Weakonomics isn’t much for putting together plans to help you get your finances in order. There are plenty of those blogs out there to help you with that. Today I want to talk about one of those blogs.
Pete is the owner of BibleMoneyMatters.com and has spent some time over the last month putting together a great series of posts about the Dave Ramsey Debt Snowball plan.
Getting out of debt with Dave Ramsey is a process of “Baby Steps”. Each step is the next level of achievement in your quest for “financial peace”. Here are the seven steps, with links to Pete’s posts on each one.
Step 1: $1000 Emergency Fund
All personal finance advocates really support the emergency fund. Ramsey is no exception. Make minimum payments on everything, saving the rest, until you get to $1000 in emergency cash
Step 2: The Debt Snowball
This will be a very long step for many people. Start with your smallest non-mortgage debt (maybe a $500 credit card) and pay minimum payments on all other debts. Use every extra bit of cash you’ve got to pay off that first credit card. Now pick your next smallest debt, roll in the cash you were using on the smallest and pay it off. You’ll create a “debt snowball”.
Step 3: 3-6 Months of Expenses
Now that you’ve paid off a bunch of non-mortgage debt, you need to use all that cash you were using for payments to build up your emergency fund to 3-6 months of living expenses.
Step 4: Investing
Now that you’ve cleared your debts and have some emergency savings, you can start investing again. Invest 15% of your income.
Step 5: College Funding for Children
You’re out of debt now, and Dave doesn’t want you to go back into debt simply to pay for your kid’s college. Start saving and help them go to college. No Ivy Leagues here. Dave went to a public in-state school, so did I. They are great!
Step 6: Pay Off That Mortgage
In the Dave Ramsey plan, debt is your enemy. The final loan you must clear is that mortgage. Get to it!
Step 7: Build Wealth and Give
You’ve got all your debts cleared, and you’re investing. It’s time to make some serious dough! More importantly, it’s time to give back to the community.
So the plan is relatively simple. Now many of you might be aware that Dave Ramsey is a very religious man, and his program is often conducted at churches around the country. If you are not of the Christian background, don’t be a fool. This plan is simply the best debt reduction program for anyone, Jews, Muslims, Atheists, Hindu, Jedi, you name it. If you don’t want to participate in the program, that’s fine. Dave has books, and a radio show. Give the show or podcast a listen for a few weeks and you’ll probably pick up some motivation from it.
Dave and I don’t agree on everything in his plan though. There are some holes I think. Thankfully Pete allowed me to share my views with his readers last week. Please check it out, it’s sort of a “Weakonomics View of the Dave Ramsey Plan“.
PS: Pete has a website for designing logos. The prices are cheap, and I plan on using his services for Weakonomics in the future.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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