Expanded Baby Steps - Stolen from MYTMMO.com - Page 4
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  1. #46
    Registered User Greebo's Avatar
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    Quote Originally Posted by katy View Post
    this doesn't seem to warrant a thread of its own but I'm curious
    "0.1: Commit to NEVER borrow $$$ EVER for ANYTHING other than possibly a house."
    Education? Is this phrased in this way because DR does't believe education is worth going into debt for, or because the plan is aimed at married couples who are out of college so he didn't feel the need to mention college debt?

    Not that the answer's gonna make me drop out of university or anything, I'm just curious how to interpret it because pretty much everyone I know considers education something worth going into debt for.
    Dave gets asked this a lot.

    Ok - the numbers I'm quoting from Dave as I best recall.

    1) The drop out rate for college students is something on the order of 50%. That alone means one should not risk going into debt for something one only has a 50 percent chance of finishing.
    2) Many people get student loans to go to schools that are very expensive, ending up with a student loan debt nearing 6 figures or worse for a career that starts off making something in the low 5's.
    3) Employers really, honestly, truly do not give a **** 95 times out of 100 what school you went to. Why pay more for what you can get for less?
    4) WORKING your way through school with part time jobs is way more impressive to employers than a 4 year degree with no experience other than "Partying 101" and "advanced toga folding".
    5) Life happens. What if you finish school with a 6 figure debt, get a good job and then get hit by a drunk and are on disability for the rest of your life? Now how do you pay off that loan?

    So yes, in a nutshell, going into debt to pay for an education is way too risky in Dave's book. Mine too, for that matter. My parents paid cash for me to go to school, and I ended up not finishing, but even w/o a degree, I do pretty ok.

  2. #47
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    This is a touchy area...borrowing for college. There are ways to work through school (in the US) that require little borrowing. I think the issue now is that with the availability of student loans, many students feel that a part-time job isn't needed. Also, maybe because I am in a different part of the country, I see an attitude that a private college is better than a public college and community college isn't really college at all. Also there is an attitude that you shouldn't consider money at all. The truth is, unless you can get into an "elite" school where you can make personal and professional contacts on a different level, school is school after about 3 years. And if you borrow $15,000 for each of those four (or five) years, you will still be paying your student loans after 10 years.
    On the other hand when I was growing up the idea of scholarships was not drilled into us either. I wish I had scholarships.
    So, I think that you have to look at the whole picture, including money, when you go to college. I think Dave does say that it is okay to borrow to go to school. I think the idea is that you should fund your retirement before college for the kids because there is no scholorships or loans for college.
    Last edited by kita; 07-10-2009 at 09:50 AM.

  3. #48
    Registered User Greebo's Avatar
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    Quote Originally Posted by kita View Post
    So, I think that you have to look at the whole picture, including money, when you go to college. I think Dave does say that it is okay to borrow to go to school. I think the idea is that you should fund your retirement before college for the kids because there is no scholorships or loans for college.
    No, he most definitely does not.

    He pushes scholarships - I'm glad you mentioned it cause I thought of it and then forgot. He says that kids should become EXPERTS at filling out scholarship forms. He cites stories of kids who fill out hundreds and hundreds of them and get so many little ones that school is paid for.

    He pushes hard work, and saving up for school.

    He never, ever, EVER says ok to student loans. He even did a whole special on the topic of NOT financing college.

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  5. #49
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    Let me check that out, I have only a copy of a seminar and as I recall it was just an off-hand remark. I am going to go re-listen to it now...

  6. #50
    Registered User Greebo's Avatar
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    Quote Originally Posted by kita View Post
    Let me check that out, I have only a copy of a seminar and as I recall it was just an off-hand remark. I am going to go re-listen to it now...
    Just listen to his radio show archives long enough and you'll hear his thoughts on it sooner or later. The topics on his show do tend to repeat.

    http://www.daveramsey.com/tdrs/ - Click on "archives"

  7. #51
    Registered User missyali's Avatar
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    I borrowed for undergrad because I was already working 3 jobs and going full time (yes, I could have gone to a less prestigious school AND filled out more scholarship apps., but I didn't ~ lesson learned!) BEFORE DR I realized I was not going to do that to myself again in my master's program. I paid for it through a monthly installment program and paid, in 5 years, $450 more in fees to do it this way. Yes, it took me 5 years to complete a 2 year program, but factor in a three rehabbed houses, two perfect children and one wonderful marriage ~ I WIN! I finished the degree without any debt. I win again and again and again. Did it suck at the time, YES! But now, for the remainder of my 20+year career, I will "live like no one else". Didn't mean to sound braggy, just wanted to give some insight from someone who has been through it.

  8. #52
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    Quote Originally Posted by joyofsix View Post
    5.0 Save for kids college fund

    6.0 Pay off house early

    7.0 Live like no one else since you have lived like no one else (investment ideas at this stage greatly appreciated, Dave doesn't go into too much detail on this stage)

    So we're down to #5, but feel like paying the house off is our priority. I'm not sure it's bad for kids to work their way through school. We also figure if we're not making a house payment that frees up that money to help them with college. Our home should be paid off by then. No plan should be gospel, IMHO.
    "I'm not sure it's bad for kids to work their way through school"

    Totally agree!! I dated a guy whose parents bought him a car with the stipulation he attend college. He was at my house while he was supposed to be in school. I had a friend who went away to school and when I went there on weekends the kids who paid for there own education studied and alot of the kids with the "free ride" partied all the time.

  9. #53
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    Quote Originally Posted by Greebo View Post
    He pushes scholarships - I'm glad you mentioned it cause I thought of it and then forgot. He says that kids should become EXPERTS at filling out scholarship forms. He cites stories of kids who fill out hundreds and hundreds of them and get so many little ones that school is paid for.
    This is it. Or to quote his favorite line on this topic: "Make applying for scholarships their full time job during the summer!"

    My wife paid for her studies (as her parents couldn't afford it) with a plethora of small scholarships - except for a small portion for which she grudgingly had to take out a student loan. However, that loan was so small that she paid it off in a year after graduating.
    She also constantly worked next to her studies to pay for food and shelter. That's how we met (at her job as financial controller at the international students office, me being the international student). Boy, am I glad she worked so hard.

  10. #54
    Registered User Greebo's Avatar
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    YAY! I beat a.nonymous!

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    the car step is the step I'm on now. seeing that car prepayment video clip makes me remember why I'm doing it again.

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    Quote Originally Posted by Greebo View Post
    Dave gets asked this a lot.

    Ok - the numbers I'm quoting from Dave as I best recall.

    1) The drop out rate for college students is something on the order of 50%. That alone means one should not risk going into debt for something one only has a 50 percent chance of finishing.
    2) Many people get student loans to go to schools that are very expensive, ending up with a student loan debt nearing 6 figures or worse for a career that starts off making something in the low 5's.
    3) Employers really, honestly, truly do not give a **** 95 times out of 100 what school you went to. Why pay more for what you can get for less?
    4) WORKING your way through school with part time jobs is way more impressive to employers than a 4 year degree with no experience other than "Partying 101" and "advanced toga folding".
    5) Life happens. What if you finish school with a 6 figure debt, get a good job and then get hit by a drunk and are on disability for the rest of your life? Now how do you pay off that loan?

    So yes, in a nutshell, going into debt to pay for an education is way too risky in Dave's book. Mine too, for that matter. My parents paid cash for me to go to school, and I ended up not finishing, but even w/o a degree, I do pretty ok.
    well personally I think my debts aren't risky because in the UK our student loans are from the government so I don't run risks like being stuck with repayments I REALLY can't afford (they're a % of income once earning over £15k I think) but I understand now why his advice is not to go into debt for college, and obviously he's writing for a US audience. Thanks for the clarification.

  13. #57
    Registered User Greebo's Avatar
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    Quote Originally Posted by katy View Post
    well personally I think my debts aren't risky because in the UK our student loans are from the government so I don't run risks like being stuck with repayments I REALLY can't afford (they're a % of income once earning over £15k I think) but I understand now why his advice is not to go into debt for college, and obviously he's writing for a US audience. Thanks for the clarification.
    Um - if you can't pay cash for it up front, you REALLY can't afford it. If you can't make the payments cause you're making
    Don't take this the wrong way, but the way you're thinking about whether you'd be able to afford the *MONTHLY* payment, and not being forced to if your income is low? That is a trap. Lenders, car dealers, and other loan sharks (gov't?) want you thinking about "monthly affordability", but being able to afford the "monthly payment" isn't being able to afford it, it's just a way to get another chain wrapped around your neck.

    Not being able to make payments and having the loans go into deferment doesn't make it "OK". It means not only can't you repay your debt, but I'm *guessing* that you're also losing more money each year the debt isn't getting paid down and you're out of school.

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    Quote Originally Posted by Michelle View Post
    Our situation (filled out so I can see where we are in this):

    0.1: Commit to NEVER borrow $$$ EVER for ANYTHING other than possibly a house. (may not be practical when buying a car--otherwise, okay, I agree. And "possibly" a house? Who in this day and age can buy a house without borrowing?)

    0.2: Talk with spouse and get him/her on the same page as you concerning finances. (done)

    0.3 Do a written budget (done)

    0.4 Temporarily stop all retirement contributions (not going to happen at this time, and we didn't do it when we were in CC debt either. We only contributed up to what our employer's matched, but we never stopped altogether. Plus at many companies it's not just a matter of making a phone call to make adjustments any ol' time you want. In the last 5 companies that Dave & I have worked for, changes to 401K could only be made quarterly.)

    0.5 Get current on all the basics (You MUST have Shelter, Food, Utilities, Basic clothing) (done)

    0.6 Amputate "toys" (bikes, boats, ATV's etc) if they will keep you from completing the snowball within 12 months (didn't have any to begin with)

    0.7 Cut lifestyle (Cut CATV, Cellphone, Regular phone "extra's", Internet, Eating out, etc) and/or take second job if $1000 EF will take more than 30-90 days. (depending on income) (Baby EF is funded, cutting out the rest unnecessary at this point)

    0.8 Get current on ALL bills (done)

    1.0 Save $1000 In baby EF (done)

    1.1 Chop up CC's (You have an EF now, no NEED to keep those CC's !!) ($1K is too small of an EF for me to rely on that soley for emergencies. I won't be cutting up my CC. I won't be cutting them up even when I have 3-6 mos in my EF.)

    1.2 Get Health insurance NOW (chances of getting sick w/ major medical bills are larger than that of death), especially if you have children. (done)

    1.3 Get Life insurance NOW if you have considerable debt/your family couldn't make it financially if you died. Especially important if you have children !! Social Insecurity provides only a small amount of coverage if you have dependents. (done)

    1.4 Amputate cars that you can't pay off within 24 months (You have an EF to fix the "bondo buggy" if something should happen) (done for now...not sure about the near future as we will be buying a "new to us" car soon.)

    1.5 Consider raising insurance deductables to $500 or $1000 and dropping full coverage on paid for "bondo buggy" (You have an EF ya know) (need to check policy. Pretty sure this is already done.)

    2.0 Do debt snowball, paying all your debts from lowest BALANCE to highest. (done)

    2.1: You can take your first vacation since finding Dave if you can pay cash for it (no using the EF !!!)

    3.0 Save 3-6 months EXPENSES in EF (working on it)

    3.1 Start car replacement fund (when does this end? how does one determine when to move on in steps? after using it to replace a car?)

    3.2 Save up 20% for home purchase OR pay down existing mortgage to the point you can drop PMI. (done)

    3.3 Start furniture or other non-essential stuff replacement fund (same as 3.1: when does this end? how does one determine when to move on in steps?)

    3.4 Move up in car if you still feel the need to (must pay cash for it) (one of our cars is 11 yrs old and about to die...we'll be buying "new to us", and there's no way we'll be able to pay cash for it--not the same as moving up when one already has a car, but I'm not going to buy a beater car and then save until I have enough money to buy a car outright. It's just not practical IMO--not for us anyway.)

    4.0 Start contributing 15% of your paycheck to retirement. (done)

    5.0 Save for kids college fund (Not sure how I feel about this one. I think I agree with Suze Orman's recommendations more than DR's. Need to research more thoroughly)

    6.0 Pay off house early

    7.0 Live like no one else since you have lived like no one else (investment ideas at this stage greatly appreciated, Dave doesn't go into too much detail on this stage)
    I do agree with what you have said. I also don't agree with everything Dave says. I have kept myself out of large debt all on my own. If I had an employer matching retirement I wouldn't forgo that to pay off credit cards; but I've never been in very large cc debt.

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    Quote Originally Posted by Michelle View Post
    Wrong. This is not the Dave Ramsey kith. If you want a place to talk DR with only people who agree with the program completely, then create a DR kith. There is absolutely nothing wrong with me disagreeing with DR in the DR forum (same as for any other forum except for the kiths). This is not a Dave Ramsey worshipper's forum.
    I do not agree with some of what dr says and I'm almost debt free all on my own, including mortgage. We used to buy older cars and keep them until they died; thus having nothing to trade in. Then we started buying newer cars and trading them in when they were still worth something; having a down payment on next car. I have kept my debt low always and will continue to use the stores money for my purchases w/o interest.

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    edit: nevermind, was a bit behind the curve on this one.
    Last edited by a.nonymous; 07-11-2009 at 06:56 AM.

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