05 Sep Dave Ramsey Kick Off 2008, Where We Differ from Strategy Then and Now

I can remember the moment I first heard Dave Ramsey’s show, although I don’t remember the exact date.  It was late 2008, that year I had let my car get repossessed, figured out how to direct deposit advance my way to getting enough cash to get it back, and then I totaled it about sixty days later in a car accident.  I found myself with an upside-down vehicle after the insurance paid off the majority of the note, and I still owed about $5,000 or so on a car being sold for its weight in metal.

The result was I managed to get a small car dealer in northern MN to sell me a car for $5,500 and in addition, they co-signed the note.  That literally never happens but I found the guy through a friend who had previously had a good experience. I explained my situation and told him about my credit report in advance and he believed in me and co-signed the note which still carried about 10% interest if I remember right.

So, here I am driving home from my girlfriend’s house and my mind is thinking about a looming pile of debt between student loans, a couple credit cards, the car note for the car I was driving, the car note leftover for the vehicle I totaled, and then some odds and ends piled up unpaid bills that were in collections.  I didn’t know how much debt it was at the time. I just knew it needed to be dealt with and I had no idea how to begin.

I flipped on my satellite radio (yes, I had satellite radio because it was FREE, paying for $15/month on top of everything else above would be rather ironic), I changed from whatever regular station I was on to whatever the Christian radio station was in hopes of inspiring or spiritually settling music.  What I got instead was an emphatic southern accent summarizing what sounded like a pretty cool story followed by, “Alright so and so family you’ve paid off a total of $88,562 in debt in just twenty-eight months! Are you ready to scream!?” You likely know the end of the story and of course the family then shouts, “We are debt freeeeeeeeee!”

I had chills, I continued to listen to the show and of course Dave announced he had books and that you can get “The Total Money Makeover” anywhere books are sold.  There was a Walmart on an exit within about a mile, it was eleven o’clock or so at night and I hopped off the exit, walked in and there were two copies on the shelf.  I bought one and went home and immediately started reading it.  I think I was up until one or two in the morning infatuated with the idea, I went to sleep that night with hope.  The next day or week I realized that I actually didn’t know how much total debt I had, and although baby step number one was to build a $1,000 emergency fund as fast as I could, I didn’t do that.  Not because I couldn’t, but because I had committed to stay out of debt no matter what unless I absolutely had to go into debt to solve an emergency during debt pay down.  I saw the $1,000 down as slowing me down from paying off three to five small collections agency notices and getting this train on the right track.  I paid off a few collections bills instead and got the benefit of the debt snowball starting to build.

While skipping baby step number one worked for me, it isn’t something I would widely recommend to others.  My situation was unique in that in 2008 I was twenty-two years old, earning somewhere around $55-62k a year while paying $400 a month in rent by living in a friend’s basement bedroom.  I had no other expenses but this pile of debt, and I thought to myself I could either save $1,000 and let it sit or I will have $1,000 extra when I got paid next, or worst case could use a direct deposit advance for a true emergency only.  That worked for me, I was perhaps uniquely disciplined in comparison to some of the Dave Ramsey fans, and I think I finally put the $1,000 in the bank when I knocked out my first significant debt which was either the totaled car note or a good-sized credit card. I figured at that point I’d gained enough traction, and rules are meant to be bent not broken so it was time to follow the rules.

Somewhere in the payoff timeline I also began to recognize that I was paying off debt at such a rapid rate that I started shifting from the smallest debt to the higher interest rate debt.  I made that pivot because my debt payoff journey started out as an emotional journey, but then it became a disciplined habit, and simple math.  I also used the power of a balance transfer and zero interest to buy myself six or twelve months of zero interest on a credit card to slow or stop the bleeding at 24% on other credit cards.  This again goes against the Dave Ramsey rules but someone was dumb enough to give me a credit card and allow me to balance transfer something like $10,000 worth of other credit card debt to them at 0% interest for a period of time so I played the game, moved it and focused on paying something else off that was at higher interest.  This can get messy however because often these 0% balance transfers come with a caveat requiring you to pay off the balance in full or interest can accrue from date of initial transfer, or if you miss making a minimum payment they can back bill you accrued interest from date of transfer.  I had good notes, a system in place and wasn’t going to let something silly like overlooking a payment mess up a good thing.

The end result was that I had paid off something like $46,500 in debt in about twenty-one months while making $55-$62k per year.  Oh and that girlfriend, became my wife and we are celebrating ten years of marriage later this week at the time of writing this blog.  She endured an interesting couple of years of courtship while I cleaned up a mess, I always promised her it would be worth it, and she’d thank me for it someday (she did).  When we got married June 2010, equipped with two incomes I was debt free and we shifted our focus to paying down her school debt.

The moral of the Dave Ramsey story is he’s awesome, he has changed more lives than I likely ever will, and he has a system and process that is indeed fool proof and works.  He takes out the minutia that would otherwise confuse some of his crowd.  I’m not the first and won’t be the last to find Dave, get started with Dave, and adjust Dave’s plan to be more efficient.  He’ll never preach that message, and that’s okay because he’s built a system that works, and it works far better than the alternative of staying financially unfit and littered with debt and no hope of how to get out of it.