Before starting on a “gazelle intensity” towards debt repayment, Dave Ramsey advises you to save up $1,000 for an emergency fund so that when Murphy comes knocking on your door while you are trying to get out of debt, you will not have to go into more debt by charging the emergency to your credit card. And since getting gazelle intense—meaning taking all of your other savings to pay off debt, most of your income, extra job income, and basically “all money you have above and beyond the $1,000 in anything except retirement plans…”—leaves you financially vulnerable, then saving up an emergency fund is a good idea.

What happens if you need to dip into this $1,000 emergency savings? After paying for the emergency in cash, you temporarily suspend putting all money possible towards your debts, and build your emergency savings back up to $1,000. Then, you get gazelle intense again.

I love Dave Ramsey and his debt snowball philosophy (check out The Total Money Makeover). I think it makes good sense, and enjoy reading all of the stories from people like you and I who decide to get focused on getting out of debt and find themselves out of a $50,000 hole 13 months later. Truly inspiring. Paul and I are working on a few of our own debts, and are very excited that we will be rid of two of them by our wedding in April! We have sold extra televisions, books, game systems, my old laptop, etc. I have picked up extra income with some freelance writing, and trimmed our fixed bills down quite a bit in order to free up some more cash. Things are really working in our corner now. After April, we will only have our mortgage and the rest of my student loan left, which I have been whittling down pretty well over the last four years.

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However, it occurred to me that if Paul and I started our debt-free journey with only $1,000 in emergency savings, right now we might be more in debt. If you remember, my car died after purchasing our first home together. Fortunately we had more than $1,000 in our emergency savings, and were able to find a replacement within two months by paying cash for a used car. Paul carpooled to work for about as long as he could, and we had moved further away from our jobs at that point so taking a bus or metro was much trickier. Granted, if both of us could have changed our work schedules permanently, then we could have figured out a way to carpool together until getting out of debt.

Perhaps that is what Dave Ramsey means by gazelle intensity and focus. If I am going to do a complete, fair review of the debt snowball, then I need to add in the extra things that Paul and I could be doing in order to be more intense in our efforts. We could be more intense about our debts, but our Number Two goal is to get married, and to do so without going into any debt whatsoever. So we are concurrently paying cash for our wedding to save us from going into more debt, and shedding these older debts. We could elope and put all of the wedding savings towards our debts (we thought about doing this, but in the end we both wanted our wedding day).  Perhaps I could have figured out a way to carpool with someone else (I am carpooling right now, but it is with a coworker who tore his Achilles tendon, and thus cannot drive for a few months, so I am the driver). We could have postponed our purchase of a home and use our down payment money to pay off our debts, though the first time homebuyer’s credit was certainly a part of our debt-free plan, and we were planning on buying a home anyway at the time that we did. And we are definitely keeping more than $1,000 in our emergency savings account—without which I would feel too vulnerable—so technically, we could throw that money onto our debts as well. We could also temporarily stop contributing towards our retirement plans and use that money to pay off the debts. However, I am a very long-term thinker and planner (have you noticed?), and so I am not comfortable with this idea, especially since we see the end in sight.

All in all, Paul and I are satisfied with shedding most of our non-mortgage debts by April, having no wedding debts, and no honeymoon debts. And while we don’t completely agree with Dave Ramsey’s $1,000 emergency fund while paying down debts, he has certainly been a part of our journey towards this point.

Do you follow Dave Ramsey? How has your experience on his plan been? What are some debts that you are working on right now?

5 replies
  1. Laura
    Laura says:

    Although I’m familiar with Dave Ramsey and his financial philosophy, I don’t follow his advice. For many people it’s counter-productive. As you know, it’s unrealistic to think a $1k emergency fund is going to do much good in an emergency. I’m also not willing to give up the rewards $$ I get back on my credit cards. And despite some of Ramsey’s questionable ‘statistics’, I don’t spend more when using a credit card (as opposed to cash), and I have never paid a credit card company one penny in interest or fees of any kind. I think Ramsey’s advice can be helpful to those who are in serious financial trouble with limited income, but that’s as far as it goes.

    It sounds like you have a very realistic approach to your finances and will be successful without hanging on every word this man says. Remember, he’s making HIS little fortune out of the pockets of people in financial trouble already!

  2. TexansFan
    TexansFan says:

    Laura,

    I agree with this article, however you have to understand that Dave Ramsey’s approach is geared towards those who have no clue about budgets and will get completely crazy with credit cards if given the chance. I also think it is a bit unfair to say that Ramsey is making his fortune off people in financial trouble, because he made his money before the books, radio show, etc.

    Amanda,

    Very true. I think everyone needs to get information from all of the sources and find the financial plan that fits them the best. Great job and as per usuall, Great Article!

  3. Crystal
    Crystal says:

    Due to reasons the other comments mentioned above, we do not follow Dave Ramsey. It seems his advice is geared to people in a different place than my husband and I.

    We already understand money, savings, budgets, and the costs of debt, so we don’t “follow” anybody. I keep an eye on financial blogs like this one and Free Money Finance to pick up tips I might not know about yet, but Suze and Dave seem to be for people who are just learning about their financial lives.

    On a side note, I too think a $1000 emergency fund would lead to trouble…we’ve had at least $10,000 set aside since we both got our first “real” jobs after college in 2005-2006. It was really tough since we were completely broke (but college debt free), but cars, homes, and medical emergencies aren’t usually nice enough to stay cheap. If someone was just starting out, I would suggest a minimum of $3000-$5000 before starting on their “debt snowball”.

  4. Lauren
    Lauren says:

    I also agree with the above commenters. Dave Ramsey’s ideas seem a little simplistic to me. I don’t necessarily agree with the idea of never going into debt – for example, does it really bode well for your future for you to rent a house for years and years while you are saving up to pay cash for a house that you buy? This idea doesnt make sense to me -MAYBE it would if you were living somewhere for free and putting all your extra $$ towards saving for a house, but most people aren’t going to live somewhere for free (and if you are living with your parents, what other parts of your life are you sacrificing in order to do this!?!) so doesn’t it make more sense to at least pay your mortgage for a house you own and put more towards the mortgage to pay it off faster?

    I also agree about the credit cards and the emergency fund – we don’t have any consumer debt, so i don’t worry about going crazy with credit cards. It has never been an issue for us. Also a $1000 emergency fund is a rather small emergency in my book. We have closer to $20,000, which granted would be a catastrophic emergency, but I’d rather be safe than sorry!

  5. Amanda L. Grossman
    Amanda L. Grossman says:

    Hello Lauren: Thanks for your comments and sharing your thoughts! A $20,000 emergency fund is great; I don’t know if you saw my article I just posted today (Our Debt Checkup), but we will be taking our emergencys avings down pretty low and wiping out the last of our debt (besides mortgage)–my student loans. Still, I have backup through money in a money market account that I just sold the stock and put it in the sidelines (for a nice profit–hurrah!). So we do have another backup.

    Also…living at home for the rest of my life? Or even another year??? No thank you:).

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