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re: Another Dave Ramsey Thread
Posted on 8/14/13 at 9:01 am to HoLeInOnEr05
Posted on 8/14/13 at 9:01 am to HoLeInOnEr05
quote:
Ramsey says to start with the smallest debt, and work your way up. I assure you, none of the above mentioned is our smallest debt.
The debt snowball works because of psychology - you start to get small wins, and they add up. Plus, paying the minimum on everything is, effectively, financial slavery (or a super slow motion Chapter 13, followed by a Chapter 7 if something happens).
Arrange them from the smallest to the largest - if there are 2 within 4 or 5 percent of each other, and the slightly larger balance is at a much higher percentage, it makes sense to alter the order then, but otherwise, smallest to biggest.
It really is the most powerful part of this (other than the budgeting, which people obviously weren't doing to get into 2x, 3x, 4x their annual salary in consumer debt.)
0
Posted on 8/14/13 at 9:06 am to Ace Midnight
quote:Is that a Ramsey quote, or an Ace Midnight extrapolation?
if you don't need the debt snowball, you don't need Step 6
Posted on 8/14/13 at 9:15 am to HoLeInOnEr05
It's pretty much common sense. You don't need the book. Pay of your debt and amp up investing after.
Posted on 8/14/13 at 9:16 am to NC_Tigah
quote:
Is that a Ramsey quote, or an Ace Midnight extrapolation?
That's all me, brah.
Posted on 8/14/13 at 9:26 am to ragacamps
quote:
It's pretty much common sense. You don't need the book. Pay of your debt and amp up investing after.
Thanks for your wonderful insight
Posted on 8/14/13 at 9:28 am to HoLeInOnEr05
quote:
HoLeInOnEr05
If you have the opportunity to attend Financial Peace University at your church (or wherever), that's a good program for couples - especially if you have different ideas on how to go about it - you'll also get a support network, if you need that sort of thing.
I just scanned TMM, set up a rigid budget and started following the steps.
Posted on 8/14/13 at 9:57 am to Ace Midnight
quote:Or others?
Ace Midnight
Do you have an mortgage interest rate limit that you feel is worth paying off early rather than saving while paying the regular payment?
I ask because, I am just purchasing a house (double with 1/2 rented) with an interest rate around 4.6% @ 30 years.
I have the capacity to begin paying $300-400 extra/mo.
I have no other debt and am disciplined.
My intent is to hold this property long term as it's a sound income earner. I think it would be wise to pay the regular amount and save the extra $.
I obviously would need $ to buy my next property. Do you believe cash on hand is more valuable(to me) than the additional equity in the long term investment? Or is the interest rate 4.6% at a high enough level I should consider paying it down quickly?
Sorry, not trying to hijack. I feel this fits into this thread. Lots of info to consider and just curious what those wiser than me think.
ETA: House is in the Uptown NOLA area. I believe the values are unlikely to depreciate and finding tenants will take days not longer.
TIA
This post was edited on 8/14/13 at 10:17 am
Posted on 8/14/13 at 10:11 am to Ace Midnight
quote:There you have it.
That's all me, brah.
Posted on 8/14/13 at 10:14 am to Oenophile Brah
When discussing paying off a mortgage no one seems to be mentioning the neighborhood that it is in being a factor. For example, if someone has a house in the Kenner area (or somewhere where the property value may be perceived to be depreciating) why would anyone dump anymore money into their mortgage than necessary regardless of interest rate?
Posted on 8/14/13 at 10:31 am to Tigersfan
quote:
When discussing paying off a mortgage no one seems to be mentioning the neighborhood that it is in being a factor. For example, if someone has a house in the Kenner area (or somewhere where the property value may be perceived to be depreciating) why would anyone dump anymore money into their mortgage than necessary regardless of interest rate?
Can't follow your logic, even if the neighborhood your house is in turns into something like inner city Detroit you still have the mortgage debt.
Posted on 8/14/13 at 11:05 am to Oenophile Brah
quote:
I have no other debt and am disciplined.
quote:
I think it would be wise to pay the regular amount and save the extra $.
You do not need Dave Ramsey's Baby Steps.
This house is primarily an investment vehicle for you. However, I would do the A/B comparison regarding forming an LLC and renting from yourself, vice your homeowner's tax deduction - if your CPA and legal counsel think it is wise, I would consider that. The catch is - you can't go fully leveraged if you are not the owner occupier. SO, I would at least have enough equity to choose this option as soon as possible - then, if you decide to move, you rent your initial residential half - and you have an instant, profit producing business, already with a nice LLC.
So, I would suggest you commit some of the $300 to $400 extra a month now. The smartest way to do that is to figure what your 15 year payment (no reason to refi right this second, unless you haven't closed, then do the A/B with a 15-year) and at least make a principal only payment for the difference between your 30 year and 15 year - even if you just do this for 24 months or so, you'll knock years off the end and get you to the equity needed, or at least more quickly, to live elsewhere and hold this property as an investment.
30-years is a sucker play, in my mind, for residential financing.
This post was edited on 8/14/13 at 1:15 pm
Posted on 8/14/13 at 1:08 pm to Ace Midnight
quote:
Ace Midnight
Thank You, Sir for your advice.
I have a feeling I'll be wargaming this for a while.
Posted on 8/14/13 at 8:09 pm to Oenophile Brah
Bump... I'm having trouble following his budget guide...
Posted on 8/14/13 at 8:24 pm to HoLeInOnEr05
quote:
Bump... I'm having trouble following his budget guide...
I made my own with a spreadsheet. I just made sure that as any previously un-budgeted item shows up, it gets added. And I tweak the discretionary amounts to make sure we run a surplus.
Posted on 8/14/13 at 9:26 pm to Ace Midnight
So during the whole snowball debt thing, did you budget in for vacation or anything like that?
Posted on 8/14/13 at 9:32 pm to Ace Midnight
quote:
That's not a fair characterization of what his method proposes. You're talking about Step 6. He does not advocate selling things to pay off the mortgage - he encourages refinancing into a 15 year, and only after your emergency and rainy day funds are full, 15% going to retirement, all other debt retired, etc., that you pay EXTRA on the 15-year mortgage.
You're right that was a mischaracterization. I was just making the point that he doesn't need to overdo anything.
Prioritize debt by int rate and either pay it off or invest it depending on the corresponding spreads.
I think people get caught up in things like paying extra on their 15 year mortgage just because it feels good to "do something".
ETA: but again, I'm not anti-Dave... If the biggest financial problem someone has is forgoing investment gains cause they plowed extra money into their 15 yr mortgage then you're in pretty fricking good shape
This post was edited on 8/14/13 at 9:34 pm
Posted on 8/14/13 at 9:38 pm to HoLeInOnEr05
quote:
Bump... I'm having trouble following his budget guide
Post ur debts and ur budget here so we can take a look and help you out.
Posted on 8/14/13 at 9:52 pm to Double Oh
You serious, Clarke?
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