Financial advice, frugality tips, stories, opportunities, and general guidance for people who are struggling financially. No Judgement, just advice!
Not promoting Dave Ramsey but after 3.5 years my wife and I are completely out of debt. Here is our story.
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Congrats! The raised income obviously helps and makes it all possible, but it's so easy for a person to get stuck in a cycle and stay in massive debt despite increased income, so you guys should be incredibly proud of what you've accomplished with all that discipline!
I've also worked the baby steps in the past, and had the similar benefit of increased income along the way, but boy does it ever feel amazing to pay off that last piece of debt (outside of a mortgage if that's applicable to people). In my case it was about ten years ago when I made my last debt payment, and never again. I never want to feel like I did during those years - it was hard & shitty during the years I was broke and struggling, but it was exponentially harder when I was taking active steps to improve my situation. I never want to feel that way again. Hopefully you guys can retain that feeling as well!
You're going to do great financially from now on. Congrats! Very proud, stranger!
Thank you, yes honestly the income is the key, need a big shovel to get out of the hole, more income = bigger the shovel. I’m just concerned with the investing. I’ve been with my company 15 years and never had the money to spare to contribute to my 401k, all that company match gone. But I’m looking forward to starting it up again after our 6 month emergency account is fully funded. Any advice on investing? I was thinking of maxing my contribution of 6% and then 9% of my income into a Roth
Your plan is solid. Still got a lot of year ahead of you. And, for what it's worth, I started my 401(k) investing during a down market, and I'll tell you - it's not a bad time to start. The first few years will look like bad, or like nothing is happening with the investment, but if you can truly take a patient approach, you'll see one day that you were buying your first shares of a fund at such a low sale price that it compounds rather quickly a decade from now.
My best advice is this; whenever you feel yourself getting down about your small investment amount, remind yourself of the alternative. You can change the past. You can either contribute now, or choose not to. Choosing to will yield at least something, where the alternative yields nothing. The older version of you, the retired one, will be very grateful for something versus nothing. Just remind yourself you're doing what you can for him ( and your future old spouse).
Best of luck!
I wouldn’t wait, I’d start now, get as much match as you possibly can…. It’s free money, even if that means an extra few weeks on your emergency fund.
You’ve got the dedication and proved results, keep at it and stack that money into investments instead of debt, nothing exotic just an S&P 500 tracker and update us all in a year 🍾
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Both spouses working, she started a job in 2020 and got 3 promotions, I was able to get a different position and just annual raises at my job over the past 10 years. But my wife was part time min wage for 5 years. It sucks you can’t make it on one good income anymore.
Congrats on the accomplishment.
I would contribute at least 10% of your paycheck to your 401k to catch up, then put the rest in to a ROTH IRA, as that has a lower cap. I think it's $6,000 for 2022. Anything else, put into a set it and forget it low fees brokerage. I'm a fan of Betterment for both my ROTH and brokerage account. I can set my risk tolerance, set up automatic contributions based on my pay cycle, and don't need to pick stocks. They have a set basket of index funds and mutual finds they invest in, as well as various bonds for the "lower risk" part of your portfolio.
Thank you, I think this is my exact plan going forward.
I wouldn't consider the Roth or 401K as investments as they're retirement funds. I would invest though. ETF's and Index funds are relatively safe while traditionally far outperforming HISAs. I also like bonds, especially with interest rates going up. The typical advice is do a high % of ETFs and few bonds and as you get older do more and more bonds but interest rates were rock bottom. I do set aside a small chunk for more speculative plays but that really shouldn't be your focus.
I would never take investing advice from ramsay but his advice for clearing out debt and building a savings is top notch advice and I've recommended it to people looking to get on the right path.
Absolutely agreed. I can’t stand his politics but his plan for getting out of debt is pretty solid, especially for those who aren’t financially savvy. That said, throwing all your money into paying off a low-interest mortgage as opposed to investing isn’t necessarily the best strategy.
Once I was debt free I refrained from listening to anything Ramsey had to say.
I’ll hear his intro saxophone song every now and again and get ptsd lmfao.
Great accomplishment! Remember to at least keep your oldest credit card account open for the "credit history", even if you don't use it.
Yes, just one from my wife’s work with 1500.00 my credit score has gone down significantly paying off and closing accounts. We just put gas on this one to keep a revolving balance and pay it off each month.
Very smart!
dude this sounds great!! What kind of jobs do yall do??
My wife is in loans at a bank, she started there a part time teller but has moved up to doing full time loan officer. I work retail but I’m in management now.
congrats on you both getting bigger shovels! onward & upward 🏆🏆
Congratulations! YOU DID IT!!!
We also used the DR steps to get out of debt. It was so hard. Then we both lost our jobs during the early COVID-19 days. But we got different jobs, got lucky with where we were finally able to land too! I mean, the same day I got the offer for my current job I was hanging out the laundry, making blackberry jam, and wondering how long we could survive on just the stuff in our pantry, fridge, and freezer. Luckily we made it that entire first four weeks without my first check. I thought my spouse was gonna cry when my checks started coming in regularly again!
Perhaps do a Roth IRA before 401k frankly I’d consider this as the same priority as the other things since this will use post tax income to give you untaxed profit in retirement
Just think about opportunity cost of your dollars today vs 20 years form now
This depends on whether the 401k is matched. The match is pretty unbeatable.
True but you could always do the max match as your first priority then a roth
I think you mean the opposite: max the match in 401k and switch over to Roth. More employers match 401k, not Roth IRA.
Yeah my bad typed that wrong edited back
They also could look into back door roths down the line if they so choose and if they expect to need an amount like that
My parents did his program, they raised 7 kids on 2 teacher salaries so money was tight growing up. 20 years later, they are debt free and own nothing on cars or house. They retired 3 - 5 years ago and have been told they have a great retirement plan. They both took up teaching online after retiring so their paychecks from that are what they live off of now, their retirement is still sitting in the account.
Nice! Nothing easy about raising 7 kids and both parents working.
The 45k to 110k income is what did it.
no, a lot of people would double their spending when their salary goes up.
it takes discipline and a plan to pay off debts, no matter the income level.
That is called lifestyle creep. Very avoidable
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Did you not read OP's post? A huge part of it was being financially responsible. A benefit of doing that is it can free up time and money for education and qualifications.
I know too many people that could be lower-middle or middle class but spend spend spend. I've sat down with friends and convinced them to track their spending for a month.
The big 4 I've seen are phone/bill, car payment/insurance, convenience food/drink, and maintaining high interest debt.
Cutting out Starbucks, Uber Eats, and frozen food are often the easiest so we start there. I find people often overestimate the time and effort required to cook competently and are intimidated by it.
Car payment is a bit trickier but if they aren't underwater on it I try and help them flip it for something that's cheaper to insure, better on gas, more reliable etc. If they're leasing they're usually boned but I at least often help them save a bunch by shopping around for insurance. $20-50/m is often doable.
Phone is pretty self-explanatory. It's the norm to get one of the highest end iPhones every 2 years that is attached with a $60+ plan. Can get decent service for half that or less.
It's insulting to read OP's efforts and complete lifestyle change and come out of it thinking it had nothing to do with that and all about income. Bruh.
Yes, income is the godking of finances. But lifestyle is often an anchor around our necks. Even if OP hadn't gotten a raise they would be in a much better financial position than they were. Treading water rather than drowning in debt.
He's money 101 for individuals who are in a really bad financial situation. Disagree with his investing advice but his baby steps are useful
What's his investing advice? Let me guess, high-fee things like mutual funds that he somehow benefits from?
No. He does suggest managed mutual funds, but not his. He just tells people to look and see what ones give the highest returns, recommends having one it dispersed in various categories and that's it. It's very reasonable advice, despite what lots of bizarrely angry critics will claim (triggered I presume by his Conservative and/or Christian idealogy).
Mutual funds are mostly crap, what are you smoking??
Calm down. There are plenty of mutual funds that have performed spectacularly over the last 20 years, some approaching a 20% return rate. It's not at all unsound to advise people to go into those. I've also heard him say that index funds are fine as well, though he prefers managed funds. Sigh... again....bizarrely angry people. I'm not associated with him, nor have I ever taken his program (not in debt and I manage my own portfolio). I'm not going to exchange childish insults.
Mutual Fund Symbol 1-year total return 3-year average total return 5-year average total return 10-year average total return Morningstar Category
Baron Partners Retail BPTRX 31.39 67.92 43.58 27.89 Large Growth No
Oberweis Micro-Cap OBMCX 53.38 34.44 22.20 19.56 Small Growth No
Goldman Sachs Large Cap Gr Insghts Instl GCGIX 29.81 30.54 22.46 19.01 Large Growth No
Columbia Large Cap Growth V GAEGX 28.72 32.83 23.45 18.80 Large Growth Yes
Glenmede Quant US Large Cap Gr Eq GTLLX 33.20 28.66 20.94 18.78 Large Growth No
Mutual funds, yes.
Between your wife and you, who was the “accountant” of the family, keeping track of the bills and progress? Did the accountant need to police the other spouse to make sure that things were not overspent?
What did you do in the event of a disagreement?
Ok so before our changes it was so stressful for her I took over. But I was doing payday loans and using one credit card to pay bills, then another credit card to pay that one off. I made a terrible mess of things but she eventually took over with the budget, I wasn’t budgeting. She would do everything on paper and used index cards to keep track of each month. Even though she took over I was involved by watching the process each paycheck we’d sit down and I’d watch and we’d be on the same page, you need both people completely in sync. It really messes with your head if one person overspends or lies about spending. The first year was really hard, but now it’s second nature. Even though we have a bunch of extra money, it’s comforting just to have my cash budget for food and gas, no debit cards, no going out to eat, no dinners out, maybe once a month. Maybe we can lighten up a bit in a few months but I feel if we go off script or stop doing the bills together it may get us off track.
Thank you so much for your response. My wife and I are in a similar situation and I’m trying to figure out a right way to communicate these issues. We’ve been married for 20 years and money has always been a touchy subject for us. I tend to be very frugal and she’s more of the spender. I’m not saying she’s the one to “blame” though. Good to hear how you guys were able to work through this.
Yeah trust me I’ve made mistakes, I took out a payday loan to pay for habits without telling her, a real dirtbag move on my part, but I owned up to it, sold some stuff to pay it off and didn’t do it again, it’s really hard making such drastic changes, but now even if I mess up and buy something I text her before hand. So at least I’m not lying about it.
This is great! Thank you Dave!
You know I feel the same way about him but he does help people get out of debt if they follow his plan.... Which is simple financial common sense that anyone can figure out if they think about it.
Can I ask a question. I thought the loan forgiveness wasn’t starting till end of yr. You already got ur loans forgiven?
Not yet we got 29k of student debt, it’s from a predatory school so either 29k will be forgiven due to that or 9k since my wife got Pell grants and 20k from Biden
Way to go! So happy for you!
This gets at one of my major problems with the Baby Steps. You and your wife probably missed out on thousands of dollars worth of employer matches into your employer sponsored retirement plans while you were paying off debt. Even the interest on credit card debt at over 20% is less than most employer plans which match at either 50% or 100%. Additionally, you missed out on the opertunity for your contributions and the matching contributions to compound. Now you are behind in retirement savings and have to start catching up.
Exactly, I think it’s a big flaw with the Dave Ramsey plan, he specifically states to stop contributing until step 4. At the beginning we were behind on everything including mortgage and power bills. I wish I would have started them up after a year because the first year was the hardest and then, I could have done just the employer match. But at least now I can max it out in a down market, hopefully get solidly gains once the market gets back up in a few years.
I’m of the opposite mind. I believe the “shoulda coulda woulda” mentality is dangerous when you’re trying to change your lifestyle and get yourself up and out of debt.
If you kept contributing a few hundred a month into retirement yeah that would obviously compound and be worth more. Assuming you’d still be contributing to retirement, how much longer would it take to crawl out of debt? Also, having even more available cash is better in case of an emergency in that situation, because would you really want to load up another credit card?
You did what you had to do to get out of debt. Now you can invest and look towards the future.
Dave Ramsey is the man. the haters can get bent IMO
I discovered him after paying off all my credit cards. had I been on my plan, I would have paid them off in about a year rather than 2+. I was basically on the same page as his plan, but stumbling my way through it from scratch. his plan is a lot more focused and streamlined.
he also got me to pay attention to my retirement planning. even if you chose not to follow his particular recommendations, everyone needs to save for retirement.
typo edit -- MY plan took 2+ years, Dave's plan would have probably been closer to 12-18 months
The chef guy?
Not Gordon Ramsey lol
I know Ramsey and Orman hate it, but I'd go Infinite Banking over maxing out a 401K. Even with the company match, you're still at the mercy of the stock market long-term. Most 401Ks lose 30% by the date of maturity.
what's infinite banking?
It's complicated, but so is investing. It's when you take out a well-structured whole life insurance policy, and add paid up addition (PUA) riders. Instead of borrowing from a bank, and paying the bank interest, you borrow from the cash value of your policy (at 5% for us), then use that money to fix the house/buy a car/fund your business/etc. You pay yourself back over time, like you would do with a 401k loan. The company that holds the policy pays you yearly dividends, which you can use to purchase paid up additions. That gives you even more money in your policy, which you can borrow as needed, and the cycle continues. Upon your death, the policy pays out to your selected beneficiaries.
Infinite Banking gives you a way to store and grow your money without paying interest to banks, or relying on the volatility of the stock market. You need to make enough money to pay your premiums, and you need to choose a reputable insurance company. An IBC practitioner can help you purchase a policy that's tailored to your individual needs.
Love this! You give me hope.
Envelope system was what kept me out of trouble during the worst times... Although I left poverty, the same system I use today.
Congrats and we are so proud of you! Also, big congrats for keeping your marriage together. A lot of marriages fail because of debt. You two worked together and stayed together. This is just as important as getting rid of debt.
Laser focus!!! Congratulations!!
Trust me it could have been more focused on my part.
Congratulations! That took perseverance and dedication. You should be proud.
very sound advice
Dividend stocks/etfa are a great place to park extra funds, I personally like jepi.
Congratulations!!! This is inspirational as my wife and I are on the Dave Ramsey plan.
Nice! Yeah baby step 2 is a bitch, keep at it
I love it. That guy is such an asshole but the basic tools are pretty effective and he tapped into the psychology of low income life and how it's not just about numbers.
Wonderful! You guys rock! Such an inspiration!
TL;DR: double your salary
His system works really well for some able-bodies neurotypicals.
But I’m glad it worked for you! You definitely deserve to celebrate.
I have physical problems and terrible depression lol
That’s nice. Too bad there are no medals for winning the pain Olympics
This is amazing!!! Congrats!!!
I also started with Dave Ramsey. His book was a good motivator along with some online Instagram accounts of people getting out of debt. I won’t support him now but it was the jumpstart I needed.
Anyway, this is amazing what you have done. It’s motivating so congrats to you both for digging yourself out and not giving up.
Congrats man, that’s what we all did.
So nice to read posts like this, when most just blame society while ignoring the fact they eat out constantly, have an iPhone, etc.
Dave Ramsey is great for people who basically have never been taught money management by their parents, but you don’t need him anymore.
My advice would be to try to max out your 401k at 19.5k a year and then for a Roth IRA for 6.5k a year. Only invest in low cost, passive mutual funds that track the S&P 500.
Then, if you have kids, open 529 plans.
Inspiring
Congratulations!!😊
CONGRATULATIONS!!!!!! 🎉🍾🎊🎈🎂🥂
Yeah!!!! Congratulations.
How to get out of poverty: Make six figures.
No, budget, change your habits, work 2 or 3 jobs, move up the ladder, get promoted. Do that for 3 years. It’s actually work, the hardest thing we’ve ever done.