I finally lost a post. After reading about others who've had the same fate, it finally happened to me. Arghh!
I started listening to Dave Ramsey's podcast. I never followed his plan, but just happen to be somewhere between steps 4-6 (saving for retirement, saving for college, paying down Heloc). I had a question for anyone out there who follows him, and and two "a-ha" moments.
Question: Why does he list saving for college as step 5 and paying off mortgage as step 6? I would think paying off the house would be the same as saving for retirement: your kids can find different ways to get through school, but you're getting older and need to be debt free. I'm saving for both at the same time, I was just curious as to what his rationale is.
A-ha #1: When looking at Dave's suggested budget template, he gives ranges for how much of your net pay you should be spending for each category. I'm in line or below on all the categories except 1: Personal. He recommends 5-10% of net income and I'm at a whopping 17%! Unfortunately, this is where all of the "fun" stuff is: allowance, pet, kids' extracurricular activities, wine (our big hobby), haircuts and mani-pedis, etc. I'm going to focus some attention on how to get this more in-line, without depriving myself, if possible. This is where it's tough to be frugal!
A-ha #2: Dave looks at net income. I also looked at gross income so I could factor how much I pay in taxes into the mix. Here are my top 4 spending categories:
1) Taxes - 27% of gross income
2) Housing - 23%
3) Personal - 13%
4) Savings - 9%
Nothing else is more than 7.25%
I mentioned Personal above, and I'd like to increase savings. The a-ha is a bit of frustration that there is not much I can do about the 2 biggest categories. I just adjusted my withholding, so taxes are what they are. Housing consists of my mortgage, heloc, property taxes (a whopping $13k+) and $300/month for maintenance and other household stuff.
So that leaves me with the little categories to attack, where I don't think there's a lot of bang for my buck.
All in all, I've enjoyed learning more about Dave's approach. How about you? Are you a Dave fan? What do you love/hate about his methods?
Thoughts on Dave Ramsey
February 24th, 2013 at 05:24 pm
February 24th, 2013 at 07:25 pm 1361733913
You'd be surprised how the little things add up.
As for the question, I think some people tend to "over" pay down their house and then borrow against it again for college. I think the point is just to do a little everything - not put all your eggs in one basket. & to not end up where you have to borrow again later. Of course, I think most his listeners will be mortgage free LONG before they ever retire, which may be more to the point.
February 24th, 2013 at 07:31 pm 1361734290
Yes, the little extras add up and those are were the excess savings are available. The less you spend on extras the more you have to pay down debt, save for college or pay off your house.
February 24th, 2013 at 11:19 pm 1361747942
Jerry
February 25th, 2013 at 01:22 am 1361755354
~Donna
February 25th, 2013 at 03:36 pm 1361806580