Since February this year, we have paid off our car and over 12k in other consumer debt. We will be free of all credit card debt (we have about 18k to go) before 2008 ends.

I am a practical (now, anyway) person so this may seem weird (and possibly “new agey”) but since we chose to follow Dave’s approach, with respect to our debt, money just seems to “find” us (money here from selling things; money there from tax return or stimulus check; money from the parents). Some of the amounts we regard as mini-windfalls.

From the beginning, we recognized that Dave Ramsey’s approach might not be logical (in many cases anyway) in the pure numbers sense (ignoring interest rates in favor of pure dollar amounts).

However, his debt payment approach takes into account a very real factor often ignored by those who espouse more “traditional” repayment methods: The role of emotion (inherently irrational and illogical) in something as important to us as our money.

If more of us (or even all of us) were logical and rational with respect to our money, we never would have accumulated debt in the first place. I think Dave Ramsey’s success (and the success of those who follow his advice) lies in the way he has linked money to basic human psychology.

Of course, the Dave Ramsey debt snowball is just one piece of Dave’s advice. The other pieces are often ignored by his critics. The only reason people use his debt snowball is because so many of us have debt. His approach would still be criticized if we had no debt. The focus would simply be on one of the other steps.

I don’t agree with him about his bankruptcy attitude. Personally, I have a huge amount of debt compared to my income, and I don’t make anywhere near enough to pay it all off in 5-10 years, let alone 24-36 months. I am working on increasing my income and it’s going up, but not fast enough to cover the debts I have from doing really stupid with a failed business. My debts have been sold many times, fees and interest added with each sale along with higher interest rates from each collector, I’ve been sued three times, and the only light at the end of the tunnel seems to be an on-coming train.

I’ve read Dave’s books, and his advice is pretty clear in The Total Money Makeover that if you are having trouble meeting necessities (I am) and have debt that you can’t become current on, you are in a much higher risk group than those who should be doing a total money makeover. He recommends reading and following Financial Peace, which I read and I’m following. But it will include a bankruptcy for me because I’m 47 and if I spend the next 10 years or more only paying off debt, I’ll have to find an Alpo cookbook for retirement. The amounts I owe have grown so huge because of the factoring that takes place with each debt sale.

I paid off the smaller debts, and I’m working on the next debt in line, which may be paid before I file, but I see no hope of being able to pay off the big ones before I die. The interest rate on a $30,000 balance is 32.6%. The original balance was $17,000 just two years ago. I don’t feel it’s reasonable to jeopardize my retirement to pay so much that I wouldn’t owe in a sane credit market.

After I file, I will take Dave’s Financial Peace University Bankruptcy Edition. I feel he has sound principles, but is a bit blindsided because he went broke doing stupid before he was successful with money. I had no debt besides my first mortgage and I never borrowed to buy cars or toys. My debt problem hit when I was laid off from my job and I started a business, Katrina and Rita hit, and I listened to the wrong people about borrowing until the storm chaos subsided.

I still haven’t figured out if Dave sees debt as he does out of fear for financial security or if he has a credit addiction. After reading Financial Peace, I think it’s fear.

A Dave Ramsey fan who IS filing bankruptcy,
Sherri

Debt Free or Bust – Sherris last blog post..Price of gas a budget-buster?

I have a feeling that Dave is right. I’ll let you guys know.

FJH
http://daveramseyguru.com/

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