Financial Debt Advice (Dave Ramsey)

[Hockley]

So I’ve considered myself being above average when it comes to debt decisions, but my wife threw me a curveball. I need a fact checker without running a bunch of numbers. Long story short, out of the debt that we carry everything is 0% other than our land note, and a truck note. The land note obviously has a much larger balance at 4%, and the truck note is 1.9%. My wife claims that Dave Ramsey says I should pay off the truck note first without paying any additional to the land note, then knock out the land note once the truck note is gone. I’ve been nearly doubling up on the land note and paying the minimum on the truck note.

I’ve never been a Dave Ramsey fan, I think anyone that believes in zero debt is a little over the top. I’m sure he is helpful for lots of people, but i can’t get on board with this logic.

Who’s right????

[hooligan]

Ramsey says pay smallest to largest. The idea works because if you get your truck paid off now you take that payment and apply it to the land so you’ll really be paying extra.

[bbqfan5909]

Your land note should be making more than the 4% interest you pay on it. Truck is depreciating at a rapid pace. Pay truck off then take the funds used to pay truck on land.

[Hockley]

Ramsey says pay smallest to largest. The idea works because if you get your truck paid off now you take that payment and apply it to the land so you’ll really be paying extra.

Even if the smallest is less of an interest rate? What if the interest rate is 0%.

[Codie]

Different strokes for different folks - I agree with some his ideas, but that doesn’t mean it is the correct path for every person. If you are going to trade the truck in or sell it and upgrade right back into a payment in the next couple if years then I don’t see the point in paying the truck off early at all no matter what other debt you have

[Drop Tine]

I’m with you on this. Thankfully my wife agrees. I think there are some good practices to utilize from his stuff but some of it is just nonsense. You can put your own money to work for you if done properly. The obsession with “debt free” makes me laugh. You should see how worked up some guys get on this site about 0% financing not really existing.

[lwelch70]

Ramsey teaches this method more as a way of positive reinforcement. I've heard him talk about it a few times. People get highly motivated seeing balances getting paid off in full. Starting with the smallest debt, you pay it off and chalk up a win. Then they get on a roll with snowballing payments into the next debt, and so on and so forth. It's a simple motivation technique that helps people see the light at the end of the tunnel.


Sent from my iPhone using Tapatalk

[Austin]

The idea behind the Dave Ramsey model is to. Snowball your debt payments. Paying off smallest balances first then taking all of those funds and moving to the next and so on and on. His premise is not to minimize interest cost per loan but a debt free lifestyle.

The concept is further rooted in keeping people grounded and committed to the process by realizing wins early on in the form of paying off notes. Again these “victories” contribute to their success and commitment to the program.

It’s not for everyone but definitely something that is a life saver for some.

This is my take on the program

[Drop Tine]

Ramsey teaches this method more as a way of positive reinforcement. I've heard him talk about it a few times. People get highly motivated seeing balances getting paid off in full. Starting with the smallest debt, you pay it off and chalk up a win. Then they get on a roll with snowballing payments into the next debt, and so on and so forth. It's a simple motivation technique that helps people see the light at the end of the tunnel.


Sent from my iPhone using Tapatalk

That’s true, and it’s effective for those that need it. In this case I think the OP is doing the right thing doubling up on his land payment to get the principle down. There’s no way you end up paying more money in interest this way. Factoring the depreciation of the truck makes things a little more tricky but my opinion is that you’re taking the right approach.

[Jon B]

Dave's plan is for people with zero discipline and the lack of brains that got them into the hole I'm the first place. We did something very similar and tackled our high interest debt first. I didn't need the "psychological win" of seeing a bill paid off to keep going. I had a brain and a calculator. Now, I will say there is definitely something to getting rid of auto debt quickly as they depreciate quicker than used toilet paper.

My best advice is to attack your debt and make a plan to pay it all off as quickly as possible. Celebrate each milestone. Zero debt is a fantastic feeling.

[bowhntrmatt]

If you plan to eventually pay off the truck and keep it a long time, then pay it off fast to minimize interest paid.

If you will buy a new truck in the near future and start the debt all over, then don’t worry about paying it off.

Making extra payments now on a long-term note like land will mean huge interest savings over the life of the loan.

[CTR0022]

This is how I run finances. On depreciating assets like vehicles, boats, campers, toys, ect you need to pay those off as soon as possible.

On appreciating assets like land, house, ect then there is no need to pay them off quickly as long as your interest rates are relatively low compared to current market rates.

Imho I would rather have $100k in the bank than say $25k in the bank and an additional $75k in debt reduction on an appreciating asset. now this can get you in trouble if your a spender and you go buying toys or expensive hunts/vacations bc you have the extra cash. But cash gives you options and you can turn around and invest that additional cash and hopefully your money starts making you money

[Terry]

Truck

[Drop Tine]

This is how I run finances. On depreciating assets like vehicles, boats, campers, toys, ect you need to pay those off as soon as possible.

On appreciating assets like land, house, ect then there is no need to pay them off quickly as long as your interest rates are relatively low compared to current market rates.

Imho I would rather have $100k in the bank than say $25k in the bank and an additional $75k in debt reduction on an appreciating asset. now this can get you in trouble if your a spender and you go buying toys or expensive hunts/vacations bc you have the extra cash. But cash gives you options and you can turn around and invest that additional cash and hopefully your money starts making you money

Yes sir. Could not agree more.

[4wheels]

It worked for me. I paid off my smallest loans first, then the largest. It worked to get me out of a boat load of credit card debt that I added up while in college. Many years later - I still do the same thing. I like the logic about pay off your truck because it is depreciating. The add that payment to the land when the truck is paid off. Want a really happy life, tell the wife she is right and do what she says.