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Discussion Starter · #1 ·
https://drbreatheeasyfinance.com/12-toddler-steps-to-financial-freedom/

I just saw this on pinterest.

I have also heard others say that you shouldn't pass up the "free" money that employers offer in matching 401K.

We follow a modified DR, in we still put money in our 401K to get the 100% match from the company. We also put money into an HSA, which the employer also adds money to.

We are currently paying on our no interest accounts first and then will snowball that into the other debts.

We did refinance our house for another 30 years, but it was the only way to have extra money to start paying down the debt. We got caught in the big mess years ago with our house and had an extremely high interest rate. We were able to get a much lower rate and have our taxes & insurance included for less than we were paying before. We did a couple of other things Dave wouldn't approve of, but so far it is working for us. We have a 5 year plan and so far we are on track. We are hoping to get it done faster.

Dave has good ideas, but sometimes it just doesn't work for everyone.
 

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I think most people who follow DR do a modified plan. I know we did.
 

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We modified too. there were just some of his ideas we couldn't do. all in all we are doing ok. Working on getting the house paid off early.
 

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Yes...we also followed the modified D.R.
You have to adjust any program to fit your needs or your family needs.
It's worked for us, but I'm also not a big spender. We paid off the mortgage and all our vehicles and have no credit card debt. Of course, then my DH retired. LOL~!
 

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He seems to think no one should use credit cards. Kind of a paternalistic attitude. If you can use them responsibly, they have benefits. I have been using CCs for 40 years, never carried a balance (except for the good old days of 0%, no fee balance transfers), never paid interest or fees, and do not buy any more than I would normally buy. In return I have gotten all kinds of cashback and rewards.
 

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I think his ideas are sound.
I use CC's and feel that he doesn't like them for most people since he's afraid that people can't pay the full balance each month. Understandable. I pay mine off when I can and have earned rewards too.
 

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It was a cheap house, $12K, and we had a high limit on the card. IIRC, we did a cash advance, so technically paid cash for the house and had no mortgage, just the CC payment. That was in 1992. Maybe it was easier then. It worked out great.

Doubt DR would have approved.
 

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Discussion Starter · #10 ·
We took a loan against our 401k. One year we took our tax return and paid off a loan, so we could get a bigger loan and paid off 5-6 credit cards. The payment was lower and all the money goes back to our 401K. Dave definitely wouldn't approve, but it worked for us.
 

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I have glanced at some of his stuff before and not been a fan.

I will say that I think the snowball method is good for paying off credit cards. If you have low interest debt, you might be better off investing before you pay off the loans, though.

For credit cards, I think it depends on how you use it. Using it to buy things you cannot afford is not generally a good idea. But we are in the electronic era and people generally do not use cash much anymore. For buying things online, a credit card is useful. More sites are using pay pal now so that does reduce the need a little bit.

I live in a high cost of living area. Ordering things online is generally significantly cheaper than buying locally.

Credit cards are generally safer too. If your credit card gets stolen, you can call and cancel it. But if you have a wallet full of several hundred dollars you will never get that back. And if you become known in the neighborhood for carrying around a bunch of cash you might as well stick a "mug me" sign on your back.

I would disagree about the 3 to 6 months in savings. That is a lot of money to be sitting around in something that earns very little interest. It would be better to stick more of that into investments. You can always take it out of the investment fund in an emergency. At the least put it into CDs or a money market account. There may be some interest penalty for early withdraw. But you will generally make up for that in the interest you earn over having it in just savings.

If you have an employer who does matching funds for retirement, it is always better to toss money in there before doing the 3 to 6 months saving plan. It may be more bang for you buck than paying off some of the lower interest rate debts too. That literally doubles your money, so it may be better than some high interest rate loans too.

I would also advise paying off high interest debt before doing an emergency fund. If you have an emergency you can charge it on a credit card. Lets say you had a $1000 home repair a year after starting the plan. If you put the $1000 into paying the card you have saved one years interest.

This is probably not mentioned in Dave Ramsey - I admit I have only read summaries - but a small food stock pile is a type of saving as well. Have a stock of bags of rice and bags of dried beans. If there is a big sale on non-perishable items it is good to buy a little extra. If a financial emergency hits you have the security of knowing you can still feed yourself and your family. It might not be the best eating, but you will not go hungry.

So my general plans for saving/investing paying off stuff. Finish paying off our last credit card - sometime this year. Bump up our retirement saving through work to the max amount - we can give up to 10%. (Matching on the first 5.) We will actually do this a tiny bit before we pay off the credit card. This is because we both will be getting a cost of living increase in pay. That is the best time to move extra money into the fund because we will not see a decease in take home pay even with more money going straight to the retirement fund.

Keep around a month in half in saving and put any extra in a money market account where it earns a little better interest.
 

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I have glanced at some of his stuff before and not been a fan.

For credit cards, I think it depends on how you use it. Using it to buy things you cannot afford is not generally a good idea. But we are in the electronic era and people generally do not use cash much anymore. For buying things online, a credit card is useful. More sites are using pay pal now so that does reduce the need a little bit

I live in a high cost of living area. Ordering things online is generally significantly cheaper than buying locally.

Credit cards are generally safer too. If your credit card gets stolen, you can call and cancel it. But if you have a wallet full of several hundred dollars you will never get that back. And if you become known in the neighborhood for carrying around a bunch of cash you might as well stick a "mug me" sign on your back.

I would disagree about the 3 to 6 months in savings. That is a lot of money to be sitting around in something that earns very little interest. It would be better to stick more of that into investments. You can always take it out of the investment fund in an emergency. At the least put it into CDs or a money market account. There may be some interest penalty for early withdraw. But you will generally make up for that in the interest you earn over having it in just savings.

If you have an employer who does matching funds for retirement, it is always better to toss money in there before doing the 3 to 6 months saving plan. It may be more bang for you buck than paying off some of the lower interest rate debts too. That literally doubles your money, so it may be better than some high interest rate loans too.

I would also advise paying off high interest debt before doing an emergency fund. If you have an emergency you can charge it on a credit card. Lets say you had a $1000 home repair a year after starting the plan. If you put the $1000 into paying the card you have saved one years interest.

This is probably not mentioned in Dave Ramsey - I admit I have only read summaries - but a small food stock pile is a type of saving as well. Have a stock of bags of rice and bags of dried beans. If there is a big sale on non-perishable items it is good to buy a little extra. If a financial emergency hits you have the security of knowing you can still feed yourself and your family. It might not be the best eating, but you will not go hungry.

So my general plans for saving/investing paying off stuff. Finish paying off our last credit card - sometime this year. Bump up our retirement saving through work to the max amount - we can give up to 10%. (Matching on the first 5.) We will actually do this a tiny bit before we pay off the credit card. This is because we both will be getting a cost of living increase in pay. That is the best time to move extra money into the fund because we will not see a decease in take home pay even with more money going straight to the retirement fund.

Keep around a month in half in saving and put any extra in a money market account where it earns a little better interest.
Personally I choose to use a debit card rather than carry a ton of cash around. I can use it securly on line and I have not had a problem renting cars, getting plane tickets etc... When I do carry cash I don't carry more than I need for my shopping trip. Rare is the day that the groceries will top $100 for the week. There are also savings to be had for paying cash where I live. For example, many gas stations here offer 10 cents less per gallon when paying cash.

As for the emergency fund... The fees and taxes associated with cashing out investment accounts make using it as an emergency fund not worth it. Plus it takes time to cash out those accounts so it you have a real emergency you will have lag time in addressing it as well as pay a heafty fee for doing so. Dave recomends you keep the 3-6 month cushion in a money market account. This is far more effective than keeping it all tied up in investments when a real emergency arises.
 

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I think it's a good program and it's obviously benefit tons of people. I already had my finances pretty well in order when I went through the online course a few years ago so I wasn't exactly the target audience, but I still learned things and changed behaviors. I modified a bit, but it seems natural to tweak it to fit your own needs once you are on track. I charge everything and never carry cash. I use mint.com so all the transactions are automatically budgeted this way, I pay off the card every payday, and I benefit from the points. So it works for me. But someone used to dealing with CC Debt may not feel the same urgency that I do in paying it off. It all depends.
 
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