Debt, debt and more debt!

[sarah marie]

My husband and I worked our way out of debt thanks to this guy and his awesome radio ministry. His name is Dave Ramsey. I'd love to hear from those who have heard him, those who would like to get out of debt or avoid bankruptcy and those who go and listen to the clip below. I was listening online today. After picking myself up off the floor (from laughing so hard), I thought I'd share the clip:

He starts out with a brief explanation of the envelope system, then explains what he calls "gazelle-like intensity" and it's beginnings in Proverbs. It's about four to six minutes.

http://www.daveramsey.com/radio/home/index.cfm?FuseAction=dspContent&strMode=dspShowArchives

Click the 6/24/2004 show and fast forward to 2:01:20

 

[IslandBreeze]

We've paid off over $9,000 in debt since the beginning of the year. It wasn't hard, and we're well on our way to being completely debt free by the end of next year!

 

[Kokopelli]

Will have to check those out tonight. TY for the link sarah marie.

 

[Jenna]

*laughs* And here I am trying to get into debt (aka buying a home). Seriously though, we've been able to keep our debt to a minimum. We didn't use to have debt, but when my mom got messed over during her divorce and didn't have two pennies to rub together to feed herself, out came the credit card. I'd happily do it again if I had to. Other than that, we just don't borrow money unless we absolutely have to.

Since debt was brought up, how do we establish what is "good" debt, and what is bad debt? I only ask because there are just some things that are nearly impossible to do without getting a line of credit, like buying a house these days. I mean, when is the last time you watched your neighbor build their home out of mud bricks or piece together a log cabin? Seen all the neighbors come together to raise a house and bang some nails? So, without large amounts of cash, there seem to be some things that a person just can't buy without going into debt. Is it just the credit cards then that are considered bad debt (granted, if you don't pay them off like you should)?

 

[Johnny Be Good]

Good question, Jenna! Why don't you start a nwe thread with this good and bad debt question?! I'm interested in finding out too!

 

[jenptcfan]

*laughs* And here I am trying to get into debt (aka buying a home). Seriously though, we've been able to keep our debt to a minimum. We didn't use to have debt, but when my mom got messed over during her divorce and didn't have two pennies to rub together to feed herself, out came the credit card. I'd happily do it again if I had to. Other than that, we just don't borrow money unless we absolutely have to.

Since debt was brought up, how do we establish what is "good" debt, and what is bad debt? I only ask because there are just some things that are nearly impossible to do without getting a line of credit, like buying a house these days. I mean, when is the last time you watched your neighbor build their home out of mud bricks or piece together a log cabin? Seen all the neighbors come together to raise a house and bang some nails? So, without large amounts of cash, there seem to be some things that a person just can't buy without going into debt. Is it just the credit cards then that are considered bad debt (granted, if you don't pay them off like you should)?

I think that good debt is a debt that is going to turn into an investment. For instance, buying a house in an area where the property value is appreciating.

Credit cards would be bad debt, even buying a house that you're not going to be able to get your money back on might be bad debt. Generally living outside your means (buying cars that are way more expensive than you need or can afford, etc.), would be bad debt.

Those are my opinions. Debt scares me. I have a house payment and just bought a new car (my old one was 10 years old, so I definately put that off as long as possible).

I haven't heard of the man in the original post, but our church uses "Crown Financial Ministry" a lot--teaches biblical principles about finances and debt management.

 

[redwing030]

Another "good debt" is studen loans. It's hard to look at the thousands we'll have to pay back in them once my husband finishes school and not cringe, but I have to remember that because we are taking out these loans now he'll have a better job in the future So it's really not a bad debt to have.

 

[Kokopelli]

Another "good debt" is studen loans. It's hard to look at the thousands we'll have to pay back in them once my husband finishes school and not cringe, but I have to remember that because we are taking out these loans now he'll have a better job in the future So it's really not a bad debt to have.

When you have sunk the amount I have into student loans and still work the same low-paying, dead job that you were when you started, the loans become a reason for heartburn. Thankfully, I have changed my major to something that will open more doors for opportunities and advancement.

 

[sarah marie]

Congrats Cammie!

Jenna,

House debt is the only kind of debt, where the object of the debt appreciates. As far as needing a good credit score, you don't. We bought our house using manual underwriting. All you need for that is two years good rent payment history and a couple of years of bank statements. Also, it's a myth that getting credit cards boosts your credit score. We went into debt trying to boost our credit score in preparation to buy a house. It did nothing to our score and we opted for manual underwriting, so it didn't end up being an issue. By the time we refinanced, we had paid off the credit cards and our scores had jumped significantly. Go figure.

My husband is going to school without a loan. We're on a very tight budget. He's not going to get through school as fast as we'd like, but he'll come out of it with no payments. Woohoo!

 

[WolfGate]

sarah marie - I have read his book Financial Peace. My wife and I had a good handle on money when I read it, but he does such a good job expressing comments that I have given the book to friends whom I believed it would help. Only rarely do I get to hear his show. Our debt today is limited to our house and an income producing vacation home. (Except for a couple of 0% interest consumer loans where I have money to pay them off allocated in an interest bearing account if needed. I figure since we have the discipline down that's an OK move for us.)

Where we do need to work, and I should probably go back and read him again, is in pure expenses. Particularly since the kids were born, we have allowed our expenses to grow to the point where we aren't saving as much as I'd like. Kids in daycare/private school, commitments to charities. Lots of things that add up and have eroded our budget surplus. That's making it hard to plan for things like home improvements, etc. that will start to be needed soon.