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[quote=Anonymous][quote=Anonymous]PPs what do you mean by conservative?

I have clue how to begin tackling our debt so Ramsey is better than nothing I guess! Student loans will be last as they're mostly in deferment. I'm thinking of using the amount I was paying on them as extra in the snowball. I've been paying the interest while deferred. [/quote]

We mean that some people, either in an attempt to make finance as simple as possible for novices, or because they don't understand economics or opportunity cost (http://en.wikipedia.org/wiki/Opportunity_cost), will advise you to do things like pay down debt, spend less money, or invest in less risky assets even in circumstances where doing these things is actually counter-productive and will make you less well off in the long run.

Ramsey, in my opinion, is one of those people. For example, he pushes you hard to pay off your home mortgage, even when that is often the wrong financial choice. (For one discussion of why a mortgage can be good, see  http://www.ricedelman.com/cs/education/article?articleId=232&titleParam=11%20Great%20Reasons%20to%20Carry%20a%20Big,%20Long%20Mortgage#.UtS3kvRDtEI).

You are correct that Ramsey might be better than nothing in your case, both because it sounds like you're not very educated on the subject yet and because it sounds like your financial situation is very simple and Ramsey will probably have the correct advise for you right now.

Basically, what you need to be doing is spending as little money on discretionary things as possible and using that money to pay down your debt. In most situations, you want to pay down your debt starting with the loan with the highest interest rate, then moving on to the loan with the second highest. You didn't tell us the interest rate on your loans, but credit card rates are almost always awful, so you probably want to start with those. I would try to get rid of all of your credit card debt before you start to accumulate after tax savings.

Whether you want to start paying down your auto loan or your student loan immediately after you finish with your credit card debt is a bit more complicated. You might not want to pay either of them down if you have an excellent interest rate, for example. I don't intend to ever make extra payments on my student loans, because my interest rate is extraordinarily low and I would be better off just putting that money in the market. You might also not want to pay down these loans if you don't have any emergency savings and it would take you a very long time to get rid of the debt. That's because if you have a sudden expenditure, you might have to go back into credit card debt, and again end up with a much worse rate then if you had delayed paying down the less scary student loans in order to accumulate some savings.

For basic guidance like this, Ramsey is a decent place to start, and will give you some time to learn more about finances. I would just encourage you, as your debt load starts to shrink, to look to some other sources as well before investing your newfound income.[/quote]

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