As I may have mentioned, I frequently start to write a post in advance, sometimes spending a few weeks editing a given post, others, not so much. It was over a month back that I started a post regarding clutter and my strategies for eliminating it as best I could. I started down the path of tying back to the frugal topic by suggesting that space wasted in your home is space that you paid for and can be put to better use. Then, from a reference on Twitter, I ran into Serene Journey and Sherri’s series Eliminating Clutter. As I read through this wonderful three part series, I was drawn to the idea that the post I was working on would make a nice addition to Sherri’s blog as there was no overlap, my ideas were thoughts that complemented hers fairly well. We exchanged emails, and I am proud to offer you my guest post on Serene Journey titled Managing Common Household Clutter.
Dennis, like you, I believe a recovery is underway. From what I can tell, Q1 was the bottom, and we will see a rolling recovery. You know what that is, but I should tell my readers that’s it’s when the whole economy doesn’t recover at once, some sectors come out of the slump a bit faster than others, so the whole economy takes some time before the recession is declared to be over.
But Dennis, I know that you feel bashed, unrightly so, and people have called you names. But from where I sit, the search Dennis Kneale Idiot yields 35K hits on Google, but the same search with our president’s name yields just under 3 million. And Britney Spears Idiot just under one million. Even Albert Einstein Idiot yields 210K results. I suspect in your case higher numbers mean name recognition, but I plan to do my part and refer to the end of this recession as the “Dennis Kneale Recovery.” Remember, I coined that phrase. Meanwhile, take a breath, anonomous bloggers (me included) can say what they will, but it’s their long term record that builds credibility. Many who took shots at you won’t be blogging by the time NBER declares the recovery. After all, it took a year before they declared the recession had begun. Best wishes to you, Dennis.
I’ve not thought too much about Dave Ramsey for some time, not since before I adopted this format and was writing a monthly article. In one article I discussed his Debt Snowball, and quote him as saying “Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly. Truth: You should pay off the smallest debt first to create the greatest momentum in your debt snowball.” I understand when authors are responding to a question from a reader often don’t have the time or space to offer as detailed a response as they might like. This statement, however, was on his site as a rule to follow, and he even added, “The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior.”
A few weeks back Adam Baker of the site Man vs Debt showed me another spin on the paying down of debt in his “Debt Tsunami: The Ultimate Method For Paying Off Debt.” No problem with this, Adam acknowledges the differences in payoff methods, and suggests that one should lower their stress while lowering their debt. (I like that idea, and his approach.)
Then, I read Money Smarts’ Is Dave Ramsey a “Financial Expert” and this prompted me to start polishing a spreadsheet and newer article I’d been working on to take another look at the Snowball. To clarify, if you’ve not heard of Debt Snowball yet it simply means that you line up all your debt by balance. You then make the minimum payments on every debt, except you pay any extra money budgeted to paying off the smallest current balance. I’ve always claimed that paying in order of rate is the right way to handle this.
Late last week I read another article, Fiscal Geek’s The Debt Snowball Saved my Marriage: Spreadsheet Tell-all and found via his site, a spreadsheet The Debt Reduction Calculator, which amazingly, offers a pulldown tab which allows you to choose your method of payment.
First, Dave’s Debt Snowball:
Then the Debt Avalanche (paying highest rate first):
Wow, the difference is $4381.62, quite a difference. Now, to explain, the most dramatic difference comes from the wide spread from high rate to low, as well as the balance on the high rate card. Would you really feel better paying those smaller balances so quickly once you learned that those good feelings came at such a high cost? I didn’t think so. And my experience shows that your lowest rate cards may very well be the cards with the lowest credit lines as well. So you might have four cards each owing $2000 at 10%, but one card with a $10,000 balance at 24%.
Tell me, does this put an end to the Snowball debate?
Joe
Kay Bell is on Twitter, tweeting as taxtweet, and also hosts her blog Don’t Mess With Taxes, a pun, as she resides in Texas. I just read her post, Jon and Kate plus 8 divorce tax tips, in which she offers some great advice to folks looking to split up. I’d like to see her offer a part two in which she talks about estate planning. Eight kids, some vey high income (while the shows continues, anyway) and this should be on the Gossellin’s minds as well.
Curtis Ophoven of Pennyjobs.com suggests How To Prepare For a Long Recession, Start Savings 50% of Your Income. While I believe that kicking our saving rate to such unprecidented levels would send the economy into a death spiral, many of the point made were valid. I offer this post as one of the extreme reactions to the mess we are still facing.
ChristianPF hosted Jay Peroni’s What is a Roth 401(k)? 6 benefits you might care about an overview of the Roth 401(k). If your employer offers the Roth 401(k), you should read this article and consider if it’s right for you.
Last, was Kevin of NoDebtPlan who authored 5 Financial Lessons to Learn from Celebrity Deaths. When people die, it’s natural for us to reflect on our own circumstances, and Kevin offers 5 timely lessons after the recent grouping of celebrities who passed on.
Have a great week ahead.
Joe
Today I’d like to reprint my ’08 post from July 4th, as I have many new readers, and I love these images. Enjoy the holiday!
The image above is not the signing of the declaration of independence, but its presentation to congress. A beautiful painting, currently on the back of our two dollar bill. (You can click on it to view a much larger image)
Above is the “Spirit of 76”, originally known as “Yankee Doodle.”