NA - Dave Ramsey

Fearless Tower said:
Like I said in post #75, this is no blanket advice for this. What works for me may or may not work for you. As some others have pointed out, you really can't use Dave Ramsey's advice universally any more than you can apply mine the same way.

My advice on the home loan thing is that this is something that you would want to talk with your accountant about and decide what is the best scenario for you.
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This. My stepfather, who was an accountant, had a mortgage on his house even though he could afford to pay it off. That was a long time ago and maybe the tax codes were different then. I did not take his advice (he was gone by then anyway) and paid off my house when I could, but I did not use my last pennies to do so.
 
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If I had an accountant that advised me to put my paid off house at risk by taking out a mortgage to invest, I would fire him on the spot.
 
Somedudeintn said:
Just curious. Would you advise someone who had a paid for house to "refi" to get a cheap loan to get more money out to invest in the stock market?

I see both sides and think people need to do what works for them.
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No, no, no. When you have a paid for mortgage, why would you go back into debt to gamble?!
 
weilke said:
When I retire, I do plan on living in a paid off house. Just the utilities and taxes, whatever is left gets spent on avgas :D


His program works for those who need it. Some of his apostles believe that it is universally great financial advice and will get quite militant towards anyone who disagrees with them.

Where I disagree with him is his sanctimonious absolutism in regards to student loans. Back when he got his BS in finance, state school tuitions were low enough to work your way through college. With the tuition racket what it is, this has gotten much harder. If you study something that leads to a career, there is considerable opportunity cost in either delaying or extending your years spent on education. Of course, there is no point in racking up 200k in debt for a bachelors in basketweaving and phys-ed, but for something like a hard engineering degree, there is a good payback on the money spent for the undergrad degree. Same with some grad schools. To become a lawyer, you gonna have to go to law school and the cheapest one may not be the one that gives you a shot at career in that field.
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I believe his advice should follow that by not being in debt to anyone, you'll have plenty of money to send your kids to college. Yes, if you have to take out student loans, then you have to. But as anyone who has studied economics for a semester should know, prices rise to meet demand. I can tell you that I took out loans for graduate school, graduated over 10 years ago, am still paying off the loans and will be for the next 5-10 years.

Putting student loans in the context of economics, the more money that is available to pay for college, the more money college will cost. There is no more supply. There is more money available. Prices get bid up. It is Economic 101, supply and demand. Loaning more money will raise prices.

I don't know anyone who believes that what Dave Ramsey says is good to be militant. I know some will disagree if you say something wrong about his program or condemn it as something that doesn't work. The proof is out there, when you follow his plan, you WILL be rich in the end. You WILL have a paid off house and be able to live like no one else (except those others who followed his advice OR those who won the lottery and were smart).
 
teejayevans said:
The reason to he recommends paying off the mortgage is because the people who listen to him obviously have a spending problem, paying off the mortgage prevents them from being tempted to spend that money.
His advice is not meant for those that have the discipline not to spend money just because they have it.
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I would propose that if you're making more than 60k a year and can't save anything, you have a spending problem. That would cover a significant portion of working America.
 
bflynn said:
No, no, no. When you have a paid for mortgage, why would you go back into debt to gamble?!
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I wouldn't take out another mortgage on a paid off house to invest, but I would certainly invest a certain amount rather than paying it off to begin with. I know that sounds like the same thing...
 
The closer we get to paying off the house, the more ready I am to cash in some savings to do it. But I really like that cash cushion.

Soon, soon, ...
 
bflynn said:
I would propose that if you're making more than 60k a year and can't save anything, you have a spending problem. That would cover a significant portion of working America.
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Depends HIGHLY on which portion of the country you live in...
 
Fearless Tower said:
That depends on a lot of things: your risk profile, what you want to invest in, market timing, what kind of rate you can get...etc.

Like I said in post #75, this is no blanket advice for this. What works for me may or may not work for you. As some others have pointed out, you really can't use Dave Ramsey's advice universally any more than you can apply mine the same way.

My advice on the home loan thing is that this is something that you would want to talk with your accountant about and decide what is the best scenario for you.
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I would even go so far as to say your accountant may not be in agreement with what you think is the best financial philosophy (for lack of a better term) for you...but either way, he can provide a good picture of what income / taxes /investments will look like.
 
MauleSkinner said:
I would even go so far as to say your accountant may not be in agreement with what you think is the best financial philosophy (for lack of a better term) for you...but either way, he can provide a good picture of what income / taxes /investments will look like.
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An accountant probably has a good idea of the income/taxes/investments situation and can look at it in a dispassionate way. But to many people, their money and/or their house takes on an oversized emotional component.
 
This is all great advice! We've got nothing to lose by trying it out!
 
Matthew said:
The closer we get to paying off the house, the more ready I am to cash in some savings to do it. But I really like that cash cushion.

Soon, soon, ...
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Ya, but once the house is paid off look how fast you can build that cash cushion back up!
 
JCranford said:
Ya, but once the house is paid off look how fast you can build that cash cushion back up!
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But one thing I know with regard to investments is that it's important to diversify. You don't want all your money in one bucket; your house, for example.
 
JCranford said:
Ya, but once the house is paid off look how fast you can build that cash cushion back up!
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Yeah, I know.

Right now our P&I is very much mostly P, so we aren't spending all that much on I anymore. Since our cash account isn't earning much either, it might be a wash right now. It all comes down to liquidity, I guess.
 
Everskyward said:
But one thing I know with regard to investments is that it's important to diversify. You don't want all your money in one bucket; your house, for example.
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A house is also a bit different in that its primary purpose is being a place to live (a basic need) with a secondary purpose being a financial investment. This ties some of the emotional attachment, but also some of the realities of wanting to protect yourself from foreclosure or otherwise losing your home.
 
sferguson524 said:
This is all great advice! We've got nothing to lose by trying it out!
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Not really much of a risk. Ramsey in 25 words or less, "Pay down debt, build savings, don't spend more than you have."

It's easy to say, but sometimes you have to take what he calls baby steps. Since he really advocates spending cash vs using a card, you end up being forced into making your financial decisions nearly every time you dip into your wallet instead of at the end of the month trying to decide how much to pay on what account when the bills are due.
 
To clarify, I have never been a follower of Dave Ramsey, but I don't listen to self-help programs. Sorry, they turn me off. I have only heard about him, mostly on POA.
 
Everskyward said:
I wouldn't take out another mortgage on a paid off house to invest, but I would certainly invest a certain amount rather than paying it off to begin with. I know that sounds like the same thing...
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That's the point I was trying to make. If you wouldn't take out another mortgage to invest, then why would you invest instead of paying off your mortgage?
 
Somedudeintn said:
That's the point I was trying to make. If you wouldn't take out another mortgage to invest, then why would you invest instead of paying off your mortgage?
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As I stated in a previous post, I don't think it's a good idea to put all your money in one thing. Besides, it's often financially advantageous to invest that money since your mortgage interest is tax-deductible. It depends on your individual situation.
 
Everskyward said:
To clarify, I have never been a follower of Dave Ramsey, but I don't listen to self-help programs. Sorry, they turn me off. I have only heard about him, mostly on POA.
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Does that mean you're helpless or beyond help? :D
 
Everskyward said:
As I stated in a previous post, I don't think it's a good idea to put all your money in one thing. Besides, it's often financially advantageous to invest that money since your mortgage interest is tax-deductible. It depends on your individual situation.
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Would you take out a $300k note to invest in the stock market?




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ejensen said:
Isn't no interest better than -3.0%? I agree no hurry but it sure was nice when we paid off the 15yr mortgage. Amazing difference when there are no payments except utilities.
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Of course, my point was if you could use your cash for investments that would more than offset the -3.0% interest, keep the loan. It's just that right now no fixed return investment short of junk bonds return that amount.
 
Question: On the chance I actually outlive my mortgage, what exactly do you burn at a mortgage burning party?
 
Matthew said:
Question: On the chance I actually outlive my mortgage, what exactly do you burn at a mortgage burning party?
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You don't. You attend Burning Man and let someone else do the fire for you.
 
Matthew said:
Question: On the chance I actually outlive my mortgage, what exactly do you burn at a mortgage burning party?
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I keep all those docs for several years just in case.
 
One of the things that you have to evaluate yearly about keeping the mortgage or paying it off is how it factors into your taxes. We're a good example. The 2016 tax year will be crossover point for us, where the mortgage deduction becomes worthless to us, and we fall back in to the standard deduction. When you run all our deductions, including 2 mortgages, 3 sets of property taxes and everything else, we will be less than 3000$ over the standard deduction this year. We are shedding the old house we have this year, and combined, the interest and taxes will decrease about 4500$. Our main house, interest and taxes only add up to about 7200$ for the year. Ya got to play the numbers with your own data to see the break point. With our situation, everything being paid on the old house now gets stockpiled for the upcoming move.
 
One thing about Dave Ramsey, he is good at motivating you. But once you get to the saving/investing aspect of things, learn about these things yourself. His investment advice is very lacking.

He pimps his network of Financial planners, and frequently talks about active managed, front end load mutual funds earning 10-12% each year.
 
ja_user said:
One thing about Dave Ramsey, he is good at motivating you. But once you get to the saving/investing aspect of things, learn about these things yourself. His investment advice is very lacking.

He pimps his network of Financial planners, and frequently talks about active managed, front end load mutual funds earning 10-12% each year.
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Yep, his idea of how mutual funds work is pretty self-serving. Some of his preferred providers are even more slimey.

Pretty good review of him here: http://religion.blogs.cnn.com/2013/11/30/what-dave-ramsey-gets-wrong-about-poverty/comment-page-2/ It's even written by another holy roller about how wrong Ramsey is both in his monetary and religious theories.

But as I said, he's good entertainment and most of the people who call in probably wouldn't do wrong to start on his "baby steps."
 
Somedudeintn said:
That's the point I was trying to make. If you wouldn't take out another mortgage to invest, then why would you invest instead of paying off your mortgage?
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Totally see your point, but....

Because the wife is much more likely to agree with the latter than the former... ;)
 
teejayevans said:
I heard him say to pay off the smallest debts first.
You should pay off the highest interest debts first.

His way gives you encouragement, the second way saves you money.
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Agree but if you're turning to Dave Ramsey or any debt relief program/service you probably don't have the discipline to pay the higher interest rate...so someone in that predicament probably winds up saving money overall.
 
flyingron said:
Yep, his idea of how mutual funds work is pretty self-serving. Some of his preferred providers are even more slimey.

Pretty good review of him here: http://religion.blogs.cnn.com/2013/11/30/what-dave-ramsey-gets-wrong-about-poverty/comment-page-2/ It's even written by another holy roller about how wrong Ramsey is both in his monetary and religious theories.

But as I said, he's good entertainment and most of the people who call in probably wouldn't do wrong to start on his "baby steps."
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That article is just griping about him not buying into the 'social justice' narrative and that he actually suggests that people have choices when it comes to making their way out of poverty.

This is what the article you cited says about his program:

Much of what Ramsey teaches is sound, helpful advice, particularly for middle-class Americans struggling with mounting credit card bills. I have celebrated with friends as they’ve marked their first day of debt-free living, thanks in part to Dave Ramsey’s teachings and all those white envelopes of cash he urges his students to use instead of credit cards.

Did you intend to quote a different article ?
 
If they guy has FREE INFORMATION so be it. If he charges - run. Never was a fan of Dave or Suzy but that's another story altogether.

As others have posted - live within your means, pay off smaller debts and snowball it.. same common sense stuff but FREE from POA peeps :)
 
Why he makes a lot of money on his radio show and doing his "financial peace" seminars for $$$, the baby steps are pretty much out there on his web site or repeated frequently on the show.
 
Not sure I read all 5 pages on this enough, but--

IMHO-

Your Mortgage is most likely the lowest cost money in your debt profile, and it's likely the only one that is tax deductible.

Therefore, you will likely spend less total $$ if the mortgage is the last debt you satisfy. Plan to have zero mortgage at your full retirement age and you'll be golden.

As to the other debt -- if you can knock out small debts in year 1 do it to reduce the hands on your treasure... then go Highest to lowest on the rates. Point being if you start on the highest rate first you MIGHT bleed some cost when you could have killed off a department store or some other thing.

Anyway.. it's an approach
 
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