How I Modified Dave Ramsey's Total Money Makeover

For all you Dave Ramsey fans out there, I know people going through the Total Money Makeover are supposed to have "gazelle-like" intensity. Modifying is frowned upon. Well, I'm still a gazelle. But my cheetah is $114,000 of debt, not $5,000 or even $30,000.

Our resources are also rather limited. I'm making approximately $30,000/year in a temp-to-hire position from which I haven't been hired. Mr. Micah will earn $5,200 this fall and $2,600 this spring as a "lecturer" teaching Intro to Philosophy classes. Once he finishes his dissertation, he'll be able to get a job earning a lot more.

So paying this off is going to take a while: probably something on the order of 7 or 8 years at least.

We've taken some of Ramsey's first steps, setting up the emergency fund and stopping credit card use.

Then we began our debt snowball. This is where we made the first change.

Normally, you're supposed to focus only on paying off debt during this period. But as I said above, it'll a long time. So we're also putting money aside to fund either a Roth IRA or a 401(k) depending on minimums and when I get hired.

Why? To take advantage of the time value of money.

I understand Ramsey's reasoning that it's better to get debt out of the way entirely. Diverting money to retirement funds takes away from what we can be paying off.

But he admits that this works best for people who can get it taken care of in a few years. Yes, the time value of money will make a difference for them, but not as big if it's only 1 or 2 years. In the same way, they can probably afford to miss out on matching employer contributions by taking into account the interest they'll save by not having the debt for years.

We're focusing more on the debt, but we put some money aside each month for retirement.

The second change we've made is tucking a little bit extra into savings every month. We're doing this because of a potential income loss in the near future.

This summer, until Mr. Micah gets hired, we won't have the money from his teaching. We use that right now to pay off the debt and save for retirement. While we can sacrifice the latter, we can't afford to get behind on debt, even if we're just able to pay the minimums.