Anyone here doing a modified Dave Ramsey program?

[laurend1985]

I try to follow is program to the letter but I can't get with having zero credit. Anyone else here do a modified DR program?

[disneysteve]

Well, technically anything other than Dave Ramsey's plan isn't Dave Ramsey's plan, but I know what you mean.

Certainly, I suppose what we did would qualify as a "modified" DR plan. We lived very frugally, put a lot of extra income toward debt, paid off my student loans about 13 years earlier than scheduled, invest for our daughter's education, prepay our mortgage, etc.

Of course, and this is one way we didn't follow DR's plan, we also have credit cards and use them to pay for virtually everything we possibly can. We pay the balance in full on time every single month so we don't pay interest or fees - it is free money. Plus we've collected thousands of dollars in rewards and a few dozen free hotel stays over the years by doing that.

[twest]

I think Dave Ramsey is great for a lot of people but I don't agree with everything he says. When I listen to him, Susie Orman, or any financial advisor I pick and choose from their ideas based on my own experience to decide what I will implement in my finances. I understand what he means about credit cards but I think if you pay them off each month there is no problem with using them. I know he says that a credit score is a "I love debt score" but so many places will look at your credit so I want to strive to have a good credit score. I think there are ways to have a good score without being in a ton of debt. So listen to his ideas but when it comes down to it trust your own instincts or you can always ask the great people here at saving advice LOL

[EarlyRetirementJoy]

I likewise don't understand how anyone can walk away from their credit score under any circumstances. As a recent example, we purchased a new vehicle recently, for which we paid cash. Just as occurred the prior two times we bought vehicles for cash, the dealership ran our credit score before accepting our check, and turning over the keys of the vehicle to us.

What I personally understand Dave to mean about credit cards is that even if you pay them off in full each month, the simple act of paying by card vs by cash leads many people to buy more than they would otherwise. I do get this, but in our case we are very aware of our retirement budget and adhere to it very carefully, regardless of whether we make our purchases by card or by cash.

So I understand his point, and take it for what it is worth, but utilize our credit card whenever possible for the same reason as Disney Steve. Love those points!

[disneysteve]

we purchased a new vehicle recently, for which we paid cash. Just as occurred the prior two times we bought vehicles for cash, the dealership ran our credit score before accepting our check, and turning over the keys of the vehicle to us.

Great point. Yes, sometimes even if you are paying cash for your purchase, your credit score can still come into play.

I have a similar example. We bought my wife's van after her previous one was wrecked in an accident. We were waiting for the insurance check but had to buy a replacement vehicle before we had that check. The dealer checked my credit, found it to be excellent (over 800 FICO) and handed us the keys. We didn't actually pay for the vehicle until 2 weeks later when the check finally arrived. There's no way we could have gotten away with that if we had lousy credit or a zero as Dave Ramsey says he has.

[Nika]

He keeps saying that you have to be in debt and pay interest to get great credit score, so "no thanks". This is simply not true.

If you pay off your balance in full every month, you don't pay any interest and not in debt, but you are reported to have a balance each month - that's the balance you happen to have on the day they take a snapshot of your account.

So you can have established credit and never pay any interest, just collect the rewards (which can be substantial).

Why would I forgo well over $1,000 in cc rewards each year when according to Dave Ramsey I could easily invest it at 12% a year and retire a millionaire. (he uses example of saving $100 a month).

Also, the study that you spend more using CCs... maybe some people.
I think of a purchase in terms of its number, not monthly payment or method of payment, so it does not matter. And doing a study using a fast food restaurant, it is flawed to begin with - first of all, the clientele of fast food joints may skew the picture of financial behaviors, secondly, if one is buying something for a very small amount, they are not likely to use credit card, but if they are making a bigger purchase that seems more appropriate to use the cc. It does not mean that they bought more just because they are paying with a cc.

[maat55]

I do a modified version also. I do use a credit card but only for specific uses, and pay in full.

[Wino]

"Modified Dave Ramsey?"

Well, to the extent that it is so modified that the only resemblance is that the goals were the same: to get out of debt.

I kept my credit cards. I paid off the loans according to "the ones that go away and can never come back" followed by revolving debt. I continued to eat in restaurants. My charity is of a personal kind, and not to a church or other controlling entity. I help out folks who need it, and when I can, I do so anonymously.

So, how "modified" does a plan have to be until it is no longer "Dave Ramsey's plan?"

[disneysteve]

Another thing I did differently than DR is focused on the highest interest debt first, not the smallest balances. That is the way that makes more sense mathematically, saves you the most money and gets you debt-free the fastest.

[bjl584]

If you are completely down and out and your finances are a wreck, then DR is the way to go. But for people with a more advanced understanding of finances and investing that have their finances in order, DR starts to become less and less reliable a source for advice.

[phantom]

My husband and I really like Dave Ramsey, but we deviate from his plan a lot. We totally ignored the order of the baby steps. We started on 3 (6 month emergency fund), jumped to 6 for a while (trying to pay off the house early), went back and finished up 2 (paying off student loans), and found ourselves back on 6. We also use credit cards for the cash back, and have a budget that doesn't cover every dollar we make and spend.

I like to think that Dave Ramsey has come up with a good generic plan that can lead anyone to financial success but that some people can have more success by making up their own plans. I know Dave disagrees with me, but that's okay. I think he can be wrong about the necessity of following his plan while still having some good ideas.

[Wino]

Thanks, Phantom. I completely forgot about having a larger emergency fund than Dave calls for. I would panic if I had only $1000 in the bank. I'd be looking for things around the house that I could sell.

Our second mortgage was on the "debt that goes away" list, so it was paid off early, too.

I guess my first goal was to just get rid of as many payments as I could, rather than to pay things off, if that makes sense to anyone out there. I just had too many payments on debt. It was stressful just making sure that I had paid everyone that I owed.

[Nika]

I completely forgot about having a larger emergency fund than Dave calls for. I would panic if I had only $1000 in the bank. I'd be looking for things around the house that I could sell.

If your monthly expenses are 7K, what good will 1K emergency fund do you? This "one mold fits all" approach is completely unreasonable.

[disneysteve]

I completely forgot about having a larger emergency fund than Dave calls for. I would panic if I had only $1000 in the bank.

If your monthly expenses are 7K, what good will 1K emergency fund do you? This "one mold fits all" approach is completely unreasonable.

I agree. I can't imagine only having $1,000. I've had plenty of unexpected expenses that exceeded that amount. HOWEVER, if I had nothing to start with and I got myself to having $1,000 in the bank, I'd probably be feeling pretty darn good.

Dave Ramsey's plan works for those who need it. If you are buried in debt, living beyond your means, have little to nothing saved and haven't got a clue how to dig yourself out of the hole you're in, Dave's plan is a good one. It will work. It will teach you how to manage things. It will motivate you along the way. Is it right for everyone? Absolutely not, because not everyone fits that description.

[phantom]

Once, long before I'd ever heard of Dave Ramsey, I took my emergency fund down to $1,500 in an attempt to get rid of my student loans as quickly as possible. A couple of weeks after sending a big payment, I totaled the car my parents had been letting me drive and quickly came to wish I'd kept my emergency fund bigger. So, I swore I'd never let my emergency fund drop that low again unless I was using it for an emergency.

Technically, I would have been fine if I'd been on the Dave Ramsey plan. I could have bought $1000 car as Dave would recommend, paid off my loans as quickly as possible, and saved up cash for a nicer car.

What I did instead was finance a $17,000 car with $1000 down.

Dave's plan certainly would have been a much better one than mine in that case. But, if I could do it all again, I'd keep a bigger emergency fund. Then when I needed a car, I'd buy one for slightly more than $1000, but much less than $17,000.