Latest Posts
Home > Ask The Get Out of Debt Experts > We’ve Been Following the Dave Ramsey Snowball Plan But It’s Not Working for Us. – Shannon

We’ve Been Following the Dave Ramsey Snowball Plan But It’s Not Working for Us. – Shannon

“Dear Steve,

My husband lost his job in October 2009. We had to fight the company to get his unemployment, but eventually won. After about six months of searching, he found a job with a university that would give him the opportunity to go back to school to earn his master’s degree for about 90% off the cost of tuition, so he decided to take it even though he would be earning LESS than he was making on unemployment. He took it for both the benefits and because we didn’t know when the next offer would come around. At the time, we had two kids, ages 3 years and 18 months. We had two mortgages, a home equity loan, a car payment, my student loans, and a credit card that we paid off literally weeks before he lost his job. We were quickly surprised with a third (and final) child who is now four months old.

Currently, our combined mortgages/property taxes/house insurance are $1,570, the car payment is $140 ($3,569 until it is paid off), car insurance is $140, my student loans are about $250, the home equity loan is $259, utilities are around $255, cell phone is on a combined plan with my parents and runs us $40/month for both of our lines (no land line). Then, of course, there are the other living expenses like feeding and clothing three children and paying for medical insurance, gas, etc.

We got rid of cable TV yesterday (took the box back and had them cancel the service) and our internet should be around $50, I think. We don’t eat out. Period. We don’t go to movies. Period. I think the last movie I saw in the theater was Pirate of the Caribbean 1. I drive an 11 year old minivan with over 230k on it.

We bought our house five years ago for $215k (plus all of the taxes, etc). It is now estimated to be worth about $173k in our area. I don’t have the immediate numbers right now, but I know we still owe more than the house is worth with the dive in the housing market.

All of our bills are current, but I think we have almost reached the point where we are having to pay the end of this month’s bills with part of next month’s paycheck. I have started couponing and watching sales to get our food/toiletries budget down.

We have been trying to do the debt snowball following Dave Ramsey’s pan, but we can’t seem to squeeze anything else out of the budget to make some room. We have sold stuff on Craigslist and eBay, and my husband will be looking for other potential jobs soon, but the thought of giving up his chance to earn is MBA for 90% off and our children earn their BA’s for 75% off is hard to swallow.

I own my own service business (transcription) and work it around caring for our three children. To put three kids into daycare in my area would be AT LEAST $1,800. My oldest will be starting Kindergarten in the fall, but kindergarten is only half-days, so he would need childcare the other half of the day for me to get a job outside of the home.

We have good credit other than being over-extended after my husband’s cut in pay. While he was unemployed, we didn’t miss a single payment.

Both of our incomes are variable and no quarterly bonuses to help us get ahead. Between unemployment and a partial year of work, our adjusted gross income last year was $41k.

What the heck do we do now? We are only making minimum payments on everything just so we can keep gas in the car for him to get to work and keep food on the table. Does debt consolidation sound like a good option in our situation?

Shannon”

Don’t miss our free Get Out of Debt – “How To” Guide Series on a number of topics, for loads of practical advice, tips, and help to beat back debt. – Click Here

The Answer

Dear Shannon,

Before I begin, I have one very important question for you, is the goal to try and fix the past or fix the future to make it financially safer for your family and kids?

Help me to understand which direction we are looking before we head off on this journey.

Post your answer in the comments section and I’ll reply.

Big Hug!

Weve Been Following the Dave Ramsey Snowball Plan But Its Not Working for Us.   Shannon
Get Out of Debt Guy – Twitter, G+, Facebook

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

We've Been Following the Dave Ramsey Snowball Plan But It's Not Working for Us. - Shannon by

Share This and Spread the Word

About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Steve Rhode

    Thanks for the feedback on the site. We’ve worked really hard to make it better.

    OK then. If you feel you can make at least your minimum payments then use the free ReadyForZero.com debt reduction service. It will give your the guidance and data you will need to get out of debt by making regular payments.

    The only real solutions for getting out of debt for less than your regular payment, if we cross bankruptcy off the list, is a debt consolidation loan, which you may be eligible for from LendingClub.com if your credit score is 700 or above. The other solution is a debt settlement approach where you may be able to repay your debt for less than you owe. The downside is it will hurt your credit, you could be sued, and it it will take longer to repair your credit. For debt settlement solutions I suggest you talk to one of the AACC member companies.

    While I don’t have to agree with your decision I do fully support you by being here as you proceed along your journey.

  • Shannon

    Hi Steve, love the new layout of the site.

      I have been giving your questions a LOT of thought, as well as taking a microscope to our budget and spending habits.

      In answer to your original question, the goal is to fix the past, even if it leaves us in a risky position.  I suppose we may change our minds on that later, but at the moment, that is where we are mentally and emotionally.

    Thank you again,

    Shannon

  • Shannon

    Hi Steve, love the new layout of the site.

      I have been giving your questions a LOT of thought, as well as taking a microscope to our budget and spending habits.

      In answer to your original question, the goal is to fix the past, even if it leaves us in a risky position.  I suppose we may change our minds on that later, but at the moment, that is where we are mentally and emotionally.

    Thank you again,

    Shannon

    • http://GetOutOfDebt.org Steve Rhode

      Thanks for the feedback on the site. We’ve worked really hard to make it better.

      OK then. If you feel you can make at least your minimum payments then use the free ReadyForZero.com debt reduction service. It will give your the guidance and data you will need to get out of debt by making regular payments.

      The only real solutions for getting out of debt for less than your regular payment, if we cross bankruptcy off the list, is a debt consolidation loan, which you may be eligible for from LendingClub.com if your credit score is 700 or above. The other solution is a debt settlement approach where you may be able to repay your debt for less than you owe. The downside is it will hurt your credit, you could be sued, and it it will take longer to repair your credit. For debt settlement solutions I suggest you talk to one of the AACC member companies.

      While I don’t have to agree with your decision I do fully support you by being here as you proceed along your journey.

  • Steve Rhode

    Sleep on it. Talk it over with your husband and think about it emotionally and logically.

    Come on back tomorrow and let’s chat.

  • Shannon

    So I guess the sort answer is, I don’t know yet.

  • Shannon

    Hi Steve,

      Oops, I guess I did misunderstand your first question previously.  I guess I’m not completely sure which is more important, paying past debt or the moving forward.  Before I wrote you, I hadn’t considered anything OTHER than repaying our past debts the best we could over the next several years.  We obviously need to give this some more thought now.

      We currently have a $1,000 emergency fund and nothing in savings.

  • Steve Rhode

    I understand your focused on achieving a certain outcome of getting out of debt by paying it down but we can’t just simply react, we need to look at the bigger picture first.

    So what I hear you saying is that you are not worried about refinancing the house when the balloon note is due.

    How much do you have currently saved in a savings account / emergency fund?

    By the way, you actually kind of missed my first question, so let me rephrase it.

    Is it more important to you to focus on repaying the past debt which may leave you in a bad and risky financial position for the next several years or is it more important to make sure your family is financially safe moving forward, can build an emergency fund and be able to be ready to handle any financial emergency on your current income?

  • Shannon

    Hi Steve,

      I don’t think it will be terribly difficult to refi the house in a few more years through our credit union, but I’m not positive, of course.  We looked at that last year with them right after my husband became reemployed when we refinanced our HELCO loan away from GE Money and cut the interest rate in half.  They said at that time that we didn’t have enough equity in the house yet (as I recall, it’s been a year).  Housing prices have gone up in the past year in our area, but not much.

      Is my head still buried in the sand?

      I’m not sure if this makes a difference in any part of your thoughts/suggestions, but all of our loans have interest rates below 9.5%, with the car and my student loans being 4.7% and 3% respectively, and the two mortgages are 6% and 7.5%.

      We had not planned on staying in this house for another 10 years.  For the past several years that we were trying to do the debt snowball, our intention has been to pay off all of our debt except the house and save up all of the money no longer going to debt to get a downpayment for a little bit bigger house.  Of course, that was before the ~50% cut in income.

    Thanks again, Steve.

    Shannon

  • Steve Rhode

    Shannon,

    Let’s get going.

    So you are way underwater on the house. Do we gamble if the home will rise enough in value over the next ten years and that you’ll be able to refinance then? Are you willing to gamble that’s what’s going to happen or do you think that housing will remain flat and your house will be difficult to refinance even in ten years?

  • Shannon

    Hi Steve,

      Wow, I didn’t realize how long my post was.  Thank you for taking the time to read it.

      Our goal has been to get out of debt so that if something should happen to either one of us (job loss, severe illness, etc) we won’t feel so blindsided.  We want to be prepared for the future because what we went through was seriously scary.

      The next morning, after I send my letter, I checked on our mortgages and we are upside down — we owe $157k on one and $40k on the other, and the home estimate calculator I found in one of your other posts shows that our house would currently be about $182k.  We also have a balloon payment coming in about 10 years.

    Thank you for your help, Steve!

    Shannon

  • Shannon

    Hi Steve,

      Wow, I didn’t realize how long my post was.  Thank you for taking the time to read it.

      Our goal has been to get out of debt so that if something should happen to either one of us (job loss, severe illness, etc) we won’t feel so blindsided.  We want to be prepared for the future because what we went through was seriously scary.

      The next morning, after I send my letter, I checked on our mortgages and we are upside down — we owe $157k on one and $40k on the other, and the home estimate calculator I found in one of your other posts shows that our house would currently be about $182k.  We also have a balloon payment coming in about 10 years.

    Thank you for your help, Steve!

    Shannon

    • http://GetOutOfDebt.org Steve Rhode

      Shannon,

      Let’s get going.

      So you are way underwater on the house. Do we gamble if the home will rise enough in value over the next ten years and that you’ll be able to refinance then? Are you willing to gamble that’s what’s going to happen or do you think that housing will remain flat and your house will be difficult to refinance even in ten years?

      • Shannon

        Hi Steve,

          I don’t think it will be terribly difficult to refi the house in a few more years through our credit union, but I’m not positive, of course.  We looked at that last year with them right after my husband became reemployed when we refinanced our HELCO loan away from GE Money and cut the interest rate in half.  They said at that time that we didn’t have enough equity in the house yet (as I recall, it’s been a year).  Housing prices have gone up in the past year in our area, but not much.

          Is my head still buried in the sand?

          I’m not sure if this makes a difference in any part of your thoughts/suggestions, but all of our loans have interest rates below 9.5%, with the car and my student loans being 4.7% and 3% respectively, and the two mortgages are 6% and 7.5%.

          We had not planned on staying in this house for another 10 years.  For the past several years that we were trying to do the debt snowball, our intention has been to pay off all of our debt except the house and save up all of the money no longer going to debt to get a downpayment for a little bit bigger house.  Of course, that was before the ~50% cut in income.

        Thanks again, Steve.

        Shannon

      • http://GetOutOfDebt.org Steve Rhode

        I understand your focused on achieving a certain outcome of getting out of debt by paying it down but we can’t just simply react, we need to look at the bigger picture first.

        So what I hear you saying is that you are not worried about refinancing the house when the balloon note is due.

        How much do you have currently saved in a savings account / emergency fund?

        By the way, you actually kind of missed my first question, so let me rephrase it.

        Is it more important to you to focus on repaying the past debt which may leave you in a bad and risky financial position for the next several years or is it more important to make sure your family is financially safe moving forward, can build an emergency fund and be able to be ready to handle any financial emergency on your current income?

      • Shannon

        Hi Steve,

          Oops, I guess I did misunderstand your first question previously.  I guess I’m not completely sure which is more important, paying past debt or the moving forward.  Before I wrote you, I hadn’t considered anything OTHER than repaying our past debts the best we could over the next several years.  We obviously need to give this some more thought now.

          We currently have a $1,000 emergency fund and nothing in savings.

      • http://GetOutOfDebt.org Steve Rhode

        Sleep on it. Talk it over with your husband and think about it emotionally and logically.

        Come on back tomorrow and let’s chat.

      • Shannon

        So I guess the sort answer is, I don’t know yet.

Get My FREE Get Out of Debt Guy Newsletter

It is the smart thing to do.

I promise to keep your email safe and secure.

Close

I want to keep you posted each weekday with just one email about the latest get out of debt news, scam alerts and information to beat back debt.

You can unsubscribe at any time with just one click.

After you subscribe, check your email to confirm your subscription. If the confirmation email does not appear in your inbox in a few minutes, check your spam folder for it. Sometimes it likes to annoyingly hide there.


  • It will keep you posted on the latest scams.
  • You will be alerted to the latest articles.
  • You will wind up smarter than everyone else dealing with debt.