Modified debt reduction plans

[Mom2-3]

The other thread on Elizabeth Warren got me thinking. Has anyone done a modified debt reduction plan?

I know Dave Ramsey is against vacations until after BS2 and not to fund your 401K if you are out of debt in less than 2 years.

Suzie Orman says no vacations until you have no debt and 8 months in the bank. Some of her "can I afford it" segments are hilarious!

I was just wondering what plan you followed and did you deviate from the "rules" I think of a debt reduction plan like a diet(lifestyle change) if you don't have a treat once in a while, you will eat the whole buffet!!

FTR- DH and I did a modified Ramsey plan. We funded our 401K and we vacationed while on BS1 and BS2. We will vacation as we are finishing BS3.

I like Suzie Orman's advice, but trying to be debt free seemed like a huge step! That's why we used some of Ramsey's advice, the baby steps were easier to manage.

[craftypam]

You really have to do what is comfortable for you. If you don't you will keep falling off the wagon. I despise debt and did not go on a real vacation (meaning 7 days) for 30 years, BUT the payoff for me is. I have no car payment, no house payment, a retirement fund and a nice savings account.

It is your life and you have to live with your choices. I couldn't pay banks interest for use of their credit card and have not ever done so. Because while DR calls paying off debt snowball, that is what getting into credit card is like. The snowball gets bigger and bigger and then it is nearly impossible to payoff.

[Mom2-3]

Oh! I agree, you have to do what is most comfortable for your family. I am blessed with a DH that is totally involved and helps motivate our progress. My girlfriend is desperate to get out of debt, but her DH figures he is making the minimum payment so all is well.

That's why I wondered if anyone has used any modifications to a debt plan and did it work? Some people have to follow each and every rule to the letter. Others can sway a bit and still be on track. It's all a personal choice.

[Palooka]

I agree with it's a personal choice. When I got divorced I racked up 7 thousand in credit card debt. I was going to school and working part time. I never saved a penny and applied everything to my debt until is was gone.

Now days I probably wouldn't have done that with the economy and all.

I still enjoy Suzie very much and I take what I have learned and just roll with it... whatever works for us.

[Mom2-3]

I guess everyone else doesn't modify at all. lol I just think it's interesting to see what little tweaks work for others.

[StanleyJohnson]

I like Dave Ramsey's step system. If I had CC debt at 30% interest I'd stay on his plan.
Because the interest rate on our debt is so low and because the economy is weak, we've decided to fully fund our EF and 6 month expenses before agressively paying down debt.

[Greebo]

We did modify the plan, somewhat. We continued putting $300 every 2 weeks into our EF during BS2.

We also moved through BS3 with less than 3 months in reserve, because we continue to put $300 every 2 weeks into our EF.

[Mom2-3]

I think in this economy it is smart to keep funding the EF, even if it's while cutting down debt.

[kita]

I think you have to decide what is "vacation". And do you have "use them or lose them" hours at work? I suppose that I would never take a vacation requiring airfare or hotel stays during BS2 but if I had to take my hours I might look around my house for free stuff to do and take a few days off. And spend part of that time working the part-time job if I had one. And catching up on stuff at home if I had been putting huge amounts of time at work.
And there are lots of discussions on the size of an ef.
Dave Ramsey mades me ask questions about how I spend my money. He mades me control and name every dollar I get. He made me insist on having an ef fund. He made me hate and pay down (and someday away) my debt. Almost everyone here has adjusted amounts on the steps. But they are in hard-core with the ideas.

[itlw8]

It is kinda like food and housing everything is supersized these days. a children can share a bedroom and a starter home does not have to have granite countertops.

a vacation does not have to cost a fortune, it does not have to include airfare or haave Disney in it.

Our children did not have fancy vacations grooing up but they have fond memories of our camping trips. We did lots of fun things on a slim budget I remembeer the year we splurged and stayed in a cabin with a kitchen it cost a bit more but we cooked all our meals. and it had a great pool.

[Mom2-3]

I guess I was just wondering who modified the actual DR baby steps (or whatever plan you are on) or do you follow the plan EXACTLY as laid out.

I enjoyed our journey through the first two baby steps and I am enjoying the third step. I think having our modifications made the plan more enjoyable and easier to take.

JMO

[porembam]

I have to have the vacation time away from the house. My children will only want to go for so many years. Great Memories and funny stories will last forever.

[savininfl]

I agree vacations are top priority in my book cause my kids are only babies once and pretty soon they won't want to be seen with mommy and daddy. I don't go all out and spends thousands but a weekend away gives me moments that last a lifetime!

[Samigirl]

We've continued to take small vacations as well. Neither of us really takes "blow money" so I consider the money we spend on them as our blow money. If money were tight, we wouldn't do this, but we've saved the cash for them, while still doing the debt snowball.

We also started on the plan with a fairly large emergency fund. DH was reluctant to get on board without it. I understand Dave's reasoning for only have a baby EF....it puts a bit of fear in you, and makes you highly motivated...but I found I had to compromise. Darn it....I don't rule my world after all.

[Preston]

The other thread on Elizabeth Warren got me thinking. Has anyone done a modified debt reduction plan?
.

Glad I could stir up the pot!

Anyway, I've been kind of a haphazard debt reduction style.

First things first: I never was able to hold onto a $1000 EF per se, I have two checking accounts which my paycheck is divided into. One is cash flow, the other is for bill payments. The cash flow account would fluctuate between $100-$1200 and it is where all our regular expenses come out of. So in order to afford something, there had to be enough in the cash flow account to cover it. Not the $1000 EF , but it worked for us.

Second, We've taken a vacation every year. Partially due to the fact that we own a timeshare.

Third, We started our 401k's while on "BS2" once our yearly union raise took effect.

Fourth, Obama's "Making work pay credit' caused our withholding to be messed up and they did not withhold twice what they were supposed to which increased our cash flow each month. This was used to pay off cc debt. It sucks now that I have to pay the money back, but it is below the level that we would owe a penalty. So I got a 'free loan' from the government because of this.

Fifth, we bought a house during BS2. "Are you crazy?!?!?" Well, first off, a relative gave us $20,000 for the down payment, and then the $8000 tax credit helped us out as well. This was a major windfall that really "busted the logjam." I really had to think hard before we went through with the house as to whether or not it would work out long term and if we were ready. But it has turned out to be a true blessing since we KNEW WHAT WE WE DOING by the time this came up. It's a 30 year mortgage, but starting in November, I am going to change the cash flow and pay EVERYTHING (including the mortgage) from the cash flow account, then whatever goes into the bill pay account is going to be thrown at the mortgage.

Sixth, I am going to do the remaining Baby Steps 3 4 5 6 at once. My ultimate goal is to have a EF of 6 months (which would be $10000) but then keep it going until it hits $25000. I am going to be saving 10% for retirement and pounding the living hell out of the mortgage. I WILL GET RID OF BANK OF AMERICA!

Seventh, Wife is going back to school this fall and I am going to allow her to take out student loans, but I will be saving up the amount of tuition in a special savings account which I will pay in full upon graduation. I just need the added flexibility since she may have trouble working during her last year in school.

Eight, I listed my debts in order of which one I hated the most and that go me so pissed off at the debts (Chase, Boa, etc) that the first six months of credit card debt reduction was done at a psychotically intense level. We didn't go grocery shopping for five weeks until the cupboards were bare. I went three months without buying gas (biked everywhere). I actually made myself AFRAID to spend money.