Author Topic: Dave Ramsey  (Read 13369 times)

Rasputin

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Dave Ramsey
« on: January 07, 2019, 12:29:16 PM »
Whatís everyoneís thoughts on this guy? He seems to make sense. Any other authors you guys and gals would recommend for overall budgeting and getting one's sh*t together?

Cromacster

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Re: Dave Ramsey
« Reply #1 on: January 07, 2019, 12:34:21 PM »
Listen to Dave Ramsey's debt payoff advice (more or less), but end here.  Don't listen to any of his investing advice.

Other good resources.

Good website about investing
https://jlcollinsnh.com/stock-series/

Good book about mindset
Your Money or Your Life
« Last Edit: January 08, 2019, 10:42:17 AM by Cromacster »

35andFI

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Re: Dave Ramsey
« Reply #2 on: January 07, 2019, 12:38:06 PM »
From my (limited) DR experience, he seems to have a target audience. In my opinion, that target audience is consumers who are in debt.

His content is a great starting place for people to get their Net Worth up to 0.

That being said, here are a few things that I (and others on here) disagree with:

1) Debt snowball vs debt avalanche
2) Paying off a house (debatable)
3) Investing

princeradar

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Re: Dave Ramsey
« Reply #3 on: January 07, 2019, 12:50:31 PM »
Dave Ramsey is a great place to start.  Following his plan will definitely help most people with their financial situation especially if you have debt.  Treat Dave Ramsey as the high school level.  You need to educate yourself to move to higher levels of financial lieteracy and the MMM forum is a great place to start. 

The thing I like about Dave, which some people here disagree with is that he doesn't always focus on the math, but on changing behaviour which is good for newbies.


Rasputin

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Re: Dave Ramsey
« Reply #4 on: January 07, 2019, 12:53:33 PM »
From my (limited) DR experience, he seems to have a target audience. In my opinion, that target audience is consumers who are in debt.

His content is a great starting place for people to get their Net Worth up to 0.

That being said, here are a few things that I (and others on here) disagree with:

1) Debt snowball vs debt avalanche
2) Paying off a house (debatable)
3) Investing

I am $80K in debt with student loans and another $20K in a car. I donít really have much more money each month to pay down my loans. I need to unf*ck myself and soon. Iím 42 and would like to impregnate my wife, but kids are expensive too.

brandon1827

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Re: Dave Ramsey
« Reply #5 on: January 07, 2019, 01:26:43 PM »
From my (limited) DR experience, he seems to have a target audience. In my opinion, that target audience is consumers who are in debt.

His content is a great starting place for people to get their Net Worth up to 0.

That being said, here are a few things that I (and others on here) disagree with:

1) Debt snowball vs debt avalanche
2) Paying off a house (debatable)
3) Investing

What would be the fundamental difference between the debt snowball method vs. debt avalanche? On the surface, they appear to be very similar methodologies

chaskavitch

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Re: Dave Ramsey
« Reply #6 on: January 07, 2019, 02:04:29 PM »
From my (limited) DR experience, he seems to have a target audience. In my opinion, that target audience is consumers who are in debt.

His content is a great starting place for people to get their Net Worth up to 0.

That being said, here are a few things that I (and others on here) disagree with:

1) Debt snowball vs debt avalanche
2) Paying off a house (debatable)
3) Investing

What would be the fundamental difference between the debt snowball method vs. debt avalanche? On the surface, they appear to be very similar methodologies

The debt snowball is applying all extra money toward paying off your debts from smallest balance to largest.  Once the smallest balance is paid, you then apply your initial extra money amount plus that (now free) smallest debt payment to the next largest balance, etc.  This is nice because you have a constant series of small accomplishments building into the bigger goal of paying off all debt.

The debt avalanche is applying all extra money toward paying off your debts from highest interest debt to lowest, in order to save the most money in interest along your path. 

Which one is best for you depends on your personality as well as how high interest your debts are.  With both plans the goal is to keep the dollar amount of money being put toward debt month to month the same, or to increase it, but either gives you more strategy and purpose than just throwing your extra money at whichever debt is worrying you the most any given month.

35andFI

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Re: Dave Ramsey
« Reply #7 on: January 07, 2019, 03:08:08 PM »
Just to be clear, putting emotion aside, the debt avalanche method comes out ahead (based on money in your pocket) reguardless of how high or low the interest rates are.

Itís simple, you put what you can into the debt with the highest interest rate until itís paid off. Then you move onto whatever has the next highest interest rate until thatís paid off. And on and on.

chaskavitch

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Re: Dave Ramsey
« Reply #8 on: January 07, 2019, 03:20:18 PM »
Just to be clear, putting emotion aside, the debt avalanche method comes out ahead (based on money in your pocket) reguardless of how high or low the interest rates are.

Itís simple, you put what you can into the debt with the highest interest rate until itís paid off. Then you move onto whatever has the next highest interest rate until thatís paid off. And on and on.

I knew I forgot something.  Dang.  Yes, debt avalanche always comes out ahead monetarily, sometimes by a tiny bit and sometimes by a lot, but always by something. 

Some people need the feeling of accomplishment from paying off the "easy" smaller loans first to keep them engaged and positive about the process, otherwise they might quit the whole process because they're discouraged about how long a larger debt takes to get rid of.  That's the only reason to choose a debt snowball rather than an avalanche - if you think you'll quit without the mileposts of getting rid of an entire category of debt relatively quickly.

SmileAllDay

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Re: Dave Ramsey
« Reply #9 on: January 07, 2019, 03:21:19 PM »
By all accounts, he's a good place to start (particularly if you're in debt). And, even if you don't agree with everything he says, doing something is better than doing nothing.

I've heard other people say he's very preachy but it's kind of his shtick. He ties parts of his methods back to Christianity. Not that that's necessarily a bad thing but it can turn some people off.

The JL Collins and YMOYL recommendations above are spot-on.

Rasputin

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Re: Dave Ramsey
« Reply #10 on: January 07, 2019, 03:59:18 PM »
By all accounts, he's a good place to start (particularly if you're in debt). And, even if you don't agree with everything he says, doing something is better than doing nothing.

I've heard other people say he's very preachy but it's kind of his shtick. He ties parts of his methods back to Christianity. Not that that's necessarily a bad thing but it can turn some people off.

The JL Collins and YMOYL recommendations above are spot-on.

His preaching is a bit annoying. I expect him to start dancing with snakes or speaking in tongues. I order the YMOYL book on amazon. I want to retire at a normal age with a bit of coin in my pocket.

alcon835

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Re: Dave Ramsey
« Reply #11 on: January 08, 2019, 05:52:26 AM »
Dave Ramsey is solid. There's no one better at getting folks out of a debt and on a budget. His advice falls off pretty hard once you get to the investing stage (especially for FIRE folks). Still, when I find someone interested in getting their finances together, I point them to Dave first. He just has a great way of getting through all the noise and convincing folks that financial fitness is a worthy, achievable cause.

brandon1827

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Re: Dave Ramsey
« Reply #12 on: January 08, 2019, 08:03:09 AM »
Thanks for the clarification everyone. I think what I'm doing currently falls into the snowball method...but my eventual goal will be to shift to the avalanche method. Coincidentally, my highest interest debts are also some of my smaller debts (credit cards)...so I'm knocking those out first before tackling my larger, lower interest debts (student loans).

reeshau

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Re: Dave Ramsey
« Reply #13 on: January 08, 2019, 08:31:05 AM »
Just to be clear, putting emotion aside, the debt avalanche method comes out ahead (based on money in your pocket) reguardless of how high or low the interest rates are.

Itís simple, you put what you can into the debt with the highest interest rate until itís paid off. Then you move onto whatever has the next highest interest rate until thatís paid off. And on and on.

I think Dave's retort to this is twofold:  the psychology of giving you some quick wins (with small debts being more achievable goals) and the fact that his method demands you will be done in about 2 years, which minimizes the compounding advantage of the debt avalanche.  As was said before, psychology over the raw, idealized numbers.

Rasputin

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Re: Dave Ramsey
« Reply #14 on: January 08, 2019, 09:38:26 AM »
Dave Ramsey is solid. There's no one better at getting folks out of a debt and on a budget. His advice falls off pretty hard once you get to the investing stage (especially for FIRE folks). Still, when I find someone interested in getting their finances together, I point them to Dave first. He just has a great way of getting through all the noise and convincing folks that financial fitness is a worthy, achievable cause.

Who do you recommend for investment information? I currently am only in a Vanguard target date fund but am always looking to improve, develop some passive income, etc.

Cromacster

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Re: Dave Ramsey
« Reply #15 on: January 08, 2019, 10:41:02 AM »
Listen to Dave Ramsey's debt payoff advice (more or less), but end here.  Don't listen to any of his investing advice.

Other good resources.

Good website about investing
https://jlcollinsnh.com/stock-series/


Good book about mindset
Your Money or Your Life

Rasputin

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Re: Dave Ramsey
« Reply #16 on: January 08, 2019, 11:54:28 AM »
Would anyone here move their money (IRA) out of the 2045 fund and into VTSAX for long term investing?

35andFI

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Re: Dave Ramsey
« Reply #17 on: January 08, 2019, 12:34:00 PM »
Would anyone here move their money (IRA) out of the 2045 fund and into VTSAX for long term investing?

I will not make any investment advice to you but I will say that I am 27 and happily invest in VTSAX in my IRA account (and my taxable account too).

It's important to look at your entire portfolio and make sure that what you put in your IRA fits in well.

alcon835

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Re: Dave Ramsey
« Reply #18 on: January 09, 2019, 06:47:21 AM »
Dave Ramsey is solid. There's no one better at getting folks out of a debt and on a budget. His advice falls off pretty hard once you get to the investing stage (especially for FIRE folks). Still, when I find someone interested in getting their finances together, I point them to Dave first. He just has a great way of getting through all the noise and convincing folks that financial fitness is a worthy, achievable cause.

Who do you recommend for investment information? I currently am only in a Vanguard target date fund but am always looking to improve, develop some passive income, etc.

I've been building out my investment portfolio for only the last year, so my advice is still growing. Honestly, though, Mr. Money Mustache seems solid if you're investing for FIRE reasons (and if you're not investing for those reasons...why not?)

What's that advice? In a nut shell, I've put all my 401Ks, IRAs, and individual investments going toward VTI and VXUS with an 80/20 split respectively. I plan to transition those to Mutual funds this year, since they'll all be over $10,000 and can transition into Admiral shares (also makes automating the whole thing easier).

If you're looking on advice for things like one-off stocks and timing the market and such, I'm not playing in that realm. I may at some point in the future, but for now I'd like to get my general investing solidly moving toward FIRE while getting a few personal items upgraded (I just bought a home and would like to furnish it!)

35andFI

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Re: Dave Ramsey
« Reply #19 on: January 09, 2019, 08:47:05 AM »
...

I plan to transition those to Mutual funds this year, since they'll all be over $10,000 and can transition into Admiral shares

...

FYI vanguard has recently reduced the minimum from 10k to 3k for many (all?) funds.
VTSAX can now be had for $3,000.

billy

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Re: Dave Ramsey
« Reply #20 on: January 09, 2019, 01:01:44 PM »
Listen to Dave Ramsey's debt payoff advice (more or less), but end here.  Don't listen to any of his investing advice.

Other good resources.

Good website about investing
https://jlcollinsnh.com/stock-series/

Good book about mindset
Your Money or Your Life

YUP! Totally agree.

Rasputin

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Re: Dave Ramsey
« Reply #21 on: January 09, 2019, 02:00:17 PM »
...

I plan to transition those to Mutual funds this year, since they'll all be over $10,000 and can transition into Admiral shares

...

FYI vanguard has recently reduced the minimum from 10k to 3k for many (all?) funds.
VTSAX can now be had for $3,000.

Would I incur any fees if I took $3,000 of my 2045 fund and bought VTSAX?

35andFI

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Re: Dave Ramsey
« Reply #22 on: January 09, 2019, 03:11:22 PM »
Would I incur any fees if I took $3,000 of my 2045 fund and bought VTSAX?

No fees and as long as it is in your IRA, no taxes either.

alcon835

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Re: Dave Ramsey
« Reply #23 on: January 09, 2019, 07:16:49 PM »
...

I plan to transition those to Mutual funds this year, since they'll all be over $10,000 and can transition into Admiral shares

...

FYI vanguard has recently reduced the minimum from 10k to 3k for many (all?) funds.
VTSAX can now be had for $3,000.

Good to know, Thanks!!

35andFI

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Re: Dave Ramsey
« Reply #24 on: January 09, 2019, 07:20:49 PM »
Happy to help!

phildonnia

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Re: Dave Ramsey
« Reply #25 on: January 16, 2019, 05:56:48 PM »
I listen to DR in the car every day.  I generally like the show, and he seems like a swell guy. 

I know he takes a lot of criticism for focusing on psychology over accepted financial wisdom.  For example, he tells people to pay off debts smallest-to-largest, rather than highest-interest to lowest-interest. You can find plenty of hate for this particular approach, and others.  But he argues (and I think he may be right) that this approach is likely to be more successful when taking human nature into account.  After all, people in debt aren't there because they don't understand interest rates.

His rants against debt culture are spectacular.  I'm always hoping for a good rant. 

But I have a couple of problems with him. 

The main thing is that he always finds ways to work his sponsors into whatever he's taking about.  Like, if someone's asking about insurance, the answer will contain a recommendation for Zander Insurance.  I get it that they need to pay the bills, but other talk hosts manage to read their copy during the breaks.  It gives the whole thing the flavor of an infomercial.  Throw in the occasionaly religious angle, and it starts to sound a little cultish as well.

He also bugs me with his frequent misuse of statistics.  "Our studies show that most millionaires pay off their house in seven years ..." (ok, fine so far) "... therefore paying off your house in seven years is the best way to become a millionaire." (wait, what?  For a self-professed "math nerd", he needs to brush up on Bayesian inference.)

I am among those who doubt that his portfolio has reliably averaged 12% return as he claims.

One difference between DR's philosophy and MMM's, is that DR is actively opposed to early retirement.  That's a philosophical argument, I suppose.

phildonnia

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Re: Dave Ramsey
« Reply #26 on: January 16, 2019, 05:59:30 PM »
I am $80K in debt with student loans and another $20K in a car. I donít really have much more money each month to pay down my loans. I need to unf*ck myself and soon. Iím 42 and would like to impregnate my wife, but kids are expensive too.

DR's advice is not to delay marriage or children because of finances.  That opinion is, obviously, controversial. 

Rasputin

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Re: Dave Ramsey
« Reply #27 on: January 17, 2019, 10:33:02 AM »
I am $80K in debt with student loans and another $20K in a car. I donít really have much more money each month to pay down my loans. I need to unf*ck myself and soon. Iím 42 and would like to impregnate my wife, but kids are expensive too.

DR's advice is not to delay marriage or children because of finances.  That opinion is, obviously, controversial.

Iím married, but Iíve been pulling out. Iíll probably put a kid in her stomach soon. I got ďTotal Money MakeoverĒ from the library. Iím making changes. Still plugging away. I guess it just takes time to become a rich baller like Dave is. I bet he drives a Benz with spinner and hydraulics.

Icecreamarsenal

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Re: Dave Ramsey
« Reply #28 on: January 21, 2019, 11:19:11 AM »
I am $80K in debt with student loans and another $20K in a car. I donít really have much more money each month to pay down my loans. I need to unf*ck myself and soon. Iím 42 and would like to impregnate my wife, but kids are expensive too.

DR's advice is not to delay marriage or children because of finances.  That opinion is, obviously, controversial.

Iím married, but Iíve been pulling out. Iíll probably put a kid in her stomach soon. I got ďTotal Money MakeoverĒ from the library. Iím making changes. Still plugging away. I guess it just takes time to become a rich baller like Dave is. I bet he drives a Benz with spinner and hydraulics.

That's a weird thing to say.  You don't have the ability to put a fully formed kid inside the stomach.  Your semen goes into her uterus, not a kid in the stomach.

Icecreamarsenal

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Re: Dave Ramsey
« Reply #29 on: January 21, 2019, 11:22:18 AM »
ANYway,
Homo economicus might come out ahead with the debt avalanche, but most people stop at econ 101 and never get to the meat of behavioral economics, which is now graying a bit.  Kahnemann in his book thinking fast and slow elucidated that people don't act optimally and that's why ramsey espouses the behavioral side as opposed to the logical side.

marty998

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Re: Dave Ramsey
« Reply #30 on: January 21, 2019, 01:17:01 PM »
I am $80K in debt with student loans and another $20K in a car. I donít really have much more money each month to pay down my loans. I need to unf*ck myself and soon. Iím 42 and would like to impregnate my wife, but kids are expensive too.

DR's advice is not to delay marriage or children because of finances.  That opinion is, obviously, controversial.

Iím married, but Iíve been pulling out. Iíll probably put a kid in her stomach soon. I got ďTotal Money MakeoverĒ from the library. Iím making changes. Still plugging away. I guess it just takes time to become a rich baller like Dave is. I bet he drives a Benz with spinner and hydraulics.

That's a weird thing to say.  You don't have the ability to put a fully formed kid inside the stomach.  Your semen goes into her uterus, not a kid in the stomach.

I don't know if that is the way DR talks but I can see the sarcasm dripping down the page.... At the very least, I'm guessing the reference to pulling out is a stab at the religious convictions of DR.

Rasputin

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Re: Dave Ramsey
« Reply #31 on: January 21, 2019, 04:41:30 PM »
I am $80K in debt with student loans and another $20K in a car. I donít really have much more money each month to pay down my loans. I need to unf*ck myself and soon. Iím 42 and would like to impregnate my wife, but kids are expensive too.

DR's advice is not to delay marriage or children because of finances.  That opinion is, obviously, controversial.

Iím married, but Iíve been pulling out. Iíll probably put a kid in her stomach soon. I got ďTotal Money MakeoverĒ from the library. Iím making changes. Still plugging away. I guess it just takes time to become a rich baller like Dave is. I bet he drives a Benz with spinner and hydraulics.

That's a weird thing to say.  You don't have the ability to put a fully formed kid inside the stomach.  Your semen goes into her uterus, not a kid in the stomach.

Is that how it works. Damn. Iíve been doing it wrong.

Rasputin

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Re: Dave Ramsey
« Reply #32 on: January 21, 2019, 04:43:21 PM »
ANYway,
Homo economicus might come out ahead with the debt avalanche, but most people stop at econ 101 and never get to the meat of behavioral economics, which is now graying a bit.  Kahnemann in his book thinking fast and slow elucidated that people don't act optimally and that's why ramsey espouses the behavioral side as opposed to the logical side.

Does the debt avalanche have you making larger payments to the debt with higher interest or balance?

englishteacheralex

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Re: Dave Ramsey
« Reply #33 on: January 21, 2019, 05:18:38 PM »
I've been listening to Dave Ramsey for about ten years. I disagree with him on some points, but we've actually taught his FPU seminar out of our home.

I like what he says about debt--pay it off before you invest. IMHO it doesn't really matter which method you use to pay it down, snowball or avalanche, just stop investing, stop paying for anything extra, and throw all the extra money you have into your debt to pay it down within two years. If it were me, I'd put one of those fundraising thermometer charts on my fridge door and fill it in every time I chopped off another $5k or so.

He's great about budgeting and I think his money advice to married couples is solid, also. It works for us, anyway.

About the baby, Dave would say: just get your wife knocked up and don't worry about it. Children are more important than money. Once she's pregnant, put the debt snowball on pause and pile up money in cash in case something goes south with the pregnancy or the birth. Once everybody's home and fine, throw the pile of cash you accumulated during the pregnancy (just in case something went wrong--you'd have cash to bail yourself out and wouldn't have to take on debt) on the debt and keep going with your debt snowball.

Stop investing. Don't even think about investing.

All of this is advice I whole heartedly agree with. The stuff about Zander insurance, his ELPs (endorsed local providers), the mythical 12% rate of return on mutual funds, etc...you can ignore all that. Steps 1-4 of his "baby steps" are solid.

alcon835

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Re: Dave Ramsey
« Reply #34 on: January 22, 2019, 07:02:39 AM »
ANYway,
Homo economicus might come out ahead with the debt avalanche, but most people stop at econ 101 and never get to the meat of behavioral economics, which is now graying a bit.  Kahnemann in his book thinking fast and slow elucidated that people don't act optimally and that's why ramsey espouses the behavioral side as opposed to the logical side.

Does the debt avalanche have you making larger payments to the debt with higher interest or balance?

@Rasputin the Debt Avalanche (or Snowball or Dave Ramsey method) has you start paying by paying the smallest balance first, then the next smallest, and so on until all debts are paid. He argues two main points for advocating this method:
1. The amount of interest accrued by the highest interest payment is negligible because of the significantly higher likelihood of a person to stick with it until they are debt free.
2. The emotional impact of paying off a debt, cutting up a credit card, no longer owing a college debt payment, etc. is the boost most people need to persevere in paying off their debts; without it most families will give up before their debts are paid and go back to their old lifestyle.

Ultimately, I agree with him completely. For most people, the small additional interest paid is not going to make a meaningful impact on their future and the risk of families giving up before their debts are completely paid is worth the slightly increased cost.

A better way to think about the two methods against each other:
1. The higher-interest first method is the most financially responsible method and will, over the course of a person's life, ultimately save them the most money which they can then use to invest.
2. The smallest balance method is the most emotionally effective method and will, over the course of a person's life, more likely allow them to become debt free and save them considerably more interest than if they had tried the other method, given up, and then transitioned back to making minimum payments and living paycheck-to-paycheck.


solon

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Re: Dave Ramsey
« Reply #36 on: January 22, 2019, 08:28:48 PM »
FWIW, the forum's search engines are um, underpowered.  Fortunately,  there's google.

I have a cure for that: https://forum.mrmoneymustache.com/forum-information-faqs/how-to-search-the-forum/

MoustacheDArgent

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Re: Dave Ramsey
« Reply #37 on: January 29, 2019, 11:37:40 PM »
One thing that reading Total Money Makeover did for me was to convince me to start creating a budget and tracking my spending. 
I found I enjoyed it and it actually gave me a feeling of security to know that I had money set aside for all my bills.
I used to just look at my checking account, see some money and think oh I can buy this or that.  Then, a bill I had forgotten about
would show up and cause havoc.

It's been over ten years and I still live on a budget.  I now own my own business and work from home and I couldn't do it
without the money skills of budgeting and tracking.

Side note:
The endless arguing over the order of paying off debt is pointless to me.   Dave knows the math, but he couldn't get people
to stick to the program when he just used math.  It wasn't until he focused on the psychology that people got on board and that's
when he realized people need small wins, in the beginning, to get motivated.  I don't think he really cares if people start with high-interest debt first.
I think he just saw more people succeeded with the debt snowball method.

phildonnia

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Re: Dave Ramsey
« Reply #38 on: January 30, 2019, 02:24:36 PM »
Side note:
The endless arguing over the order of paying off debt is pointless to me.   Dave knows the math, but he couldn't get people
to stick to the program when he just used math.  It wasn't until he focused on the psychology that people got on board and that's
when he realized people need small wins, in the beginning, to get motivated.  I don't think he really cares if people start with high-interest debt first.
I think he just saw more people succeeded with the debt snowball method.

Dave generally expects all your unsecured debts to be cleared up in two years.  He correctly points out that on this schedule, the difference in interest rates is likely minimal.  This also comes out in his advice on refinancing: do it if you want, but don't fool yourself into thinking you've made any progress.

50ShadesOfStache

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Re: Dave Ramsey
« Reply #39 on: January 30, 2019, 02:45:00 PM »
My first introduction to personal finance was Dave Ramsey at age 13. Got me through college debt free. The only place I really got screwed over was that i followed his no credit card rule, and ended up with no credit score at all. It turns out it can be hard to find a place to live with no credit score. I offered one apartment manager a years rent in cash up front and still got turned down :(

Rasputin

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Re: Dave Ramsey
« Reply #40 on: January 30, 2019, 04:05:18 PM »
Side note:
The endless arguing over the order of paying off debt is pointless to me.   Dave knows the math, but he couldn't get people
to stick to the program when he just used math.  It wasn't until he focused on the psychology that people got on board and that's
when he realized people need small wins, in the beginning, to get motivated.  I don't think he really cares if people start with high-interest debt first.
I think he just saw more people succeeded with the debt snowball method.

Dave generally expects all your unsecured debts to be cleared up in two years.  He correctly points out that on this schedule, the difference in interest rates is likely minimal.  This also comes out in his advice on refinancing: do it if you want, but don't fool yourself into thinking you've made any progress.

I have $80,000 in student loans. No way I can clear that in 2 years

v8rx7guy

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Re: Dave Ramsey
« Reply #41 on: January 30, 2019, 05:18:25 PM »
Side note:
The endless arguing over the order of paying off debt is pointless to me.   Dave knows the math, but he couldn't get people
to stick to the program when he just used math.  It wasn't until he focused on the psychology that people got on board and that's
when he realized people need small wins, in the beginning, to get motivated.  I don't think he really cares if people start with high-interest debt first.
I think he just saw more people succeeded with the debt snowball method.

Dave generally expects all your unsecured debts to be cleared up in two years.  He correctly points out that on this schedule, the difference in interest rates is likely minimal.  This also comes out in his advice on refinancing: do it if you want, but don't fool yourself into thinking you've made any progress.

I have $80,000 in student loans. No way I can clear that in 2 years

Why not?

Rasputin

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Re: Dave Ramsey
« Reply #42 on: January 30, 2019, 07:41:59 PM »
Side note:
The endless arguing over the order of paying off debt is pointless to me.   Dave knows the math, but he couldn't get people
to stick to the program when he just used math.  It wasn't until he focused on the psychology that people got on board and that's
when he realized people need small wins, in the beginning, to get motivated.  I don't think he really cares if people start with high-interest debt first.
I think he just saw more people succeeded with the debt snowball method.

Dave generally expects all your unsecured debts to be cleared up in two years.  He correctly points out that on this schedule, the difference in interest rates is likely minimal.  This also comes out in his advice on refinancing: do it if you want, but don't fool yourself into thinking you've made any progress.

I have $80,000 in student loans. No way I can clear that in 2 years

Why not?

Thatís $3300 a month. I clear $3700 after tax.

v8rx7guy

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Re: Dave Ramsey
« Reply #43 on: January 30, 2019, 10:05:27 PM »
Side note:
The endless arguing over the order of paying off debt is pointless to me.   Dave knows the math, but he couldn't get people
to stick to the program when he just used math.  It wasn't until he focused on the psychology that people got on board and that's
when he realized people need small wins, in the beginning, to get motivated.  I don't think he really cares if people start with high-interest debt first.
I think he just saw more people succeeded with the debt snowball method.

Dave generally expects all your unsecured debts to be cleared up in two years.  He correctly points out that on this schedule, the difference in interest rates is likely minimal.  This also comes out in his advice on refinancing: do it if you want, but don't fool yourself into thinking you've made any progress.

I have $80,000 in student loans. No way I can clear that in 2 years

Why not?

Thatís $3300 a month. I clear $3700 after tax.

Then increase your income!  What did you go to school for that cost you at least $80K that you are making $3,700 after tax?  If you can't increase your income then deliver pizzas, drive for Uber, etc... That's what Dave would say.  I have seen people do some crazy things to wipe out their debt when they are intentional about it.

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Re: Dave Ramsey
« Reply #44 on: January 31, 2019, 06:01:08 PM »

I have $80,000 in student loans. No way I can clear that in 2 years

Seriously, his advice to you would be to deliver pizzas at night.  This is where I get a little skeptical.

reeshau

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Re: Dave Ramsey
« Reply #45 on: February 01, 2019, 03:06:12 AM »

I have $80,000 in student loans. No way I can clear that in 2 years

Seriously, his advice to you would be to deliver pizzas at night.  This is where I get a little skeptical.

The main point is to be, in Dave's words, "gazelle intense."  Meaning, focused as if your life depended on it, because in a lot of ways it does:  if you don't get on a good track financially, soon, you will have a long, miserable time with this problem staring you in the face.  Whether your action is to take an easy-to-get side job, move back in with your family, take a leap to a better career, sell a large number of accumulated goods, etc. the point is that whatever you think is "all you can do," there is always something more you could do--you are choosing not to.  Not that this is an easy choice, but it always is.

Dave is working with people who have had issue dealing with definitions of "normal," and have gotten themselves into trouble.  He needs to wake these people up somehow--the shock value has a purpose.  And if you relax, you could easily relapse to prior habits.  I think that's part of why he wants people to be in a hurry--so you get to the other side, before you give up.

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Re: Dave Ramsey
« Reply #46 on: February 19, 2019, 07:35:43 PM »
I think Dave Ramsey is good for a lot folks, if they actually follow the plan. I know people that have been regular listeners for years, decades even, yet they still say their goal is to pay off their credit card debt. The mortage is a bigger nut to crack, and the only people I meet who've paid off the mortage are near or beyond traditional retirement. FWIW, I followed his plan through step seven. That was back in 2007 and I decided to move on to other things.

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Re: Dave Ramsey
« Reply #47 on: February 21, 2019, 08:51:30 AM »
ANYway,
Homo economicus might come out ahead with the debt avalanche, but most people stop at econ 101 and never get to the meat of behavioral economics, which is now graying a bit.  Kahnemann in his book thinking fast and slow elucidated that people don't act optimally and that's why ramsey espouses the behavioral side as opposed to the logical side.

Does the debt avalanche have you making larger payments to the debt with higher interest or balance?

Highest interest rate.
Debt snowball makes it a behavior problem. 
Economists used to think that the most logical path would be what people would take.  Paying off higher interest loans makes sense mathematically.
I guess the assumption that Ramsey makes is that people in debt aren't that good at math to begin with; the newer economics of human behavior show that the vast majority of humans are not homo economicus.
I'm not married to either idea but I paid off my student loans and mortgage using the debt snowball.

MMM's accountant Keith from the Wealthyaccountant.com was a ramsey ELP.  I doubt that he would say that you should follow the ramsey method past baby step 2.

MrThatsDifferent

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Re: Dave Ramsey
« Reply #48 on: February 21, 2019, 11:43:50 AM »
From my (limited) DR experience, he seems to have a target audience. In my opinion, that target audience is consumers who are in debt.

His content is a great starting place for people to get their Net Worth up to 0.

That being said, here are a few things that I (and others on here) disagree with:

1) Debt snowball vs debt avalanche
2) Paying off a house (debatable)
3) Investing

I am $80K in debt with student loans and another $20K in a car. I donít really have much more money each month to pay down my loans. I need to unf*ck myself and soon. Iím 42 and would like to impregnate my wife, but kids are expensive too.

Create a case study. People have gotten out of debt with much more than you. But also, be brave. Maybe it means selling the car, take a hit but get what you can afford in cash? Make sure the SLs are at the lowest rates. Attack your expenses. Also, have that kid now than wait.

WheresMyMule

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Re: Dave Ramsey
« Reply #49 on: March 04, 2019, 06:53:39 PM »
Just to be clear, putting emotion aside, the debt avalanche method comes out ahead (based on money in your pocket) reguardless of how high or low the interest rates are.

It’s simple, you put what you can into the debt with the highest interest rate until it’s paid off. Then you move onto whatever has the next highest interest rate until that’s paid off. And on and on.

I think Dave's retort to this is twofold:  the psychology of giving you some quick wins (with small debts being more achievable goals) and the fact that his method demands you will be done in about 2 years, which minimizes the compounding advantage of the debt avalanche.  As was said before, psychology over the raw, idealized numbers.
I haven't finished reading the thread, but the snowball also gives you more cash flow flexibility than the avalanche. As you eliminate debts, your snowball grows, b which allows you to better deal with unexpected expenses without incurring further debt.

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