it's all about choices.

[Susan in TN]

In our experience, we put "as much as we feel possible" into retirement - which isn't 15%, a tiny bit into college funds, and then we live within our means. We don't eat beans and rice, although with the current economy, we're pretty close :tongue_smilie:.

 

You DO need to live in the mean time. We don't vacation much, and when we do it's either to visit family or a rare/cheap visit to the beach. We spend money on a few non-necessities like music lessons and an extra-curricular activity here and there. We give money to our church.

 

Our priorities have been to be out of debt (except the mortgage) and have a decent emergency fund, good insurance, and a working budget. The other stuff we add to as we can.

[OH_Homeschooler]

A household who makes $50k a year is going to work the plan much differently than someone who makes $150k a year... and yes, the latter still may need help getting out of debt because they've been wasting money and not working within priorities.

 

Well that is a bit of an overgeneralization, don't you think? There are many reasons someone with a high income may be in debt besides "wasting money."

[Just Kate]

But how? That is my point. We don't have the money to do Step 4 alone; how could we possibly do Step 4 and Step 5 and Step 6???

 

Well, you do what you can. I think Dave Ramsey's plan is great for getting out of debt. We have been attempting to get there for years now, but we keep getting derailed. The debt snowball is great and makes sense for most people. After you are out of debt, you should set up a fully funded emergency fund (3-6 months living expenses). After that, your goal should be retirement and college savings, and then paying off the house. However, if you get to step 4 and you can't afford 15%, then you should do what you can. I don't think that Dave Ramsey's plan is written in stone and I don't think it has to be followed exactly. If you take his plan and do it in a way that works for your family, you will still probably be ahead of most people out there who don't pay attention to their money.

[aggieamy]

Steps 4 & 5, and generally 6 are all done at the same time.

 

You set up to have 15% of your income going to retirement. Check. You're done. That 15% coming out won't stop coming out until you retire. If you don't have the 15%, then you work with what you have. Put in the extra you do have available.

 

If you have no extra money in the paycheck after Step 4, then the kid's college doesn't get financed by you. Dave says to take care of your retirement before you fund college. If there's not extra money after Step 4 or 5, then the house doesn't get paid off early.

 

In regards to vacation, you budget for it in your monthly budget after the debt steps. It can be anything from a Disney vacation to a "Staycation". Whatever is appropriate for your income level.

 

---

 

ETA: I must be a slow typist. Lots of info added after I started typing. :) It is my personal belief that after you complete the debt steps, then you ease into more of a lifestyle you can reasonably live with. The food budget gets raised a bit, you add vacation to your budget, a sinking fund for furniture, etc. It may be VERY modest, but it's more about your personality. Dave says he'll never eat tuna again because of his rice and beans (and tuna) years. For you, you might decide that your rice & beans are just fine but you must have some getaway time.

 

:iagree:

 

This is how it's supposed to work but like others said you do what you can. I've found that if I make a good plan then usually the money will show up eventually. DH and I are big DR fans though.

[LittleIzumi]

There have been discussions here previously about the fact that Dave Ramsey does not work for certain low income levels. If there is no money to spare (the family is already cutting everything just to survive), then there is no way to stash 15%, or 5%, or any %, without increasing income at least a little. There are ways to increase it a little, like donating plasma, but the income has to be there to utilize.

[cjzimmer1]

Dave Ramsey, and other similar programs, basically teach that if one can't afford a particular lifestyle, then don't live it.

 

I rarely had a vacation growing up, and I turned out just fine. The entire concept of baby steps helps one to understand that vacations, cell phones, internet, and cable tv are not necessities. If one can't afford it, so be it.

 

Living off of rice and beans can sustain life for years and years and years.

 

I know that's not what you want to hear, but that's the way it is. Our American mindset of what is a necessity is totally warped from our grandparents' and great-grandparents' idea of necessities. My DH's parents lived through various "potato" famines while growing up in Ireland. They are now in their late 80's and still alive and kicking and driving.

 

:)

 

 

:iagree:What people consider "necessities" is so skewed they assume they have a right to what only 20-30 years ago was a luxury. With that mindset it is no wonder people can't afford to live the life they want.

 

 

"Rarely" implies (to me) that you had at least one or two, of some sort.

 

A vacation growing up was taking a one day trip to the zoo or the wildlife center or an amusement park. But those didn't happen every year. 2-3 years in between each event was normal.

 

 

I disagree that cell phone and internet are not necessities. I need the internet for my job, and I would not feel safe driving alone without a cell phone. (Even if I didn't have a cell phone, that would free up about $8/month, hardly enough to make saving for retirement possible!)

 

 

Yes our world has changed and things that we once luxuries feel more important. I agree with you that I feel much safer having a cell phone but it still doesn't make it a necessity. Internet at home isn't a necessity either. I know MANY families whose only access is to go to the library. Sure it's inconvenient but it's not a life or death matter. Our culture has the mindset that convenience is a necessity when really it's a luxury.

 

 

But now re-reading your post ... are you basically saying that deciding to follow Dave Ramsey means never taking a vacation of any kind, never eating anything for dinner other than rice and beans, never going to the movies or eating out or buying furniture, etc, etc, for 20+ years?

 

No that isn't really what he says. If that's what your income allows than yes that is what he'd expect you to do but that is only half the equation. The other half is the income side. I think it's much harder to increase your income than 10 years ago (or whenever he wrote his materials) but it's not impossible and it doesn't change the basic message. If your income isn't enough you have to find a way to either make it enough or make a larger income. There really is only 2 choices. Saying it's not possible is playing victim mentality that we have no control over things. To an extent that is true but really we have many choices in our life both big and small.

 

Because if that's what the program is all about, that's fine. But then we have to re-think if this is something we want to commit to doing. It seems like a lot to ask of people. To say, "Well, immigrants lived like that generations ago!" doesn't make it more of an acceptable lifestyle to me.

 

 

I understand no one wants to live in poverty or constantly watch their spending but really it's only the last generation or so that even had the possibility of doing anything else. To expect that everyone can rise above that level is a bit unrealistic in my opinion. Sure it sucks to face the idea that you might never get ahead but I think Americans have come to take way to many materialistic things for granted.

[Mom-ninja.]

When the plan was written it was assumed that people were getting annual raises, and the extra was to go to the next step, but with the economy many people are not getting raises or at least not as fast as the prices of goods are going up, so any plan is going to be more difficult right now.

 

And some people are having their salary cut.

 

 

 

someone who makes $150k a year... and yes, the latter still may need help getting out of debt because they've been wasting money and not working within priorities.

 

 

Wow. That is quite the assumption.

[Carrie12345]

But how? That is my point. We don't have the money to do Step 4 alone; how could we possibly do Step 4 and Step 5 and Step 6???

 

Question for you (you don't have to answer, but maybe do the math yourself.) What percentage are you currently paying toward debt? What percentage is your current snowball? If the combined total is 15% or more, there's your emergency saving fund and then "ideal" retirement savings once the debt is paid off, without having to change anything you're doing now.

 

If it's much less than 15%, well kudos to you! ;)

[Mom-ninja.]

It's been a few years since I've read the book. Does anyone know if he says to stop matched retirement payments until debt (excluding mort) is paid off? Example if your employer matches 6% do you contribute to your retirement fund or pay off debt first?

[Soror]

As pp stated you are to do 4, 5 and 6 concurrently. As to how much to fund for 5 especially that is up to the individual, all the way from none to full ride to ivy league. Retirement is at a higher priority. If one cannot afford both then it is to be retirement. Personally I don't know what or how much we will fund for college, dh is more in the camp of letting them stay at home for cc but pay it on their own. I don't know how I feel. We are not doing anything as of now.

 

We all have different priorities/values in those regards though but I don't see it as financial failure not to provide a full ride but a choice rather. We all have limited funds and must prioritize and do what we can.

 

We have reduced retirement savings for this year to pay off the house for dh's peace of mind. That is not according to plan but our decision. We will be going up to 15%-20% 401k at the beginning of the year when the house is paid for and then I guess try to figure out if we can agree on a plan for college savings.

[Just Kate]

It's been a few years since I've read the book. Does anyone know if he says to stop matched retirement payments until debt (excluding mort) is paid off? Example if your employer matches 6% do you contribute to your retirement fund or pay off debt first?

 

Yes, DR's plan says to stop all retirement savings until you reach step 4 (including company match).

[Soror]

Dave Ramsey, and other similar programs, basically teach that if one can't afford a particular lifestyle, then don't live it.

 

I rarely had a vacation growing up, and I turned out just fine. The entire concept of baby steps helps one to understand that vacations, cell phones, internet, and cable tv are not necessities. If one can't afford it, so be it.

 

Living off of rice and beans can sustain life for years and years and years.

 

I know that's not what you want to hear, but that's the way it is. Our American mindset of what is a necessity is totally warped from our grandparents' and great-grandparents' idea of necessities. My DH's parents lived through various "potato" famines while growing up in Ireland. They are now in their late 80's and still alive and kicking and driving.

 

:)

:iagree:

 

I do think that when we talk about people not being able to afford necessities what is qualified as a necessity was often considered a luxury not too long ago. Our houses are way bigger, our cars nicer and many more toys- clothes, etc. There are of course people that are truly poor, as there always has been but it is often hard to disentangle that from the fact that are standards are considerably higher than they were before.

[Soror]

Yes, DR's plan says to stop all retirement savings until you reach step 4 (including company match).

IIRC there is a caveat that it depends on how long it will be until pay-off. As he doesn't advocate that past a couple of years time

[Mom-ninja.]

Yes, DR's plan says to stop all retirement savings until you reach step 4 (including company match).

 

According to Orman she says not to do this because you are throwing away free money (the free money being the matched % from employer). Or does she say this for only after debt being paid?

 

Also, why does he say to not pay off the house before saving for retirement? Curious.

[speedmom4]

I love Dave Ramsey and I listen to his podcasts almost every day. But I use his advice to meet my needs. I don't let a curriculum be my task master but a guide that I will tweak as I see fit. That is how I view Dave Ramsey's plan. I follow it loosely but I do what is right for our situation regardless of what Dave says. We just keep working the plan our way. I have been following it since Sept. 2009 and I can't believe the progress we have made.

Just keep working at your finances even if it's not exactly like DR and you will make progress!

 

God Bless,

Elise in NC

[Soror]

According to Orman she says not to do this because you are throwing away free money (the free money being the matched % from employer). Or does she say this for only after debt being paid?

 

Also, why does he say to not pay off the house before saving for retirement? Curious.

 

Compound interest.

 

Fwiw we've never completely stopped funding our retirement. His idea of stopping all retirement for a short period is that it should be a good motivator to kick it in gear and get the debt gone.

[FairProspects]

According to Orman she says not to do this because you are throwing away free money (the free money being the matched % from employer).

 

Of course, that is assuming you actually have a match, which is becoming rare in some segments of the workforce. Dh has never held a job with a retirement match in his 8+ years in his professional career so if we stop saving for retirement, we're only giving up our own contribution.

[CheerioKid]

We have been following Dave Ramsey for the last 4 years. We only have one wage earner in our family which is my husband. We have 6 chldren but only 4 still living at home and under 18. My husband brings home about 2 thousand dollars per month ( after taxes, medical/life insurance and pension plan are deducted).

 

We don't live "high off the hog", but we are debt free ( no credit cards, no car loans and a very small mortgage left on our farm) and can put away savings. We have an emergency fund already filled with 6 months pay and we have sinking funds to cover house repairs, car repairs/ used car replacement, appliance replacement fund, ectera.

 

We shop super carefully, I spend 100 dollars per week on groceries for our family of 6. An extra 25 per week on Health and Beauty needs and cleaning supplies, paper products. All together my grocery bill is 500 per month. We have no cell phones, no cable satelite tv and no we do not take exspensive vacations. We go camping for cheap instead.

 

We traded in cable tv for netflix streaming at $ 7.99 per month. We have landline only and my husband has an emergency cell phone (only for emergencies for 10 dollars a month). We buy all clothing at thrift shops, yard sales and Goodwill except underwear and socks.

 

We eat only 2 meals a week with meat (chicken typically which can be used for 2 to 3 meals) and eat fish once a week. Beans, soups, pasta and veggie meals are eaten the other 4 days of the week. We don't drink sodas or juices and instead drinks LOTS of water. Milk is only used for cooking in small amounts. We eat LOTS of fruit and veggies and I freeze enormous quantities from our spring, summer and fall gardens. We make green smoothies daily and I bake most of our snacks from scratch.

 

We live small but we do have money in a retirement fund ( 6 % plus 6 % match), and we are paying down the mortgage slowly but sure and steady. My husband works as a landscaper for a college so college is free for our children if they wish to attend.

 

Since we have only one income and only one wage earner because I "choose" to stay home and homeschool my children, we understand that it will take us much longer to complete the 7 Baby steps. It is something we are willing to do to reach the "finished plan" evenutally. If I was working we would have much more money, but right now my children are only young once, so we are riding this "season of life" out until they are grown and on their own. Once they are all grown, we will have plenty of time for me to work fulltime again and enjoy nice vacations and some extras in our life. For now, we are enjoying this season of our life that we are in and finding ways to make it on our simple income.

 

I love this!! I cannot imagine living on your budget, but kudos for doing it!! I think "rice and beans" means different things to different people. It can be literally rice and beans for dinner (which sounds good for tonight, btw) or rice and beans in other ways. For instance, we almost NEVER buy retail clothing...the thrift store here is awesome! We buy everything there, all the way down to shoes. I never turn down hand-me-downs either.

 

The OP's question seems to have already been answered, I have nothing of note to add to the discussion, but I agree that #4, #5 and #6 are all continuous as you are able. Think of it like a fountain. When the debt is paid, the top level is full and begins to spill over, your emergency fund is then filled up. When it is full, it spills into the retirement/college/house fund. Retirement first...like putting your own oxygen mask on before helping someone else...you kids won't thank you for putting them through college first, if they have to move you in with them when you retire because you can't afford to have your own house. Teach them to manage their finances responsibly, and you have done them more good than any amount of college can do.

 

We don't take "vacations" either....and can honestly say we have never really had a vacation that didn't directly involve a great deal of time with family. Never a hotel or even money spent on "amusements." We camped at Outer Banks one year and dh lost his job 2 months later.

 

I never went to Disney until after I graduated High School, and I turned out just fine. I don't want my kids to expect an expensive vacation every year like so many of their friends do.

[amyk]

The idea is to live within your income. If you have debt you are making payments on, you have income that is not going towards basic necessities. When you no longer have debt, that income can go towards saving for: retirement, college or building wealth.

[Soror]

Our only vacations growing up were camping in tents. We maybe went out to eat once a month for something cheap. We ate very simply. I never felt deprived or such. I just see it as prioritizing. I think it is a perfectly valid decision to decide you want to eat nicer or to take a vacation but that is prioritizing those things over retirement funding if doing so means that you don't have funds for retirement. Nearly all of us do that to some degree though. Working hard isn't some guarantee of some income level either, there are no guarantees in life. I know here we've made decisions at times that means we put other priorities above making more money or saving more and I don't regret that(although at other times we've certainly had bonehead decisions). We all just have to be the best stewards we can and do the best with what we have. In the end it is a matter of your own priorities and it doesn't matter what DR or anyone else thinks but whether your own value system.

[a27mom]

I think you need to look at it as a recommdation to save 15% for retirement. If you can't save that you save as much as you can. Saving for retirement is really not optional. Saving for college is optional. So if you can only set aside say 5% for retirement, that's what you do. (You should have something since you are no longer paying on debt). You are still paying your mortgage (if you have one) so your house will eventually be paid off.

 

If you are highly dissatisfied with your lifestyle then you need to find a way to make more income. Dave does have some resources that address this, not all written by him. You might check his website.

 

If you listen to Dave Ramsey, you will realize that in some cases it is an income problem, and that may be the priority that needs to be addressed.

[Mom-ninja.]

Of course, that is assuming you actually have a match, which is becoming rare in some segments of the workforce. Dh has never held a job with a retirement match in his 8+ years in his professional career so if we stop saving for retirement, we're only giving up our own contribution.

 

Dh gets a 6% match. We are trying to decide (open enrollment is next month) if we should contribute 6% at the very least in order to take advantage of the match or if we should send that money to debt.

 

We would have had our debt paid off within a year, but dh just started a new job making 12% less. So it will now take us longer. That's why we're trying to decide if we should hold off on meeting the 6% match or not.

[Mom2Es]

But my main question is ... how and when does that Step Four ever end?? :confused:

 

With the other steps, there was a clear end, where you "finished" and could move on to the next step. But how do you move on to Step Five, saving for college? Where is that extra money for Step Five supposed to come from, and when are you supposed to get it?

 

Then same thing with Step Five. When are you "done"? I guess you're not supposed to move to the next Baby Step and pay off the house until all your kids have finished college?? :confused: That seems like an awfully long time to move through this financial plan.

 

And along the same lines ... how long, exactly, are you supposed to eat beans and rice, forego anything "extra" or nice, like family vacations, decent furniture, etc? I can understand doing that for a year or two while you're frantically paying off debt...Hello, of course I would like to do those things, and know I should do them, without you having to tell me. But your book doesn't tell me how it's possible!

 

But in the second place, if we waited to get through all the Baby Steps before we could take family vacations, it would literally be too late. My kids would be grown by then.

 

 

Well, I guess my question for you would be WHY that idea irks you, exactly, and what you think people should do otherwise to get those things? There's nothing rocket science about Dave Ramsey; it all boils down to not spending money you don't have and setting priorities. If you're okay with trading annual family vacations for being in debt and living off your Social Security check, then that's your choice to make. When Dave talks about tightening your belt or finding extra income; he doesn't mean it in a flippant way; it's just that mathematically, your options for getting the things you want are limited.

 

Step 4 is perpetual. You don't stop it and move on to Step 5. You add in step 5 on top of that. If you can't swing it to move on to Step 5, you sit on step 4 and do what you can. If you have enough money in your retirement fund that you are confident you have enough to live off of, THAT is when you stop step 5. Because you can't put off your old age. You can put off most of those other things.

 

I had a whole long post typed out, but I decided nobody has time to read my life story, so I'll say this: We did Dave Ramsey, but not exactly by the book. I did tweak a little to fit our situation (and because I disagree with Dave mathematically on some things. Dave is great for people who need lots of handholding and don't have any idea where to start and need to see a quick pay-off in order to keep with it). I can tell you, though, that it DOES work. It does not work overnight. And it is WORK. Our income has been cut in half twice since we started doing it (both times for reasons of personal choice), but unlike most people, it was not a time for panic or stress--we have only one creditor (mortgage) and we have an emergency cushion. We've been as far as thinking about starting Step 6, but at the moment, we're back to Step 4. We ask for college fund contributions for birthdays and holidays, and what's in there from before is growing, and if that's truly the best we can do right now, then that's that. Do we eat beans and rice because we are only on Step 4? No, we don't. I think most people ease up on the extreme belt tightening somewhere around step 2 or 3. But, again, it's a matter of priorities. The more life changes you make and keep, the more quickly you can get through the steps. I have friends who started off in worse-off situations and with more challenges than I have who also affirm that it works.

 

When I was growing up, "vacation" was going to visit relatives or going camping. We did not eat out pretty much EVER, unless we were on a road trip or something. And then it was fast food or Shoney's. I remember being in high school hearing other kids talk down about how "gross" McDonald's food was, and I felt weird because McDonald's had always been considered a treat in my mind. We wore hand-me-down clothes and played with hand-me-down toys. We listened to the swap-and-shop radio show on Saturday mornings to see if anyone was selling something we needed. New furniture? Between the time I three or so and the time I left for college, I got one new bedspread, we replaced one chair and one sofa in the living room, we painted the bathroom cabinets and got a new shower curtain once, and got new kitchen linoleum. That's it. Everything else they DIY'ed, learned to repair or refinish, or just made do with as-is. Almost all our food except for meat and "boxed staples" was grown in the back yard and canned or frozen to eat during the winter (they still do this). It wasn't because they were fans of the homesteading movement; it was because that's all we had money to do. And even without all those "nice things" I realize now that we still had more--even from a strictly material standpoint--than a whole lot of people in the world. Now that the kids are out of the house and they don't have a house payment, blah, blah, blah, they do take vacations almost every year. I do not begrudge them this; they can now, and they couldn't then. If they had done it then, they'd still be living in a tiny house and eating rice and beans now instead of having room for everyone to sleep when the whole family is home for a visit.

 

I can write to you a little bit more about how the math works out and where the money comes from, but it's errand-running time. I will try to revisit later!

Edited October 18, 2012 by Mom2Es

[Beetkvass]

:iagree:What people consider "necessities" is so skewed they assume they have a right to what only 20-30 years ago was a luxury. With that mindset it is no wonder people can't afford to live the life they want.

 

 

 

 

 

I understand no one wants to live in poverty or constantly watch their spending but really it's only the last generation or so that even had the possibility of doing anything else. To expect that everyone can rise above that level is a bit unrealistic in my opinion. Sure it sucks to face the idea that you might never get ahead but I think Americans have come to take way to many materialistic things for granted.

 

 

I'm really baffled as to why things like the internet are considered a "luxury". Just because it didn't exist in our parents generation doesn't make it a luxury now. I'm confident it would cost me more in gas money and wear and tear to drive to our library to use the internet. That said my husband works online full time and it's as required in my house as running water and electricity. It would be as ludicrous as considering paint brushes and a ladder as a luxury for someone who paints houses for a living.

[FairProspects]

I'm really baffled as to why things like the internet are considered a "luxury". Just because it didn't exist in our parents generation doesn't make it a luxury now. I'm confident it would cost me more in gas money and wear and tear to drive to our library to use the internet. That said my husband works online full time and it's as required in my house as running water and electricity. It would be as ludicrous as considering paint brushes and a ladder as a luxury for someone who paints houses for a living.

 

:iagree:It is really hard to compare historically with some advances.

[El...]

I really like the image of the fountain for steps 4-6. I don't know how to quote yet, but that is cool. :)

[AvasMom]

math is math, and money has to abide by math laws!

 

:iagree: Math doesn't care if you think it's an acceptable lifestyle. 1+1 still equals 2. If you can't afford it, you don't do it. What's the alternative? Charge it, go anyway, and end up financially worse off every year? Well, ok. Suit yourself. :001_smile:

[Spryte]

I had a whole long post typed out, but I decided nobody has time to read my life story [...]

 

I can write to you a little bit more about how the math works out and where the money comes from, but it's errand-running time. I will try to revisit later!

 

Mom2Es, I hope you do come back and revisit. I would love to read more about how you did DR, and how it all works out. I'll even make time to read your life story. :) Inspiration is good.

 

We are doing DR light, since we're tweaking it a bit. Still chunking money into retirement, though, to take advantage of company matching. I can't get Suze Orman out of my head, talking about throwing away free money.

[Kaleidoscope]

I hated Financial Peace. Hated really isn't a strong enough word. I don't like his little quotes about changing the family tree... and there are a couple others that just irked me to no end. I think it's presumptuous at times.

 

BUT. It helped us a lot. It worked. It got us on the same page.

 

You have to remember though it is written to the masses. You have to personalize it at times. Obviously if you need the internet for work then it's not a luxury. Of course you may not be able to do 15%... but why can't you.. really be honest and figure out if you are justifying luxuries.

 

I did find myself disappointed and disheartened as we did the class. We were in decent shape going into the program. I really though that once we saved up our 6 month emergency fund we were going to have money to spend and finally be able to do stuff. Then I saw step 4 and 5 and realized we will never have money to spare.

 

In the end we can't do 15% for step 3. We also have no money for college savings. It just isn't there. But we are doing 12% for step 3 and we will have our house paid off when the kids go to college.... that will free up some money to help them out I hope.

 

We've also managed to navigate through having 10K in surprise medical bills without dipping into our emergency fund. We have had cash for all the care maintenance this year and we have money building up for a home repair project. I don't know how it worked but it did. We have cash set aside for Christmas... but Christmas will be small. Our kids are understanding and active members in making financial decisions. That part is awesome.

 

I'm still sad about what we can't do. But I can't blame Dave or FPU for that. We won't be going on vacation often if ever. We can't eat out or go to movies. We will always be shopping at GoodWill. Our kids won't have cars or cell phones. I cried and cried when I realized our finances weren't really going to relax any. I'm still sad. However, facing it and accepting it has been freeing in the end. Being honest about what we can and can't do financially and getting over the disappointment has changed our attitudes. It probably took me a good 6 months to not be sad.

 

My goal is to be in the position that when my children have children we can do for them. I'd love to have grandparents who could give our kids birthday or Christmas gifts. I watch our friends parents take their kids for the weekend and give our friends a gift card for dinner and a movie and I am so hopeful I can give that gift to my children one day. I know their lives will likely be tough financially so maybe we can start them off smarter than we were and then be there to help fill in the holes some.

 

Once my kids are grown and I find a job I will be sticking as much money as I can in savings for my Awesome Grandma fund.

 

My greatest fear though is that we will have saved and saved and saved and me or dh or one of the kids will die before we ever get to do the trip or event we saved for... that would be heart breaking. I used to be just panic stricken by that fear.... I guess I should have never watched UP! (Though I had that fear even before UP... however I can't watch the movie because of that part of the storyline!) Now though I realize how silly it is to put that much emphasis on trips and outings and other money sucking experiences. My kids and I made amazing memories in the past week and we didn't spend a dime.

[Mom-ninja.]

Still chunking money into retirement, though, to take advantage of company matching. I can't get Suze Orman out of my head, talking about throwing away free money.

 

This is me. I'm having a very hard time with that. We'll do some number crunching and see.

[shanvan]

And some people are having their salary cut.

 

And some are having it cut more than once, so it is like having every raise you've been given taken away yearly.

[SunnyDays]

Well that is a bit of an overgeneralization, don't you think? There are many reasons someone with a high income may be in debt besides "wasting money."

 

 

Wow. That is quite the assumption.

 

 

It was just a flippant example, guys. Of course there are many reasons people could be in debt, at any salary level.

[Melissa in Australia]

Dave Ramsey, and other similar programs, basically teach that if one can't afford a particular lifestyle, then don't live it.

 

I rarely had a vacation growing up, and I turned out just fine. The entire concept of baby steps helps one to understand that vacations, cell phones, internet, and cable tv are not necessities. If one can't afford it, so be it.

 

Living off of rice and beans can sustain life for years and years and years.

 

I know that's not what you want to hear, but that's the way it is. Our American mindset of what is a necessity is totally warped from our grandparents' and great-grandparents' idea of necessities. My DH's parents lived through various "potato" famines while growing up in Ireland. They are now in their late 80's and still alive and kicking and driving.

 

:)

:iagree::iagree::iagree: