Author Topic: Distancing myself from Ramseyism.  (Read 38542 times)

Lmoot

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Re: Distancing myself from Ramseyism.
« Reply #200 on: July 06, 2017, 07:39:58 PM »
I'm not religious (Don't call myself atheist, I just have my own beliefs)-

For the record -'atheist' just means 'not religious'. That's all. You're free to not call yourself one, but you are one by your own words.

Don't mean to derail the topic, but since Ramsey uses religion as part of his hook, I thought I'd mention this misconception people often have.

An atheist could be a nice, generous liberal, or angry, greedy libertarian. They might hate all religions, or not care about the subject at all. They could be highly logical/rational, or they could be a nutty conspiracy theorist. All they have to do is not have any religion/dogma or God they believe in. They could say they just don't know if a God or Gods exist (agnostic = no knowledge), or say the overwhelming evidence shows that any God is as fictional as Santa Claus or Batman.

Every time I've met someone who is super impressed by Ramsey, they're also very religious, very dumb with money, and very low-information, emotional deciders -meaning they seem to believe many important things in their lives based on whatever they feel they want to be true. People like Ramsey know this and abuse it as 'voices of authority' -same as most churches and cults that make sure to start right at birth.

I know this is way off topic, so apologies in advance, but I feel the need to clarify this.

'Atheist' does not mean 'not religious,' it mean a non-theist.
Many people are clearly religious while also being atheists.
Many Buddhists, Jains, Raelians, and Unitarian Universalists for example.

An atheist does not hold a belief that a god exists, that is all.
Any belief of dogma or religion aside from that is a whole other issue.


(yeah, I know, I'm pedantic... sorry)

I would also add that not all theists  follow a religion. They may choose to believe in or honor a god or gods in their own personal way. So to summarize, they are atheistic religions, and there are non-religious theists.

jlcnuke

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Re: Distancing myself from Ramseyism.
« Reply #201 on: July 07, 2017, 04:54:54 AM »
Do you check your credit report ever? I would be willing to bet dollars to donuts that they are most likely closed for inactivity.


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.

Sorry, but your assertion that you can tell what I would or would not spend my money on is absurd. You can make that assumption, but it doesn't make it true.  I may not get rich off the hundreds of dollar/year I get in reward points or with the savings I get from free stuff from my cards (above and beyond the annual fees), but saving money is saving money and I tend to think that saving MORE money is better than not saving more money. Maybe "you would probably spend more if not using cash" but that doesn't equate to "everyone" would spend more if not using cash.

p.s. even back when ATMs weren't common, people were still going out to eat on Sunday night without going to a bank on Friday as credit cards have been commonplace for the past 50+ years.
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neverrun

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Re: Distancing myself from Ramseyism.
« Reply #202 on: July 07, 2017, 06:12:19 AM »
Do you check your credit report ever? I would be willing to bet dollars to donuts that they are most likely closed for inactivity.


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.

Sorry, but your assertion that you can tell what I would or would not spend my money on is absurd. You can make that assumption, but it doesn't make it true.  I may not get rich off the hundreds of dollar/year I get in reward points or with the savings I get from free stuff from my cards (above and beyond the annual fees), but saving money is saving money and I tend to think that saving MORE money is better than not saving more money. Maybe "you would probably spend more if not using cash" but that doesn't equate to "everyone" would spend more if not using cash.

p.s. even back when ATMs weren't common, people were still going out to eat on Sunday night without going to a bank on Friday as credit cards have been commonplace for the past 50+ years.

Or gasp instead of putting it on a credit card writing a check when they couldn't get to the bank on time.

Actually thank god for the ATM, it allows me to keep my bank as USAA and still be able to get cash, the only time I stand in line at a bank for is when I go to my local credit union where I keep an account to change out my $20s I took from the ATM for $100s when I'm traveling to a place for work that basically requires it.  (a lot of the developing world gives a better exchange rate for $100s and those $100s need to be new and pristine.)

I know Dave says credit card studies show a person spends 18% more on a credit card, but honestly I'm good with my overall spending, maybe if I used all cash I'd buy foldger's instead of a local coffee brand but maybe not.  And I guess it doesn't really matter to me the 1-3 times I fill up my gas tank what the price of gas actually is.  But I fill the tank when I need it because I've chosen to drive my car somewhere.

Honestly to me the level of deliberate spending that you are advocating for is getting into the far end of diminishing returns.  I'm personally not worried about complete optimization of say APY on cash savings nor am I interested in getting all unnecessary spending out of my life, it's just not worth the mental energy for me.  I admit I use credit cards for convenience, they are smaller than cash and 2 cards plus my drivers license fit in the case of my cell phone so I don't have to carry a lot when I'm out and about.  Plus for budgeting purposes I can use specific cards for specific purposes to make tracking easier.  If I get rewards from that it's a bonus.   

fuzzy math

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Re: Distancing myself from Ramseyism.
« Reply #203 on: July 07, 2017, 08:09:02 AM »
Surprised to have found so many stock market statistics in this thread. Enjoyed it immensely.

I think DR talks about debt as a diet _ you dont have to live (eat) that way forever, but yes at first you are giving up something major for the good of the cause and it's going to feel pretty bad. For most success stories the overall good will outweigh the chance that the missed investments might have allowed that person to fail. When I was in debt and investing, there was no real plan. That extra $100 a month in my 401k certainly didn't make me rich, and it confused my already complicated finances enough that I couldn't get my shit together. I'd charge a bunch one month, feel bad and pay off a lot the next, then promptly run out of money and have to charge it up again the following month. It's like binge eating. In that situation having someone tell you you can't have anything is a lot easier than telling yourself you will moderate it on your own when you clearly can't.

If MMM had been around in the mid 2000s when I needed the help, would I have been successful? Id like to think so but his overall advice I don't think dumbed it down enough like DR does. Would I have been able to see that I too could retire early? Would I have been able to put together a stepped plan? I might have gotten too overwhelmed at that point. DR was just enough spoon feeding to get where I needed, then MMM was like the college course version.
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jmecklenborg

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Re: Distancing myself from Ramseyism.
« Reply #204 on: July 07, 2017, 10:06:21 AM »


Sorry, but your assertion that you can tell what I would or would not spend my money on is absurd. You can make that assumption


I don't think there's any doubt that credit cards (and debit cards, even) cause people to spend more in a consumer situation.  If you pay for a one-time medical procedure with a credit card (like an MRI or expensive dental work, for example), no, you're not going to spend more.  But such situations only come about a few times per year.   

My company's owner runs virtually every business expense through his personal Amex card and earns tens if not hundreds of thousands of dollars per year in points.  But that is not consumer spending. 

« Last Edit: July 07, 2017, 12:08:08 PM by jmecklenborg »

jlcnuke

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Re: Distancing myself from Ramseyism.
« Reply #205 on: July 07, 2017, 10:32:28 AM »


Sorry, but your assertion that you can tell what I would or would not spend my money on is absurd. You can make that assumption


I don't there's any doubt that credit cards (and debit cards, even) cause people to spend more in a consumer situation.  If you pay for a one-time medical procedure with a credit card (like an MRI or expensive dental work, for example), no, you're not going to spend more.  But such situations only come about a few times per year.   

My company's owner runs virtually every business expense through his personal Amex card and earns tens if not hundreds of thousands of dollars per year in points.  But that is not consumer spending.
Studies have shown that using credit cards results in "the average" person spending more. However, not everyone is "the average" person. My bills are paid automatically. My savings are set up to automatically come out. The remainder of my income is what I plan to spend. As such, if I don't hear go into debt (which I haven't), then I'm not spending more than planned, regardless of whether I pay cash or pay off the charges with the cash. The later just happens to provide a better incentive by returning some of my spending and providing the other benefits associated with using credit over cash.

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englishteacheralex

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Re: Distancing myself from Ramseyism.
« Reply #206 on: July 07, 2017, 11:03:26 AM »
Ah the Dave Ramsey credit card advice, closely followed by the Dave Ramsey cash envelope system.

Back when I took the Financial Peace University course in 2010, I sadly cut up my credit cards even though I had never carried a balance. He explained that everyone spends more money with credit cards because of the psychology of getting to swipe a card instead of physically taking out cash. Ouch! Cash! So hard to spend! It's not like I haven't been a tightwad my whole life.<---sarcasm

So I dutifully got rid of my credit cards, doled out money into my envelopes, and kept them in my purse.

Took my friend's two-year-old daughter to a pumpkin patch. She found the envelopes in my purse, which was next to her carseat as we drove. Took the envelopes out with the car window open, opened them up, and out flew all my grocery money for the month. I only discovered it when I arrived at the pumpkin patch.

Gah! STUPID ENVELOPES!

Hastily ordered a good travel rewards card and went back to my credit cards.  I live in Hawaii and travel points have helped me see my family for a lot less money over the past seven years. I haven't "gotten rich" off them, but they are a wonderful part of any tightwad's frugality plan.

And here's the deal with the psychology of cash: as technology has evolved, for people like me who track every expense to the penny electronically, paying with cash tends to make me spend more. Cash feels easy-come-easy-go to me at this point. It isn't tracked on Mint and when I have some in my wallet I'm much more likely to buy dumb stuff at gas stations and vending machines because neither my husband or I will be reminded of the expense when we look online. It will just be an ATM visit with no budget line item attached. Meanwhile my credit card is linked to budget categories that decrease as the month go on--it's a powerful visual that tightens my wad up like mad.

Bottom line: Dave Ramsey is fine and very helpful, but he also paints with broad strokes and spouts generalizations as though they are 100% true all the time, for everyone. This is necessary for his product, which is a mass-market approach to money. It's fine! But it's also possible to deviate and still be good with money.

Many, many tightwads who FIRE are devotees of credit cards in the same way that I am. If you have the financial discipline, credit cards can be amazing.

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Psychstache

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Re: Distancing myself from Ramseyism.
« Reply #207 on: July 07, 2017, 12:32:23 PM »


Sorry, but your assertion that you can tell what I would or would not spend my money on is absurd. You can make that assumption


I don't there's any doubt that credit cards (and debit cards, even) cause people to spend more in a consumer situation.  If you pay for a one-time medical procedure with a credit card (like an MRI or expensive dental work, for example), no, you're not going to spend more.  But such situations only come about a few times per year.   

My company's owner runs virtually every business expense through his personal Amex card and earns tens if not hundreds of thousands of dollars per year in points.  But that is not consumer spending.
I think the studies that Dave references are dated and don't account for people like me that never really adulted with cash (had direct deposit since I had my 1st job at 16)

I'll use myself as an example with the most common shopping experience there is: grocery shopping.

Once a week, my wife and I go through the pantry and fridge and look for Staples that are low/empty and add them to the list. Then we meal plan for the week and add ingredients need for those meals to the list. Then, we get on the app for our grocer and add any coupons for things we have in the list. Finally, we go to the grocery store and get the things on the list.

How are we overpaying? Where does the method of payment create any effect on our purchase?

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prognastat

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Re: Distancing myself from Ramseyism.
« Reply #208 on: July 07, 2017, 12:43:24 PM »
And here's the deal with the psychology of cash: as technology has evolved, for people like me who track every expense to the penny electronically, paying with cash tends to make me spend more. Cash feels easy-come-easy-go to me at this point. It isn't tracked on Mint and when I have some in my wallet I'm much more likely to buy dumb stuff at gas stations and vending machines because neither my husband or I will be reminded of the expense when we look online. It will just be an ATM visit with no budget line item attached. Meanwhile my credit card is linked to budget categories that decrease as the month go on--it's a powerful visual that tightens my wad up like mad.

I think there is a generational gap here.

I feel the same way and I am far better at it when I can track it all electronically and see where money is going as opposed to having it in cash where it can go anywhere.

I think a big part of this might be being younger and having grown up with always having a debit/credit card and not really handling cash for most my life.

nara

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Re: Distancing myself from Ramseyism.
« Reply #209 on: July 07, 2017, 06:45:40 PM »
Just another opportunist preying on those who are in debt and desperate. He sells his cookie cutter approach and people go along with it because it's dumb downed financial advice. It's easier to tell people to pay off their lowest debts first to celebrate the win than to explain to them about interest rates and good debt versus bad debt.

jmecklenborg

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Re: Distancing myself from Ramseyism.
« Reply #210 on: July 08, 2017, 02:10:26 AM »
Took my friend's two-year-old daughter to a pumpkin patch. She found the envelopes in my purse, which was next to her carseat as we drove. Took the envelopes out with the car window open, opened them up, and out flew all my grocery money for the month. I only discovered it when I arrived at the pumpkin patch.

Gah! STUPID ENVELOPES!


Um, okay.  No reason why a kid couldn't have pulled a credit card out of the wallet and flung it out the window where it belongs.  I have delivered pizzas for roughly 1,300 10-hour shifts.  I have never lost any physical cash that I know of despite handling hundreds of dollars each of those nights.  One night in 2010 or 2011 another driver asked me to borrow $40 that he "lost somewhere out on the road".  Two days later I heard that he died of a heroin overdose.  So those two $20 bills might have killed him and obviously I wasn't paid back. 

It seems like a lot of people on here want to think they are tightwads but they really aren't.  If you carry a credit card at all times it seems like you expect unexpected expenses to appear out of nowhere.  You might happen upon a "deal", for example.  Fact is that unexpected expenses rarely appear if your life is organized and "deals" are rarely actually deals. 

neverrun

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Re: Distancing myself from Ramseyism.
« Reply #211 on: July 08, 2017, 05:16:44 AM »
Took my friend's two-year-old daughter to a pumpkin patch. She found the envelopes in my purse, which was next to her carseat as we drove. Took the envelopes out with the car window open, opened them up, and out flew all my grocery money for the month. I only discovered it when I arrived at the pumpkin patch.

Gah! STUPID ENVELOPES!


Um, okay.  No reason why a kid couldn't have pulled a credit card out of the wallet and flung it out the window where it belongs.  I have delivered pizzas for roughly 1,300 10-hour shifts.  I have never lost any physical cash that I know of despite handling hundreds of dollars each of those nights.  One night in 2010 or 2011 another driver asked me to borrow $40 that he "lost somewhere out on the road".  Two days later I heard that he died of a heroin overdose.  So those two $20 bills might have killed him and obviously I wasn't paid back. 

It seems like a lot of people on here want to think they are tightwads but they really aren't.  If you carry a credit card at all times it seems like you expect unexpected expenses to appear out of nowhere.  You might happen upon a "deal", for example.  Fact is that unexpected expenses rarely appear if your life is organized and "deals" are rarely actually deals.

I just noticed this thread may have brought you to the MMM community, Welcome!  Please, since you are hear go check out the rest of the forum you will find many threads talking about buy nothing, eat everything in your fridge and what not especially in the "throw down the gauntlet" section.  In general you won't find people talking about deals unless it is a great deal on an airline flight to Peru.  Instead they see a deal and wonder but why would I need that at all and what consumer sucker is going to buy that but hopefully that consumer sucker will so that my VTSMX goes up.  You also with find the great debate of pay off your house vs. investing everything extra.

Let me think about my last unexpected expense.  Oh yeah that was lunch a couple of days ago at work.  I had brought my lunch in but it was a frozen homemade burrito; I unexpected got roped into a surveillance (I'm in Law enforcement) so I ended up grabbing a sandwich from the Starbucks I was parked close to for the rest of the afternoon.  If I had known when I left for work I would have packed a PB&J instead.  Of course now this post reminds me that I need to restock my work car with "emergency" rations but sometimes you just get tired of Granola/meal replacement bars.   

FrenchStache

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Re: Distancing myself from Ramseyism.
« Reply #212 on: July 08, 2017, 07:31:06 AM »
Like many people mention on here, he was a great stepping stone in the beginning.  After we got married my wife and I started on the DR plan to get rid of our debt, a bit of credit card and car loans.  It taught us to live within our means even though we did not think we were extravagant.  It's great for people to gain awareness of where their money goes because as you guys know people have no freaking clue what they are doing with their paychecks and then some.  We ended up paying off all our debt in roughly two years if I remember correctly.  It's a great starting point for people that want to get organized. 

I even got in touch with a financial ELP but that did not turn out so well.  I don't think we stayed with him a full year.  I turned sour when I started asking simple questions about expense ratios on the american funds we were invested in.  Simple information that I was starting to learn from the FI community.  That's when I just pulled out of there and took my money to Vanguard and Betterment.

Would the average Joe greatly benefit from simply following his plan?  Absolutely, meaning pay attention to what you spend, invest for your future, getting your financial life in order etc.  But the advice falls short when you want to optimize, such as increasing your savings rate, decreasing your expense ratios, investing in real estate and advanced retirement strategies etc.

Like someone said on here before, I see it as basically graduating from the basics (not so basic for most consumers unfortunately) and now I met the FI community which has put our finances into overdrive!
 

englishteacheralex

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Re: Distancing myself from Ramseyism.
« Reply #213 on: July 08, 2017, 10:14:05 AM »
Le sigh.

Somebody's been brainwashed. No, sorry, Dave is wrong about credit cards for people who have financial discipline. He's absolutely right for the vast majority of the population. But this community is generally a few steps above the basics of avoiding debt and saving 15% for retirement.

Here's a personal rundown/case study of why credit cards are NOT always for people who think they'll have unexpected expenses:

I've never had a balance on my credit cards. Ever. My husband and I have over 20k in an emergency fund--if an unexpected expense comes up, we can probably cover it. Our total net worth is around 250k, which really isn't much considering we are in our mid thirties (around here 250k is chump change) but we met and got married only five years ago and both of us are public servants working with relatively small salaries. We also have a goal of radical generosity rather than retiring early, so we save 20%, give away 20%, and live on the rest (living on 60% of our income is weak sauce but we have two kids in daycare right now).

We have two cars (kinda lame, but with two kids and two jobs it's necessary). Both cost under $5k. Both were purchased via Craigslist with cash. We own a condo that is 850 square feet--cheaper for utilities and not so much space to furnish. We've been religiously tracking our spending since 2009, and I can tell you to the penny how much we spend on every line item per month and per year (hint: except for childcare, most categories are pretty bare bones). I can also project out what we'll be spending in the future.

So most of our expenses are not unexpected at all. In fact, we have sinking funds for predictable but irregular expenses such as medical bills and car repairs.

Look, credit cards can be absolutely ruinous and it's true that the majority of people should avoid them. The system benefits people like me precisely because most people wind up paying interest and fees, which subsidizes all the great perks the cards offer. I get that. After actually teaching the Dave Ramsey class and talking to a group of people about their financial situation over the course of several weeks, I was clued in to the fact that compared to the majority of the population, my husband and I are freaks. So I don't even talk about our credit card points strategies to most people because I think gaming the system is just not going to happen for them and they'll probably be sucked into the slave factory of consumer debt.

BUT this is a forum for freaks like my husband and me. There are lots of people here way freakier than us. And we can handle the "pull" of the credit card. Trust me.

One reference is a great financial blog called www.frugalwoods.com. Wonderful, well-spoken freaks who use credit cards exactly the same way we do.

Lastly: if that toddler had thrown out my credit cards I would have just cancelled them and not been out the $150/month of grocery money that used to be my grocery budget in 2009. Sigh. The grocery budget of a single lady. Wish I could get back to that level of thrift...

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PizzaSteve

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Re: Distancing myself from Ramseyism.
« Reply #214 on: July 09, 2017, 09:34:16 AM »
...Read The Intelligent Investor, bottom line is that there are ways to gain an indication of which funds will out-perform that market.
Suprised no one called you out on this.  This is just the sort of nonsense Dave's vampires feed on to suck fees from victims.  'How can you ever outperform, if you don't have an 'expert who knows how to use data and research to pick the winners?'

The problem is that you blithely brush of the multiple sources of peer reviewed analysis which clearly indicates that no model successfully predicts the minority of funds that will slightly outperform.  Yet the higher fees are a factual given.

Suggesting to this forum that you believe Dave's advice to the typical Peace Univ student... that they seek out a bloodsucking money vampire data expert/superior fund picking advisor.. is excellent advice for Dave to give is ridiculous.  Just because a few industry insiders write an article that effectively says  active managers can occasionally deliver, does not make Daves advice good advice.
« Last Edit: July 20, 2017, 07:29:20 AM by PizzaSteve »
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jlcnuke

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Re: Distancing myself from Ramseyism.
« Reply #215 on: July 09, 2017, 05:02:07 PM »
Took my friend's two-year-old daughter to a pumpkin patch. She found the envelopes in my purse, which was next to her carseat as we drove. Took the envelopes out with the car window open, opened them up, and out flew all my grocery money for the month. I only discovered it when I arrived at the pumpkin patch.

Gah! STUPID ENVELOPES!


Um, okay.  No reason why a kid couldn't have pulled a credit card out of the wallet and flung it out the window where it belongs.  I have delivered pizzas for roughly 1,300 10-hour shifts.  I have never lost any physical cash that I know of despite handling hundreds of dollars each of those nights.  One night in 2010 or 2011 another driver asked me to borrow $40 that he "lost somewhere out on the road".  Two days later I heard that he died of a heroin overdose.  So those two $20 bills might have killed him and obviously I wasn't paid back. 

It seems like a lot of people on here want to think they are tightwads but they really aren't.  If you carry a credit card at all times it seems like you expect unexpected expenses to appear out of nowhere.  You might happen upon a "deal", for example.  Fact is that unexpected expenses rarely appear if your life is organized and "deals" are rarely actually deals.

I carry a credit card at all times because eventually I'm going to use it and it's more convenient to leave it in my wallet than to keep taking it out and putting it back in again. That has nothing to do with "unexpected expenses", it has to do with not wasting my time or energy moving it for no good reason. The fact is, if two people spend the identical amount of money on the identical things, the one that used cash has less money in the end than the one that used a cash-back credit card. $1000 in spending with $10 cash back = -$990 net vs $1000 in spending with $0 cash back = -$1000 net. The math is really that simple for anyone who has the discipline to not blow money they didn't plan on spending. Fortunately for credit card companies, the "average" consumer doesn't have that discipline. Fortunate for those of us who aren't shit with our money, the credit card companies can offer us "free" stuff because those who suck with money are paying for it for us.
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Virtus

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Re: Distancing myself from Ramseyism.
« Reply #216 on: July 11, 2017, 05:56:58 PM »
...Read The Intelligent Investor, bottom line is that there are ways to gain an indication of which funds will out-perform that market.
Suprised no one called you out on this.  This is just the sort of nonsense Dave's vampires feed on to suck fees from victims.  'How can you ever outperform, if you don't have an 'expert who knows how to use data and research to pick the winners?'

The problem is that you blithely brush of the multiple sources of peer reviewed analysis which clearly indicates that no model successfully predicts the minority of funds that will slightly outperform.  Yet the higher fees are a factual given.

Suggesting Dave's advice to the typical Peace Univ student... to seek an advisor.. is good advice because the industry thinks it can deliver, is to me poor advice.

I am well aware of the view points on both sides of this issue. Like I said in my original comments many of the peer reviewed studies have major holes. For example, they only track the funds, not fund managers. The average for managed funds is lower than index funds, true but since when is average the target? The average wage in the U.S. is $56k should we aim for that or try to out-perform? 

I honestly don't think suggesting actively managed or passive products is inherently bad advice. I have seen bad passive products and good actively managed products.

For example, if you could invest in VPMAX would you? I would.

FYI: I primarily invest in low cost index funds.

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Re: Distancing myself from Ramseyism.
« Reply #217 on: July 11, 2017, 06:26:39 PM »
Its funny to me the parallel discussions in this thread.

Anti-Ramsey:
Credit cards - use them, you can beat the average which is to spend more
Active managed funds - don't use them, you cannot beat the average

Pro-Ramsey:
Credit cards - don't use them, on average they cause bad behavior
Active managed funds - use them, you should strive to beat the average

You have to admit with credit cards though there is not much upside potential. Take MMM's 2016 budget. If he used a credit card on everything he could (some thing like health insurance and utilities normally charge you if you pay with a credit card) he would only have made $291 in cash back rewards (Assumes a 1.5% reward card on all purchases) or $24.25 per month. At most using a credit card for personal expenses provides a few extra bucks per month. It can become a little bit of a bigger deal if you use it for work transactions.

Disclaimer: I do have a credit card

fuzzy math

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Re: Distancing myself from Ramseyism.
« Reply #218 on: July 11, 2017, 09:49:40 PM »


You have to admit with credit cards though there is not much upside potential. Take MMM's 2016 budget. If he used a credit card on everything he could (some thing like health insurance and utilities normally charge you if you pay with a credit card) he would only have made $291 in cash back rewards (Assumes a 1.5% reward card on all purchases) or $24.25 per month. At most using a credit card for personal expenses provides a few extra bucks per month. It can become a little bit of a bigger deal if you use it for work transactions.

Disclaimer: I do have a credit card


MMM spent another $60k listed as business expenses. If those all went on cards he made a lot more. And I hope everyone has a better than 1.5% reward card. 2% is the new minimum, and there are lots with categories that hit 5%
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Lmoot

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Re: Distancing myself from Ramseyism.
« Reply #219 on: July 12, 2017, 12:38:43 AM »


You have to admit with credit cards though there is not much upside potential. Take MMM's 2016 budget. If he used a credit card on everything he could (some thing like health insurance and utilities normally charge you if you pay with a credit card) he would only have made $291 in cash back rewards (Assumes a 1.5% reward card on all purchases) or $24.25 per month. At most using a credit card for personal expenses provides a few extra bucks per month. It can become a little bit of a bigger deal if you use it for work transactions.

Disclaimer: I do have a credit card


MMM spent another $60k listed as business expenses. If those all went on cards he made a lot more. And I hope everyone has a better than 1.5% reward card. 2% is the new minimum, and there are lots with categories that hit 5%

 Also the ability to dispute charges before funds are taken out, is a pretty awesome benefit.  Rewards paid for half of a $1200 plane ticket this year, and I will be taking out another credit card with a large sign on bonus and end of year reward matching, which will pay for the next $1000+ trip in full.

 I have borrowed well over 50 grand at 0% interest, for up to two years at a time, through credit cards. Alot of the time I had the cash, but I left it in high yields savings accounts, and even CDs earning over 1%; add that to over 1% in rewards. It costs money to borrow money, so the ability to borrow 10's of thousands at a time, at 0%, is a pretty big benefit.  Especially when you own a rental property that needs to be fixed up before it can be rented out, the perfect tenants waiting, and you don't have all of the cash. Had I not had access to thousands of free borrowing, I would've had to take out a HELOC at 3-5% interest + fees and increased risk attached to the property, or just miss out on 6+ months of rental income, at $250 more than rent prior to the fixes, (losing awesome potential renters), and continue paying nearly 3 times what I am now in insurance, on a vacant property, while I saved up $15-20k.
« Last Edit: July 12, 2017, 12:47:14 AM by Lmoot »

englishteacheralex

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Re: Distancing myself from Ramseyism.
« Reply #220 on: July 12, 2017, 01:12:47 AM »
The credit card thing is something I've thought about a lot in regards to Ramsey. Apparently he got badly burned by them. He always tells the story of how American Express called his wife and asked her how she could stay married to a guy who didn't pay his bills. So he hates them on a personal level, which has only been exacerbated by all the phone calls over the years of people reporting unlawful collection practices by credit cards.

He calls credit card companies snakes--is always saying don't play with snakes, you'll get bit.

That's one way of looking at them, and I have to agree that the financial services sector is in general guilty of unethical business practices. I'd love to see it regulated more, but I'm a fairly pinko lefty and I love government regulation, at least in theory.

That being said, I think there's another way of looking at credit cards, and that is as a legitimate business that exists to provide convenience to consumers. Credit cards provide relatively easy capital--something that greases the wheels of the economy. It truly is possible to use them responsibly in a way that does not cause them to be predatory.

We are not travel hacking nerds but even with our very low maintenance travel hacking strategy we have been able to score at least one free round-trip flight to the mainland from Hawaii every year since 2009. Usually we're able to get two round-trip flights. That is no small help to our budget, considering we have to purchase these tickets in order for our parents to see their grandchildren, and that the tickets are expensive as all get-out! Over the past 8 years, our credit cards have saved us around $13k in travel expenses. We have not paid a dime in interest but we have had to shell out about $100 in fees every year. Worth it!

This is done mostly by signing up for the bonus miles. Our spending truly is not impacted by our use of credit cards. It's all tracked very carefully on Mint and our budget is set in stone. There's no impulse buying just because it's on credit.

Anyway. Credit cards aren't making us rich but they do help us with our travel budget, which is an expense we view as necessary given our odd circumstances of living in Hawaii, far from family.
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mckaylabaloney

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Re: Distancing myself from Ramseyism.
« Reply #221 on: July 12, 2017, 08:48:38 AM »
You have to admit with credit cards though there is not much upside potential. . . . At most using a credit card for personal expenses provides a few extra bucks per month.

This is true only if you ignore the benefits of signup bonuses, which are often huge. By the end of this year, I'll have earned nearly 200K airline miles in signup bonuses alone. That's thousands of dollars saved on future flights.

ender

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Re: Distancing myself from Ramseyism.
« Reply #222 on: July 12, 2017, 08:59:33 AM »
I'm nearly 100% sure I would spend less if I used cash than credit cards.

How much less? That's really the question. If you aren't getting signup bonuses, it only takes a few increased purchases to negate all the benefit of cards. Course, if you are actively collecting signup bonuses then you can probably spend 20% more and still come out ahead...

marion10

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Re: Distancing myself from Ramseyism.
« Reply #223 on: July 12, 2017, 09:40:17 AM »
Besides the bonuses on credit cards, they offer a number of consumer protections. Extended warranties, being able to do a charge back if the product is defective, etc. It is very difficult to rent a car without a credit card (and I get insurance coverage as well), you end up with huge holds. In today's society, everyone should have one credit card for emergencies, etc.

boyerbt

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Re: Distancing myself from Ramseyism.
« Reply #224 on: July 12, 2017, 09:57:17 AM »

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. 
 

First: No one is saying that they got rich off of rewards points from credit cards! But free money is free money!

This has always been one of the sticking points for me with DR as he speaks out of both sides of his mouth with regards to "free money". He will rant and rave all day long that credit cards, especially for rewards/points, are terrible things that no one can correctly use but is okay with refinancing a mortgage in order to save $1,000-2,000 per year instead of just paying it down faster. How is this any different? No, I am not getting rich off of the points but I will gladly take an extra $1,000 or free flights off of signup perks for the gas, groceries, and ancillary items that I buy everyday anyways. And that is was DR says, typically once a week he discusses refinancing and says that it makes sense and "I would cash a $x,xxx check if you wrote me one" which is the same thing. But this does not fit into his mantra and so he has to stick with it.

No, my credit cards do not cause me to spend more. Like the majority of this forum, we are a group of people that understand math and track our spending. I am also in the younger demographic and therefore do not typically have cash on me so when I do, I consider this money spendable as I do not track cash outside my accounts. If you can't use credits cards responsibly and earn free flights, cash, or other perks stick with cash but for the rest of us on MMM I will continue to enjoy the benefits that my CC give me.

Lastly, I would like to point out that I listened to DR everyday while I was working a second job to pay off the $90k worth of student loan debt that I had. I wasn't in CC debt and still aren't. Throughout the entire process I continued to use my CC as this wasn't the issue. He helps people who need it, but once you've graduated beyond DR there is a lot more information and tools to use for financial information.

/end rant/
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PizzaSteve

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Re: Distancing myself from Ramseyism.
« Reply #225 on: July 12, 2017, 10:14:56 AM »
...Read The Intelligent Investor, bottom line is that there are ways to gain an indication of which funds will out-perform that market.
Suprised no one called you out on this.  This is just the sort of nonsense Dave's vampires feed on to suck fees from victims.  'How can you ever outperform, if you don't have an 'expert who knows how to use data and research to pick the winners?'

The problem is that you blithely brush of the multiple sources of peer reviewed analysis which clearly indicates that no model successfully predicts the minority of funds that will slightly outperform.  Yet the higher fees are a factual given.

Suggesting Dave's advice to the typical Peace Univ student... to seek an advisor.. is good advice because the industry thinks it can deliver, is to me poor advice.

I am well aware of the view points on both sides of this issue. Like I said in my original comments many of the peer reviewed studies have major holes. For example, they only track the funds, not fund managers. The average for managed funds is lower than index funds, true but since when is average the target? The average wage in the U.S. is $56k should we aim for that or try to out-perform? 

I honestly don't think suggesting actively managed or passive products is inherently bad advice. I have seen bad passive products and good actively managed products.

For example, if you could invest in VPMAX would you? I would.

FYI: I primarily invest in low cost index funds.
I get it.  However i dont think the advisors Ramsey recommends are good, and that is what this thread is about.  His sheep are getting a haircut, pure and simple,

Reasons for avoiding active funds
1. Odds are you underperform market.
2. Fees are higher...pretty much always
3. Taxes impact is worse, almost by definition due to churn, realized gains, etc.
4. Even if fund has a star manager, it is rare they actually stay for the length of time you need to realize a proper equities investment timeline (min of 10+ years time horizon)

Reasons for chosing active funds
1. Seeking strategy unavailable in a purely passive format (e.g. momentum strategy, private equity)
2. Manager is efficient enough that fees are reasonable (rare, but exist...e.g. Wellington Fund)
3. Emotional value of feeling your money is in expert hands, and smug feeling in years you outperform market

Ramsey relies completely on #3 above.  If an advisor prevents emotional errors, perhaps it helps, but that can be done by this forum or Bogleheads for free.
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PizzaSteve

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Re: Distancing myself from Ramseyism.
« Reply #226 on: July 12, 2017, 10:24:39 AM »
Besides the bonuses on credit cards, they offer a number of consumer protections. Extended warranties, being able to do a charge back if the product is defective, etc. It is very difficult to rent a car without a credit card (and I get insurance coverage as well), you end up with huge holds. In today's society, everyone should have one credit card for emergencies, etc.
True, but we havent mentioned that credit card companies are predatory on both weak willed consumers and merchants.  The monopoly forces the extraction of 2-4% from any merchant, and they literally have no choice.  It is prohibited to offer a discount for cash within the card acceptance TOS.  This gets built into all of our prices, so the rewarda are a sort of crack designed to addict consumers so they can do a mob style shakedown of merchants.

A bit evil...yep...

Will a tech play eventually disintermediate them?  Doesnt look like it, all signs are that the fintechs will settle for A Piece of the Action (ala Star Trek original series episode of the same name...suprisingly prophetic..BTW).
« Last Edit: July 12, 2017, 08:53:21 PM by PizzaSteve »
All posts are opinions of the author subject to independent verification by the reader.  No representations of fact are asserted regarding commercial products or services.

Pizzasteve prefers to avoid excessive critical debates.  In the event of a post, no need to reply or quote if you disagree. I am posting information meant to stand on its own and hope to avoid back and forth debating.

englishteacheralex

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Re: Distancing myself from Ramseyism.
« Reply #227 on: July 12, 2017, 10:55:54 AM »
Oh yeah! I forgot about the fact that we're all paying for the credit card perks because of the giant fees credit card companies charge merchants. And the fact that merchants can't get around the fees so I presume they factor them into their pricing.

Well, this is another reason to work the system--if I'm paying invisible higher prices because of the credit card fees, I might as well get some of that money back as a person who never pays interest.
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mathlete

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Re: Distancing myself from Ramseyism.
« Reply #228 on: July 12, 2017, 10:59:05 AM »
Read the OP and beamed with pride for them :)

Nothing feels better than realizing that the "information" you're getting is 80% sales pitch. Then you can drop the habit and free up a ton of listening time.

Agree with the second poster. High volume. Low content.

mathlete

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Re: Distancing myself from Ramseyism.
« Reply #229 on: July 12, 2017, 11:04:11 AM »
Regarding merchant transaction fees: I believe that the positive impact that being able to buy on credit has on commerce far outweighs the fees that credit card companies charge.

Lmoot

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Re: Distancing myself from Ramseyism.
« Reply #230 on: July 12, 2017, 11:44:52 AM »
Regarding merchant transaction fees: I believe that the positive impact that being able to buy on credit has on commerce far outweighs the fees that credit card companies charge.

+1 not to mention but many merchants have also joined the  bandwagon by offering their own credit cards; they profit off of others' mid management of money as well. Can you imagine if people only bought what they could afford around Christmas? Merchants would go bankrupt!

dcamnc

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Re: Distancing myself from Ramseyism.
« Reply #231 on: July 12, 2017, 04:51:34 PM »
I like Dave, I would modify the baby step system though. Looking back (I'm in "step 7" personally), I would say bs 1 should be to freeze the spending and get on a budget immediately, then save the 1k once that's established. I've worked with folks on their finances, and if they can't stop the spending and get on a budget right off the bat, they'll never go through with the other steps.

Also, I don't think you should turn down a 100% roi by temporarily suspending your 401k employer match. I know he wants all the spare money to go towards debt, but turning down 100% roi is madness.

I think Dave is correct about credit cards, *for folks in the hole*. The folks I've talked to absolutely have to stop using cc's. They are generally weaker, money-sense wise, than us. Using cc's encourages them to carry the balance and spend more freely, whereas with debit, you are more forced to budget. For us financial jedi (if you are a regular on these boards, you likely are, compared to the general public) cc's can be an asset.

Virtus

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Re: Distancing myself from Ramseyism.
« Reply #232 on: July 12, 2017, 06:41:36 PM »
...Read The Intelligent Investor, bottom line is that there are ways to gain an indication of which funds will out-perform that market.
Suprised no one called you out on this.  This is just the sort of nonsense Dave's vampires feed on to suck fees from victims.  'How can you ever outperform, if you don't have an 'expert who knows how to use data and research to pick the winners?'

The problem is that you blithely brush of the multiple sources of peer reviewed analysis which clearly indicates that no model successfully predicts the minority of funds that will slightly outperform.  Yet the higher fees are a factual given.

Suggesting Dave's advice to the typical Peace Univ student... to seek an advisor.. is good advice because the industry thinks it can deliver, is to me poor advice.

I am well aware of the view points on both sides of this issue. Like I said in my original comments many of the peer reviewed studies have major holes. For example, they only track the funds, not fund managers. The average for managed funds is lower than index funds, true but since when is average the target? The average wage in the U.S. is $56k should we aim for that or try to out-perform? 

I honestly don't think suggesting actively managed or passive products is inherently bad advice. I have seen bad passive products and good actively managed products.

For example, if you could invest in VPMAX would you? I would.

FYI: I primarily invest in low cost index funds.
I get it.  However i dont think the advisors Ramsey recommends are good, and that is what this thread is about.  His sheep are getting a haircut, pure and simple,

Reasons for avoiding active funds
1. Odds are you underperform market.
2. Fees are higher...pretty much always
3. Taxes impact is worse, almost by definition due to churn, realized gains, etc.
4. Even if fund has a star manager, it is rare they actually stay for the length of time you need to realize a proper equities investment timeline (min of 10+ years time horizon)

Reasons for chosing active funds
1. Seeking strategy unavailable in a purely passive format (e.g. momentum strategy, private equity)
2. Manager is efficient enough that fees are reasonable (rare, but exist...e.g. Wellington Fund)
3. Emotional value of feeling your money is in expert hands, and smug feeling in years you outperform market

Ramsey relies completely on #3 above.  If an advisor prevents emotional errors, perhaps it helps, but that can be done by this forum or Bogleheads for free.

I think this is a fair assessment. The question then is if you don't like finances and learning about the subject, might it make sense to spend 5 hours with a financial advisory every year and pay $1,000 (or whatever amount) vs spending 50 hours on financial forums per year? Looks like the financial nerd earners $22 per hour for there efforts. Not bad, but not a ridiculous expensive chore to outsource.

Personally, I in-source the acquisition of financial knowledge and financial planning in my life but I really can't say its bad advice to recommend people outsource that aspect of their life to a professional for a little money. I outsource medical procedures. I in-source most car repairs but outsource oil changes because its not worth it when you look at the time and money trade-off. 

TheJamesGang

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Re: Distancing myself from Ramseyism.
« Reply #233 on: July 18, 2017, 09:05:58 AM »
I enjoy Dave Ramsey's simplistic approach to money. Am I past the point of his simple Baby Steps? Yes but that doesn't mean I don't need to go back to the basics every once in a while. And for that I appreciate him.

I read an article on Christian PF a while back that summarized his methods very well

Let’s take Apple as an example. There were dozens of MP3 players on the market before the iPod came out. Apple just took the existing technology and made it so simple and easy to operate that your grandma could use it. They did not seek to satisfy the “techies” who were already using MP3 players. They were going after a market that wouldn’t have bought one unless it was simple.

Dave Ramsey is like the iPod of the financial gurus. While so many of the other financial guys are arguing and debating about trivial issues that are over most people’s heads, Dave was figuring out a way to boil all these financial principles down to a 5th grade level. He succeeded.

Dave’s books and seminars are designed for beginners and not for the people who have mastery over their finances. It is not perfect advice for everyone, but it is great advice for most people and is exactly what millions of people need.

czr

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Re: Distancing myself from Ramseyism.
« Reply #234 on: July 18, 2017, 12:32:16 PM »
I listen to DR to pass time and keep me on track on not getting any more debt however:

These are my issues with him or his plan
1.   Does not take into account Net Worth
2.   Self-righteous narcissist with only one way to get wealthy which happens to be his program
3.   Does not consider tax minimization and strategy
4.   Decline Investment contributions including employer’s 401k match if they have debt
5.   Strict no debt policy except 15 yr mortgage. There is a way to use debt responsibly
6.   Immediately pay off low interest rate loans including 0%.
7.   Pushes his expensive ELPs who pay him in one way or another
8.   Encourages mutual funds and bashes Index funds
9.   Religious and political

This is what I like about him and his show:
1.   He hit rock bottom, went through bankruptcy, and from my estimates worth over $50M.
2.   He is helping many financially illiterate people and takes calls on his show most weekdays
3.   He is a great speaker and has funny analogies
4.   He is tough on people who are super dumb with credit cards, expensive cars, timeshares and people living above their means
5.   He discourages enabling behavior and promotes healthy boundaries
6.   He encourages people not to study in degrees that do not have a good ROI
7.   He makes people think about their decisions by asking tough questions
8.   He is smart and witty on-air and his show is entertaining and has a wide range of callers
9.   His ‘millionaire’ hour theme shows have fun stories of normal people that grinded it to $1M
10.   I can respect he is a great businessman and is growing his business even if he is ‘all cash’. I’m sure his Every Dollar APP is a cash cow
11.   His podcasts are easily accessible and help pass the time
12.   His callers make me feel better that I am no longer that dumb about debt

Dave Ramsey wouldn’t approve of my financial plan even though I have been a 5 year listener:
1.   I’m not debt free. Still have mortgage at 3.5%, car loan at 1.74%, student loan at 1.78% effective rate
2.   Always use credit card and get about $1,000 a year in rewards and throw some of that at the mortgage principal
3.   Max out each of me and my wife’s annual 401k, FSA,  HSA, dependent care contributions
4.   Keep 6-9 months in Emergency Fund and invest in taxable account
5.   Will never use his “ELPs” and invest in majority just Index Funds

I think his ‘baby step’ routine works great for the low-information and mostly low-income people who don’t understand how expensive ‘bad debt’ is. After they have a budget set up and paid off their credit cards and can pay it off monthly they can dump his plan. He probably doesn’t care what we think because he is successful and really growing his business even when the economy is UP. Imagine what happens when the economy is shitty and people are really looking to dump debt. Take his show for what he says: ‘Free’ money advice entertainment radio show and you get what you pay for. 

jmecklenborg

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Re: Distancing myself from Ramseyism.
« Reply #235 on: July 18, 2017, 12:57:53 PM »
^The big problem with Dave is that he didn't really hit rock bottom -- he merely hit rock bottom for someone of a privileged upbringing.  His parents paid for him to go to UT (which wasn't very expensive at the time, but nevertheless he has no first-hand experience with student loan debt), then got him the loans that enabled him to build his leveraged real estate mini-empire at age 25.  After he went bankrupt, he was eventually bailed out with an inheritance or some other mysterious lump of cash around age 30 that enabled him to get back into real estate and start his financial help business. 

The other problem which some others have mentioned is that his kids were also raised in a highly privileged environment.  They didn't have student loans but he has his daughter running around the country lecturing all and sundry on how to avoid loans, as if she could have done it without daddy's pile of cash.  I also don't believe that he completely rebuilt his real estate empire with all-cash after having paid off a first house, as he recommends.  Maybe he did if he inherited a pile of cash (see above -- either from his parents or his wife's), but the whole problem with Dave is that he like so many other rich boys assumes that he would have achieved his level of success without parental help and bailouts.  A big inheritance puts you decades ahead of everyone else.  You can mess up and mess up BIG and guys who are smarter and work harder than you can never catch up. 

He has all of these people on for his millionaire hour who did not receive inheritances to assuage his own insecurities about what he got.  Fact is that hard work and self-discipline might pay off but inheritances always do. 
« Last Edit: July 18, 2017, 01:01:28 PM by jmecklenborg »

v8rx7guy

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Re: Distancing myself from Ramseyism.
« Reply #236 on: July 18, 2017, 04:07:40 PM »
His parents paid for him to go to UT (which wasn't very expensive at the time, but nevertheless he has no first-hand experience with student loan debt), then got him the loans that enabled him to build his leveraged real estate mini-empire at age 25.  After he went bankrupt, he was eventually bailed out with an inheritance or some other mysterious lump of cash around age 30 that enabled him to get back into real estate and start his financial help business. 

The other problem which some others have mentioned is that his kids were also raised in a highly privileged environment.  They didn't have student loans but he has his daughter running around the country lecturing all and sundry on how to avoid loans, as if she could have done it without daddy's pile of cash.  I also don't believe that he completely rebuilt his real estate empire with all-cash after having paid off a first house, as he recommends.  Maybe he did if he inherited a pile of cash (see above -- either from his parents or his wife's), but the whole problem with Dave is that he like so many other rich boys assumes that he would have achieved his level of success without parental help and bailouts.  A big inheritance puts you decades ahead of everyone else.  You can mess up and mess up BIG and guys who are smarter and work harder than you can never catch up.

Do you have sources that say he received mysterious lumps of cash?  I honestly don't know... I'm not trying to call you out.

jmecklenborg

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Re: Distancing myself from Ramseyism.
« Reply #237 on: July 19, 2017, 10:05:43 AM »
Amazing.  I just re-googled what I recall looking for more than five years ago and it appears that Ramsey Solutions or whatever it is called has paid to have Dave "scrubbed" off of Google.  It's sort of like googling stuff on the Mormon Church -- you're not going to find any bad information.  I recall a fair number of Great Recession-era comments at the end of anti-Ramsey articles calling him out for not being honest about his bio (people who claimed to know him or know people who knew him back in the 80s). 

I spent a few minutes looking and could not find these basic pieces of information:
-is he an only child (profoundly affects inheritance, obviously)?
-what are Dave's parents' names and when did they die?
-what is his wife's maiden name and is that family wealthy?  Is she an only child?

So the door is wide open for an investigative reporter to move to Nashville for a few months and dig into Dave's past.  I'm not familiar with how property records are kept in Tennessee but it would probably be possible to retrace companies and investors who he worked with and there should be some indication as to how they were paid for and transferred. 

There is a convenient 10-year gap in Dave's story stretching from about 1987 through about 1997.  He has shared that he was forced into bankruptcy after being unable to pay on about $350,000 in debt (he sold off what he could in 90 days in an attempt to clear the debt).  The bankruptcy filing might be searchable and would offer some clues. 

Did he have wages or business earnings garnished for years after the bankruptcy, or did he just walk away with ruined credit?  Did he lose his house?  Did they transfer it into his wife's name or a more distant relative's name to protect it from creditors?  Or did they buy a house after the bankruptcy in her name? 

The 80s and 90s weren't so long ago so many of the shadowy figures involved when Dave pushed that big rock aside and rose from the dead should still be around.   

 

lhamo

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Re: Distancing myself from Ramseyism.
« Reply #238 on: July 19, 2017, 04:19:27 PM »
Not so sure about that.  Yes, the radio and publishing parts of his enterprise are probably both very profitable, as is the live events segment (they would not keep proliferating live events if they weren't making money -- though some of that money comes from the loop he perpetuates between the radio shows (not just his, but also Entreleadership and True Stewardship) and the books/courses.  But the property part of the business is also worth a big chunk.  He has mentioned several times on air that they signed an option to purchase his main office building for a VERY good price, and they have since gone on to develop other properties (including the conference center across the road.  Nashville is booming these days, and I'm sure he has a nice big chunk of that growth.
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v8rx7guy

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Re: Distancing myself from Ramseyism.
« Reply #239 on: July 19, 2017, 04:29:23 PM »
Dave Ramsey started Financial Peace University in 1994, since then something like 2,000,000 families have taken his  class which is currently about runs about $100.  I believe that is what he started doing after going bankrupt.  That is $200M in gross sales from that aspect of his business alone.

jlcnuke

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Re: Distancing myself from Ramseyism.
« Reply #240 on: July 20, 2017, 07:28:36 AM »
https://hubpages.com/money/Confessions-of-a-Dave-Ramsey-Endorsed-Local-Provider-ELP

Dave is making pretty decent money referring people to others, who are vetted very casually I'm.

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lhamo

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Re: Distancing myself from Ramseyism.
« Reply #241 on: July 20, 2017, 11:07:27 AM »
I'm glad Keith did that write up about his experience as an ELP.  He talked about it a bit at Camp Mustache last year, but it is great to see the way the deals are structured publicly documented (though I'm guessing his lawyers will get it taken down sooner or later).

Also, re: his real estate holdings, I was listening to some backlogged podcast episodes yesterday and he specifically mentioned how he profited from real estate investment during the Great Financial Crisis -- the example he gave was a commercial building he bought for 1.5 million that he recently sold for over 4 million. 

Again, I don't doubt that all the other branches of his business are also profitable, but I do think the real estate arm is a huge chunk of his net worth.

Oh, looks like the LLC that manages at least some of his property holdings (Capital Realty Group, LLC) currently has four residential properties listed for rent.

http://www.homefinder.com/broker/Capital-Realty-Group-Llc-4748640d/rentals/

Not sure how to extrapolate from the number of listings to likely number of total holdings -- 5x? 10x? 

Anybody want to rent from Dave and see if you can get us some more insider info?
 
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jmecklenborg

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Re: Distancing myself from Ramseyism.
« Reply #242 on: July 20, 2017, 11:39:56 PM »
I found the following post at https://www.biggerpockets.com/forums/79/topics/37369-dave-ramsey-s-real-estate-story-


Dennis Treacy HVAC Contractor from Philadelphia , Pennsylvania
replied almost 8 years ago

Dave ended up in the dumps along with a few other REI folks I personally know. Before that tax code change. Guys like Dave made their money on selling limited partnerships on insanely over leverage real estate. The limited partners mostly highly paid professionals who needed big tax right offs bought in by paying the monthly mortgage for the owner investor.

Here is how the investors made the big bucks. First find a totally worthless rental building, the bigger the better. Buy it for what it was worth (just about nothing), next fix the place just enough to make it habitable.
Next sign leases with folk who were at least breathing, make the rent as high as believable, next go to a lender who was not being properly regulated, was allowed to lend money based on the new value of the building which was now based on a totally rented fully leased building.
Easy slam dunk deal, the investor is holding $100's of thousand of borrowed tax free money, and the limited partners paid the mortgage, plus the other expenses involved in the building. The professionals got a huge write off by owning the losses of the building, without being on the mortgage docs or owning the building.
The investor had easy management, he did not worry about collecting rent, or upkeep as the limited partners paid the freight.
The tenants never complained as most did not pay the rent anyway.
But Uncle Sam threw a monkey wrench into the deal. The new tax code disallowed loses from real estate for these professionals who earned above $125k and that is all of them.
The limited partners stopped paying the mortgage, and walked away free.
My friend had 2.6 million dollars of mortgages to pay on negative cashflow buildings. He of course also ran away with his credit totally destroyed forever, and the lenders mostly failed.
This my friends was called the S+L crisis.

Dave probably pays cash because his credit is shot to hell, my friend has a $1million judgment on his credit to this day.
Don't worry about him though, he has quite a few college rental buildings hidden in land trusts to keep the lenders a bay, he paid cash for them, he had squirreled a few of those limited partnership bucks away.

How history repeats itself.

KeithTax

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Re: Distancing myself from Ramseyism.
« Reply #243 on: August 01, 2017, 06:44:16 PM »
I'm glad Keith did that write up about his experience as an ELP.  He talked about it a bit at Camp Mustache last year, but it is great to see the way the deals are structured publicly documented (though I'm guessing his lawyers will get it taken down sooner or later).

Also, re: his real estate holdings, I was listening to some backlogged podcast episodes yesterday and he specifically mentioned how he profited from real estate investment during the Great Financial Crisis -- the example he gave was a commercial building he bought for 1.5 million that he recently sold for over 4 million. 

Again, I don't doubt that all the other branches of his business are also profitable, but I do think the real estate arm is a huge chunk of his net worth.

Oh, looks like the LLC that manages at least some of his property holdings (Capital Realty Group, LLC) currently has four residential properties listed for rent.

http://www.homefinder.com/broker/Capital-Realty-Group-Llc-4748640d/rentals/

Not sure how to extrapolate from the number of listings to likely number of total holdings -- 5x? 10x? 

Anybody want to rent from Dave and see if you can get us some more insider info?
 

For the record, I published the Hubpages article on 9/4/2014:

https://hubpages.com/money/Confessions-of-a-Dave-Ramsey-Endorsed-Local-Provider-ELP

and touched on the subject on The Wealthy Accountant several times:

http://wealthyaccountant.com/?s=Dave+Ramsey

and to-date no letters from the Ramsey legal team.

Hubpages might blink if Dave put up a fit, but I am not so easy. I would exercise my right to free speech to the nth degree and republish on The Wealthy Accountant.

I doubt Dave is dumb enough to create a media storm around something I wrote years ago, drawing attention to the issues. A few years back a company sued Pete over a forum post. It didn't go well for them either.

Thank you all for reading my stuff. It feels good knowing something I wrote three years ago is still helping people make good choices.

Virtus

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Re: Distancing myself from Ramseyism.
« Reply #244 on: August 07, 2017, 05:51:08 PM »
I found the following post at https://www.biggerpockets.com/forums/79/topics/37369-dave-ramsey-s-real-estate-story-


Dennis Treacy HVAC Contractor from Philadelphia , Pennsylvania
replied almost 8 years ago

Dave ended up in the dumps along with a few other REI folks I personally know. Before that tax code change. Guys like Dave made their money on selling limited partnerships on insanely over leverage real estate. The limited partners mostly highly paid professionals who needed big tax right offs bought in by paying the monthly mortgage for the owner investor.

Here is how the investors made the big bucks. First find a totally worthless rental building, the bigger the better. Buy it for what it was worth (just about nothing), next fix the place just enough to make it habitable.
Next sign leases with folk who were at least breathing, make the rent as high as believable, next go to a lender who was not being properly regulated, was allowed to lend money based on the new value of the building which was now based on a totally rented fully leased building.
Easy slam dunk deal, the investor is holding $100's of thousand of borrowed tax free money, and the limited partners paid the mortgage, plus the other expenses involved in the building. The professionals got a huge write off by owning the losses of the building, without being on the mortgage docs or owning the building.
The investor had easy management, he did not worry about collecting rent, or upkeep as the limited partners paid the freight.
The tenants never complained as most did not pay the rent anyway.
But Uncle Sam threw a monkey wrench into the deal. The new tax code disallowed loses from real estate for these professionals who earned above $125k and that is all of them.
The limited partners stopped paying the mortgage, and walked away free.
My friend had 2.6 million dollars of mortgages to pay on negative cashflow buildings. He of course also ran away with his credit totally destroyed forever, and the lenders mostly failed.
This my friends was called the S+L crisis.

Dave probably pays cash because his credit is shot to hell, my friend has a $1million judgment on his credit to this day.
Don't worry about him though, he has quite a few college rental buildings hidden in land trusts to keep the lenders a bay, he paid cash for them, he had squirreled a few of those limited partnership bucks away.

How history repeats itself.


Very interesting.  I second my opinion that he makes more on books and radio than real estate.  He brags about his successes but I don't believe he is upfront about his failures, and just to make a guess I doubt he is making more than if he had put all of his extra income into the S&P 500.

I don't know about that. I was listing to the show and he let it slip that he has over $100 million in real-estate.

Virtus

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Re: Distancing myself from Ramseyism.
« Reply #245 on: August 08, 2017, 12:56:21 PM »
I found the following post at https://www.biggerpockets.com/forums/79/topics/37369-dave-ramsey-s-real-estate-story-


Dennis Treacy HVAC Contractor from Philadelphia , Pennsylvania
replied almost 8 years ago

Dave ended up in the dumps along with a few other REI folks I personally know. Before that tax code change. Guys like Dave made their money on selling limited partnerships on insanely over leverage real estate. The limited partners mostly highly paid professionals who needed big tax right offs bought in by paying the monthly mortgage for the owner investor.

Here is how the investors made the big bucks. First find a totally worthless rental building, the bigger the better. Buy it for what it was worth (just about nothing), next fix the place just enough to make it habitable.
Next sign leases with folk who were at least breathing, make the rent as high as believable, next go to a lender who was not being properly regulated, was allowed to lend money based on the new value of the building which was now based on a totally rented fully leased building.
Easy slam dunk deal, the investor is holding $100's of thousand of borrowed tax free money, and the limited partners paid the mortgage, plus the other expenses involved in the building. The professionals got a huge write off by owning the losses of the building, without being on the mortgage docs or owning the building.
The investor had easy management, he did not worry about collecting rent, or upkeep as the limited partners paid the freight.
The tenants never complained as most did not pay the rent anyway.
But Uncle Sam threw a monkey wrench into the deal. The new tax code disallowed loses from real estate for these professionals who earned above $125k and that is all of them.
The limited partners stopped paying the mortgage, and walked away free.
My friend had 2.6 million dollars of mortgages to pay on negative cashflow buildings. He of course also ran away with his credit totally destroyed forever, and the lenders mostly failed.
This my friends was called the S+L crisis.

Dave probably pays cash because his credit is shot to hell, my friend has a $1million judgment on his credit to this day.
Don't worry about him though, he has quite a few college rental buildings hidden in land trusts to keep the lenders a bay, he paid cash for them, he had squirreled a few of those limited partnership bucks away.

How history repeats itself.


Very interesting.  I second my opinion that he makes more on books and radio than real estate.  He brags about his successes but I don't believe he is upfront about his failures, and just to make a guess I doubt he is making more than if he had put all of his extra income into the S&P 500.

I don't know about that. I was listing to the show and he let it slip that he has over $100 million in real-estate.

Not necessarily, he could have earned $90M in books / radio and then earned $10M in real estate over the years, but now has $100M in real estate as he uses most of his earnings to buy real estate.  He mentions on his show all the time that he loves real estate so I don't doubt that is a big portion of his overall portfolio, but it doesn't mean that the value of his properties is based on growth within the portfolio vs. him leveraging his high income to buy lots of things.

He actually did mention that a lot of it was due to growth. He was advising someone on the split between real-estate and mutual funds. He mentioned that he ended up being heavily weighted in real-estate because he had some incredible gains from the bargains be bought in 2007-2008.

jmecklenborg

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Re: Distancing myself from Ramseyism.
« Reply #246 on: August 08, 2017, 02:05:41 PM »
It's not unrealistic to expect that Dave is getting $2500/mo on scads of homes he bought for under $100k during the crash and those homes are now worth near or over $300k. 

Nashville recovered very quickly from the collapse and is now experiencing an acute housing crisis.  There are dozens of tower cranes dotting the skyline. 

jmecklenborg

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Re: Distancing myself from Ramseyism.
« Reply #247 on: August 08, 2017, 03:27:42 PM »
It's not unrealistic to expect that Dave is getting $2500/mo on scads of homes he bought for under $100k during the crash and those homes are now worth near or over $300k. 

Nashville recovered very quickly from the collapse and is now experiencing an acute housing crisis.  There are dozens of tower cranes dotting the skyline.

DC is similar too, housing market is making a new bubble.  The cranes will go away in the next recession.  But the S&P 500 will continue to outpace the housing market over the next 50 years, in my opinion.

Unless we go to nuclear war with north korea, then this is all pointless.

No doubt that stock prices will outpace the price of homes as it always has, but a rental property purchased at a good price earns huge "dividends" as compared to any stock.  A single family home purchased as a rental property has the advantage of capital appreciation in addition to the rental income, unlike a 4-family or larger multi-unit complex.  The disadvantage of single-family rentals is the much higher per-unit management hassle/fee as compared to a plex. 

The money from buy & hold real estate gets huge when the 1. property is purchased for under market value 2. the property is completely paid off so that 3. almost all of the collected rent can be reinvested. 

Dave is adamant that he is a cash buyer 100% of the time.  This approach mitigates risk but it's very difficult to do because few people have the patience to pass on deals until they have enough cash to buy a first rental property.   

Re3iRtH

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Re: Distancing myself from Ramseyism.
« Reply #248 on: August 08, 2017, 11:52:15 PM »
I found the following post at https://www.biggerpockets.com/forums/79/topics/37369-dave-ramsey-s-real-estate-story-


Dennis Treacy HVAC Contractor from Philadelphia , Pennsylvania
replied almost 8 years ago

Dave ended up in the dumps along with a few other REI folks I personally know. Before that tax code change. Guys like Dave made their money on selling limited partnerships on insanely over leverage real estate. The limited partners mostly highly paid professionals who needed big tax right offs bought in by paying the monthly mortgage for the owner investor.

Here is how the investors made the big bucks. First find a totally worthless rental building, the bigger the better. Buy it for what it was worth (just about nothing), next fix the place just enough to make it habitable.
Next sign leases with folk who were at least breathing, make the rent as high as believable, next go to a lender who was not being properly regulated, was allowed to lend money based on the new value of the building which was now based on a totally rented fully leased building.
Easy slam dunk deal, the investor is holding $100's of thousand of borrowed tax free money, and the limited partners paid the mortgage, plus the other expenses involved in the building. The professionals got a huge write off by owning the losses of the building, without being on the mortgage docs or owning the building.
The investor had easy management, he did not worry about collecting rent, or upkeep as the limited partners paid the freight.
The tenants never complained as most did not pay the rent anyway.
But Uncle Sam threw a monkey wrench into the deal. The new tax code disallowed loses from real estate for these professionals who earned above $125k and that is all of them.
The limited partners stopped paying the mortgage, and walked away free.
My friend had 2.6 million dollars of mortgages to pay on negative cashflow buildings. He of course also ran away with his credit totally destroyed forever, and the lenders mostly failed.
This my friends was called the S+L crisis.

Dave probably pays cash because his credit is shot to hell, my friend has a $1million judgment on his credit to this day.
Don't worry about him though, he has quite a few college rental buildings hidden in land trusts to keep the lenders a bay, he paid cash for them, he had squirreled a few of those limited partnership bucks away.

How history repeats itself.


Very interesting.  I second my opinion that he makes more on books and radio than real estate.  He brags about his successes but I don't believe he is upfront about his failures, and just to make a guess I doubt he is making more than if he had put all of his extra income into the S&P 500.

I don't know about that. I was listing to the show and he let it slip that he has over $100 million in real-estate.

Not necessarily, he could have earned $90M in books / radio and then earned $10M in real estate over the years, but now has $100M in real estate as he uses most of his earnings to buy real estate.  He mentions on his show all the time that he loves real estate so I don't doubt that is a big portion of his overall portfolio, but it doesn't mean that the value of his properties is based on growth within the portfolio vs. him leveraging his high income to buy lots of things.

He actually did mention that a lot of it was due to growth. He was advising someone on the split between real-estate and mutual funds. He mentioned that he ended up being heavily weighted in real-estate because he had some incredible gains from the bargains be bought in 2007-2008.

If he had bought the S&P 500 index fund in Jan 2009 it would have gone up 175% (2480 vs 900), while the median home price in Nashville increased 52% ($232000 vs $152000) over the same time period.

Good rationalization for investing in stocks vs. real estate.

In reality, that same real estate could of enabled one to earn enough passive income to FI/RE in 3-4 years of acquiring properties, providing a solid $3-4K of passive monthly income. In addition, it would show as $0 of income or a slight loss on your tax return.

For the same amount as the down payment on those rentals, the mutual fund investor could have fun waiting 10 or 20 years, HOPING they could FI/RE at that time, and pray it doesn't happen to be a down market.

I speak from my own experience. I don't experience up or down months or years. Every day of every year is an "up" day (rental income). I love John Bogle, but index fund investing is too safe and more importantly, too slooooow and too loooong, even for a relatively high income earner. Different strokes for different folks.

talltexan

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Re: Distancing myself from Ramseyism.
« Reply #249 on: August 10, 2017, 07:15:42 AM »
Saying the median home PRICE increased 52% isn't the same as saying all homes appreciated 52%. Some homes could go up by a bunch, raising the median because which home IS the median changes. If Dave owned those homes, then he makes more than 52%.