Elizabeth Warren

**Preston** · 04-01-2010, 02:51 PM

So I was first 'introduced' to Elizabeth Warren in the documentary "Maxed Out" and I've been meaning to look into who she is further. I've agreed with a lot of what she says.

I am currently reading her book "All Your Worth" and she has a similar plan as Dave Ramsey. But they differ in a few ways.

The first thing she does is say there needs to be a balance with your money. 50% to "must-haves" (rent, utilities, groceries, etc.) then 30% to "wants" (movies, eating out, etc) and the 20% to savings (which includes debt reduction.)

I think this is a good way to look at it and I am thinking about switching plans (well, I would balance it different, our living expenses, including wants are at 45% and we have a 55% savings rate.)

On our income 20% of $3500 is $700, and I'm sorry, but I hate Bank of America too much to only put that amount toward debt.

But once we've got our consumer debt cleared, I think this would be a better plan. Right now I'm getting a little burnt out on 'rice and beans.'

But once your money is in balance she recommends first getting $1000 in savings as a 'security' fund , and then getting rid of your credit cards and never using them again. Then she says to pay off all consumer debt ASAP. Then continually build up the security fund to 6 months living expenses. After that, do a 3 tiered 'step' where you save for retirement, pay off the mortgage, and save for kids college. which is VERY similar to the DR plan.

For those of you who don't know her she was put in charge of oversight of the TARP bailout and has been fighting the big banks and predatory lending for quite some time. I like her personality better than Dave Ramsey and I was curious if anyone else has tried her plan.

**Jellybeanz** · 04-01-2010, 02:58 PM

I like her! I've seen a video of her speaking about this subject, maybe the one you mentioned. I didn't know she had written a book, I will have to check that out.

Yes I like her plan better, from what you shared of it, it sounds more reasonable to me. I never was much of a fan of Dave Ramseys' but to each his own. He has helped many get out of debt so more power to him.

I just get the feeling watching and listening to her that she has a better handle on the "average" american family and the challenges. So thanks, I'll be looking for that book now. Can't wait to read it !

For anyone who isn't familiar with her, it's definately worth searching around for info on. She seems like one smart, compassionate and level headed lady :-)

**Imarachne** · 04-01-2010, 03:10 PM

Thanks for the tip ! I'll definitely check out her ideas.

**porembam** · 04-01-2010, 04:18 PM

Is maxed out still on tv - if so do you know where?
I liked her show

**mauimagic** · 04-01-2010, 04:50 PM

Never heard of her, but she sounds interesting - shall look her up!! Mahalo!!

**Preston** · 04-01-2010, 08:05 PM

maxed out is a documentary. you can probably find a copy at your local library. I think it is also available through netflix on demand.

**bumplett** · 04-01-2010, 08:25 PM

thanks for the info! I'll look for the book this weekend @ the library.

**Palooka** · 04-01-2010, 09:08 PM

I've never heard of her and will have to check this out. Seems there has been something mentioned about Maxed Out before.

**Greebo** · 04-02-2010, 09:00 AM

I don't agree with treating debt reduction as savings. Reducing ones debt is not the same as having savings available - for one thing, if the creditors close or reduce your account after you pay down the debt, you don't have a fallback plan. If you have money in the bank, and you have debt, you can, however, ignore your creditors during an emergency and focus on the 4 walls.

**StanleyJohnson** · 04-02-2010, 09:42 AM

Originally Posted by Greebo

I don't agree with treating debt reduction as savings. Reducing ones debt is not the same as having savings available - for one thing, if the creditors close or reduce your account after you pay down the debt, you don't have a fallback plan. If you have money in the bank, and you have debt, you can, however, ignore your creditors during an emergency and focus on the 4 walls.

I agree. I plan to fully fund my 6 month expenses account before agressively
paying down my debt. I've also gone to an interest only loan.
Normally I pay more than the required payment, but it's nice to know I can fall back on interest only payments in case of job loss etc.

**Preston** · 04-02-2010, 03:33 PM

Originally Posted by Greebo

I don't agree with treating debt reduction as savings. Reducing ones debt is not the same as having savings available - for one thing, if the creditors close or reduce your account after you pay down the debt, you don't have a fallback plan. If you have money in the bank, and you have debt, you can, however, ignore your creditors during an emergency and focus on the 4 walls.

There are parts of the plan that call for shift in priorities, i.e. job loss. But the important thing here is balance.

And debt reduction IS savings. You owe the money and the balance will always be there (and growing) unless you pay it off. You could get a check for $500, put it in savings or put it toward a debt. The base result is the same - net worth goes up by $500.

Also, within the 20% balance, it says to break it down by your comfort level. It may by 15% put toward debt reduction, and 5% in savings, but that is the concept.

The important thing is getting your money in balance. It may not be as intense as going all out Dave Ramsey style, but for some people this is a MUCH gentler and better way to look at it.

**Preston** · 04-02-2010, 03:35 PM

Originally Posted by StanleyJohnson

I agree. I plan to fully fund my 6 month expenses account before agressively
paying down my debt. I've also gone to an interest only loan.
Normally I pay more than the required payment, but it's nice to know I can fall back on interest only payments in case of job loss etc.

Would it make more sense to say, chop up your 'saving' toward the EF and put 75% toward EF then 25% toward the debt. It may not be as intense, but it may be more effective.

**mauimagic** · 04-02-2010, 04:15 PM

Mahalo - am going to check out netflex!!

**Greebo** · 04-02-2010, 04:25 PM

If you only consider the debt/savings ratio in terms of net worth, yes, it's true, they're functionally, mathematically equal.

But in my opinion, it also is an incomplete way of considering savings. Savings is not something one should consider primarily from the perspective of net worth, but from that of insurance, IMO.