Author Topic: Distancing myself from Ramseyism.  (Read 38545 times)

Telecaster

  • Pencil Stache
  • ****
  • Posts: 928
Re: Distancing myself from Ramseyism.
« Reply #150 on: April 25, 2017, 12:36:50 PM »

Its funny how people criticize Dave for his investing advice and go as far as calling it "dangerous".  Now I don't have the time or resources to run an analysis on all the mutual funds that have existed over the last 100 years which would eliminate things like survivor bias; I can however, run a quick sample that should give us some general idea if Dave advice is "dangerous".

I wouldn't use the term "dangerous."  More like "an expensive example of ignorance."   Survivorship bias in active mutual funds is huge.  It is a serious and fundamental mistake to ignore it.   And you're right, it is fairly hard to study, because you need access to the CRSP database.  But others have done those studies, for example, this one from Vanguard:

https://personal.vanguard.com/pdf/s362.pdf

Bottom line, over the last 20 years, the vast majority of actively managed funds (79%) either died, were merged into other funds, and then underpeformed, or just flat underperformed.   

So, is it "dangerous" advice to recommend something that almost always underperforms?  No, just an expensive lesson in ignorance. 




Virtus

  • Stubble
  • **
  • Posts: 211
Re: Distancing myself from Ramseyism.
« Reply #151 on: April 25, 2017, 01:00:43 PM »

Its funny how people criticize Dave for his investing advice and go as far as calling it "dangerous".  Now I don't have the time or resources to run an analysis on all the mutual funds that have existed over the last 100 years which would eliminate things like survivor bias; I can however, run a quick sample that should give us some general idea if Dave advice is "dangerous".

I wouldn't use the term "dangerous."  More like "an expensive example of ignorance."   Survivorship bias in active mutual funds is huge.  It is a serious and fundamental mistake to ignore it.   And you're right, it is fairly hard to study, because you need access to the CRSP database.  But others have done those studies, for example, this one from Vanguard:

https://personal.vanguard.com/pdf/s362.pdf

Bottom line, over the last 20 years, the vast majority of actively managed funds (79%) either died, were merged into other funds, and then underpeformed, or just flat underperformed.   

So, is it "dangerous" advice to recommend something that almost always underperforms?  No, just an expensive lesson in ignorance.

Expensive you say! Maybe say I!

From the Vanguard link 30% of the funds in the study out-performed while 70% under-performed which is in line with other literature I have read on the subject. I would hardly say that 70% under-performing the market is equivalent to "almost always". If you were going to close your eyes and throw a dart to select your mutual fund, you have a 30% chance of making more money than indexing. Think about what your odds would be if you performed research on the fund manager, institution, and fund performance.

Again, I am not advocating actively managed funds, I like the simplicity of index funds.

paddedhat

  • Handlebar Stache
  • *****
  • Posts: 2238
Re: Distancing myself from Ramseyism.
« Reply #152 on: June 27, 2017, 05:02:27 PM »
As a long term Vanguard fund owner, I have found these alleged "under-performers" to typically be lagging by a small fractions of a percent. Then I think about the 1.25% my active broker removed from my account every year, and the  vanguard fees, which are a tenth of that and less. Yea, under-performing is awful. Especially since in a one year period, my 1.25% guy "managed" his way to returns that were 1/3rd of the VTSAX.

VoteCthulu

  • Bristles
  • ***
  • Posts: 292
Re: Distancing myself from Ramseyism.
« Reply #153 on: June 27, 2017, 05:24:04 PM »
I give Dave a pass on this.

Obviously low fee index funds are far better than the high fee funds he suggests (in order to pay for his kickbacks), but his target audience (average consumers rolling in debt) is so much better off following his flawed advise than not that I can't condemn him too harshly.

mghjuno

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Re: Distancing myself from Ramseyism.
« Reply #154 on: June 27, 2017, 06:22:24 PM »
I listened to Dave for years largely because at the time (pre-smartphone) my office was in a radio deadzone & his station came in the loudest.  He's also a local - I drive by his main office building almost every day.  At first, I thought his advice was great but the more I listened the more turned off I became by his simplistic cookie cutter advice and southern preacher schtick.  I listened anyway until the day he shamed a crying woman for her situation, and then in the very next call he verbally back-slapped and sidehugged a man calling for advice on virtually the exact same situation he berated the woman for.  The contrast was stark and obvious. 

However at this point his financial advice is almost beside the point; his obsession with his brand and inability to tolerate dissention are legendary in my area.  If he told me the sky was blue I'd look outside to check in case he was telling me it was blue to make a dollar and stroke his own ego.

« Last Edit: June 27, 2017, 06:24:00 PM by mghjuno »

SC93

  • Bristles
  • ***
  • Posts: 367
Re: Distancing myself from Ramseyism.
« Reply #155 on: June 27, 2017, 08:24:03 PM »
I WAS Dave Ramsey long before Dave Ramsey was Dave Ramsey..... I've never had a credit score in my life. No idea how to use the credit card thing at the check out. I basically follow my own steps as I always have, just so happens that he chose some of the same steps I had done since I was 18 years old. When I do listen to Dave I listen to this ARCHIVES on his app. Not near as many commercials. Commercials is why I stopped listening to Clark Howard. If you want REAL radio listen to Todd & Tyler from Omaha's z92 :)

Now the part about Dave that none of you have mentioned..... he doesn't say you can't get rich any other way. He doesn't say you can't stay rich if you use credit cards. What he talks about is RISK. That's basically what his whole show is about is getting out of debt and not having any risk.... well that and making money from people buying his stuff. He is GREAT for people who are in debt and once you get out of debt if you choose to not have any risk you can still follow him, if not, you can do your own thing. Then if you get in a jam again, you will know what channel to turn the dial to.

aGracefulStomp

  • 5 O'Clock Shadow
  • *
  • Posts: 50
  • Location: Australia
Re: Distancing myself from Ramseyism.
« Reply #156 on: June 27, 2017, 08:44:46 PM »
I agree that Dave's approach to money and investing can be very infuriating. Also he's a massive misogynist.

However, having found the Dave Ramsey (really lovely) community on YouTube, I think the Ramseyism approach is 100% suitable for specific types of people.

Finance and money can be bewildering, and if you have a tendency to spend coupled with no inclination/ability to sit down and crunch numbers or understand how investments work ... then perhaps his approach is the best one.

And this isn't saying anything negative about people who don't have an inclination to finance, they have strengths in other areas where I/we struggle.
« Last Edit: June 28, 2017, 06:19:43 AM by aGracefulStomp »



jmecklenborg

  • Stubble
  • **
  • Posts: 123
Re: Distancing myself from Ramseyism.
« Reply #157 on: June 27, 2017, 09:16:33 PM »
I lived in Nashville in the early and mid-2000s and so listened to his show when it was a local show or had just a few dozen stations.  The biggest influence Dave had on my life was his urging people to go deliver pizzas part-time.  I got a job delivering pizzas in 2008 and almost 10 years later I still work at the same place and have made upwards of $200,000 after taxes.  I lost my day job during the recession so if not for the pizza delivery I would have gone broke.  I sustained 2-3 more layoffs during the recession and didn't land a steady day job until mid-2011.  I have been working 7 days a week since.  I have traveled out-of-town once or twice per year for weddings in that time but otherwise haven't taken a vacation and often work 100 days in a row. 

So with that said, I now find Dave to be a nauseating figure.  He pretends that privilege doesn't exist in America and that inheritances are just incidental events.  The fact is that Dave would have never been able to go broke so spectacularly at age 27 if not for the loans his dad got him from the savings and loan owned by a golfing buddy back at age 23 or 24.  It was just like a Fred Trump/Donald Trump or Kushner situation.  Also, the big detail missing from Dave's oft-repeated story is how he got back on his feet after going broke.  I have spent some time trying to figure it out and it appears that he was rescued by...an inheritance.  The reason he never talks about his parents is because it was their money that enabled him to recover from the bankruptcy and start what we now call Ramsey Solutions.  The whole "started the business on a card table" thing is a bit of an exaggeration since the whole thing came about as a bit of an accident. 

Dave has never really worked for anyone else.  He was always the golden boy, just like Trump and Kushner. The humiliation he experienced from the bankruptcy was real, but if not for that event, he'd be an even more out-of-control egomaniac. 
 

mghjuno

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Re: Distancing myself from Ramseyism.
« Reply #158 on: June 28, 2017, 05:24:58 AM »
I lived in Nashville in the early and mid-2000s and so listened to his show when it was a local show or had just a few dozen stations.  The biggest influence Dave had on my life was his urging people to go deliver pizzas part-time.  I got a job delivering pizzas in 2008 and almost 10 years later I still work at the same place and have made upwards of $200,000 after taxes.  I lost my day job during the recession so if not for the pizza delivery I would have gone broke.  I sustained 2-3 more layoffs during the recession and didn't land a steady day job until mid-2011.  I have been working 7 days a week since.  I have traveled out-of-town once or twice per year for weddings in that time but otherwise haven't taken a vacation and often work 100 days in a row. 

So with that said, I now find Dave to be a nauseating figure.  He pretends that privilege doesn't exist in America and that inheritances are just incidental events.  The fact is that Dave would have never been able to go broke so spectacularly at age 27 if not for the loans his dad got him from the savings and loan owned by a golfing buddy back at age 23 or 24.  It was just like a Fred Trump/Donald Trump or Kushner situation.  Also, the big detail missing from Dave's oft-repeated story is how he got back on his feet after going broke.  I have spent some time trying to figure it out and it appears that he was rescued by...an inheritance.  The reason he never talks about his parents is because it was their money that enabled him to recover from the bankruptcy and start what we now call Ramsey Solutions.  The whole "started the business on a card table" thing is a bit of an exaggeration since the whole thing came about as a bit of an accident. 

Dave has never really worked for anyone else.  He was always the golden boy, just like Trump and Kushner. The humiliation he experienced from the bankruptcy was real, but if not for that event, he'd be an even more out-of-control egomaniac.

That's VERY interesting about his inheritance. 

I hesitated to mention Trump in my very first post on this forum but Dave reminds me so much of Trump it is, in fact, nauseating as you say.  I'd say he's like the evangelical prosperity gospel version of Trump in a lot of ways.  If he had remained the small local money guy I'd have nothing but respect for him even if I disagreed with a lot of his advice, because he clearly gave the impression that his priority was helping people.  Today it's clear his priority is enriching himself and marketing his brand.  Helping his customers seems only important to the degree that it helps him.
« Last Edit: June 28, 2017, 05:26:32 AM by mghjuno »

jmecklenborg

  • Stubble
  • **
  • Posts: 123
Re: Distancing myself from Ramseyism.
« Reply #159 on: June 28, 2017, 08:24:02 AM »
Dave periodically mentions that his dad was in real estate and that his parents weren't religious.  Those are basically the only two details we get. 

The Boston Globe just ran a story this week on how Jared Kushner's dad set him up with $8 million in apartments in Sommerville, MA while he was an undergrad at Harvard.  Dave regularly brags about how he "got his real estate license at 18..." but there's no way he would have done that if his parents hadn't urged him.  He was lucky to have had interest in the family business and lucky to have gotten started in a city that has since boomed (unlike Memphis, Knoxville, Birmingham, or any number of Nashville's neighbors).  Similarly, Donald Trump got started in Manhattan real estate when the island was at its historic nadir.  That was just dumb luck. 


prognastat

  • Pencil Stache
  • ****
  • Posts: 797
  • Location: Texas
Re: Distancing myself from Ramseyism.
« Reply #160 on: June 28, 2017, 11:30:03 AM »
I agree that Dave's approach to money and investing can be very infuriating. Also he's a massive misogynist.

However, having found the Dave Ramsey (really lovely) community on YouTube, I think the Ramseyism approach is 100% suitable for specific types of people.

Finance and money can be bewildering, and if you have a tendency to spend coupled with no inclination/ability to sit down and crunch numbers or understand how investments work ... then perhaps his approach is the best one.

And this isn't saying anything negative about people who don't have an inclination to finance, they have strengths in other areas where I/we struggle.

I wouldn't say he is a massive misogynist, but he definitely subscribes to quite a few regressive social and gender norms and this can at times be quite grating when they are brought to the fore and most of his fans completely agree with him.

I do feel the truly intelligent portion of Ramsey's audience eventually moves on and only takes the things they can use from his program, but there definitely are some who wouldn't even worse off without David Ramsey and would be lucky enough if they only followed his program and nothing else.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4422
Re: Distancing myself from Ramseyism.
« Reply #161 on: June 28, 2017, 11:33:01 AM »
I agree that Dave's approach to money and investing can be very infuriating. Also he's a massive misogynist.

However, having found the Dave Ramsey (really lovely) community on YouTube, I think the Ramseyism approach is 100% suitable for specific types of people.

Finance and money can be bewildering, and if you have a tendency to spend coupled with no inclination/ability to sit down and crunch numbers or understand how investments work ... then perhaps his approach is the best one.

And this isn't saying anything negative about people who don't have an inclination to finance, they have strengths in other areas where I/we struggle.

I wouldn't say he is a massive misogynist, but he definitely subscribes to quite a few regressive social and gender norms and this can at times be quite grating when they are brought to the fore and most of his fans completely agree with him.

I do feel the truly intelligent portion of Ramsey's audience eventually moves on and only takes the things they can use from his program, but there definitely are some who wouldn't even worse off without David Ramsey and would be lucky enough if they only followed his program and nothing else.
I am just curious, how do you differentiate misogynist vs regressive gender norms? 

Sent from my SPH-L710 using Tapatalk


prognastat

  • Pencil Stache
  • ****
  • Posts: 797
  • Location: Texas
Re: Distancing myself from Ramseyism.
« Reply #162 on: June 28, 2017, 11:37:55 AM »
I agree that Dave's approach to money and investing can be very infuriating. Also he's a massive misogynist.

However, having found the Dave Ramsey (really lovely) community on YouTube, I think the Ramseyism approach is 100% suitable for specific types of people.

Finance and money can be bewildering, and if you have a tendency to spend coupled with no inclination/ability to sit down and crunch numbers or understand how investments work ... then perhaps his approach is the best one.

And this isn't saying anything negative about people who don't have an inclination to finance, they have strengths in other areas where I/we struggle.

I wouldn't say he is a massive misogynist, but he definitely subscribes to quite a few regressive social and gender norms and this can at times be quite grating when they are brought to the fore and most of his fans completely agree with him.

I do feel the truly intelligent portion of Ramsey's audience eventually moves on and only takes the things they can use from his program, but there definitely are some who wouldn't even worse off without David Ramsey and would be lucky enough if they only followed his program and nothing else.
I am just curious, how do you differentiate misogynist vs regressive gender norms? 

Sent from my SPH-L710 using Tapatalk

Misogyny would require a dislike/contempt/ingrained prejudice against women. I don't quite feel he meets that standard though I would disagree with much of his stance on gender roles. This is of course only something anyone can make an assumption on based on how someone represents themselves since we can't truly know someone's basis for his beliefs.

However if you feel he does meet the standard for misogyny then he is equally a misandrist since the also has regressive beliefs on the gender norms for men. That's why I feel saying he is a misogynist is less informative of his stances than saying he holds regressive gender norms.
« Last Edit: June 28, 2017, 11:42:18 AM by prognastat »

ABC123

  • Stubble
  • **
  • Posts: 216
  • Location: Nashville
Re: Distancing myself from Ramseyism.
« Reply #163 on: June 28, 2017, 12:28:39 PM »
I live in Nashville and used to listen to his show very occasionally - I work full time and rarely was off during his show hours.  He switched around a bit, first on the right wing talk radio channel, then he moved to the sports talk radio channel.  Then one time I went to listen and I couldn't find him.  I looked on his website, and he did not have his show on a single radio channel in Nashville.  That seems really odd, since he is based here.  I just looked again, and he is now on one AM station here.  Strange.

VoteCthulu

  • Bristles
  • ***
  • Posts: 292
Re: Distancing myself from Ramseyism.
« Reply #164 on: June 28, 2017, 02:39:00 PM »
I'm surpised at how much this thread is focused on how bad of a person Dave Ramsey is instead of the accuracy and utility of the lifestyle changes he espouses.

IMO, the worst thing about Ramseyism is advocating expensive mutual funds instead of cheap index funds.

The best thing is about Ramseyism is getting people with debt problems to methodically pay them off and cut up their credit cards. While most people can benefit from credit cards, those with a spending problem are well served removing the temptation from their wallets.
« Last Edit: June 29, 2017, 01:54:36 PM by VoteCthulu »

TexasForever

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Re: Distancing myself from Ramseyism.
« Reply #165 on: June 28, 2017, 06:43:13 PM »
This thread just proves that haters gonna hate.

Dude has helped hundreds of thousands? Millions? of people get out of debt and we are complaining that he doesn't tailor his message to the .001% of people in America who know how to responsibly handle/leverage debt (and who never call into his show) ?

If he started giving caveats for everything and detailed explanations as to why credit cards are OK if you can handle them responsibly, would this do more to help or hurt those who call into his show?

aGracefulStomp

  • 5 O'Clock Shadow
  • *
  • Posts: 50
  • Location: Australia
Re: Distancing myself from Ramseyism.
« Reply #166 on: June 29, 2017, 03:57:44 AM »
I make the comment in the context that I find it hard to listen to him, because I'm yet to hear him talk to a female caller like she's not a child.

I think it's relevant because it spouts the same old sexist message to the millions of people that listen to him that finances is for the men, and this affects people's relationship (and therefore actions) with money.

People may disagree with me and that's great because at least they're not receiving that message.

And as i said in my post, i think by and large his program is 100% perfect for millions of people who have turned their financial situation around - and for that, good for him. I often watch the "I'm Debt Free" screams on youtube and its so lovely!
« Last Edit: June 29, 2017, 07:46:55 AM by aGracefulStomp »



Dicey

  • Walrus Stache
  • *******
  • Posts: 6531
  • Age: 59
  • Location: NorCal
Re: Distancing myself from Ramseyism.
« Reply #167 on: June 29, 2017, 08:50:40 AM »
I'm surpised at how much this thread is focused on how bad of a person Dave Ramsey is instead of the accuracy and utility of the lifestyle changes he espouses.
Huh. It seems this thread is (correctly, IMO) discussing how limited DR's message is. How you extrapolate that into "how bad of a person Dave Ramsey is" is...interesting.

Hating the person's message and method of delivery is not hating the person. Let's not forget his extravagant lifestyle, as evidenced by his mansion, automatically makes him royally face-punch worthy.
-----
As to TexasForever's claim/question that DR has helped "millions", I seriously doubt it. Millions of listeners maybe, but actual help? I don't think so. Now, if you said he has made millions, that'd probably be accurate.

Fact is, DR does this for profit. If there was no money in it (fees + advertising) he wouldn't be doing it.
I did it! I have a journal!
A Lot Like This
And hell yes, I am still moving confidently in the direction of my dreams...

jmecklenborg

  • Stubble
  • **
  • Posts: 123
Re: Distancing myself from Ramseyism.
« Reply #168 on: June 29, 2017, 09:43:48 AM »
I'm a bit surprised that Dave keeps trying to grow the business.  He mentions with some regularity that his kids and their spouses will get the business, but it seems like a real estate business would be so much easier to pass along.  He should have just planned to sell Ramsey Solutions, or whatever it's called.  It's going to end up tearing his family apart. 




solon

  • Handlebar Stache
  • *****
  • Posts: 1104
  • Age: 1817
  • Location: CO
Re: Distancing myself from Ramseyism.
« Reply #169 on: June 29, 2017, 09:46:23 AM »
I am the coordinator for a local Financial Peace University class. We're four weeks into the course, with another five weeks to go.

There are 16 participants. All of them are at different places financially. Some are complete and utter train wrecks. Others are farther along. One couple just paid off their house last week. But EVERY SINGLE ONE of them is doing what needs to be done - starting from where they are right now and taking the next tiniest steps forward. I'll include myself in that. Even though I'm the coordinator, and basically have my house in order, I still get new ideas, tips, and inspiration from this course.

I don't know how many people, exactly, have benefited from this course. But I know there are thousands of course going on at any given time. If every person in each of those courses is taking steps like the people in my course, and this has been going on for 20 years, I bet millions have been helped.

I don't necessarily agree with everything Dave Ramsey teaches. Let's just say there is further room for optimization. But the undeniable fact is that many, many people are better off now than before they took the course. We can't fault Dave for touching people's lives. He is a financial guru, just like MMM, but he reaches a different audience.

jlcnuke

  • Stubble
  • **
  • Posts: 205
Re: Distancing myself from Ramseyism.
« Reply #170 on: June 29, 2017, 10:46:16 AM »
I initially had a strong distaste for Dave because by the time I heard about him I already have a good knowledge of finances AND had adequate personal control to responsibly use debt. Then I heard about his investment advice and I detested him for much of his message at that point.

Then, I decided to waste some of my time and talk to one of our financial advisors through work (401k plan). During our, albeit brief, discussion I discovered why they often recommend investments that would not be the best for me even if I was in the same situation as the person they were consulting; I'd summarize it as "people are ignorant and lazy" and so recommending they put their money in the target date funds helps to protect those people from themselves (as something more complicated tends to discourage any investing for some and others would never update their investments thus exposing them to more risk later in life than they would/should be comfortable with).

I then tried to think about how Dave's advice, vs mine, would be utilized by "the average" consumer. The average consumer is used to spending all their money (or close to it). The average consumer is used to constantly being in debt. The average consumer isn't really saving for retirement (sure, they may put a bit aside, but if they're lucky it will help supplement SS, but they're never going to approach FI without SS).  The average person is also lazy and ignorant. As such, they don't want 4 hours with me explaining how to budget, how to leverage debt responsibly to grow their net worth, how to invest in low-cost index funds. This explains much of why it's a good idea to send them to a financial advisor, even if the investments they'll choose aren't optimal and their fees are more than a financially responsible person would pay (imo).

The average person also wants instant gratification and their motivation for anything decreases exponentially as time passes without new motivation or gratification. This explains why he chooses to have people attack their smallest debt first, instead of going after the debt that will save them the most money first. Sure, it doesn't maximize net worth for those of us who are responsible or motivated enough to pay off debt without needing additional motivation, but if it keeps "the average person" from giving up because it's "taking too long and we don't seem to be getting anywhere anyway" then it does actually help maximize their net worth (relative to the other "likely" choice they'd make.. i.e. going back to making minimum payments).

Then we go back to that instant gratification. The average person Dave appeals to has been charging stuff without bothering to see if they can afford it for years. It's an ingrained habit, and it'll take time to get rid of that habit. As such, "not having a credit card" (despite the advantages of responsible use of such) means they're significantly less likely to fall back on old habits and get themselves back into loads of consumer debt.

So, while I still detest some of his advice (not recommending low-cost index funds, having "recommended" advisors that are really just "here's the guys paying Ramsey to refer business to them", etc), I recognize that there is a large contingent of people out there that are likely better off using his advice than they would be if I tried to tell them to do things "more responsibly", if only because they're more likely to stick with his approach and not go back to their old financial habits than they would be with the "more complicated" methods of maximizing net worth that people like us utilize. As such, I think his service provides a net-positive influence.
Delta card referral, 10k extra for both of us (60k total bonus miles for you) http://refer.amex.us/JEFFRC3xlu?xl=cp52

Milizard

  • Bristles
  • ***
  • Posts: 391
  • Location: West Michigan
Re: Distancing myself from Ramseyism.
« Reply #171 on: June 29, 2017, 11:44:19 AM »
I'm surpised at how much this thread is focused on how bad of a person Dave Ramsey is instead of the accuracy and utility of the lifestyle changes he espouses.

IMO, the worst thing about Ramseyism is advocating expensive mutual funds insteam of cheap index funds.

The best thing is about Ramseyism is getting people with debt problems to methodically pay them off and cut up their credit cards. While most people can benefit from credit cards, those with a spending problem are well served removing the temptation from their wallets.

IMO, it's between that, and forgoing the match/not saving anything for retirement while paying off all debt, including your mortgage.

Proud Foot

  • Pencil Stache
  • ****
  • Posts: 784
Re: Distancing myself from Ramseyism.
« Reply #172 on: June 29, 2017, 12:42:23 PM »
I'm surpised at how much this thread is focused on how bad of a person Dave Ramsey is instead of the accuracy and utility of the lifestyle changes he espouses.

IMO, the worst thing about Ramseyism is advocating expensive mutual funds insteam of cheap index funds.

The best thing is about Ramseyism is getting people with debt problems to methodically pay them off and cut up their credit cards. While most people can benefit from credit cards, those with a spending problem are well served removing the temptation from their wallets.

IMO, it's between that, and forgoing the match/not saving anything for retirement while paying off all debt, including your mortgage.

Mortgage is step 6 and comes after the 15% towards retirement. I do agree forgoing the match/not saving anything is not the best advice. In my opinion this area is too nuanced for a blanket recommendation other than the simple advice of what he gives.

solon

  • Handlebar Stache
  • *****
  • Posts: 1104
  • Age: 1817
  • Location: CO
Re: Distancing myself from Ramseyism.
« Reply #173 on: June 29, 2017, 01:11:41 PM »
I'm surpised at how much this thread is focused on how bad of a person Dave Ramsey is instead of the accuracy and utility of the lifestyle changes he espouses.

IMO, the worst thing about Ramseyism is advocating expensive mutual funds insteam of cheap index funds.

The best thing is about Ramseyism is getting people with debt problems to methodically pay them off and cut up their credit cards. While most people can benefit from credit cards, those with a spending problem are well served removing the temptation from their wallets.

IMO, it's between that, and forgoing the match/not saving anything for retirement while paying off all debt, including excluding your mortgage.

Fixed that for you.

Milizard

  • Bristles
  • ***
  • Posts: 391
  • Location: West Michigan
Re: Distancing myself from Ramseyism.
« Reply #174 on: June 29, 2017, 02:00:07 PM »
I'm surpised at how much this thread is focused on how bad of a person Dave Ramsey is instead of the accuracy and utility of the lifestyle changes he espouses.

IMO, the worst thing about Ramseyism is advocating expensive mutual funds insteam of cheap index funds.

The best thing is about Ramseyism is getting people with debt problems to methodically pay them off and cut up their credit cards. While most people can benefit from credit cards, those with a spending problem are well served removing the temptation from their wallets.

IMO, it's between that, and forgoing the match/not saving anything for retirement while paying off all debt, including excluding your mortgage.

Fixed that for you.

TY

Rosy

  • Handlebar Stache
  • *****
  • Posts: 1199
  • Location: Florida
Re: Distancing myself from Ramseyism.
« Reply #175 on: June 29, 2017, 02:05:11 PM »
Ramsey appeals to people who are temporarily lost, overwhelmed by debt, have little to no money smarts or just need to be hammered with the same message for weeks on end to "get it" and become "unstuck".
At this stage of the game his message is no different from MMM saying that your debt is an emergency - hair on fire, situation.

The day you paid off your debt and re-organized your finances to the point that you can breathe again - you graduate from financial Kindergarten.

Your brain unfreezes and you start looking to optimize further and invest some of your precious time in learning more about how to manage your own money. Bingo - you may find MMM or cruise the world of online financial blogs, podcasts, youtube, even start reading investment books.
You develop your own financial plan and define your own strategies and milestones - things that are uniquely important to you and your family, not a rubber stamp plan designed for people who simply cannot take the next step - unassisted.

You learn, you grow, you move on when you are ready. Undoubtedly, Ramsey has helped a lot of people, because he has a gift for helping you out of the muck of financial ruin and morass.
I listened to his podcasts for a while and re-read his book, (Financial Makeover) both reinforced a bible principle we lived by when I was growing up, "debt makes you a slave to the lender". 
It was helpful at the time.

So yes to his debt payoff strategies, but I quickly found that his baby steps while generally speaking a good, solid idea, was not in sync with my lifestyle. I did not care for "his" recommended investment adviser set up, nor was I impressed with the constant rah-rah for his lectures, books, CDs etc.
I hadn't found MMM yet, but hey, even spendy pants me recognized that I don't want to be bullied into tithing or spending extra money on his brand, while I am struggling to get out of debt.
It was around that time I re-discovered libraries.

Gronnie

  • Stubble
  • **
  • Posts: 141
  • Age: 31
  • Location: Midwest
Re: Distancing myself from Ramseyism.
« Reply #176 on: June 29, 2017, 02:10:20 PM »
I'm an engineer and normally think very logically. However, I don't mind the snowball approach unless you end up paying off tons of very low interest debt while paying minimums for a long period on very high interest debt. In most cases it won't matter much and the boost in enthusiasm many get seeing things paid off is real.

However, I would modify many things:
1. ALWAYS contribute up to the match.
2. Traditional instead of Roth in many situations
3. Max out retirement accounts if possible, even if that is more than 15% - then decide whether extra goes to the mortgage or taxable

SC93

  • Bristles
  • ***
  • Posts: 367
Re: Distancing myself from Ramseyism.
« Reply #177 on: June 29, 2017, 04:26:30 PM »
I understand Dave should explain his situation a little better but I LOVE it when others are jealous when a person is helped by someone else and succeeds. Or even if they don't succeed. People talk so bad about others no matter what when they have help to getting where they are at..... that is so DAMN funny. Mind you, I had no help, I rode my bicycle through 2 harsh Nebraska winters and worked as much as 123 hours a week to get to where I'm at. I couldn't be happier for people when they get help.

I have a friend that I'll call Clyde.... cuz that's his name. lol His dad built an asphalt company in to a multi-million dollar company. Since Clyde was 16 his dad has given him $1 million or more every year for his race team. Just a dirt track race car but nowadays they get expensive. Clyde bought a big Nascar hauler and lived the big time roll. Wow were people jealous of him. So I went over and became friends with him because I thought it was great. To this day, 10 years later, people are still jealous of Clyde. All because his dad worked his (*) off so he could give his kids a better life than he had. Oh wait..... isn't that exactly what most people say they want to do........???


Road2Freedom

  • 5 O'Clock Shadow
  • *
  • Posts: 14
  • Age: 42
  • Location: Georgia
Re: Distancing myself from Ramseyism.
« Reply #178 on: June 29, 2017, 05:49:14 PM »
I've been a big Dave Ramsey fan (someone gave my wife the TMM several years ago) and listen to him on the radio while I sit in Atlanta traffic to help make time go by.  I never followed the steps in order (already had a few of them in place) but felt it kept me on the right path to building wealth.  I've also done some things that he would probably disapprove of along the way.

As others have mentioned, he brings value to people that are financially irresponsible and don't have a plan in place.  I liken it to someone that realizes they need to lose weight but need a plan and kick in the butt to get started.  I even try to get some of my co-workers to at least try it out when I hear them talk about their financial issues but they keep on their own path.

With that being said, I moved in a new direction over the last couple months after researching how I can retire early.  It led me to this site along with several others and provided new insight I hadn't considered in the past.  I now consider myself a 'grad school' student in FI.  My initial goal was to retire at 60 and now I've set a more aggressive goal of 55 (I'm 41, for at least a couple more weeks :-) and wife is 45).

GilbertB

  • Stubble
  • **
  • Posts: 118
  • Age: 40
  • Location: Gent
    • Sci-fi Meandering
Re: Distancing myself from Ramseyism.
« Reply #179 on: June 30, 2017, 01:25:11 AM »
I've been a big Dave Ramsey fan (someone gave my wife the TMM several years ago) and listen to him on the radio while I sit in Atlanta traffic to help make time go by.  I never followed the steps in order (already had a few of them in place) but felt it kept me on the right path to building wealth.  I've also done some things that he would probably disapprove of along the way.

As others have mentioned, he brings value to people that are financially irresponsible and don't have a plan in place.  I liken it to someone that realizes they need to lose weight but need a plan and kick in the butt to get started.  I even try to get some of my co-workers to at least try it out when I hear them talk about their financial issues but they keep on their own path.

With that being said, I moved in a new direction over the last couple months after researching how I can retire early.  It led me to this site along with several others and provided new insight I hadn't considered in the past.  I now consider myself a 'grad school' student in FI.  My initial goal was to retire at 60 and now I've set a more aggressive goal of 55 (I'm 41, for at least a couple more weeks :-) and wife is 45).
The fitness plan is a good analogy.
His method is to get fat arses to the gym regularly and getting them off the obese bandwagon.
But if you are fit, and are looking at a spot on the Olympic team, his way makes no sense.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1179
Re: Distancing myself from Ramseyism.
« Reply #180 on: June 30, 2017, 09:38:24 AM »
I understand Dave should explain his situation a little better but I LOVE it when others are jealous when a person is helped by someone else and succeeds. Or even if they don't succeed. People talk so bad about others no matter what when they have help to getting where they are at..... that is so DAMN funny. Mind you, I had no help, I rode my bicycle through 2 harsh Nebraska winters and worked as much as 123 hours a week to get to where I'm at. I couldn't be happier for people when they get help.

I have a friend that I'll call Clyde.... cuz that's his name. lol His dad built an asphalt company in to a multi-million dollar company. Since Clyde was 16 his dad has given him $1 million or more every year for his race team. Just a dirt track race car but nowadays they get expensive. Clyde bought a big Nascar hauler and lived the big time roll. Wow were people jealous of him. So I went over and became friends with him because I thought it was great. To this day, 10 years later, people are still jealous of Clyde. All because his dad worked his (*) off so he could give his kids a better life than he had. Oh wait..... isn't that exactly what most people say they want to do........???

Your anecdote about Clyde doesn't include any information suggesting that he's done hard work or developed a strong character deserving of these $1 million annual investments. Clyde sounds like a person you're friends with simply so you can have access to some of his (dad's) material wealth.

jmecklenborg

  • Stubble
  • **
  • Posts: 123
Re: Distancing myself from Ramseyism.
« Reply #181 on: June 30, 2017, 10:01:45 AM »
There are a few Clydes in my life...some are still okay but there's a limit to how much you can have in common with them.  The worst is when a dad sets up his son in the family business and the son is poised to inherit tens if not hundreds of millions of dollars but is essentially locked in a cage of his dad's making.  The family legacy is the dad's central life project and the son has to be just right. 

   

Indyfella317

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Distancing myself from Ramseyism.
« Reply #182 on: June 30, 2017, 01:48:56 PM »
Started listening to DR after my parents suggested. Which led me to searching for financial blogs which then led me here and to the Wealthy Accountant among others.
I still listen to his podcasts every now and then and if at work I might put him on just for background noise. Will echo others here that I enjoy the debt free screams. Church Hill mortgage ads and Licensed ELP's get worn out. I still have cc's so didn't take all of his advice to heart but I think his message of being debt free is something all of America needs to hear/listen to just to get started.

Whether you choose to follow his advice/sales pitch is up to you. The wonderful part is that if you don't want to listen you don't have too.

paddedhat

  • Handlebar Stache
  • *****
  • Posts: 2238
Re: Distancing myself from Ramseyism.
« Reply #183 on: June 30, 2017, 03:32:57 PM »
There are a few Clydes in my life...some are still okay but there's a limit to how much you can have in common with them.  The worst is when a dad sets up his son in the family business and the son is poised to inherit tens if not hundreds of millions of dollars but is essentially locked in a cage of his dad's making.  The family legacy is the dad's central life project and the son has to be just right. 

 
d
The flip side of this this tale is something that I have seen repeatedly. The parent work like dogs to create a thriving business. They are guilt ridden since they don't really have enough time to be the kind of parents they think that they could or should be, if the business didn't consume 70-80 hours a week. As a result they shower the kid with material goods, while failing to maintain any kind of structure or discipline in their lives. By the time the kid is in his early teens, he is known in the community as "that spoiled little brat" and well on their way to being a pretty dysfunctional adult. Give it another decade, mom and dad are past burned out and looking forward to junior taking the reins. Five to seven years after handing their life's work over , one of two things happen, either mom and dad are back, trying to salvage the epic cluster-F that junior created, or it's too late, and the business is beyond salvaging. Not only has it been painfully common in my local community, but I have even seen cases where there were interventions of sorts, with friends and business associates who took the effort to warn the parents that the kid was not, and might never be, ready to take charge, but it didn't make a difference.

Rcc

  • 5 O'Clock Shadow
  • *
  • Posts: 23
  • Location: NC
Re: Distancing myself from Ramseyism.
« Reply #184 on: July 01, 2017, 08:06:55 PM »
Leaving this comment, for folks who are interested - should be at your local library:

Pound Foolish: Exposing the Dark Side of the Personal Finance Industry - Helaine Olen

englishteacheralex

  • Pencil Stache
  • ****
  • Posts: 696
  • Age: 38
  • Location: Honolulu, HI
Re: Distancing myself from Ramseyism.
« Reply #185 on: July 02, 2017, 11:20:39 AM »
^I read this! I loved it!
I journal at https://forum.mrmoneymustache.com/journals/the-aloha-journal/msg1267277/#msg1267277

Tales of a haole teacher whose futon washed up on Oahu over a decade ago.

Dicey

  • Walrus Stache
  • *******
  • Posts: 6531
  • Age: 59
  • Location: NorCal
Re: Distancing myself from Ramseyism.
« Reply #186 on: July 02, 2017, 02:35:56 PM »
So, while I still detest some of his advice (not recommending low-cost index funds, having "recommended" advisors that are really just "here's the guys paying Ramsey to refer business to them", etc), I recognize that there is a large contingent of people out there that are likely better off using his advice than they would be if I tried to tell them to do things "more responsibly", if only because they're more likely to stick with his approach and not go back to their old financial habits than they would be with the "more complicated" methods of maximizing net worth that people like us utilize. As such, I think his service provides a net-positive influence.
Good stuff.

As others have mentioned, he brings value to people that are financially irresponsible and don't have a plan in place.  I liken it to someone that realizes they need to lose weight but need a plan and kick in the butt to get started.  I even try to get some of my co-workers to at least try it out when I hear them talk about their financial issues but they keep on their own path...

With that being said, I moved in a new direction over the last couple months after researching how I can retire early.  It led me to this site along with several others and provided new insight I hadn't considered in the past.  I now consider myself a 'grad school' student in FI. 
More good stuff.

I think there's a place for the DR's and even the SO's of this world, but what they preach is not Mustachianism. It's a great start, and wonderful for consumer sukkas who have amassed a pile of debt. For anyone who actually wants to create wealth, their messages only go so far.

Note to solon: One of my motivations to FIRE was to have more time to volunteer. Kudos to you for doing this. Is it hard to resist dropping hints of Mustachianism into the conversation?
I did it! I have a journal!
A Lot Like This
And hell yes, I am still moving confidently in the direction of my dreams...

solon

  • Handlebar Stache
  • *****
  • Posts: 1104
  • Age: 1817
  • Location: CO
Re: Distancing myself from Ramseyism.
« Reply #187 on: July 02, 2017, 05:31:45 PM »
Note to solon: One of my motivations to FIRE was to have more time to volunteer. Kudos to you for doing this. Is it hard to resist dropping hints of Mustachianism into the conversation?

Not too hard. It's very subtle. This week we had the lesson where Dave asks us to cut up our cards. We literally pass a scissors around and applaud for each other when we cut one. Some people don't want to cut up their cards, and all I can think is, "it's OK, just use them responsibly and you'll be fine. You don't have to swallow this stuff hook, line and sinker" - but of course I don't say that, because that would be un-Ramseyian.

Several people have talked to me outside of class about different things. All of their questions so far have shown remarkable depth of insight - even those who are just thinking about this stuff for the first time. I'm very proud of everyone in the class, and it really makes me feel good to be playing a small part in their turn-arounds.

v8rx7guy

  • Pencil Stache
  • ****
  • Posts: 787
  • Location: PNW
Re: Distancing myself from Ramseyism.
« Reply #188 on: July 02, 2017, 08:02:19 PM »
I too teach the class.  I will be doing my 3rd time through in the fall and look forward to it.  I agree with the positive sentiment in this thread.  Yes it is not the most ideal plan on the world when you compare to the theories of mustachianism,  but in my opinion it is good for 90%+ of America and if you follow the plan it is nearly impossible to screw up.  I appreciate seeing my classes eyes open up when they put together their budgets for the first time!  We spend how much going out?! 

nottoolatetostart

  • Bristles
  • ***
  • Posts: 424
Re: Distancing myself from Ramseyism.
« Reply #189 on: July 03, 2017, 03:34:06 AM »
I'm an engineer and normally think very logically. However, I don't mind the snowball approach unless you end up paying off tons of very low interest debt while paying minimums for a long period on very high interest debt. In most cases it won't matter much and the boost in enthusiasm many get seeing things paid off is real.

However, I would modify many things:
1. ALWAYS contribute up to the match.
2. Traditional instead of Roth in many situations
3. Max out retirement accounts if possible, even if that is more than 15% - then decide whether extra goes to the mortgage or taxable

Totally agree with your advice here. However, want to stress that I can think of 3 people (maybe 4) in my life right now where I would love for them to do the Ramsey program. Everything a lot of us know about what you mentiom above, more advanced info is over the heads of most of our friends and family. They don't contribute to 401k contributions now so foregoing it while they get out of debt is no problem.

I discovered Dave Ramsey in 2010 when I had $70+K in student loans. At the time, he had a paid forum for $89 a year (can't remember the figure but I think it also gave you access to his radio program to download commercial-free). I frequented that forum and learned so many tips about frugality from it. There were tons of people on it. I whole heartedly credit Dave Ramsey for getting us to a point where we had a good bedrock. We never stopped contributing to 401k (our employers' contributions were 10k a year if we at least did basic match) while we were paying off my student loans. Took a little over a year to pay everything off. Discovered MMM in 2013 and now we are months away from being retired or semi-retired at 37 yrs old.

The bulk of the traffic at his forum is on getting out of debt. Some of these more complicated topics were not as heavily discussed. Again, I wish some of our friends and family would do his program, just to get started. I love the simplicity of it and the tangible goals.

prognastat

  • Pencil Stache
  • ****
  • Posts: 797
  • Location: Texas
Re: Distancing myself from Ramseyism.
« Reply #190 on: July 03, 2017, 07:19:19 AM »
I'm an engineer and normally think very logically. However, I don't mind the snowball approach unless you end up paying off tons of very low interest debt while paying minimums for a long period on very high interest debt. In most cases it won't matter much and the boost in enthusiasm many get seeing things paid off is real.

However, I would modify many things:
1. ALWAYS contribute up to the match.
2. Traditional instead of Roth in many situations
3. Max out retirement accounts if possible, even if that is more than 15% - then decide whether extra goes to the mortgage or taxable

Totally agree with your advice here. However, want to stress that I can think of 3 people (maybe 4) in my life right now where I would love for them to do the Ramsey program. Everything a lot of us know about what you mentiom above, more advanced info is over the heads of most of our friends and family. They don't contribute to 401k contributions now so foregoing it while they get out of debt is no problem.

I discovered Dave Ramsey in 2010 when I had $70+K in student loans. At the time, he had a paid forum for $89 a year (can't remember the figure but I think it also gave you access to his radio program to download commercial-free). I frequented that forum and learned so many tips about frugality from it. There were tons of people on it. I whole heartedly credit Dave Ramsey for getting us to a point where we had a good bedrock. We never stopped contributing to 401k (our employers' contributions were 10k a year if we at least did basic match) while we were paying off my student loans. Took a little over a year to pay everything off. Discovered MMM in 2013 and now we are months away from being retired or semi-retired at 37 yrs old.

The bulk of the traffic at his forum is on getting out of debt. Some of these more complicated topics were not as heavily discussed. Again, I wish some of our friends and family would do his program, just to get started. I love the simplicity of it and the tangible goals.

This was my hope for a family member and after years there was finally an opening to where they seemed open to changing their financial ways. I gifted them the classes right away and at least they attended them, however just a few months later the plan was "on hold" and has been ever since. This was our last ditch attempt after many others. I was hoping through the fact that it was relatively simple, was done in a group so there could be some peer pressure plus support and that there was a religious aspect to it with it being taught in church that these might be enough to actually help put it all in to practice unlike the many times my wife and I tried to help and give advice ourselves that fell on deaf ears.

At this point we are done trying, which is what my wife and I agreed on when we paid for the class.

Dicey

  • Walrus Stache
  • *******
  • Posts: 6531
  • Age: 59
  • Location: NorCal
Re: Distancing myself from Ramseyism.
« Reply #191 on: July 03, 2017, 08:25:16 AM »
This was my hope for a family member and after years there was finally an opening to where they seemed open to changing their financial ways. I gifted them the classes right away and at least they attended them, however just a few months later the plan was "on hold" and has been ever since. This was our last ditch attempt after many others. I was hoping through the fact that it was relatively simple, was done in a group so there could be some peer pressure plus support and that there was a religious aspect to it with it being taught in church that these might be enough to actually help put it all in to practice unlike the many times my wife and I tried to help and give advice ourselves that fell on deaf ears.

At this point we are done trying, which is what my wife and I agreed on when we paid for the class.
Good for you! I'm sorry it didn't "take", but at least you have the peace of mind that you tried. This is the exact reason that I questioned that millions have been helped by DR. No doubt that millions have heard DR's program, but too many are unwilling to take even the smallest of "baby steps."
I did it! I have a journal!
A Lot Like This
And hell yes, I am still moving confidently in the direction of my dreams...

prognastat

  • Pencil Stache
  • ****
  • Posts: 797
  • Location: Texas
Re: Distancing myself from Ramseyism.
« Reply #192 on: July 03, 2017, 08:32:21 AM »
This was my hope for a family member and after years there was finally an opening to where they seemed open to changing their financial ways. I gifted them the classes right away and at least they attended them, however just a few months later the plan was "on hold" and has been ever since. This was our last ditch attempt after many others. I was hoping through the fact that it was relatively simple, was done in a group so there could be some peer pressure plus support and that there was a religious aspect to it with it being taught in church that these might be enough to actually help put it all in to practice unlike the many times my wife and I tried to help and give advice ourselves that fell on deaf ears.

At this point we are done trying, which is what my wife and I agreed on when we paid for the class.
Good for you! I'm sorry it didn't "take", but at least you have the peace of mind that you tried. This is the exact reason that I questioned that millions have been helped by DR. No doubt that millions have heard DR's program, but too many are unwilling to take even the smallest of "baby steps."

I'm sure a large portion if not a majority of people that attend the class probably end up slipping in to old habits. Still great of course for those that actually turn their lives around, but changing bad habits can be extremely hard to achieve permanently. I'd say it's very similar to diets, most of them end up failing.

jmecklenborg

  • Stubble
  • **
  • Posts: 123
Re: Distancing myself from Ramseyism.
« Reply #193 on: July 03, 2017, 09:51:54 AM »
I got out of more than $25,000 in credit card debt thanks to Dave but I never cut up or closed any of the accounts.  The cards have been in my safe for about five years.  They're expired now so I don't think the cards work but the accounts are still open.  It took several years but I finally stopped getting credit card offers! 

Gronnie

  • Stubble
  • **
  • Posts: 141
  • Age: 31
  • Location: Midwest
Re: Distancing myself from Ramseyism.
« Reply #194 on: July 03, 2017, 10:35:01 AM »
I got out of more than $25,000 in credit card debt thanks to Dave but I never cut up or closed any of the accounts.  The cards have been in my safe for about five years.  They're expired now so I don't think the cards work but the accounts are still open.  It took several years but I finally stopped getting credit card offers!

Do you check your credit report ever? I would be willing to bet dollars to donuts that they are most likely closed for inactivity.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1179
Re: Distancing myself from Ramseyism.
« Reply #195 on: July 06, 2017, 01:21:10 PM »
I experimented with the DR thing by giving up my credit cards during the six weeks of Lent (I was only allowed to use my credit card in the presence of my wife).

I actually really like it. I felt as though I was moving toward freedom from these minor debts. Unfortunately, I do carry a balance of low-interest credit card debt. After balance transfer fees (which I use periodically to roll it forward), the effective interest rate is between 2%-4%. The sum of this debt is about 10% of what I have invested inthe stock market in various taxable accounts, so I've "lapped" it over the past two years. Perhaps I should count my winnings and take these off the table, but I truly believe staying in the market is going to be better long term than  paying off these debts.

OurTown

  • Pencil Stache
  • ****
  • Posts: 534
  • Age: 48
  • Location: Tennessee
Re: Distancing myself from Ramseyism.
« Reply #196 on: July 06, 2017, 02:55:08 PM »
I don't carry any cc balances.  Unlike the Ramsey purists, however, I do have a handful of cards that I use for stuff I would buy anyway, like gas & groceries, just to get the little 3% or 4% bonus.

marty998

  • Magnum Stache
  • ******
  • Posts: 4950
  • Location: Sydney, Oz
Re: Distancing myself from Ramseyism.
« Reply #197 on: July 06, 2017, 03:30:04 PM »
I got out of more than $25,000 in credit card debt thanks to Dave but I never cut up or closed any of the accounts.  The cards have been in my safe for about five years.  They're expired now so I don't think the cards work but the accounts are still open.  It took several years but I finally stopped getting credit card offers!

Do you check your credit report ever? I would be willing to bet dollars to donuts that they are most likely closed for inactivity.

Do you not get charged annual fees for the credit cards?

Virtus

  • Stubble
  • **
  • Posts: 211
Re: Distancing myself from Ramseyism.
« Reply #198 on: July 06, 2017, 04:04:53 PM »

Its funny how people criticize Dave for his investing advice and go as far as calling it "dangerous".  Now I don't have the time or resources to run an analysis on all the mutual funds that have existed over the last 100 years which would eliminate things like survivor bias; I can however, run a quick sample that should give us some general idea if Dave advice is "dangerous".

I wouldn't use the term "dangerous."  More like "an expensive example of ignorance."   Survivorship bias in active mutual funds is huge.  It is a serious and fundamental mistake to ignore it.   And you're right, it is fairly hard to study, because you need access to the CRSP database.  But others have done those studies, for example, this one from Vanguard:

https://personal.vanguard.com/pdf/s362.pdf

Bottom line, over the last 20 years, the vast majority of actively managed funds (79%) either died, were merged into other funds, and then underpeformed, or just flat underperformed.   

So, is it "dangerous" advice to recommend something that almost always underperforms?  No, just an expensive lesson in ignorance.

Expensive you say! Maybe say I!

From the Vanguard link 30% of the funds in the study out-performed while 70% under-performed which is in line with other literature I have read on the subject. I would hardly say that 70% under-performing the market is equivalent to "almost always". If you were going to close your eyes and throw a dart to select your mutual fund, you have a 30% chance of making more money than indexing. Think about what your odds would be if you performed research on the fund manager, institution, and fund performance.

Again, I am not advocating actively managed funds, I like the simplicity of index funds.

Read "A Random Walk Down Wall Street".  Bottom line is that you can't predict the funds that will outperform the S&P 500 in advance.  If you did research and picked the guys who beat the market in the past, they are actually more likely to underperform in the future.

Life is simple.  Stick to Vanguard index funds with low fees.  Leave the gambling to your trips to the casino.

I have read A Random Walk Down Wall Street, and its analysis on predicting which funds will outperform the S&P 500 is incomplete. Read The Intelligent Investor, bottom line is that there are ways to gain an indication of which funds will out-perform that market.

jmecklenborg

  • Stubble
  • **
  • Posts: 123
Re: Distancing myself from Ramseyism.
« Reply #199 on: July 06, 2017, 04:08:08 PM »
Do you check your credit report ever? I would be willing to bet dollars to donuts that they are most likely closed for inactivity.

No hadn't.  I did it for the first time ever...at one time I had 5 credit cards.  Three of them appear to have been closed.  I couldn't check back further than two years but this one is still alive and waiting for a spontaneous tropical cruise:


Also, I had no recollection of the purchase, but I did apparently use this card one time in 2016 for an online purchase.  I usually use a prepaid debit card for online purchases but I assume that the bank wasn't letting me transfer money to it for whatever reason and that's why I used this credit card:



I attempted to go all of 2017 without using a debit card (cash for every single purchase) but I have used a debit card about five times because I had some stuff come up that I didn't anticipate (getting an apartment ready for a tenant on short notice, for example).  I have a tipped second job and I collect some rent in cash so I am able to get pretty much everything including gasoline with cash and usually deposit some cash each week. 

To the points people -- Dave is completely correct in asserting that you aren't going to get rich off of points and you will spend more money overall in your pursuit of the points.  People justify it by saying they were going to "buy something anyway".  No, you probably weren't. 

To me paying cash is about slowing down and getting deliberate.  I'm old enough to remember when there were hardly an ATM machines and people had to get cash for the weekend from the bank on Friday.  That kept people from overspending.  If you were out of cash, you couldn't go to a restaurant on Sunday night.