Dave Ramsey’s Financial Peace University – Week 4 Dumping Debt

by financialmom on August 4, 2011

in Debt, Financial Peace University, Money

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Dave Ramsey’s Financial Peace University Week 4 lesson on Dumping Debt is the longest lesson by far. For good reason. We are drowning in debt. We have allowed debt to become a normal way of life.

We wonder how our great country could be so deeply in debt, to the tune of trillions of dollars. It’s very simple. It’s easy to keep borrowing money and borrowing money when no one puts the brakes on, and no one is held accountable. It’s only when debt becomes a crisis that we are willing to consider change.

Debt is crushing us. Debt is crushing our country. And change has to start with us, and our families. So we need a plan to get out of debt, and to stay out of debt forever.

Dave’s plan for dumping debt is not complicated. Not everyone may agree with the method he recommends. He calls it the Debt Snowball. Here’s the thing – it works. I have seen it in action in many families, and if applied diligently, you will become debt free.

Debt Snowball

Here’s how the Debt Snowball works. First of all, you make a list of all your debts – including the total amount, the minimum monthly payments, the monthly payment amount you actually make, and the remaining balance after a payment is made.

Do this with your smallest debt first, ending with the largest debt. Pay no attention the interest rate on each debt. Pay the minimum payment on each debt, but focus any extra money on getting the smallest debt paid off quickly.

Some financial advisors will tell you to pay down the debt with the largest interest rate first. The problem with this is it usually gives you no fast satisfaction. Paying off your smallest debt quickly will give you a fast feeling of victory. It will help keep you motivated to pay more debts off.

Once you pay your smallest debt off, take what you have been paying on that debt, and add it to the minimum payment of the next debt on your list. This starts the snowball effect. As you pay your debts off, you will have more and more money to pay on the next debt.

Stop Being Normal

You will become debt free much faster than you ever thought you could. And to stay debt free, you must change your lifestyle. Are you willing to be different than the average person, who thinks it’s normal to be in debt?

Stop thinking about your purchases in terms of what the monthly payments will be (think cars). Think about them in terms of how much they cost, and save for them to pay cash. Your grandparents did it, and it’s time for us to go back to their kind of lifestyle.

Debt is destroying our peace. And it is preventing us from giving to causes that really need our support. Are you willing to commit to being different? Stop being a slave to debt, and find out what amazing things God has in store for you!

New Profile Pic 2599R Dave Ramseys Financial Peace University   Week 4 Dumping DebtPamela Otten is CEO of Pamela Otten LLC, a Registered Investment Advisor. She loves to work with women business owners and entrepreneurs, and women in transition due to job change, death, or divorce. Pamela will help you set and reach your financial goals, educate you to understand your investments, and teach you how to do more charitable giving. Pamela is a Qualified Kingdom Advisor (www.kingdomadvisors.org), trained and committed to integrating biblical principles with her investment advice.

cc smallest Dave Ramseys Financial Peace University   Week 4 Dumping DebtPhoto Credit – KAZVorpal

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

The opinions voiced in this material are for general information only, and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, please consult your financial advisor prior to investing.

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{ 2 comments… read them below or add one }

Paul Crowson August 4, 2011 at 3:29 pm

Thanks Pam…we realized what you said about being car poor just a few years ago…took care of that…now the house!

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Lori August 8, 2011 at 1:08 pm

Having debt, especially credit card debt is probably the biggest financial mistake most of us make!

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