I’ve been doing the Dave Ramsey Thing for almost 7 years now. I became debt free in 2007. A year later, I paid cash for my wedding and honeymoon and by 2010 we had paid off Mrs wizardpc’s credit cards and student loans, and had also purchased a house with a 20% down payment. We have been debt free except the house since October of 2010. We’ve had 6 months of expenses in the bank since this past spring. We were about to start paying off the house early the day we found out lilwizard would be joining us.
At every point in my journey, there have been people who have said “Well, that’s great in theory, but just wait until X! You’ll have to borrow money then!”
So far, the values for X have been:
- When you get a girlfriend.
- When you get engaged.
- When you get married.
- When you get a house.*
- When you have kids.
And I have a few ideas about what the next ones will be. At every point, I’ve just trucked along without any problems.
I’ve done this single. I’ve done this while trying to convince a girl I was worth marrying. I’ve done this while keeping the wife happy and increasing her standard of living. I’ve done this as a renter. I’ve done it as a homeowner. I’m about to do it as a parent.
No matter where you are in your life, you can do this. Just like quitting smoking, though, quitting debt is hard. You have to want it.
I want $17,000,000 at retirement more than I want a new $35,000 truck instead of a $2,700 Cherokee. I want to be able to buy my kids houses as wedding presents more than I want to live in a $400,000 house 5 minutes from work. I want my wife to be able to be a stay at home mom if she wants to more than I want all the cable channels.
Life is about trade-offs.
*Yes, I got a mortgage, but that’s not what I’m referring to. People kept telling me I’d need to build my credit. We bought a house, but I got a mortgage. With a 15 year fixed rate conventional mortgage and 20% down, I was able to get a 4.375% mortgage during a time where 4.5-5.25% mortgages were the norm, despite not having any consumer debt since 2005 or any debt at all since 2007. I didn’t have to go out and “build my credit” like so many people told me I was going to have to do. The wife had a much more recent credit history but adding her to the mortgage would have negatively affected our rate. Think about that. ETA: mrswizardpc reminded me last night (and in comments today) that the problems we had adding her to the mortgage were related to her just having graduated college and therefor having less than a year of professional work history.
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I’ve been debt-free for 13 years now. I’d never heard of Dave Ramsey, though. I was just facing the prospect of going to grad school with about $15,000 worth of credit card debt. While that was something I could maintain with a regular salary, I knew it was something I didn’t want to deal with on a fraction of that salary. I spent a year and a half putting every spare penny into paying off that debt, and I’ve stayed that way.
(And not being of the Dave Ramsey/Andrew Tobias mold, I’ve actually had car payments at three times during that period. But I paid them off early and expect to run my current 7-year-old car into the ground.)
I was promised a correction that hasn’t yet appeared…
I had a more recent credit history (from the credit cards and students loans, at the time), but that had nothing to do with the mortgage. It was the lack of professional employment history (being employed only a year after grad school when we got pre-approved for the mortgage). That’s important to note for those fresh from school (whatever kind that may be).
Also – all the “credit” we needed was a couple hours of “hi [insert company we pay a monthly bill to here], can you fax a letter stating we pay the bill on time each month?” This included cable, electric, and phone companies, if memory serves me correctly. Now, we’d add water and trash to the list.
What you do is ruin your credit when you’re like 22. Then you are forced to live without debt because nobody will loan you anything!
Funny what you can get when you’re willing to actually put 20% down, right?
We do keep our credit going by having a card and paying it off every month. We just use it for things like gas and groceries and the like.
I have, in the past, had the actual lenders tell me I would have to “build my credit”, so there is some truth to it. It may have a lot to do with age, professional history, how long you had been in your job, etc. I was relatively young at the time.
When the lenders say that, what they mean is “I’m too lazy to do anything other than FICO-score based lending” or “My corporate office doesn’t think I’m smart enough to gather information for manual underwriting.”
True story: When I was getting a mortgage, the first broker I had told me he could do manual underwriting. I made it very clear what I wanted. Two days later he emailed me saying he couldn’t find a lender that would do manual underwriting, so I would have to get a higher rate or get an FHA mortgage with PMI. When I told him we would just go with someone else if he couldn’t do it, he magically discovered lenders that would do manual underwriting within 15 minutes. We fired the guy for being dishonest.
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