I've read the book from cover to cover and my opinion is that it will work.
This is the basic premise, duped from his website:
1) Make a written budget! 2) $1,000 to start an Emergency Fund 3) Pay off all debt using the Debt Snowball 4) Three to six months of expenses in savings 5) Invest 15% of household income into Roth IRAs and pre-tax retirement 6) College funding for children 7) Pay off home early 8) Build wealth and give! Invest in mutual funds and real estate
First you start out by spending every dollar of your income on paper before you have it. Anything you're not using to make minimum payments on debts goes into your emergency fund until you have $1000 in it. $500 is recommended instead of $1000 for incomes less than $20k per year. Build your emergency fund as quickly as possible. Sell stuff that isn't heirlooms, pick up a side job, etc.
As soon as you've got your emergency fund fully funded, you work on the debt snowball. You pay minimums on everything but your smallest debt, which you pour any and all money left over in your budget into. This pays it off as quickly as possible and gives you fast progress feedback. You're less likely to give up on something that doesn't look and feel hopeless. If you have to tap into your emergency fund for a true emergency (car breaks down, had to go to hospital) you start back at step 2 and build your emergency fund back up. You repeat the debt snowball for each debt (including student loans!) until they are all gone. For the purposes of this step, a mortgage is not included.
The next step is your real safety cushion. You build up 3 to 6 months of your expenses (not income) so that if you were to be out of work you could still pay the bills and buy the groceries. This is everything non-debt that you had budgeted.
I'll stop here, but if you want more just let me know. I love this plan because it's not a get rich quick scheme. It's 20% brain power and 80% behavior - you have to change the way you think about money. It's about freeing yourself from being in anyone else's debt for the rest of your life.
PS - Including student loans, I'm carrying approximately $45k in debt - excluding the mortgage! My take-home pay is about $2422 per month. My plan is to have my debt knocked out in two years. I'll try to keep progress updates posted.
No, it definitely sounds like a good idea, and I'd like to start it once I graduate and get steady employment. I'm a bit overwhelmed at the amount of student loans I have, and I'm freaking out about paying them off. I have a small amount of credit card debt from my period of unemployment (like $3500) and even paying that seems impossible. My monthly bills aren't too bad at the moment, and I will get another $200 back each month after my car is paid off in April. So, I dunno. I remember seeing on TV about that family with 16 kids who went to a seminar about debt and now live without debt--enough to pay for building a huge house without taking out a loan. I think that would be cool. I'll definitely look at the book (what's the exact title?) I hope it's not heavy in financial terminology because that is my weak point.
They're running a special right now where you can get the book for $14.95 +S&H. They accept check or branded debit for payment. No credit cards!
You may be able to find it elsewhere with free shipping. It's about 220 pages and I promise you won't be overwhelmed by it. The book is written at a level anyone who has ever had a paycheck burning holes in their pockets can understand.
It's an easy read and I found it quite addictive. I had finished the book within a few days of picking it up for the first time.
This is the basic premise, duped from his website:
1) Make a written budget!
2) $1,000 to start an Emergency Fund
3) Pay off all debt using the Debt Snowball
4) Three to six months of expenses in savings
5) Invest 15% of household income into Roth IRAs and pre-tax retirement
6) College funding for children
7) Pay off home early
8) Build wealth and give!
Invest in mutual funds and real estate
First you start out by spending every dollar of your income on paper before you have it. Anything you're not using to make minimum payments on debts goes into your emergency fund until you have $1000 in it. $500 is recommended instead of $1000 for incomes less than $20k per year. Build your emergency fund as quickly as possible. Sell stuff that isn't heirlooms, pick up a side job, etc.
As soon as you've got your emergency fund fully funded, you work on the debt snowball. You pay minimums on everything but your smallest debt, which you pour any and all money left over in your budget into. This pays it off as quickly as possible and gives you fast progress feedback. You're less likely to give up on something that doesn't look and feel hopeless. If you have to tap into your emergency fund for a true emergency (car breaks down, had to go to hospital) you start back at step 2 and build your emergency fund back up. You repeat the debt snowball for each debt (including student loans!) until they are all gone. For the purposes of this step, a mortgage is not included.
The next step is your real safety cushion. You build up 3 to 6 months of your expenses (not income) so that if you were to be out of work you could still pay the bills and buy the groceries. This is everything non-debt that you had budgeted.
I'll stop here, but if you want more just let me know. I love this plan because it's not a get rich quick scheme. It's 20% brain power and 80% behavior - you have to change the way you think about money. It's about freeing yourself from being in anyone else's debt for the rest of your life.
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My monthly bills aren't too bad at the moment, and I will get another $200 back each month after my car is paid off in April.
So, I dunno. I remember seeing on TV about that family with 16 kids who went to a seminar about debt and now live without debt--enough to pay for building a huge house without taking out a loan. I think that would be cool.
I'll definitely look at the book (what's the exact title?) I hope it's not heavy in financial terminology because that is my weak point.
Reply
http://www.daveramsey.com/shop/The_Total_Money_Makeover_P123C46.cfm
They're running a special right now where you can get the book for $14.95 +S&H. They accept check or branded debit for payment. No credit cards!
You may be able to find it elsewhere with free shipping. It's about 220 pages and I promise you won't be overwhelmed by it. The book is written at a level anyone who has ever had a paycheck burning holes in their pockets can understand.
It's an easy read and I found it quite addictive. I had finished the book within a few days of picking it up for the first time.
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