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How Dave Ramsey helped me pay off $250,000 in debt

Written by ecannon - 7 Comments

The guest post comes from Rob Berger. He is the founder of the popular personal finance blog the Dough Roller.

How Dave Ramsey helped me pay off $250,000 in debt

I remember the moment I pledged to become debt free as if it were yesterday. It was nearly seven years ago. I was 40 and my wife and I had about $250,000 in non-mortgage debt. Dave Ramsey’s podcast was playing while I cleaned out my workshop.

If you’ve ever listened to Dave’s show, you’re no doubt familiar with what I call the debt-free battle cry: “I’m debt free!” His listeners call in to the show and shout for joy once they’ve climbed out of debt.

I wanted that same feeling of freedom. I wanted it more than a new car, nice clothes or expensive vacations. So at age 40, I vowed to be debt free by 50. At the time, the goal was beyond unreasonable. We had no way of paying off that much debt in 20 years, let alone 10. We did it in five.

Here’s how.

Ironically, we ignored much of Dave Ramsey’s advice

As loyal readers of Five Cent Nickel know, Dave is bad at math. While I find him inspirational, when it comes to the nuts and bolts of getting out of debt, he and I had to part company in several respects.

First, I absolutely took advantage of zero-percent credit cards. Ignoring Dave Ramsey’s disdain for plastic, my wife and I transferred tens of thousands of dollars in debt to zero percent balance transfer cards. When the no- interest offer expired, we’d transfer the remaining debt to a new card that charged no interest. Our primary card of choice was the Discover card, but there are many options available.

The benefit to this approach is twofold. You of course avoid paying hundreds if not thousands of dollars in interest. In addition, you pay off your debt faster. Failing to use this tool will cost you dearly and significantly increase the time it takes you to pay off your debt.

Second, we did not keep $1,000 in an emergency fund as Dave recommends. Much of our debt was in the form of a home equity line of credit. So rather than locking money away in a low interest savings account, we put all extra cash on the line of credit. If an emergency did arise, we could always pull the money back out.

Finally, we tackled debt with the highest interest first. While Dave recommends paying off the lowest balance first, that approach can be costly. In our case, most of our debt was at very reasonable rates. But we nevertheless listed our debts based on the interest rates and chipped away at the highest rate debt first. This enabled us to pay off our debt faster and for less money.

We lived below our means

You may have heard stories of families who lived a meager existence to pay off debt. That doesn’t describe us. I’ve never been one to reuse Ziploc bags to save a few pennies. But we did live below our means.

We didn’t buy new cars. When I received a raise or bonus, we applied it to our debt. Tax refunds went to pay down debt. While we took vacations, they were generally low-cost affairs to a nearby beach.

And most importantly, we vowed not to go into more debt for any reason. This was where the inspiration from Dave Ramsey’s show really helped us. We even turned down zero-percent financing on some furniture we purchased. We paid cash instead.

We monitored our credit

You may think that your credit score isn’t important if you plan to avoid future debt. Nothing could be further from the truth. In our case, an excellent credit score helped us in several respects.

First, it allowed us to qualify for the best balance transfer cards I mentioned above. Second, it allowed us to qualify for the lowest possible interest rate on our home equity line of credit. And finally, a solid credit score enabled us to refinance our primary mortgage to rock-bottom rates.

It’s not an exaggeration to say that our good credit has saved us tens of thousands of dollars in interest.

We earned a side income

Finally, we managed to earn a side income that enabled us to supercharge our debt payments. It was a bit by accident, but in 2007 I started the personal finance blog the Dough Roller. While it was never my intent to build a business from blogging, over the next several years the site grew and started to earn a modest income.

The key here was that we used every dime earned from blogging to tackle our debt. We could have used the money to expand our lifestyle. Instead, we focused entirely on our debt. While blogging may not be for everybody, finding a way to earn extra income can accelerate your efforts to become debt free.

In our case, it was part of what enabled us to pay off $250,000 in debt in just five years. Your debt hopefully isn’t that much. But whatever debt you have, commit to paying it off as quickly as possible. I hope some of the above tips will help you reach that goal.

Published on July 5th, 2013 - 7 Comments
Filed under: Debt Reduction

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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7 Responses to “How Dave Ramsey helped me pay off $250,000 in debt”

  1. 1
    Kirk Kinder Says:

    This is awesome. I totally agree with you that Dave gets you fired up, but his methods aren’t optimal. Paying higher rate loans, even if larger in size than others, is wise. Snowballing accounts may provide a mental boost, but if you are truly dedicated to getting out of debt, focusing on the high debt is best.

  2. 2
    Lance @ Money Life and More Says:

    We’re planning on trying out a zero interest balance transfer card as well and our side income definitely helps accelerate our debt pay off. My fiancee has quite a bit of student loan debt left.

  3. 3
    Stephen Says:

    Congrats on both success fronts!

    My mortgage at 5% and my car at 2.9%, I paid my car first for no other reason than I could remove the car payment from my budget sooner than I could remove the mortgage payment – something that seemed to me to be of real, tangible benefit beyond motivation. In the very least it removed stress. In the very most, I could handle life’s little bumps a little easier. And little bumps are larger when a person’s income is smaller.

  4. 4
    BG Says:

    Awesome, I love reading “Debt Free!” stories.

    I’d like to defend Dave Ramsey about his views of credit-cards (plastic). He isn’t saying that you can’t shuffle debt around (refinancing high-interest debt into lower interest, which is what you did) — he is saying that you should make purchases with cold hard cash.

    Notwithstanding the fact that it is impossible to go into credit card debt if you don’t actually own a credit card — there is (he claims) a psychological difference between charging for example $200 on a credit card for a retail purchase, and counting out ten $20 bills on the counter for the same purchase.

    As for me: I’d be more worried about losing the cash (or theft), so I use debit-cards for everything — I use real-credit cards for things like car-rentals and pay the balance in full every month.

  5. 5
    Rusty O'Connor Says:

    Great article,

    A side income is vitally important if you want to get ahead. Once you have started making more money you can look at other passive investment options. A side business also provides a cushion if work ever gets tight in your main industry.

    Rusty

  6. 6
    Loan Modification Help Center Says:

    Great article on recovering from debt!

  7. 7
    Dianna Says:

    What if your husband who’s been unemployed for over 3 yrs, has a chronic incurable illness so is no longer able to work, and has used the Chase & Discover 0% balance transfer and gone beyond (used cash advances)to pay other credit cards; just a vicious circle. The ccd’s are all in his name. I simply don’t bring home enough to pay even the minimums. He’s already cashed out a retirement annuity, took the penalty but then now we owe ~$7000 in income taxes. The loan for our house is in my name alone as is the deed to it. I am in the process of getting him SSN disability, but that could take 2yrs. What do I do now?

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