It is extremely important to teach you kids non-consuming American ways

[elcheapo]

If your kiddo wants to get a car loan, have them watch Dave Ramsey Videos on Youtube, if they say that I want to build credit ask them why ? So that you can go into slavery and bondage and have to work tons of overtime at work ? Parents need to start being prepared to answer their kids questions about money and debt in the correct most nourishing ways. 

[Kaplin261]

So what's wrong with debt? Do you plan to buy your children a home or give them a loan to buy the home? Credit is a useful tool when used correctly.

[onlykelsey]

So what's wrong with debt? Do you plan to buy your children a home or give them a loan to buy the home? Credit is a useful tool when used correctly.

Agreed.  Credit for appreciating assets that you can afford is a great tool.

Credit should never be used for something that you simply don't have cash for as a knee jerk reaction.

[elcheapo]

So what's wrong with debt? Do you plan to buy your children a home or give them a loan to buy the home? Credit is a useful tool when used correctly.

If you think that debt is Ok , look up Dave Ramsey on Youtube and get back to me. Debt is bad.  Leverage in real estate can be a double edged sword.

[onlykelsey]

What a simplistic way to look at the world.  Real life is not as black and white as Ramsey teaches folks. 

[Kaplin261]

So what's wrong with debt? Do you plan to buy your children a home or give them a loan to buy the home? Credit is a useful tool when used correctly.

If you think that debt is Ok , look up Dave Ramsey on Youtube and get back to me. Debt is bad.  Leverage in real estate can be a double edged sword.

I'll take all the debt i can get when they are giving it out at 3% interest rates!!

[elcheapo]

What a simplistic way to look at the world.  Real life is not as black and white as Ramsey teaches folks.

I met a 47 year old one time and he owned about 100 debt free rental houses. I asked him what his secret was. He replied 2 words. (DEBT FREE)

I will take his advice.

[onlykelsey]

What a simplistic way to look at the world.  Real life is not as black and white as Ramsey teaches folks.

I met a 47 year old one time and he owned about 100 debt free rental houses. I asked him what his secret was. He replied 2 words. (DEBT FREE)

I will take his advice.

Anecdata.  I have ultra high net worth clients, and I think their answer would be more like LEVERAGE.

[Villanelle]

Maybe they want to build credit so they can easily rent an apartment, or so they can take advantage of the consumer protections and the rewards that come with credit card usage. 

That's great that one person did really well with NO DEBT.  I assume you would also take the word of a person who told you the secret to his great wealth was LOTTERY TICKETS, right?  Just because it worked for one person doesn't mean it is the best way. 

[elcheapo]

Maybe they want to build credit so they can easily rent an apartment, or so they can take advantage of the consumer protections and the rewards that come with credit card usage. 

That's great that one person did really well with NO DEBT.  I assume you would also take the word of a person who told you the secret to his great wealth was LOTTERY TICKETS, right?  Just because it worked for one person doesn't mean it is the best way.

The lottery is a tax on the poor. I have never boughten a lottery ticket. So I would not take the advice of a lottery winner. But after talking to the 100 debt free houses guy, I learned a lot. Its just simple compounding and simple compounding is easy to do when you are 100% debt free. But its extremely hard to do when you lose your largest wealth building asset and thats your income and if your income is paying interest on debt, well then your like a fish swimming up stream with a 90 lbs. sack of cement on your back. But yes there is a benefit to a very good credit score and thats credit card churning. I make about $20,000 a year doing that. But I dont have a car loan or credit card debt and I am knocking out my home loan through Badassity right now and I will be 100% debt free in one more year !

[Psychstache]

So what's wrong with debt? Do you plan to buy your children a home or give them a loan to buy the home? Credit is a useful tool when used correctly.

If you think that debt is Ok , look up Dave Ramsey on Youtube and get back to me. Debt is bad.  Leverage in real estate can be a double edged sword.

I listened to Dave Ramsey's podcast pretty much every day for years. He was my introduction into learning about personal finance. I am forever grateful for the motivation and beginning steps that have lead me to where I am.

That said, his advice is incredibly oversimplified and not appropriate for the segment of the population that has the discipline, skills and interest in doing better, which can include using debt appropriately and to your advantage.

[Kaplin261]

What a simplistic way to look at the world.  Real life is not as black and white as Ramsey teaches folks.

I met a 47 year old one time and he owned about 100 debt free rental houses. I asked him what his secret was. He replied 2 words. (DEBT FREE)

I will take his advice.

So lets use your debt free scenario vs my debt is good scenario.

Bob has $200k and wants to get into the rental market.

Using your scenario he could buy a $200k home and receive $2,000 a month in rental payments.

Now let's say the banks are willing to loan me money at 3% with a down payment of of 20% I could buy a $1,000,000 piece of property. It should bring in $10,000 a month.

[woopwoop]

Yeah, I don't think el cheapo is going to reevaluate his way of looking at things anytime soon. Dave Ramsey is evangelical, and he sounds like he's got himself a born again cult member here. But for anyone else reading, debt (especially leveraged and/or low-interest debt) is not evil or bad, and in fact can be used to very good purpose. I could pay off my low-interest mortgage right now but I'm not going to - it makes zero mathematical sense and I'd have to find another way to hedge against inflation. When I bought a car and was offered a 0% loan for five years, you bet your butt I took that loan.

I hope I can teach my kids enough mathematical skills that they feel comfortable doing their own calculations about what makes financial sense instead of giving them blanket statements like "debt is bad."

[elcheapo]

What a simplistic way to look at the world.  Real life is not as black and white as Ramsey teaches folks.

I met a 47 year old one time and he owned about 100 debt free rental houses. I asked him what his secret was. He replied 2 words. (DEBT FREE)

I will take his advice.

Nope his secret was that he started extremely young, he was 18 and made about $150,000 a year and started out 100% debt free and grew it all from the debt free point. He's the slow non-leveraged turtle that one the race. Surely his $150,000 a year helped hugely towards the 100 debt free houses.
Anecdata.  I have ultra high net worth clients, and I think their answer would be more like LEVERAGE.

[elcheapo]

So what's wrong with debt? Do you plan to buy your children a home or give them a loan to buy the home? Credit is a useful tool when used correctly.

If you think that debt is Ok , look up Dave Ramsey on Youtube and get back to me. Debt is bad.  Leverage in real estate can be a double edged sword.

You exactly right about Dave, he is speaking to the Un-Disciplined. I am disciplined so yes I churn credit cards all of the time and I have zero credit card debt and car loan debt.

I listened to Dave Ramsey's podcast pretty much every day for years. He was my introduction into learning about personal finance. I am forever grateful for the motivation and beginning steps that have lead me to where I am.

That said, his advice is incredibly oversimplified and not appropriate for the segment of the population that has the discipline, skills and interest in doing better, which can include using debt appropriately and to your advantage.

[elcheapo]

What a simplistic way to look at the world.  Real life is not as black and white as Ramsey teaches folks.

I met a 47 year old one time and he owned about 100 debt free rental houses. I asked him what his secret was. He replied 2 words. (DEBT FREE)

I will take his advice.

You like rentals eh ?
So lets use your debt free scenario vs my debt is good scenario.

Bob has $200k and wants to get into the rental market.

Using your scenario he could buy a $200k home and receive $2,000 a month in rental payments.

Now let's say the banks are willing to loan me money at 3% with a down payment of of 20% I could buy a $1,000,000 piece of property. It should bring in $10,000 a month.

[elcheapo]

Yeah, I don't think el cheapo is going to reevaluate his way of looking at things anytime soon. Dave Ramsey is evangelical, and he sounds like he's got himself a born again cult member here. But for anyone else reading, debt (especially leveraged and/or low-interest debt) is not evil or bad, and in fact can be used to very good purpose. I could pay off my low-interest mortgage right now but I'm not going to - it makes zero mathematical sense and I'd have to find another way to hedge against inflation. When I bought a car and was offered a 0% loan for five years, you bet your butt I took that loan.

I hope I can teach my kids enough mathematical skills that they feel comfortable doing their own calculations about what makes financial sense instead of giving them blanket statements like "debt is bad."

This is horrible advice for kids. Even if a car loan is at O% why would you want an obligation period and I mean period ? Also the car depreciates so fast. wouldn't you rather save up cash and buy a $3000 car and be out of debt slavery ? Ive driven $1000 to $3000 cars my whole life and none of them have ever left me stranded as long as I keep them maintained. By the way I will worship Dave Ramsey as a "CULT MEMBER" to the day that I die because he retired me from my Jay oh Bee (JOB) in my 30's !  Also why would you want to carry mortgage even at 3% ? Let me guess you want to take all of that money and re invest it in stocks or mutual funds and basically risk your house to gain under a measly 10% rate of return ? I dont get out of bed and risk my house over a measly 10%.  30% rate of return starts to spark my interest. Mr. Money Mustache says to avoid debt like your hair is on fire. What do you say ? That we should convince ourselves that its OK and to lust after it ?

[woopwoop]

Here's a link to a discussion on the forums that discuss investing vs. prepaying your mortgage with actual numbers: http://forum.mrmoneymustache.com/investor-alley/paying-off-mortgage-early-how-bad-is-it-for-your-fi-date/msg605854/#msg605854

For a 4% mortgage rate (and sticking with cfiresim's default investment settings), for every $100k of mortgage paid off or not obtained, the historical median amount left on the table was $266k (in inflation-adjusted dollars).  For a 3% mortgage rate, that number was $368k.

That was the point I made in that same post #292 above describing the cfiresim methodology, that the historical investor who would have been able to take out a $200k mortgage with a 4% rate but chose not to would have left at least $532 THOUSAND DOLLARS on the table half of the time.  Of course, the actual historical investor would not have been able to do so, because such low mortgage rates were not available, which led to all the debate in this thread about the appropriateness of using historical investment performance data but not historical mortgage rates.

I doubt I'll get a reasoned rebuttal with numbers backing up your insane arguments, but there it is for anyone else who's curious. This thread has also taught me the importance of teaching my kids about logical fallacies (hasty generalizations and appeal to authority being the relevant ones here).

[jamesvt]

Yeah, I don't think el cheapo is going to reevaluate his way of looking at things anytime soon. Dave Ramsey is evangelical, and he sounds like he's got himself a born again cult member here. But for anyone else reading, debt (especially leveraged and/or low-interest debt) is not evil or bad, and in fact can be used to very good purpose. I could pay off my low-interest mortgage right now but I'm not going to - it makes zero mathematical sense and I'd have to find another way to hedge against inflation. When I bought a car and was offered a 0% loan for five years, you bet your butt I took that loan.

I hope I can teach my kids enough mathematical skills that they feel comfortable doing their own calculations about what makes financial sense instead of giving them blanket statements like "debt is bad."

This is horrible advice for kids. Even if a car loan is at O% why would you want an obligation period and I mean period ? Also the car depreciates so fast. wouldn't you rather save up cash and buy a $3000 car and be out of debt slavery ? Ive driven $1000 to $3000 cars my whole life and none of them have ever left me stranded as long as I keep them maintained. By the way I will worship Dave Ramsey as a "CULT MEMBER" to the day that I die because he retired me from my Jay oh Bee (JOB) in my 30's !  Also why would you want to carry mortgage even at 3% ? Let me guess you want to take all of that money and re invest it in stocks or mutual funds and basically risk your house to gain under a measly 10% rate of return ? I dont get out of bed and risk my house over a measly 10%.  30% rate of return starts to spark my interest. Mr. Money Mustache says to avoid debt like your hair is on fire. What do you say ? That we should convince ourselves that its OK and to lust after it ?

Not sure if serious. Where are you getting 30%+ returns on your money?

[ender]

So what's wrong with debt? Do you plan to buy your children a home or give them a loan to buy the home? Credit is a useful tool when used correctly.

I'd much rather error on the side of using too little credit than too much...

We can argue philosophically about this subject all we want, but more people get themselves into trouble with debt than get themselves into trouble because they will not take on debt. With respect to plastic vs cash, our brains physiologically react differently.

People who read these forums are overwhelmingly more financially literate than most people. But more importantly, financially disciplined.

[ahoy]

Paying a 30 yrs loan or yr own home is not for everyone.   It's an individual thing and whether you personally can stand this ball and chain or not. 
 
Never forget, everyday thousands and thousands of people are laid off and plenty more suddenly become too ill to work.  An employee is always dispensable. We never know what is around the corner (i.e  a few weeks ago, a 47 year old husband that I know had a heart attack and died, his wife now has to support their teenager  and 6 yr old by herself).  Even having a low interest rate on a home with zero to minimal income is not pleasant to pay every month. 

I don't even listen to Dave Rasmey, but if he lectures not to have debt, isn't he talking to the masses? Surely this advice isn't directed to investors.  However, leveraging 200k to buy rentals?  Again, not everybody wants to do this. 

[jms493]

I am a DR listener and fan but you have to remember he is a radio host.  He is successful because his plan is super simple and easy to understand.  That is what the masses in trouble need.  Sort of like an apple product...so easy a 2 year old can navigate it.

With that said once you grasp your own personal finance agenda you need to do more research.  There are many ways to have a healthy financial life.  If you choose to be debt free then that's great...it works for you.  I would proceed with caution though about preaching his word.  I personally am moving forward debt free and plan to not borrow another dollar...but that is my personal choice and it doesn't work for everyone.

There are many ways to build wealth...DR system is just one of them.

Good luck.

PS...I hear you...when I first found DR I thought it was the only way to do personal finance.  After branching out that view has changed.

[Dicey]

I met a 47 year old one time and he owned about 100 debt free rental houses. I asked him what his secret was. He replied 2 words. (DEBT FREE)

I will take his advice.

Should have thought about asking him what "debt free" meant to him. I doubt very much that he never took a mortgage.

When I was a flooring sales rep, one of my customers was a former professional football player (back in the old days, when they didn't get rich). He owns over 750 mostly single family homes in the oh-so-high-COL Bay Area. He kept the business so he could get his flooring for cost, and to have access to builders, among other reasons. His answer would most decidedly not be "debt free". It would be "HARD WORK"! I'll take my guy's approach any day.

FWIW, I understand that younger players still come to him for advice on what to do with their money, which is largely irrelevant to this story, but cool nonetheless.

BTW - Do you mean "your" kids? My dad used to call the six of us "you kids", so thanks for the memory trigger, as he's now in hospice, but I doubt that's what you meant.