Dave Ramsey vs. Suze Orman

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

The first time I was six figures in debt I turned to Suze Orman for help to get them pesky piles of credit card bills down and paid off. This time around I am looking into Dave Ramsey's techniques.

Now don't get me wrong I still love Suze and her advice worked wonders my last go around with debt. But Dave's approach with debt is a little different.

Being in banking for twenty years and having a finance degree, plus having six figures of debt before, you are probably thinking how the heck did you let this happen again?

Basically, I lost my focus. Everything I have learned about finance and what I learned the last time I paid off my debt went out the window. So I am getting focused again and as Dave would say I am running from this debt like a gazelle.

So, how different are Suze and Dave? Really not all that much, but here's some of the differences.

I feel Suze stresses not putting anything into savings until your debt is paid off. Which I see her point in that the interest on your credit cards is most likely higher than what your savings account is paying so you are losing money. Pay the credit cards first. But Dave teaches with his Baby Step # 1 to build an emergency fund of $1,000.

The emergency fund of a $1,000 has a safety net feel for me. That there is actually cash money safe and sound somewhere that I can get to for an emergency like a night out on the town...just kidding. No for car repairs or something unexpected. After that though Dave does stress to start working on paying off your debt and not worry about savings for the time being.

Next Dave says to start with the credit card that has the lowest balance on it and work on paying that one off first. Just like the savings plan Dave is on the opposite side of the fence from Suze on this one. Suze would say to pay off your credit card with the highest interest rate first. Which mathematically makes sense, but does math makes sense to most people in debt?

Dave's approach to debt is more psychological to me than mathematical. Debt is usually psychological to begin with. The need for stuff, which is what usually puts people in debt to begin with, is psychological in nature itself. So paying off the easier balance to tackle first gives the feeling of wow I can do this. Let's move on to the next one.

As I mentioned in a previous post I have begun building my emergency fund. I have $400 in there now and soon as I hit the $1,000 mark I'll be moving on to paying off my lowest balance credit card. Let's see how this works out.