EliteCM.net

Credit to Dave Ramsey, I attended a free course of his (except for materials)

its a simple concept, put your debts in order of smallest to greatest...pay only minimum payments to all the ones except the one with lowest balance...this one, pay as much as you can...scape every last cent to pay this one of...after that one is paid off, you then take whatever you were applying to the one you paid off, and add it to the next smallest, and so on.  the little ones get paid off fast cause they are small, and once you have two or three of them paid off, you have a larger chunk of money that you have freed up monthly to be able to apply to the remaining debts. there is nothing to buy, no gimics to look out for, just an idea...and it works.

i.e. say you figure you have 7 debts: sears card, Home depot card, 2 credit cards, a student loan, and 2 car loans.

Sears: $250 with $25 minimum
HD: $400 with $30 min
Credit 1: $500 with $35
Credit 2: $750 with $50
Student: $5000 with $150
Car 1:  $9000 with $300
Car2: $13,000 with $425
Total debt: $28,900 Total Min Monthly Payments:  $1015  

Say you actuall put out $1150 total to all.

Most people ony pay the minimum to small debts and pay larger payment chuncks (more than minimum) to big debt in hopes to pay them off.  problem is the small ones are still there and never get paid off because of making minimum payments.

Now, so lets say you have $1150 that you are spending monthly on $1015 of debt, difference is $135.  So now you pay Sears the minimum plus the $135 extra that you were paying out to other debts, which gives you $160. So $250-$160=$90.

Next month you owe Sears $90, you have $160 just like the month before, but now you only owe $90, so you pay it off, and you are done with it (should also cut it up at this time!) but then there is still $70 left over..so it goes to home depot...$400 - last month $30-this month $30 -$70 left over from sears payments=$270...

now your are in month 3 Sears is gone, HD is $270.  You have $160 that you were paying to sears + $30 minimum for HD=$190.  HD is now $80.  

Month 4: Sear is gone, HD is gone (paid off and cut up) AND you have $110 left over to apply to the next one, credit card 1: which is $500...but you have made 3 min monthly payments of $35 x 3=$105...so its is really $395 but then you still have $110 left over from pay off HD & Sears and you are at $285.  So $285 minus month four Min of $35...$285-$35=$250

Month 5: Sears, HD are gone...Credit 1 is now only $250.  now your montly payment ball is: $225 (Sears=$160 HD=$30 Credit 1=$35)...Credit 1 has $25 balance

Month 6: Sears, HD, and Credit one are paid off, and you have $200 left from this months snowball.  Credit 2 was $750 with $50 min which you have been paying...so 6 months @ $50= $300 minus $200 left from snowball, and now Credit 2 has a $100 balance...

Month 7: Sears, HD, Credit 1, and Credit 2 are paid off.  you have $175 left from snowball (Sears=$160 HD=$30 Credit 1=$35 Credit 2=$50)-100 left from Credit 2 balance=$175)   Next one is a big jump, student loan $5000 at $150 a month.  so $150x7 months=$1050 plus remaining $175 from snowball=$1225.  $5000 balance-$1225=$3775 new balance

Month 8:  Monthly snow ball ammount is now: (Sears $160, HD $30, Credit 1 $35, Credit 2 $50, and Student Loan $150) = $425 it takes another 9 months to pay off the student loan, at $425 a month

Month 17:  Sears, HD, Credit 1, Credit 2 and Student Loan are Paid off.  Your next debt is Car 1: $9000 with $300 min.  But you have paid that down over the last 17 months so the loan is now only $3900!  Your debt snow ball is now  $725 ($425 + $300).  So now your Car 1 payments are $725 a month.   In 5 more months Car 1 is paid off

Month 22:  Sears, HD, Credit 1, Credit 2, Student Loan, and Car 1 are Paid off.  Your next debt is Car 2: $13,000 with $425 min.  But you have been paying that over the last 22 months, so now IT is only $3650!!!  Your debt snow ball is now $1150 ($725 + $425) .  So now your Car 2 payments are $1150 a month.  In 3 months Car 2 is paid off!

So in just about 2 years, you are debt free....this of course is just an example, I made up the numbers

Just for shits and giggles, lets add in a mortgage ( a bit more complicated becuse of the time interest):  $200,000 with $1500 monthly payments for 30 years would to $540,000 over those 30 years ($1500 a month x 12 months) x 30 years=540,000

mortgages are mainly all interest in the beginning, with very little of the payment going towards principal...and towards the end, very LITTLE interest and mostly principal.   the trick is to pay down the principal so there is less interest that can be charged.

so for 2 years we are paying the 1500 a month=$72,000 which is mainly interest, but still $540,000 - $72000 = $468,000 balance in principal and interst.
Using the money from the debt snowball $1150 and adding that to the $1500 per month = $2650 a month payment towards the mortgage.  So $468,000 / $31,800 = 14 years, so it has cut the loan in half.  Actually it would end up being more like 5 years; becuase of the shorter time period, you will end up paying less money for interest and more towards the principal.  Soooo say that of the regular $1500 a month, $750 goes to interest and $750 goes to principal...its not 50/50 but for the sake of arguement well just do this.  You are $1150 a month from the debt snowball directly to principal, as well as $750 of monthly mortgage payment=$1900 x 12 months=$22,800 a year towards the principal loan ammount of $200,000

Good info Mark. Makes total sense to do it this way. I tried this method briefly but couldn't stick to it since shit always comes up.

5000 for student loans? Boy I wish!

you need to establish and "emergeny" fund, usually $1000 is what is recommended, that way you don't have to revert back to debt...the use of this money is for true emergencies...and to make sure you don't use it on random shit, pretend like it is there for your childrens life, and their lifes are at stake.


Yeah me too...that's acutally about what I have left though

Seems like basic common sense for those of us that are fiscally irresponsible.  Student loans are my biggest debt, which is why the school I went to was the biggest mistake.  I don't have any credit cards or any other debt because I don't want to accrue any more debt.

actually an emergency fund should be approx 6 months of salary - definitely takes time to obtain but should be built as a reserve.

I can relate. I am almost maxed on mine for life......

Mine have come way down the last three years I've managed to pay off about 40k. Trying to get most of it knocked out before buying a house this year.

true but 6 months takes alot of time like you said, so it is important to have something, and that's why saving up $1000 asap is recommended (alot of emergencies fall within that $4 ammount)...the next step would be three months, then 6 months

that's why you start small and pay off the smalll debts first to get them out of the way (and don't build back up) then you throw everything you can come up with every month to pay down the bigger ones.  the course I took, they recommended selling everything you can that you don't use on a regular basis, and also applying that money to your loans as well.  also, cutting out all the little purchases through out the week, like convienient stores...packing lunch instead of going out, etc.

I think the point being that if you stop spending, you can finish paying off what you have.

That's a good theory, but what are the chances that if you built up all this debt, that you're not going to continuously accrue new debt while you're paying off the old ones?

That's where will power comes in. It's possible you accrue more debt but it's also possible you land a bad ass job with a hefty paycheck as well. Everything is full of what ifs and we can what if it to death but it has worked for me in the past when I stuck to it.

A lot of this seems like common sense to me but, it's impractical for most people. Packing a lunch and not stopping at a store is impractical for most of us. I wish I had the time to pack a lunch! Of course it would save me some money but, it's just not realistic.

True but there's other ways to cut back. That's just one thing that can be done.

There's a lot of ways that I've cut back on my spending over the years.  I bring lunch with me to work 95% of the time, I brew coffee at home, and I rarely go out to dinner.  I agree with Mike though.  A lot of this is common sense, and some of it is impractical depending on lifestyle and living situations.  It's all about changing how you do things.

easy...YOU DONT DO IT...we haven't used our credit cards, or aquired any more debit for a year (since we took the class)...theory works, thousands of people have done it.

Mike, they make these things called refridgerators...they keep food from going bad...you can pack your lunch ahead of time, and put it in there!

Not possible in my environment. I change places to often. I have offices in two different buildings in MA, and travel to CT a lot also. It's easier for me to just grab something on the run. I'm not saying I got out and spend $20 or $30 on lunch but, it's probably about $5 a day. There’s a point where depending on peoples jobs things just aren't practical. We could save money by walking to work to but, I don't see a lot of people doing that. It’s my opinion that the best spending to cut out is the useless stuff. Instead of going home and drinking a beer or two or six every night have a glass of lemonade. On of the biggest things that I’ve noticed and changed is that I will only order a glass of water when I eat out. Restaurants generally charge more than the cost of a bottle of soda for a soft drink!

That's why I always get 3-4 refills!

I agree, and cutting out the litttle BS purchases is one of the best things you can do...I have limited drinking to special occasions...alcohol is not cheap.

The Dave Ramsey stuff works.  I enjoy fiscal responsibility (due in large part to my wife) and we use a modified D.R. type system.  Stick to budget, dont spend what you dont have, pay cash for purchases (excluding home), etc.  Only time I finance a car is when the money works harder in the bank, i.e. savings interest rate is greater than loan interest rate.  Seemingly basic stuff, but harder to implement than you think.  I do think it's important to use a credit card assuming you have self control.  You are protected from fraud to a greater degree.  If you have fraudulent purchases on your debit card it will eventually get resolved, but you are out the cash until then.

Just take out your 401k from previous jobs and payoff debt that way...Worked for me.

Unless you use the credit option at checkout, I do that all the time.


Yeah, if you're a dumb shit...bye bye retirement, doh!

I disagree with you on 401k mark. I've actually made alot of money by taking loans against mine and investing the money on my own. I took a large loan as the economy started to take a shit then invested it. The loan gets paid back with interest to myself. Because of the bad economy the interest is greater than the rate of the return so I ended up making money on both sides. You just need to be smart with it, and not take any loans against it after your 35 - 40.

different situation though mike, he is talking about taking it out and using it to pay off debt, not reallocating it for better investments...

Yeah and No. In a down economy if your 401k is turning a loss for investment using it to pay off high interest debt is actually not bad. At least that way your not losing money on both sides. Of course the right thing to do would be to increase the amount of money in the 401k at your current job to replace what you've taken out of the other one.

I like this idea. You obviously need a budget in the first place. Then you can determine how much "extra" you have per month to put on the lowest debt and get started.

Dude, we loosely follow it, and have done very well.  we need to get strict again though because my wife is a teacher and has no money coming in during the summer time.  although, this method has allowed us to set aside money from her paychecks throughout the year, and put it into "summer fund" which will allow us to pay the bills through the summer with no problems.

Good info Mark.  My wife and I are also doing D.R.'s Debt Snowball after reading "Total Money Makeover".  We started in January 2009, and by December we were down to my Accord, two small student loans, and one large credit card.

Due to the birth of our second child, and an unexpected NICU stay, we had to take a break from the Debt Snowball and focus on medical bills.  As soon as we have stopped hemoraging money, we will start up again and I would like to be debt free (except the house) by December 2010.

But I must add...  Because we had SAVINGS, we did not have to use credit cards to pay for medical bills.  We have paid cash for every bill we have received thus far, and we still have a financial reserve.

I'm soooooo glad we started this program last year, because, if we had not, the birth of our son would have destroyed us financially.

Good to hear man!  Keep it up...its hard to do, but very worth it!

I am glad to day that i have 1 more debt to go...the dreaded Student Loan. 1 more hill to climb and I can actually enjoy my paycheck

How's everyone doing with this method? I just picked up Dave Ramsey's "Total Money Makeover" 2 days ago and I'm almost done with it. For anyone who has done this or followed this, do you feel that this was an effective way of paying off your bills? What are your thoughts? Because I'm serious about getting out of debt and I need a little encouragement.

P.S. The book says to get rid of a car that you have more than 20 payments left on, technically I only have 19 so I'm not getting rid of my Accord   ;D

that sounds cool but you always have to factor in unexpected cost.... ive been trying to pay off my credit card for months now... i literally only have 450 on it BUT, food shopping, gas, etc comes in to play and then the  moment i get a pay check, i just payed off what i spent  on it in necessities

I have done this method before! Works like a charm if you stick to it...

Anybody have a copy of this book they are willing to send my way?

Mike, I'd be willing to send you my copy if you'd like to read it. I've already read it and now it's just sitting around. The only thing I ask is that you send it back when you're done. PM me your address if you still want it.

Bump, how you guys making out with this?  

I/We haven't used our cards since we took the class almost two years ago.  The mess with the house really screwed things up as far as applying prior monthly payments to future payments inorder to pay it down faster.  once everything settles we will be doing this again, as it helped out so much before.

My card's other than BJ's card (reward points) which I pay off monthly are @ 0. Justin I still haven't finished this book if you need it back let me know.

good shit Mike.  yeah, we have all our cards paid off, except for home depot, but that's because my mother in law got a bunch of stuff, and used our account for discount...she is paying it off monthly.

all I have left is my student loan, car loan, home equity loan, and mortgage.  once the house crap is settled, I should be able to pay the student loan off almost right away.  then the car within 6 months I would say.  hopefully we will be able to refinance our house once its rebuilt (we may be forced to) and that will get us both a lower rate, and combined bills.  if for some reason we have money left over from our build back, that money will go directly to paying off debts.

no credit cards FTMFW!

Figured I'd bring this back since I've been in a nasty situation for quite some time thanks to bad decisions years ago. I've recently looked into a debt management program and its pros and cons. I know it's going to hurt my credit in the short term but the end result is what I'm after. Thoughts and experiences would be great. Thanks.

I really can't offer any info, but I can offer sympathy ...because going to a private art school by the beach was NOT a good idea...lol...looking forward to everyone's suggestions....if I'd won that big jackpot I'd help all of yous guys out! :D

I did a debt consolidation company once and just kept one credit card active.... it helped alot. Your credit Score will thank you in a few years once you've pay off the amount owed. I consolidated like 4 cards into 1 monthly payment! Now I just have that same 1 credit card and my debit card, been good since...

That's good to hear Billy. My hope it's that this will put my into a better place financially now and later. This fucking debt is killing me right now.

Had a women from a debt consolidation company speak in a first time home buyer class I was in. The best advice is to find one that is a non profit organization. Obviously they aren't there just to make money they are there to help. Often states offer programs as well.