Monday, June 17, 2013

What if we Dave Ramsey'ed Now?

We could get out of debt now if we were gazelle intense. But would it really help us out? We have 2 debts, my car ($7800) and tractor ($22,000). We also have $9300 in savings. We could pay off my car with savings and still have the recommended $1000 emergency fund. Considering we just bought the tractor for $29,000+ and they don't really depreciate like cars, I'm confident we could sell it to cover the loan.

Where would that leave us? We would have paid off a 0% interest loan and not have much in savings if one of us did lose a job. We wouldn't have a tractor loan but we would have no way of moving any snow this coming winter. We may be able to save up for a new tractor but not likely the whole thing before snow falls.

We would be debt free except for our mortgage but its very debatable if we would be in a better position.

What do you think?

13 comments:

  1. I think, nowadays $1000 is savings is not enough at all! Now that my husband will be out of work in two weeks, I'm grateful we saved more than that!

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    1. I agree, Lena. We are a two income household with pretty secure jobs but losing a job will always be a worry.

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  2. I agree, I'd rather have more in savings. I know it's not the DR way - but people are still losing jobs & it could be either me or hubby tomorrow. I would keep the savings - or maybe put PART of it towards your car - but not all. But with the amount of debt I have, you probably shouldn't listen to me LOL

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    1. Part of the reason we're keeping more in savings is because I'm pregnant and not sure about upcoming medical bills. I might have to take more time off of work than planned. You just never know.

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  3. I think there are good debt and bad debt. Bad debt is the result of irresponsible spending habits, charging credit cards and paying interest on them. If it were not a tractor but a motorcycle, you should probably sell it but a tractor definitely seems a requirement for you. As for the student loan, I think it just bugs you. I know, because I also do have a small debt which will go away in 11 months with a small interest. I prefer to keep more money in my savings for rainy days.

    I guess what you are doing is good and sensible. Especially with a little one on the way, nothing beats financial preparedness.

    To me an Emergency Fund should be at least 6-8 months worth of expenses.

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  4. It definitely depends on your individual situation. For me, $1k is low, but manageable. I'd like to get to $3k EF. But since it's two of you, could you live without the other's income? If not, I'd set aside however months you feel comfortable with, and then pay a chunk of debt off. But as you said, it's a 0% loan. When does it become interest bearing, if ever? If it doesn't, then no rush. Being debt free is great, but being prepared is better.

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    1. The car is 0% for the life of the loan. We could live off of one income but it wouldn't give us much room for unexpected expenses like medical bills.

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  5. I think that I would leave the money in savings. You seem to devour debt so it won't be too long before you have everything paid off. It seems harder to save than it does to pay things off. But maybe that's just me.

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  6. This may sound kinda hypocritical coming from someone who recently drained her savings to pay off debt twice. But, I think you should keep the savings. Since you're close to $10K in savings, why not once you reach that amount, stop saving for a bit and try to focus more money towards debt instead of savings? That way you have money available if there was an emergency but you won't have dual priorities? Just a thought.

    If the car loan is 0% and the tractor is needed before you could resave for it, to me it doesn't make sense to drain your savings and sell the tractor. Its bit too risky for not much gain.

    Good luck!

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  7. Our EF consists of $5K... not as much as a lot of "experts" recommend, but overall we could pull out $10K cash from all 3 accounts if we needed to. In your position, i'd maybe leave the EF as is for a while and focus on that car loan. Once it's gone work on your EF again if you feel the need.

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  8. While I don't agree entirely with everything that Dave Ramsey says, I have been through "Financial Peace University", read his book "The Total Money Makeover", and listen to him on the radio occasionally. The reason Dave's "plan" doesn't seem so awesome to you and I is because we don't live paycheck to paycheck. Dave's plan appeals most to people who are accustomed to having no money in the bank and being up to their eyeballs in debt and about to drown. My only debt is my home, but I can assure everyone that I do not have some sudden crazy surplus of cash. I still have regular maintenance bills to live, just like everyone else, and college savings to fund, and retirement looming, and a family "want" list a mile long. Life doesn't go away just because you're debt free. BUT, it's great to be able to pay for things when they come along, instead of worrying if you'll be able to eat next week. We personally don't want to go into debt again... but who knows, we might someday. However, I know the mindset we have, and the mindset is that if we did we would work our butts off to pay it off ASAP, because we like telling our money where to go.

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    1. That's the best way i've seen it put in a while...

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  9. Have you decided what you are going to do?

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