The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: Jags4186 on May 14, 2015, 12:21:22 PM
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I was listening to the Dave Ramsey podcast (mostly for the lulz) and I heard the most ridiculous thing today. A man called in wanting to know if he should take a reverse mortgage. Dave asked him a few questions:
Age: 83
Family: none whatsoever
Income: $830/mo from social security
Owns home outright
No savings
Dave told him it was "stupid" to take out a reverse mortgage and a "mathematically awful product". He suggested he take out a conventional mortgage and pay on it OR sell his home and move down to a 50k condo.
I found myself yelling at the radio.
1) what 83 year old man can get a conventional mortgage (that even if someone would give it to him leaves him open to a foreclosure)
2) what 83 year old man with no family wants to move
3) since when did "math" figure into any of Dave's arguments?
The guys 83 years old. He could take the 150k from the reverse mortgage, put it in a savings account, and double his income for 15 years making no interest, and never have to worry about being foreclosed on or making mortgage payments.
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DR's strength seems to be in convincing people aged 20-50 to stop using debt as a way to live above their means. The people I've talked to who've had their lives improved the most have been people who lived in a debt lifestyle and were turned around to the idea of living debt free instead. That seems to be his strength. I really wouldn't use DR teachings for anything beyond that. An 83-year old should be talking to a CPA or CFP or someone who can specialize in the financial needs of people who are already retired. It's a very different market to serve than young, working people who are living from one loan to the next.
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DR's strength seems to be in convincing people aged 20-50 to stop using debt as a way to live above their means. The people I've talked to who've had their lives improved the most have been people who lived in a debt lifestyle and were turned around to the idea of living debt free instead. That seems to be his strength. I really wouldn't use DR teachings for anything beyond that. An 83-year old should be talking to a CPA or CFP or someone who can specialize in the financial needs of people who are already retired. It's a very different market to serve than young, working people who are living from one loan to the next.
Dave Ramsey is a lot like Dr. Oz in that he doesn't make the distinction between what is his specialty and what isn't. If it roughly pertains to their fields, they have opinions on them - educated or otherwise and don't inform people that they're straying outside that narrow lane.
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That is freaking ridiculous. Reverse mortgages aren't for everyone, but this particular guy is EXACTLY the sort of person who should be taking one.
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My mother is in almost exactly this state (down to being 83). As you mention, there's no way she'd ever qualify for a mortgage. We discussed the reverse mortgage idea a bit. It does have significant downsides, mainly relating to the risk that she may need to go to a long term care facility at some point. Many of the reverse mortgages are written to allow the bank to demand the repayment if the owner is not resident in the house. This would essentially force a sale or foreclosure at the worst possible time, of her only asset, with any remaining money now unprotected from Medicaid seizure to pay for her long term care. She has enough Social Security survivor's benefits to live on since my step-father passed away, so we're just leaving it be for now.
In the case of this guy, though, what's the down side? His income is very, very low; the money might give him a few more comfortable years, and with no family and no heirs, who cares if they take the house when he has to move? It's only mathematically horrible if he had other options. He doesn't.
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You guys have to remember its a RADIO show. The person calling in to a radio show for serious advice and expect to get the right answer in 2 mins is equally at fault.
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Ramsay's investing advice is awful too. Literally boils down to: "Invest in funds with good results in the past, and oh, feel free to use these that I get a kickback from"
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I listen to DR from time to time mostly to hear the different people do their DFS and hear about how they have pulled themselves out of debt. Because I am in the process of paying off my student loans (step 2 in DR's plan) I find their stories to be somewhat motivating and a part of me wants to call in a do it as well once I am out of debt.
HOWEVER - the one item that never ceases to rub me the wrong way is when DR tells someone that you should never, under any circumstances, help to pay off someone's debt unless you are married. He says that it is not your responsibility until "I do". To me this is BS! My girlfriend, who is debt free, is also helping me pay down my debt because she understands that the quicker we can pay my loans off, the sooner we will be able to do other things that we want to such as travel. Dave always explains these scenarios as a lost cause because at any point the person can walk away from you and you have been wasting your money by helping pay down the debt.
Not a huge vote of confidence for all of these relationships....
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I listen to DR from time to time mostly to hear the different people do their DFS and hear about how they have pulled themselves out of debt. Because I am in the process of paying off my student loans (step 2 in DR's plan) I find their stories to be somewhat motivating and a part of me wants to call in a do it as well once I am out of debt.
HOWEVER - the one item that never ceases to rub me the wrong way is when DR tells someone that you should never, under any circumstances, help to pay off someone's debt unless you are married. He says that it is not your responsibility until "I do". To me this is BS! My girlfriend, who is debt free, is also helping me pay down my debt because she understands that the quicker we can pay my loans off, the sooner we will be able to do other things that we want to such as travel. Dave always explains these scenarios as a lost cause because at any point the person can walk away from you and you have been wasting your money by helping pay down the debt.
Not a huge vote of confidence for all of these relationships....
That happens to be a piece of advice of his I definitely DO think is important to follow.
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You guys have to remember its a RADIO show. The person calling in to a radio show for serious advice and expect to get the right answer in 2 mins is equally at fault.
Right but you think he might say "hey you are in a pretty unique situation that doesn't relate to many of our listeners. It requires a little more explanation than I can give on the air. We'll have one of our people pick up and talk to you."
Instead of just saying NO to what seems to me to be a perfectly reasonable thing to do...
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I listen to DR from time to time mostly to hear the different people do their DFS and hear about how they have pulled themselves out of debt. Because I am in the process of paying off my student loans (step 2 in DR's plan) I find their stories to be somewhat motivating and a part of me wants to call in a do it as well once I am out of debt.
HOWEVER - the one item that never ceases to rub me the wrong way is when DR tells someone that you should never, under any circumstances, help to pay off someone's debt unless you are married. He says that it is not your responsibility until "I do". To me this is BS! My girlfriend, who is debt free, is also helping me pay down my debt because she understands that the quicker we can pay my loans off, the sooner we will be able to do other things that we want to such as travel. Dave always explains these scenarios as a lost cause because at any point the person can walk away from you and you have been wasting your money by helping pay down the debt.
Not a huge vote of confidence for all of these relationships....
Sure it's not but it's definitely a realistic scenario, and it happens a LOT more than you think. You also happen to be on the receiving end of this exact situation, so agreeing with it would amount to "biting the hand that feeds you."
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Not a huge vote of confidence for all of these relationships....
A quick google search threw out a number of ~85% of relationships ending in a breakup. On what basis should a radio host giving financial advice presume otherwise?
If you give money to someone who you have any kind of personal relationship with (dating or otherwise), you may as well consider it a gift and lost if said relationship expires. If you are not ok with that result, you can't justify giving the money.
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I hate his whole tithe advice too. Ass over head in debt? Tithe because the church is always the answer! Always! Not sure how the church is going to solve a person's financial problems, but okay. Nearly all of Ramsey's advice is poor outside of the few rather obvious claims he makes.
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HOWEVER - the one item that never ceases to rub me the wrong way is when DR tells someone that you should never, under any circumstances, help to pay off someone's debt unless you are married. He says that it is not your responsibility until "I do". To me this is BS! My girlfriend, who is debt free, is also helping me pay down my debt because she understands that the quicker we can pay my loans off, the sooner we will be able to do other things that we want to such as travel. Dave always explains these scenarios as a lost cause because at any point the person can walk away from you and you have been wasting your money by helping pay down the debt.
Not a huge vote of confidence for all of these relationships....
His advice for that seems spot on. Your girlfriend is not acting wisely in this manner and is going to be really sad if the relationship ends as it is most likely going to. Paying someone's debts for them is a terrible way to show "confidence" in a relationship. A 0% loan w/ a contract describing terms of repayment is helping someone in a relationship. Giving them money is displaying the a lack of sense.
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DR's advice not to pay off the debt of someone who you're not married to is probably one of his best pieces of advice. I completely agree with it.
I listened to his show for about a year, but got fed up with his overly simplistic, and in some cases totally wrong advice. Also I was completely grossed out by how invested he was in his daughters' sex life.
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I hate his whole tithe advice too. Ass over head in debt? Tithe because the church is always the answer! Always! Not sure how the church is going to solve a person's financial problems, but okay. Nearly all of Ramsey's advice is poor outside of the few rather obvious claims he makes.
He's a Christian, gives Christian advice, and the Bible is rather clear on supporting your local church.
So, yeah, it's decent advice from his perspective and from the perspective of a lot of his listeners.
Just because the MMM groupthink hates religion and charity doesn't mean everyone does...
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DR's advice not to pay off the debt of someone who you're not married to is probably one of his best pieces of advice. I completely agree with it.
Yup. I wouldn't pay off someone else's debts and wouldn't expect anyone to pay off mine.
Of course the person taking someone else's hard earned money thinks it's a great idea. but they'd have to justify the act.
-- Vik
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He's a Christian, gives Christian advice, and the Bible is rather clear on supporting your local church.
So, yeah, it's decent advice from his perspective and from the perspective of a lot of his listeners.
Just because the MMM groupthink hates religion and charity doesn't mean everyone does...
I consider my self quite firmly entrenched in "MMM groupthink" and am also religious, thankyouverymuch. Many devout Christians disagree on the stance that the Bible prescribes tithing to a home church. There are far more Christ-like uses of money than paying for a bunch of yuppies to read the Bible over brunch. I personally love Dave Ramsey, but the criticisms voiced here have merit and shouldn't be dismissed out of hand.
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You don't have to agree 100% with everything Dave Ramsey says (even he says so). I know I don't. But over all his show and it's message has helped and changed MANY people lives for the better!!! I think his show is great!!!
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You don't have to agree 100% with everything Dave Ramsey says (even he says so). I know I don't. But over all his show and it's message has helped and changed MANY people lives for the better!!! I think his show is great!!!
I do think most of his advice is decent. Most of the people who call in are in the same situation and the same advice works. I was just floored by what he told this old man who called in. His situation wasn't the same as everyone's...I just thought it was irresponsible what he told the man
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Ramsay's investing advice is awful too. Literally boils down to: "Invest in funds with good results in the past, and oh, feel free to use these that I get a kickback from"
It's been a while since I've listened to his show but if I remember right he specifically advises his followers to invest in front load mutual funds and as you said he directs everyone towards the ones he gets paid to promote. After I realized this I lost all interest in anything he had to say.
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I feel that his advice to get out of debt is a good thing and some of it is quite sound. How to make money work for you... that's not his style in my mind. His investment strategies are not in line with mine.
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After a brief flirtation with the works of Robert Kiyosaki I realized that basically all of these financial advice gurus are amateurs whose only legitimate expertise is self-promotion and the discovery of a niche audience. If you are drowning in debt and clueless, they can be great at giving you a bit of a facepunch and making you wake up about your own finances, but they can't offer much more than that.
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Replying to the original post...i listened to the call. Ramsey never, ever advises anyone to go in debt for any reason. Therefore advising someone to take on a reverse mortgage would be out of line with his teachings. He has one way and he stays on his track. In most cases it is good advice to most people and thats what he targets.
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I listen to DR from time to time mostly to hear the different people do their DFS and hear about how they have pulled themselves out of debt. Because I am in the process of paying off my student loans (step 2 in DR's plan) I find their stories to be somewhat motivating and a part of me wants to call in a do it as well once I am out of debt.
HOWEVER - the one item that never ceases to rub me the wrong way is when DR tells someone that you should never, under any circumstances, help to pay off someone's debt unless you are married. He says that it is not your responsibility until "I do". To me this is BS! My girlfriend, who is debt free, is also helping me pay down my debt because she understands that the quicker we can pay my loans off, the sooner we will be able to do other things that we want to such as travel. Dave always explains these scenarios as a lost cause because at any point the person can walk away from you and you have been wasting your money by helping pay down the debt.
Not a huge vote of confidence for all of these relationships....
He is right on that one, just look at shows like Judge Judy where former couples go to court, because they would help pay their gf/bf expenses and then when they break up, they ask for their money back, the other person usually defends by saying it was a gift. If it works for you, glad it does, but I know I wouldn't do it.
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I hate his whole tithe advice too. Ass over head in debt? Tithe because the church is always the answer! Always! Not sure how the church is going to solve a person's financial problems, but okay. Nearly all of Ramsey's advice is poor outside of the few rather obvious claims he makes.
I don't think that is true, I remember Ramsey once said to a caller that if he is in debt, it is ok to put the tithing aside until he gets his mess cleaned up, although in his past, Ramsey was tithing even when he was bankrupt.
I regularly listen to Dave Ramsey whenever I have the urge to spend and I have to say his radio show takes away all that urge of spending on stupid stuff. But I don't listen to all of his advice, I am not a hardcore christian nor do I go to church, so whatever he says about god and faith, I usually ignore itéé..samething when it comes to investments, he wants people to put their money on mututal funds, not sure how much they cost in the US, but here in Canada, mutual funds cost way too much (2% overall).
I just wish MMM would do a similar podcast, that would be cool, but I doubt Pete would want to do that.
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Replying to the original post...i listened to the call. Ramsey never, ever advises anyone to go in debt for any reason. Therefore advising someone to take on a reverse mortgage would be out of line with his teachings. He has one way and he stays on his track. In most cases it is good advice to most people and thats what he targets.
Except that he recommended the guy take out a conventional mortgage (which Ramsey knows he won't qualify for). Probably why he didn't plug Churchhill Mortgage...
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I have on another forum people who hate Robert Kioysaki and love David Ramsey.
I would say depending on your economy situation it is different what is best for you. I like partly David Ramsey but not of all of his advice it is a bit chicken advice:)
Robert Kioysaki is bold advice, but there is a fine line between being genius and insane sometimes. Proof? Many super smart chess masters have become insane.
A psychopath is not same as sociopath. A psychopath is usually smart and well educated you can find such persons also in finance world bankers etc and not everyone of them become murderers though they literally can not feel emotions such as love, compassion etc A psychopath can marry for economical gain and/or sexual lust of course and they learn to mimic emotions fairly well i.e they can say "I love you" although they don't.
Robert Kioysaki advice is more for the bold and risktakers and those who have already done the first babystep advices of David Ramsey. David Ramsey is also very USA oriented much of his ramblings of 401k etc has nothing to do with Europe where I live.
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Robert Kioysaki advice is more for the bold and risktakers and those who have already done the first babystep advices of David Ramsey. David Ramsey is also very USA oriented much of his ramblings of 401k etc has nothing to do with Europe where I live.
Robert Kiyosaki's advice is often borderline illegal, his stories are completely apocryphal, and his company recently went bankrupt.
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Robert Kioysaki advice is more for the bold and risktakers and those who have already done the first babystep advices of David Ramsey. David Ramsey is also very USA oriented much of his ramblings of 401k etc has nothing to do with Europe where I live.
Robert Kiyosaki's advice is often borderline illegal, his stories are completely apocryphal, and his company recently went bankrupt.
There took less then one minute to find one hater here:)
David Ramsey is CHICKEN advice there you go lol. Smart and wise advice, but not bold lol. However the part don't use your credit card etc pretty common sense.
I take the good parts of both of them and Robert Kioysaki is a multimillionaire. So what if one of his companies went bankrupt he is still a millionaire. Now I would not pay for his expensive courses, but seeing youtube videos or reading a book lent from library cost nothing.
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Robert Kioysaki is a multimillionaire.
He is a millionaire personal finance guru. There's scanty evidence that any of his other 'ventures' made any money at all.
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Robert Kioysaki is a multimillionaire.
He is a millionaire personal finance guru. There's scanty evidence that any of his other 'ventures' made any money at all.
He has not published a financial record that is true, but he has made lots of real estate investments that is know fact and he has been landlord.
Now I am landlord, but I don't own so much property as Robert Kioysaki and I am not a millionaire.
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HOWEVER - the one item that never ceases to rub me the wrong way is when DR tells someone that you should never, under any circumstances, help to pay off someone's debt unless you are married. He says that it is not your responsibility until "I do". To me this is BS! My girlfriend, who is debt free, is also helping me pay down my debt because she understands that the quicker we can pay my loans off, the sooner we will be able to do other things that we want to such as travel. Dave always explains these scenarios as a lost cause because at any point the person can walk away from you and you have been wasting your money by helping pay down the debt.
I have to agree with DR here. If you girlfriend wants to pay off your debt so that you can travel, it would make more sense to me that she pays for you to travel with her. At least that way she gets something out of it. If you were married, your debt becomes her debt (in most states), so I can see the benefit of her paying it off.
For me- the advice I cannot stand is that credit cards are terrible and no one should ever use them. SOME people cannot be trusted with credit cards. For others they are an incredible tool. I spent cash so much more easily than credit cards. Put $100 in my wallet and it is gone and I have no idea what it went on. A credit card I see an itemized list of exactly what I spent and control my spending so much better. So I NEVER carry cash. Too easy to just buy little things here and there and not think about how quickly they add up.
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HOWEVER - the one item that never ceases to rub me the wrong way is when DR tells someone that you should never, under any circumstances, help to pay off someone's debt unless you are married. He says that it is not your responsibility until "I do". To me this is BS! My girlfriend, who is debt free, is also helping me pay down my debt because she understands that the quicker we can pay my loans off, the sooner we will be able to do other things that we want to such as travel. Dave always explains these scenarios as a lost cause because at any point the person can walk away from you and you have been wasting your money by helping pay down the debt.
I have to agree with DR here. If you girlfriend wants to pay off your debt so that you can travel, it would make more sense to me that she pays for you to travel with her. At least that way she gets something out of it. If you were married, your debt becomes her debt (in most states), so I can see the benefit of her paying it off.
My girlfriend is not paying off my debt, She is simply helping. Over the last 17 months since beginning to get serious with paying down the debt we have knocked out $31,000 out of $83,000. Out of that total $31,000, my girlfriend has given me roughly $2,600 so I feel that those saying that she is paying down my debt are incorrect.
Also, I would feel worse about letting my girlfriend pay for an entire trip to wherever while I am still so far into debt than having her chip in on paying down the loans. This seems very unmustachian, even if it costs me $0. We are always trying to reduce our spending so that we can throw more at debt and taking a trip now seems very frivolous.
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Money is fungible and so on.
Semi-related story - my now MIL was giving my then fiancee flack because "he just wants you to pay his mortgage for him" over a $400 / month "rent" payment she was making to me when she moved in about a year before we were married. Nevermind the mortgage, condo fees, utilities, cable, and internet added up to more than $800 / month. Or that she moved from an apartment where she was paying $700 / month + utilties, cable, internet, so this was cheaper than her original housing arrangement.
I thought it was odd because I'm not the first dude my wife has shared an apartment with, and some kind of arrangement as to paying housing costs and utilities and stuff must have been made before. Probably just another chance for MIL to say "I don't approve of this lifestyle" - no reason to think she wasn't getting flack for that with prior boyfriends too.
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He's a Christian, gives Christian advice, and the Bible is rather clear on supporting your local church.
So, yeah, it's decent advice from his perspective and from the perspective of a lot of his listeners.
Just because the MMM groupthink hates religion and charity doesn't mean everyone does...
He gives Christian advice to Christians... which seems (sort of) reasonable.
I've heard him talk to an open atheist and he immediately switched off the Christian mode. He said something along the lines of "When I'm talking to other Christians, I'd say XX, but that doesn't apply here so..."
This actually moved him a notch up in my view.
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For me- the advice I cannot stand is that credit cards are terrible and no one should ever use them. SOME people cannot be trusted with credit cards. For others they are an incredible tool.
I agree with you here.
The other advice of DR's I cannot stand is how he encourages people with several different kinds of debt to pay of the one with the smallest balance first, so it can 'snowball'. Whaa? For example, if you have a SL of $2k at 3.5%, a $9k car loan at 5% and a $22k cc at 21%, he pushes people to pay off the SL first, just because it is smaller. Mathematically the wrong answer.
He used to make my blood boil, but I've seen several people be helped by his methods (which are largely psychologically based), so I've tempered quite a bit. If he helps people that's great. But once you have your economic emotions under control his advice is not too good.
Also hate his reliance on mutual funds (kickbacks?) and never using debt as a useful tool. I also don't personally believe in the 'never loan a bf/gf money until you are married" because it places a lot of assumptions both on marriage/divorce and on the idea that long-term partners should get married.
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I listen to DR alot while working and while his advice is often too simplistic, it has helped many people totally change their finances for the better. On this and other threads people have mentioned his talking about his daughter's sex life. I'm intrigued by this as I've never heard him talk about this at all, but only hear about a third of his show. What exactly does he refer to about this on nationwide radio?
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HOWEVER - the one item that never ceases to rub me the wrong way is when DR tells someone that you should never, under any circumstances, help to pay off someone's debt unless you are married. He says that it is not your responsibility until "I do". To me this is BS! My girlfriend, who is debt free, is also helping me pay down my debt because she understands that the quicker we can pay my loans off, the sooner we will be able to do other things that we want to such as travel. Dave always explains these scenarios as a lost cause because at any point the person can walk away from you and you have been wasting your money by helping pay down the debt.
I have to agree with DR here. If you girlfriend wants to pay off your debt so that you can travel, it would make more sense to me that she pays for you to travel with her. At least that way she gets something out of it. If you were married, your debt becomes her debt (in most states), so I can see the benefit of her paying it off.
My girlfriend is not paying off my debt, She is simply helping. Over the last 17 months since beginning to get serious with paying down the debt we have knocked out $31,000 out of $83,000. Out of that total $31,000, my girlfriend has given me roughly $2,600 so I feel that those saying that she is paying down my debt are incorrect.
Also, I would feel worse about letting my girlfriend pay for an entire trip to wherever while I am still so far into debt than having her chip in on paying down the loans. This seems very unmustachian, even if it costs me $0. We are always trying to reduce our spending so that we can throw more at debt and taking a trip now seems very frivolous.
Just get married, controversy over.
I listened to that call. That guy was pretty screwed. $0 savings, living off SS with a paid for house. It's not a good idea to put him in contact with people who run sophisticated financial products with lots of gotchas.
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I listen to DR from time to time mostly to hear the different people do their DFS and hear about how they have pulled themselves out of debt. Because I am in the process of paying off my student loans (step 2 in DR's plan) I find their stories to be somewhat motivating and a part of me wants to call in a do it as well once I am out of debt.
HOWEVER - the one item that never ceases to rub me the wrong way is when DR tells someone that you should never, under any circumstances, help to pay off someone's debt unless you are married. He says that it is not your responsibility until "I do". To me this is BS! My girlfriend, who is debt free, is also helping me pay down my debt because she understands that the quicker we can pay my loans off, the sooner we will be able to do other things that we want to such as travel. Dave always explains these scenarios as a lost cause because at any point the person can walk away from you and you have been wasting your money by helping pay down the debt.
Not a huge vote of confidence for all of these relationships....
Your girlfriend is not thinking clearly at all...DR is completely correct that you only gift money.
If she is helping you with debt, she may be thinking this is a very long term relationship, but as in any arrangement, you don't pay until the contract is in place. If this was a business friend, she would demand a contract with terms beneficial to her.
She would be much better off just saving the money, and then treating the both of you to a vacation as a gift to you.
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[snip]
Just get married, controversy over.
Common' man... not everyone wants to get married, and not everyone who wants to get married can.
Furthermore, of the people that are married, not all of them can be trusted. Look at how many keep bank accounts or debt hidden from their spouses, how many struggle with addiction, how many just have extremely poor financial skills.
Marriage is a poor indication of whether you should or should not lend someone money.
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The other advice of DR's I cannot stand is how he encourages people with several different kinds of debt to pay of the one with the smallest balance first, so it can 'snowball'. Whaa? For example, if you have a SL of $2k at 3.5%, a $9k car loan at 5% and a $22k cc at 21%, he pushes people to pay off the SL first, just because it is smaller. Mathematically the wrong answer.
Yes - it's mathematically "wrong," but if it helps people start the process of getting out of debt, and they are actually managing to dig their way out and haven't been able to before, then it works better than advice that is "optimal" and isn't followed because "I've not making progress against $22k" and they give up.
"Financially sub-optimal advice that works" is better than "financially optimal advice that gets ignored."
Dave Ramsey deals with people whose hair is on fire. He's not that useful for people who are already well on their way to FI, but he's sure good at pointing people in that direction and helping them take the first steps.
I also don't personally believe in the 'never loan a bf/gf money until you are married" because it places a lot of assumptions both on marriage/divorce and on the idea that long-term partners should get married.
... you do recall he's a Christian, giving Christian advice, yes?
I didn't pay for any of my fiancee's debts (not bad, maybe $10k total in student loans and a car payment) until after we were married and they were "our" debts. Then we knocked them out with my bonus check.
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I think Dave Ramsey's advice on living below your means and avoiding debt -- IMO these are good pointers for the mass. But I was already doing that and I wished I would have not taken his advice on paying off debt when my interest rate at 3.0% was so low. If I didn't pay off my mortgage and used and put the money into a vanguard mutual fund I would probably be up $30k in net worth these past few years.
Granted living debt free is a great feeling and the mass should appeal to many of his ideals. But I think some people like myself get tired of his message and want something more.
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But I think some people like myself get tired of his message and want something more.
You. Are. Not. His. Target. Audience.
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"Financially sub-optimal advice that works" is better than "financially optimal advice that gets ignored."
Dave Ramsey deals with people whose hair is on fire. He's not that useful for people who are already well on their way to FI, but he's sure good at pointing people in that direction and helping them take the first steps.
As I said, I've seen him help people, so my opinion has tempered somewhat. It's still advice that I abhor, and in many cases can be counter-productive.
... you do recall he's a Christian, giving Christian advice, yes?
that's what bothers me most about it - I don't see this as being very Christian advice, and I am a Christian. I simply believe that you shouldn't exclude helping people financially based on matrimony. I also don't believe loaning money to a spouse is always the right thing to do.
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that's what bothers me most about it - I don't see this as being very Christian advice, and I am a Christian. I simply believe that you shouldn't exclude helping people financially based on matrimony. I also don't believe loaning money to a spouse is always the right thing to do.
The very concept of "Loaning money to a spouse" is absurd - your finances are combined, for better or for worse, when you get married.
I don't think he's against giving to help people out, but paying off a boyfriend/girlfriend's debts is still pretty silly unless you are just viewing it as a gift with no strings attached.
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I used to think his advice was pretty good, even though the only debt I've ever had was student loans years ago. But I got a bit fixated on the simplicity of his 7 baby steps and built an emergency fund that I now consider too large. I also got too content with saving 10% (plus 9% to work pension and 6% matching from employer). Fortunately, I did realize that our mortgage rate was too low to be too concerned about it and that our money would work harder for us being invested. I'm so glad I found MMM and other blogs that made me realize I could be saving more and achieving financial independence sooner. I think for the average person who is struggling with debt, his approach can help improve lives. But more needs to be done for those interested in building wealth.
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that's what bothers me most about it - I don't see this as being very Christian advice, and I am a Christian. I simply believe that you shouldn't exclude helping people financially based on matrimony. I also don't believe loaning money to a spouse is always the right thing to do.
The very concept of "Loaning money to a spouse" is absurd - your finances are combined, for better or for worse, when you get married.
This is not always the case, as is evident in the number of people who choose to keep their finances separate even after decades of marriage. It's not the route we took, but it is quite common.
I don't think he's against giving to help people out, but paying off a boyfriend/girlfriend's debts is still pretty silly unless you are just viewing it as a gift with no strings attached.
I think this has to be a case-by-case judgement. I've seen many instances of an affluent person helping out their partner - often by taking over payment of their monthly loan payments. In every relationship there is give-and-take, and it's up to the individuals to decide. Fundamentally, I don't see how this is different from moving into your partner's home without paying rent.
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I think Dave Ramsey's advice on living below your means and avoiding debt -- IMO these are good pointers for the mass. But I was already doing that and I wished I would have not taken his advice on paying off debt when my interest rate at 3.0% was so low. If I didn't pay off my mortgage and used and put the money into a vanguard mutual fund I would probably be up $30k in net worth these past few years.
Granted living debt free is a great feeling and the mass should appeal to many of his ideals. But I think some people like myself get tired of his message and want something more.
The problem with DR is that he's not really qualified to say anything more, but he still does. Your own ancedote is proof of that.
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... with any remaining money now unprotected from Medicaid seizure to pay for her long term care....
Medicaid will put a lean on the house, so it's not really protected. I suppose if you got better the house would still be there to use, if that's what you meant. My grandpa didn't get better, all that was left of his 450k house when medicaid got done was about 60k. 92 years old and he died of what amounts to natural causes. You really want a zero balance sheet before you enter into that cesspool of TLC. This has led to my parent's standing instructions of "as soon as we're old enough so nobody's asking questions, just smother us."
I hate his whole tithe advice too. Ass over head in debt? Tithe because the church is always the answer! Always! Not sure how the church is going to solve a person's financial problems, but okay. Nearly all of Ramsey's advice is poor outside of the few rather obvious claims he makes.
Struggling to figure out how to meet my 10% obligation to charity is what first prompted me to start a budget. I'm sure there's a bit of trying to find meaning amid the chaos in that, but there's no way someone is going to set aside 10% for charity without budgeting for it, and I can personally attest that it's led me to save far more than I ever gave away. Also the positive benefits of that giving sold me on the idea that there is something out there that can make me happier than more stuff will. And that led me to the possibility of financial independence.
The conversation went like
Me: "No way can I just give away 10%, that's way too much."
Catholic co-worker:"Well, how much can you give away?"
Me: "Umm, I don't know, you want like a %?"
Ccw:"You not knowing is why you can't give away 10%, it has nothing to do with how much you make, or how much you have left over."
Ccw: "The issue isn't with giving 10%, the issue is that many people give nothing. Not because they don't have enough, but because despite having far more than enough, they spend even more."
An accomplished, educated, humble, intelligent man speaking in a reasonable tone to someone 20 years his junior. I'll always remember this conversation, it happened at a Taco Cabana on the northwest side of Houston. There were about a million different things that clicked in my head all at once, from finance classes, from talking to rich people, from talking to poor people, how my parents grew up, how their siblings lived, I mean everything. Prior to this I saved, but in a sort of reckless, out of control, "saving money is good" sort of a way. I had never paid attention to it before.
The religious obligation to give 10% to charity is 100% about living below your means. By definition, in the word, in the spirit, and in actual practice. The non-religious looking in focus on who is receiving that charity, instead of who is providing it. I have never attended a church that even suggested tithing (as I understand it, catholics are pretty big on it. As I've gotten older, alot of the catholic stuff seems to really just be about efficiency in religion, so my rage has settled quite a bit). "You need to be doing this for yourself, for your family. You can give the money to us, or you can give it to any cause you wish, but you must give it away."
More than one road can take you where you want to go. Just because you got there another way doesn't mean this isn't a tried and true tactic.
Rage at DR about any particular piece of advice I think would be equivalent to rage at MMM about spending money on beer being OK. You're sort of missing the overall message.
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Fundamentally, I don't see how this is different from moving into your partner's home without paying rent.
Because if you live in a house, your mortgage is a fixed cost. Having someone else come live with you doesn't change it. And if they break up with you and leave there is no effect. You'd monetarily do better to have them pay rent, but you are not out anything by having them not pay rent.
But paying off someones, who is not legally bound to you, loan is a real cost to you.
Now, if you're in a sugar-daddy type situation, sure. If it's just a gift, sure. Instead of buying a watch, have some money toward the loan.
But is money "lost" to the person.
But the if my boyfriend were to pay off my hypothetical loans (I've never had any)- then he gets nothing from it. If my boyfriend paid for me to go to Europe, he's out the same amount of money, but he got to vacation to Europe, which he wanted to do. Not wait until I didn't have loans so that he could do something fun. Obviously, I still have loans- but that was my problem to begin with.
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I don't know if this is offtopic, but one best friends of mine asked me to pay of his student debt that part that is not my country's government funded/protected which has 6% currently. He would then pay me instead a the debt slowly over in 6-7 years with less interest then 6%.
My friend is male and I am 100% heterosexual and I am usual very sexually interested in women. This is how it works for me. Since he is one of my best friends I would feel like a greedy pig if I say 5% to him but I have said 4% and he has agreed to 4% which we both think it is fair.
My investment apartment mortgage's are NOT fixed terms mortgages I wll not tell their %, but not even near 4%,,,
His percentage also increase from 4% if the CEB(Central European Bank compare to FED in USA) raises general %.
I think that is good for both me and my friend and his debt is not that great... a small investment from me to help my friend.
I am Christian, but I coldly say sometimes that my moral is more like a Crusader... which is cruel and I would kill without hesitation if I would get into war to defend my country. I don't do charity, but helping a friend sometimes and sometimes even helping a stranger on the street feels good to me. I don't complain about those who do charity however it is everyone's choice to choose how they do about that.
Oh and I am not blue eyed and I trust no employer or other person then me Of course I make a real and legal contract with me friend about the loan I grant him so his student debt is paid the part that is not government backed only that part of his student loan I pay. When paid then he starts paying me instead with less interest.
You know i was very drunk last April 2015... my friend who is lower middle class and live in rented apartment had invited his girlfriend, me and other people. Later that evening when one dude said to my best friend who is not wealthy: since you are host can you not order everyone...
My friend looked awkward and said nothing... I was uhm very drunk and said ... I am richest in our small group at this table and I will pay! I did and nobody complained and usually I am not eager to buy drinks to other people but it felt natural... and do you know sometimes the children bluntly say the truth and if you are drunk the truth can come out...
I am NOT a millionaire and I have one friend that is much richer then me. He is a millionaire, but he was not with us during that evening.
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I hate his whole tithe advice too. Ass over head in debt? Tithe because the church is always the answer! Always! Not sure how the church is going to solve a person's financial problems, but okay. Nearly all of Ramsey's advice is poor outside of the few rather obvious claims he makes.
He's a Christian, gives Christian advice, and the Bible is rather clear on supporting your local church.
So, yeah, it's decent advice from his perspective and from the perspective of a lot of his listeners.
Just because the MMM groupthink hates religion and charity doesn't mean everyone does...
The bible is pretty clear on selling all your possessions, pooling your communal resources and making distributions from that communal pool based upon need. It's literal communism, right there in the Book of Acts. And this isn't OT irrelevant prophets or Paul pretending that he's an authority on what Jesus wanted, these are the actions of the people who lived with Jesus, followed him from town to town around Judea, heard him speak. When the people who lived with Jesus decided they wanted to make a society worthy of him while they awaited his return and the end of days the society they chose to make had no money, it had no individual possessions, people helped each other according to need.
The idea that what Jesus wanted was megachurches demanding tithes in exchange for redemption is disgusting. The people who knew him knew him better than that. They knew he believed that money had no place in the house of God.
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I still have somewhat of a soft spot for Dave Ramsey, even though I disagree with most of his advice beyond basic "how to get out of debt" stuff. Mainly because when I was 18-19, I was making some poor financial decisions and my parents decided to pay me ~$100 to watch his Financial Peace University series. I expected to be bored out of my mind, but hey, free money, so I watched it. It got me thinking about financial responsibility, avoiding debt, and saving at an early age.
And that was how I ended up with a 401k and no debt at 21. My increasing interest in personal finance and investing led me to discover MMM in 2013, and to teach my then-boyfriend (now husband) about the financial principles I was learning. Now we're on track to retire by 2028 -- hopefully sooner! -- and I sincerely doubt this would be the case if I hadn't watched that Dave Ramsey series years ago. My parents were certainly positive role models, but I did have a spendy-pants problem and it makes me nervous to think how I might have ended up if I hadn't gotten on the right track early.
Dave Ramsey is a good "gateway" to personal finance, especially for those who are trapped in the average American consumer lifestyle. I have plenty of issues with him, but I can't deny the amount of good that he is doing for people who would otherwise be screwed.
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I am Christian, but I coldly say sometimes that my moral is more like a Crusader... which is cruel and I would kill without hesitation if I would get into war to defend my country.
You might want to stop saying that without further research on your part. The crusaders were not defending their respective countries. They were invading other countries.
If you mean you'd coldly kill for personal gain or evangelical fervor about your specific brand of Christianity, then yes, continue to say you have a crusader morality.
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I am Christian, but I coldly say sometimes that my moral is more like a Crusader... which is cruel and I would kill without hesitation if I would get into war to defend my country.
You might want to stop saying that without further research on your part. The crusaders were not defending their respective countries. They were invading other countries.
If you mean you'd coldly kill for personal gain or evangelical fervor about your specific brand of Christianity, then yes, continue to say you have a crusader morality.
Well here are facts about me mentally:
1. I am sadist. That does not mean I like to kill in real life unless attacked by Russia. However sadist horror and brutal Action is to my liking in movies.
Example I like the movie:
You 're next
http://www.imdb.com/title/tt1853739/?ref_=fn_al_tt_1
which is sadistic horrror movie.
and I liked
Spartacus Blood and Sand Tv series
http://www.imdb.com/title/tt1442449/?ref_=nv_sr_1
and it is brutal and cruel Action.
2. I do rent apartments, but I do it of greed and not of want to help them really. I am still fairly fair and I don't freak out if rent is paid 2 weeks late as long as they pay it.
3. Politically I voted well lets skip that part since politics should be avoided, but that party is not considered friendly by many...
4. I don't do charity.
Christianity keeps me in check though I do believe in Jesus and God... yes you are true saying I am Crusader is overblown... but if compared to many other Christians I would not consider myself very good.
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I found myself yelling at the radio.
Ever thought about anger management? If a radio show does that to you, I bet you're a terrific all-around person when you face a real issue.
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Wow - I don't understand all of the hatred around here toward Dave Ramsey, a man whose primary message is to live within your means. I would have thought that he would be a hero around here! Instead, I was shocked to find a lot of superiority complex, something I was not expecting to find on MMM.
Although I will freely admit that I do not agree with him on religion, tithing, 12% returns, and a few other things, I admire his undying determination to help folks, even if it involves continually repeating the same general message over and over for 25 years - You can't accuse him of inconsistency!
I think people spend too much time dwelling on the details that make him unique, while completely overlooking his general message - LIVE WITHIN YOUR MEANS! Instead of picking at his differences, focus on the common message, and the people who call in Debt Free Screams - these can be really inspiring.
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Wow - I don't understand all of the hatred around here toward Dave Ramsey, a man whose primary message is to live within your means.
I agree, some of the criticism seems over the top. The man does a lot of people who need basic advice about debt a lot of good. My BIL, who spent like a drunken sailor for years, is finally finding some Financial Jesus with DR. Whatever it takes for him to get on a better path, I'm not going to nitpick the details.
An old and dear and very religious friend of mine tithed for years and was always paycheck to paycheck. We fell out of touch over time. I discovered last year his family lost their home to a foreclosure when he hit a rough patch. There are probably lots of things he could have been doing better, but all I will say is he was always there for his Church and in his hour of need the same did not occur. Those thousands he contributed every year (and, frankly, some better decisions) could have kept him in his home.
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Wow - I don't understand all of the hatred around here toward Dave Ramsey, a man whose primary message is to live within your means. I would have thought that he would be a hero around here! Instead, I was shocked to find a lot of superiority complex, something I was not expecting to find on MMM.
Oh, I think you may be reading more into these comments then necessary. On the whole you are correct, the man tries to help people live within their means, and on that level there's a lot of respect towards him. However, the thread is entitled "Dave Ramsey advice that pisses me off" and to be frank he gives some advice that's just bonkers to people who already have their financial lives in order. Mostly I see this as just a cathartic rant-thread. Similar to "I love my brother but i just can't stand that he..."
In one of his earliest posts MMM describes this as a site for people who have already mastered the basics. As he puts it, "we don't talk about clipping coupons and freezing credit cards in blocks of ice (paraphrasing here)" . I know people who have gone deeply in debt and dove into the deep end of the consumerism debt pool. For them, following his advice is a dramatic improvement. I'm glad that so many people have improved their lives by listening to him. Doesn't mean some things that he says won't continue to bug me.
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I found myself yelling at the radio.
Ever thought about anger management? If a radio show does that to you, I bet you're a terrific all-around person when you face a real issue.
No, really - you should of heard the call. I was yelling at the radio too and I am a very peaceful person. Dave was giving this poor old man terrible advice.
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Wow - I don't understand all of the hatred around here toward Dave Ramsey, a man whose primary message is to live within your means. I would have thought that he would be a hero around here! Instead, I was shocked to find a lot of superiority complex, something I was not expecting to find on MMM.
Superiority complex abounds here.
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There's nothing wrong with Dave Ramsey. I like his show and I think for the most part he gives good advice. THIS advice was bad and I really felt sorry for the caller.
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There's nothing wrong with Dave Ramsey. I like his show and I think for the most part he gives good advice. THIS advice was bad and I really felt sorry for the caller.
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Dave Ramsey makes my skin crawl in many ways, but I'll admit that he's the reason that we were able to get out of debt. We even did it his way with the debt snowball (listing debts smallest to largest, while totally ignoring interest rates), and the psychology of those small victories really did keep us going. At the time, we were broke and had absolutely no financial literacy at all, so his dumbed down, step by step approach was really appreciated.
Once we were out of debt and had our full emergency fund, we looked to the next step of learning how to invest with him. That's where we went, "nope" and knew that his usefulness had run its course for us. But when he was helpful, he was REALLY helpful. Most folks on MMM have a fairly high (if not incredibly high) level of financial literacy, and nothing Dave Ramsey says would likely be helpful. But for people starting from scratch, I think that he has his place.
Caveat being that I've never listened to his radio show, and all information gleaned came from the The Total Money Makeover book.
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I don't like reading books, but I do watch news and read Online and see youtube videos.
David Ramsey the first 3 baby steps are pretty good and 4th the 401k does not at all apply to Europe that is USA only.
Make your skin crawl? Ok whatever I like hearing him.
I like both Robert Kioysaki and David Ramsey. What people fail to see they might not give you that super advice, but they are motivational speakers. People that make me want to do some effort....
I sold Magic The Gathering cards again... this weekend for more then 500 euro and I went to a Magic The Gathering place to do it lot of effort during weekend. These motivational speakers make me want to do some effort to become rich.
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Wow - I don't understand all of the hatred around here toward Dave Ramsey, a man whose primary message is to live within your means. I would have thought that he would be a hero around here! Instead, I was shocked to find a lot of superiority complex, something I was not expecting to find on MMM.
Superiority complex abounds here.
It's not about having a superiority complex. The advice Dave Ramsey gives is fine up to a point. He encourages young people to get out of debt. But if you're hoping to use him to accomplish anything more sophisticated than a facepunch, you should be very cautious. He's just not very rigorous with the numbers.
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I've never had a problem with debt, so I have limited knowledge of Dave Ramsey. That said, I recently encountered a DR group that was giving out advice per the DR philosophy. There was no debate permitted. Anything that didn't parrot DR's baby steps was deleted, and the people who dared question the logic were kicked out.
I guess that was the prerogative of the leaders, but here is a sample. A late 20's couple had no debt expect about $14,000 in student loans all at 2.75% and less. The wife was trying to convince her husband to quit contributing 5% to his 401k that gets a 3.5% match on that contribution. The advice given was to stop contributions until the student loans were all paid off. The group was instructed to "ignore the math". I hope DR himself wouldn't have given that woman that kind of advice, but the more I read about him, the more I wonder.
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That's exactly the advice he would have given that couple on the radio any way. Listen to the show enough, and you could basically be at the microphone yourself. "Enough" in this context is maybe 1-2 weeks - it is not complicated, nuanced advice he is selling.
DR is usually a big step up when you're a complete beginner with personal finances. Even with all of the sub-optimal decisions, most people are better off following the baby steps than the complete-lack-of-any-plan that was the prior choice.
The most dangerous piece of advice, I think, is the 8% withdrawal rate though. Wonder how many people follow his plan faithfully, follow this little tidbit from the books, and have to re-enter the workforce or drastically reduce lifestyle years down the road. To most of his audience, retiring early would be 60, pretty close to social security, so maybe not all that many. Replace 8% with 4% and it seems like the long-term outcomes should be not too bad for the vast majority - just takes longer to get there.
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I've never had a problem with debt, so I have limited knowledge of Dave Ramsey. That said, I recently encountered a DR group that was giving out advice per the DR philosophy. There was no debate permitted. Anything that didn't parrot DR's baby steps was deleted, and the people who dared question the logic were kicked out.
I guess that was the prerogative of the leaders, but here is a sample. A late 20's couple had no debt expect about $14,000 in student loans all at 2.75% and less. The wife was trying to convince her husband to quit contributing 5% to his 401k that gets a 3.5% match on that contribution. The advice given was to stop contributions until the student loans were all paid off. The group was instructed to "ignore the math". I hope DR himself wouldn't have given that woman that kind of advice, but the more I read about him, the more I wonder.
You are right about that, Dave Ramsey says to stop all contributions to your retirement (I disagree with him totally on this one) until all debts are gone.
I like listening to Dave Ramsey, because its the only show I know of that motivates me to save instead of spending, but I don't follow all of his advice or his principles. I have a credit card for example, DR is totally against it. I don't listen to anything he says about investing, he believes mutual funds can return 12% per year for example, but then again I am from Canada where mutual funds cost over 2% on average.
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Listen to the show enough, and you could basically be at the microphone yourself. "Enough" in this context is maybe 1-2 weeks - it is not complicated, nuanced advice he is selling.
To elaborate - that is the point the point OP is trying to make with this thread, I think. Even when presented with a situation that screams for complicated, nuanced advice, Dave Ramsey almost never strays from the standard line "debt is bad - always".
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The big problem with DR's advice is that it completely lacks nuance. For instance, I have a car loan. I know that makes me terrible, but whatever. That car loan is at .9%. If I were to follow DR's advice, I would frantically try and pay that car loan down AND THEN WHEN DONE I could start investing in my 401k. Well, my employer matching on my 401k is 100% of the first 6%. And my ROR on my 401k is somewhere around 10%, +/-. So if I followed DR's advice to the T, I would sacrifice 1) all employer matching contributions to my 401k, 2) all tax benefits of diverting income to my 401k, and 3) the returns I make in my 401k. All to avoid paying .9% inerest on a loan that's about 3% of my monthly gross.
On what planet does that make sense? It's almost criminally negligently bad advice. And oh by the way, this is a car that will be paid for in year 4 that I own it and I expect to own for 10-12 total years.
Same with my wife's student loan. She consolidated back in '05 at literally about .05% interest. We pay $88/mo, automatically deducted from checking. The remaining balance is, oh, I dunno, $6k? I could write a check for it tomorrow and be done, but at .05%, why bother? I think even my checking account gives a better return than that.
You need to take DR's advice for people with money problems the way you need to take a reformed alcoholic's advice on booze; as if he's speaking with other alcoholics. If you aren't an alcoholic, the occasional beer or drink ain't going to hurt you. It's only if you're an alcoholic must you abstain completely, otherwise it's not great advice.
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I have a credit card for example, DR is totally against it.
How does DR propose one buy a plane ticket, check into a hotel, rent a car, or buy anything on the internet without a CC? Sure, that can all be done with a debit card, but especially with hotels and rental cars, you tie up your own cash, and with buying anything online, I'd much rather have a fraudulent item freeze up CC "money" than real money in my account.
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I have a credit card for example, DR is totally against it.
How does DR propose one buy a plane ticket, check into a hotel, rent a car, or buy anything on the internet without a CC? Sure, that can all be done with a debit card, but especially with hotels and rental cars, you tie up your own cash, and with buying anything online, I'd much rather have a fraudulent item freeze up CC "money" than real money in my account.
He says its all done with debit and that he does that all the time.
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I've only ever had a problem once using a debit card for anything travel related - to rent a car. And that had nothing to do with the fact it was a debit card - my credit union had decided to block all transactions from Budget (this one is what finally pushed me over the edge with that particular credit union). Went next door and it worked fine. OK I lied - twice I've had an issue - when we were in Greece account got locked even though we told them many times we would be in Greece for those dates. Again though, this has nothing to do with being a debit or a credit card - it was an "oops" from the issuing bank.
Granted I use a credit card now for travel, but the idea that it is required is totally false. Now if the question is, how do you get a FREE plane ticket, hotel room, or rental car without a credit card, that's another question altogether.
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Most hotels and rental car companies put a hold on your cash when you check in or rent that may be much in excess of what you will actually end up paying. I personally manage my checking account pretty carefully to have a relatively low balance, and push more into savings and investments. Therefore, if I'm away, and someone decides to put a $1k hold on my cash for a room or car I'm going to pay $200 or $500 for, that's a pretty big annoyance. It CAN be gotten around by padding your checking account, etc, but why would you want to deal with that when you can let them just put a hold on "credit limit" instead?
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That's exactly the advice he would have given that couple on the radio any way. Listen to the show enough, and you could basically be at the microphone yourself. "Enough" in this context is maybe 1-2 weeks - it is not complicated, nuanced advice he is selling.
DR is usually a big step up when you're a complete beginner with personal finances. Even with all of the sub-optimal decisions, most people are better off following the baby steps than the complete-lack-of-any-plan that was the prior choice.
The most dangerous piece of advice, I think, is the 8% withdrawal rate though. Wonder how many people follow his plan faithfully, follow this little tidbit from the books, and have to re-enter the workforce or drastically reduce lifestyle years down the road. To most of his audience, retiring early would be 60, pretty close to social security, so maybe not all that many. Replace 8% with 4% and it seems like the long-term outcomes should be not too bad for the vast majority - just takes longer to get there.
Ugh, I was willing to give him the benefit of the doubt on that one.
I agree the 8% withdrawal rate is downright dangerous advice.
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Just because the MMM groupthink hates religion and charity doesn't mean everyone does...
How dare you, Syonyk? (That's the most polite way I can think of to say F-U, Syonyk!) I don't hate religion or charity and I am a firm supporter of Mustachianism. You're right that not "everyone does", including many people in the MMM community. Shame on you for making such an un-Christian and uninformed generalization.
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I've never had a problem with debt, so I have limited knowledge of Dave Ramsey. That said, I recently encountered a DR group that was giving out advice per the DR philosophy. There was no debate permitted. Anything that didn't parrot DR's baby steps was deleted, and the people who dared question the logic were kicked out.
I guess that was the prerogative of the leaders, but here is a sample. A late 20's couple had no debt expect about $14,000 in student loans all at 2.75% and less. The wife was trying to convince her husband to quit contributing 5% to his 401k that gets a 3.5% match on that contribution. The advice given was to stop contributions until the student loans were all paid off. The group was instructed to "ignore the math". I hope DR himself wouldn't have given that woman that kind of advice, but the more I read about him, the more I wonder.
I have about $13k of student loans at 2.8% as the only debt I have. It would make no sense for me either to stop 401k contributions just to pay off the debt early. I contribute 6%, my company 5%, moving to 7% next year.
I think DR makes sense for people who have serious financial self-control issues, but I have never really had those problems. My sister and BIL used to be the biggest DR zealots on the planet. Would lead FPU courses and gave us the book and listen religiously to his call in show. They would tell us how much they disagreed with our CC usage, even though we told them we pay them as soon as the charges post and use them for rewards. "But DR said no one got rich off of CC rewards!" Um, who said I was trying to get rich? Have gotten free flights though, well over $1k in cash travel credits, etc. They would just poo poo that. Whatever...
The amusing thing is that they have really fallen off the wagon. I have heard them mentioning going into student loan debt, carrying balances on credit cards (that they swore up and down they would not have again!), have a lot of what I would term pretty unnecessary regular monthly expenditures. They aren't beyond their eyeballs in debt (yet), but definitely have abandoned the ways of their former lord and savior, Dave Ramsey.
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I love Dave R. He gives some pretty good advice to the great masses.
That said he --
Is primarily a marketer
Makes money selling information
Get's sizable kickbacks from Mutual Fund sellers
States he averages 12% on his mutual funds
Doesn't really encourage saving a very high percentage
Lives in a 5 Million dollar paid in cash house
Encourages home debt for those without the cash to purchase said homes
I mostly don't get pissed listening to him though.
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"States he averages 12% on his mutual funds" and he doesn't say how you can average 12% with mutual funds, all he suggest is to see their ELP local provider or whaterver they are called.
"Doesn't really encourage saving a very high percentage" This one is debatable, he says to build wealth at baby step 7, so that can be anything really including saving 70% like MMM did.
"Lives in a 5 Million dollar paid in cash house" I don't see how that is relevant, I doubt viewers would listen to advice from some guy living on the streets.
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Doesn't really encourage saving a very high percentage
I'm not sure about that, I think in his own roundabout way he does. Having read his book, he basically says get out of debt, set up a cash cushion/emergency fund, then start saving 15% of your gross income no matter what. However in later steps you are supposed to start saving and investing more than just the 15%.
But overall I agree with your point DR is all about the four to seven decades of employment life.
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I love Dave R. He gives some pretty good advice to the great masses.
That said he --
Is primarily a marketer
Makes money selling information
Get's sizable kickbacks from Mutual Fund sellers
States he averages 12% on his mutual funds
Doesn't really encourage saving a very high percentage
Lives in a 5 Million dollar paid in cash house
Encourages home debt for those without the cash to purchase said homes
I mostly don't get pissed listening to him though.
That pretty much sums it up for me as well. And he's good with a facepunch when needed.
I can't say I always agree with 100% of Mustacians either. I take the bits I like. (And sometimes I realize months later the bits I didn't like are also pretty tasty.)
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DR has helped a lot of people, and I enjoy listening to his program on occasion.
But his overall values don't match my own. "Live like no one else so that you can later live like no one else" is about delayed gratification. but consumerism and the finer things in life seems to be the ultimate goal, at least based on his current home, cars and overall lifestyle. A $5 million home in Nashville is fucking ridiculous by any estimation. I much more prefer the MMM philosophy which focuses on finding happiness in the simple things and eschewing societal barometers of success.
(http://www.coolsprings.com/wp-content/uploads/2010/10/dave-ramsey-mansion-house-cool-springs-tn.jpg)
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I call DR's 5 million dollar house his billion dollar mistake. Since he constantly states he averages 12% on his mutual funds and that his credit is so good that he doesn't even have a credit score, one would assume that he could get a home loan for sub 4%. So that is an 8% spread.
Also, if he merely lived in a 1 million dollar house (pretty nice in Nashville) and invested the 4 million at 12%, in 60 years (about the time his grandkids are in their 50s) that investment would be worth some 600 million dollars inflation adjusted.
So the question is would you rather leave your grandkids 600 million or an odd old house that is so expensive no one can buy it?
I say this because he often talks about changing your "family tree" financially.
It is really the same thinking pattern that MMM and much of our fellow readers, including myself, have. MMM has 400K parked in his fancy pants "hey I paid cash for it and live at the park!" house.
The reality is that the percentage of people who are "happy" and have wonderful lives living in 100K houses is similar to those living in 400K houses.
Dave, as many of us, believes that fancy pants house = happiness.
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Dave, as many of us, believes that fancy pants house = happiness.
I can't deny that when I drive through certain neighbors in St. Louis that I don't get house envy once in a while. I irrationally think how much happier my life would be if I lived in X or Y house. I know it's not true, but the beauty of the home and the yard overtakes me. For me personally this occurs in historic neighborhoods with gorgeous early 20th century brick homes with all the elegant touches. These are usually 6,000 sq. foot tops. Now that is a big ass house IMO, but nothing like the monstrosity I linked to above. Houses like Dave's just make me cringe when think of all the colossal waste involved. And you're right, Bob. No one is telling him to live in a 200K or less house like the rest of us schlubs. He made it big, but with Nashville houses prices, one should be able to satisfy one's high brow needs with much, much less. And aren't his kids mostly grown by now? Does that mean just he and his wife are living in this off the charts large house?
I can't deny that it makes me question his overall message. I mean - is this the point of it all? To eventually live a lavish life?
Regarding MMM, I believe he has downsized from his 400K home for some of the reasons many of us on the forum live in smaller places - the space is unnecessary and he wanted to have a smaller footprint environmentally. That I can respect, although I probably wouldn't have judged him in his 400K home either. Not all of us live in locations where you can buy a good home in a respectable neighborhood for 150K or less.
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Not all of us live in locations where you can buy a good home in a respectable neighborhood for 150K or less.
Exactly. I just bought a very modest ~1700 sq ft house much closer to my and my wife's office, in the best school district, safe wide streets, lots of parks, etc. I paid betwen $300 and $350k, and am spending another ~$20k refurbishing lots of it (sanding/resurfacing HW floors, paint, appliances, HVAC, redoing the finished basement (inc. in the 1700 sq ft), adding a full bath in the basement (only had 1.5 baths prior), etc. I looked at houses from $300k to $420k, and this one was the best mix of features we wanted and projects we wanted to do (mostly cosmetic plus easy mechanical stuff, not taking down walls, etc.).
$150k here in Chicagoland either buys you something falling down, a condo or townhome, or something in a school district you wouldn't dare send your kid to (and good luck reselling that house some day).
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DR has helped a lot of people, and I enjoy listening to his program on occasion.
But his overall values don't match my own. "Live like no one else so that you can later live like no one else" is about delayed gratification. but consumerism and the finer things in life seems to be the ultimate goal, at least based on his current home, cars and overall lifestyle. A $5 million home in Nashville is fucking ridiculous by any estimation. I much more prefer the MMM philosophy which focuses on finding happiness in the simple things and eschewing societal barometers of success.
(http://www.coolsprings.com/wp-content/uploads/2010/10/dave-ramsey-mansion-house-cool-springs-tn.jpg)
Is that really his house? Wowsa!
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Is that really his house? Wowsa!
Yeah, although to be honest it's consistent with his teachings. He teaches that you need to save and be debt free in order to buy even nicer stuff in the future. He doesn't teach minimalism, which is what we're accustomed to here. I think that's part of what's so alluring, since most people like the idea of having more than whatever they have today. People who are debt-free and putting money in investments will be better positioned to own much nicer things in the future. Me personally, I'd rather simply retire earlier, but the DR system appeals to people who like the idea of having nicer stuff rather than retiring earlier and still having inexpensive stuff.
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Is that really his house? Wowsa!
Yeah, although to be honest it's consistent with his teachings. He teaches that you need to save and be debt free in order to buy even nicer stuff in the future. He doesn't teach minimalism, which is what we're accustomed to here. I think that's part of what's so alluring, since most people like the idea of having more than whatever they have today. People who are debt-free and putting money in investments will be better positioned to own much nicer things in the future. Me personally, I'd rather simply retire earlier, but the DR system appeals to people who like the idea of having nicer stuff rather than retiring earlier and still having inexpensive stuff.
I think that is a great point. He is appealing to the vast majority of people in the US consumer driven culture. He owns expensive boats, lake homes, a paid off 10 million dollar office building etc... He has done very well for himself.
So he basically tells people -- get out of debt, invest, and at some distant point you will have a bunch of money. He is on the work hard from age 21 till 65 track for sure.
In reality if people followed his advice it would work out nicely for them and often does if you listen to his Friday debt free screams.
I really like that portion of the show. It is often people with children earning over 100K a year that were totally in debt. Many of them get on his program and within 5 years have paid all the debt and their house off. I imagine those people figure out real quick that they can save some serious money. I also imagine that they are unlikely to deviate from the frugal path they have followed and run out and buy a boat, house and lake house. Although, some probably will. I'm guessing that many of them are saving 60-85% of their income once they are debt free and the house is paid off. So even if they follow Dave's advice and invest with the crappy, endorsed, full commission, mutual fund salesmen, they will do very well investment wise.
One thing I really like about Dave is his emphasis on giving once you have bank. We don't hear much about giving on this forum.
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One thing I really like about Dave is his emphasis on giving once you have bank. We don't hear much about giving on this forum.
Let me correct that. Feel free to give me money.
Seriously though, cut the guy some slack. Is he biased? Yes. Is he selfishly motivated? Yes. Is his advice 100% accurate 100% of the time? Hell no. Name one radio/TV host who gives perfect advice to everyone. Yes, his system has some mathematical flaws, but he widely acknowledges this. He's a very smart man. He knows that paying the 25% interest CC is better than paying the 10% CC. He has 50x the experience helping people as MMM, and 10000x any of us. If he says that paying off the smallest debt is the right way to go, he's giving the best advice for the greatest number of people.
As to the Mutual Funds, I haven't listened to him in awhile, but I never heard him specifically mention any MF by name. He would always just say stuff like, "Invest in a good MF". He would regularly recommend finding a local approved provider. Are they the ones recommending the front loaded funds?
Not that I want to derail this thread, but I remember getting pretty pissed off at Jim Cramer a few years ago, because he was always recommending people buy the gold ETF "GLD". My stance on gold ETFs aside, there was another ETF "IAU" that provided the same exposure, but had a lower expense ratio. On one of his shows, they finally aired someone calling him out about it. He stated that the reason he recommended GLD was because he owned IAU, and he couldn't buy/sell stocks for x days after mentioning them on air. This got me a little more pissed at Cramer, as he basically just admitted to leading his viewers to a suboptimal investment so that he wouldn't be inconvenienced.
Anyways, my point with bringing that up is to make it clear that all of these celebrity investing/finance people are self motivated. They are greedy, and they'd sell you a 20% mortgage if they could get away with it. The only reason they don't, is because they want to protect their reputation. Just don't think that they wouldn't sell you down the river to make a few bucks for themselves. Information isn't free. DR gots to get paid.
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One thing I really like about Dave is his emphasis on giving once you have bank. We don't hear much about giving on this forum.
Let me correct that. Feel free to give me money.
Seriously though, cut the guy some slack. Is he biased? Yes. Is he selfishly motivated? Yes. Is his advice 100% accurate 100% of the time? Hell no. Name one radio/TV host who gives perfect advice to everyone. Yes, his system has some mathematical flaws, but he widely acknowledges this. He's a very smart man. He knows that paying the 25% interest CC is better than paying the 10% CC. He has 50x the experience helping people as MMM, and 10000x any of us. If he says that paying off the smallest debt is the right way to go, he's giving the best advice for the greatest number of people.
As to the Mutual Funds, I haven't listened to him in awhile, but I never heard him specifically mention any MF by name. He would always just say stuff like, "Invest in a good MF". He would regularly recommend finding a local approved provider. Are they the ones recommending the front loaded funds?
Not that I want to derail this thread, but I remember getting pretty pissed off at Jim Cramer a few years ago, because he was always recommending people buy the gold ETF "GLD". My stance on gold ETFs aside, there was another ETF "IAU" that provided the same exposure, but had a lower expense ratio. On one of his shows, they finally aired someone calling him out about it. He stated that the reason he recommended GLD was because he owned IAU, and he couldn't buy/sell stocks for x days after mentioning them on air. This got me a little more pissed at Cramer, as he basically just admitted to leading his viewers to a suboptimal investment so that he wouldn't be inconvenienced.
Anyways, my point with bringing that up is to make it clear that all of these celebrity investing/finance people are self motivated. They are greedy, and they'd sell you a 20% mortgage if they could get away with it. The only reason they don't, is because they want to protect their reputation. Just don't think that they wouldn't sell you down the river to make a few bucks for themselves. Information isn't free. DR gots to get paid.
In Dave Ramsey, you are not obligated to buy anything, all his baby steps are listed free on the internet, the rest is up to you.
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Seriously though, cut the guy some slack. Is he biased? Yes. Is he selfishly motivated? Yes. Is his advice 100% accurate 100% of the time? Hell no. Name one radio/TV host who gives perfect advice to everyone. Yes, his system has some mathematical flaws, but he widely acknowledges this. He's a very smart man. He knows that paying the 25% interest CC is better than paying the 10% CC. He has 50x the experience helping people as MMM, and 10000x any of us. If he says that paying off the smallest debt is the right way to go, he's giving the best advice for the greatest number of people.
That doesn't excuse the fact that he often gives demonstrably bad advice for the sake of having overly simplistic rules for everyone to follow. When you try to represent a single solution as the best for everyone, don't be surprised when people come back and challenge you on that.
If your advice is that good, you don't need to misrepresent it.
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Now that I'm FIRE, I'm rarely in the car, so I was surprised to turn the radio on last week to hear that the afternoon drive time show host was none other than Dave Ramsey! I know his work well, but had never heard him speak. I, too, am appalled at the advice about the reverse mortgage.
DR seems to hold traction best when he's teaching people to get out of debt. His credibility gets slipperier once that hurdle has been crossed. What he should have done is to point the caller in the direction of a firm that specializes in this type of loan without ripping off seniors charging egregious fees. Sure, there are lots of bad reverse mortgage lenders, but there are good programs out there as well. The potential benefit for the caller's remaining quality of life far outweighs any point DR might be trying to make for the drowning-in-debt congregation he preaches to.
I came to MMM to learn what to do so that I could retire early, not to figure out how to get out of debt. DR is a one-trick pony. MMM covers a much broader spectrum of life.
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DR seems to hold traction best when he's teaching people to get out of debt.
Even then though, his "anihilate all debt before investing" is terrible advice. It's like telling someone they should lose weight by only dieting, and then when they reach their goal weight they should start working out to build muscle. It's just dumb. There is debt that needs to be attacked quickly (high APR, CCs, etc), and there is debt that should be paid off more slowly if investing can beat the interest rate (low APR car loan, low APR student loans, etc). Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
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The religious obligation to give 10% to charity is 100% about living below your means. By definition, in the word, in the spirit, and in actual practice. The non-religious looking in focus on who is receiving that charity, instead of who is providing it. I have never attended a church that even suggested tithing (as I understand it, catholics are pretty big on it. As I've gotten older, alot of the catholic stuff seems to really just be about efficiency in religion, so my rage has settled quite a bit). "You need to be doing this for yourself, for your family. You can give the money to us, or you can give it to any cause you wish, but you must give it away."
More than one road can take you where you want to go. Just because you got there another way doesn't mean this isn't a tried and true tactic.
Rage at DR about any particular piece of advice I think would be equivalent to rage at MMM about spending money on beer being OK. You're sort of missing the overall message.
Good thoughts. I've heard DR speak often on his show about tithing. He often prefaces it with acknowledgements that a) it doesn't matter what he says, it's what God says and b) giving any amount isn't going to earn you your salvation just by that act. The way he talks, it's about acknowledging your blessings and trying your best to follow God's spirit in being generous. Even if you aren't a churchgoer or even a believer, that seems like a good spirited way to approach it.
And I hadn't even thought about tithing essentially starting the budget discipline, but boy that sure makes sense. If you don't have a budget, and then you've decided to give 10 percent back (or whatever percentage,) perhaps the next relevant question can be, "Hmm, where's the other 90 percent going?"
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Is that really his house? Wowsa!
Dave is just looking after it, it's god's house.
LOL
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Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
Ditto on prepaying one red cent on a low-interest mortgage before maxing out all available retirement vehicles and the college accounts of any offspring.
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Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
Not really. It depends on who the plan is for. His approach is behavioral, which works for people who may have financial self-control problems. They need an all-or-nothing approach. Get out of debt completely, and never go back.
If Dave were to leave any room in his advice for people to leave debt on the back burner while they put their money elsewhere, it wouldn't be effective. Playing with debt is playing with fire for many of his listeners. If they were financially sophisticated they wouldn't be in so much debt to begin with. (Myself included. His advice was exactly what I needed to hear four years ago.)
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Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
Not really. It depends on who the plan is for. His approach is behavioral, which works for people who may have financial self-control problems. They need an all-or-nothing approach. Get out of debt completely, and never go back.
If Dave were to leave any room in his advice for people to leave debt on the back burner while they put their money elsewhere, it wouldn't be effective. Playing with debt is playing with fire for many of his listeners. If they were financially sophisticated they wouldn't be in so much debt to begin with. (Myself included. His advice was exactly what I needed to hear four years ago.)
I agree, and paying off your debt is more likely to provide you with the financial self-discipline to not eventually raid your retirement accounts. We forget that this is routinely done by people. We might look at it as untouchable, but a lot of people don't.
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I agree, and paying off your debt is more likely to provide you with the financial self-discipline to not eventually raid your retirement accounts. We forget that this is routinely done by people. We might look at it as untouchable, but a lot of people don't.
I've done that in the past :( Those were pretty dire days in our household though and we got an enormous amount of utility from the money. Stupid mistake though.
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Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
Not really. It depends on who the plan is for. His approach is behavioral, which works for people who may have financial self-control problems. They need an all-or-nothing approach. Get out of debt completely, and never go back.
If Dave were to leave any room in his advice for people to leave debt on the back burner while they put their money elsewhere, it wouldn't be effective. Playing with debt is playing with fire for many of his listeners. If they were financially sophisticated they wouldn't be in so much debt to begin with. (Myself included. His advice was exactly what I needed to hear four years ago.)
I disagree with giving up the 401k match, unless perhaps if the match is less than 50% and the debt is 24% or so. The question is giving up a 50% or more match in order to pay off a loan at less than 3%. Even if you end up cashing out that 401k later on, you're going to be better off for having gotten that match.
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Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
Not really. It depends on who the plan is for. His approach is behavioral, which works for people who may have financial self-control problems. They need an all-or-nothing approach. Get out of debt completely, and never go back.
If Dave were to leave any room in his advice for people to leave debt on the back burner while they put their money elsewhere, it wouldn't be effective. Playing with debt is playing with fire for many of his listeners. If they were financially sophisticated they wouldn't be in so much debt to begin with. (Myself included. His advice was exactly what I needed to hear four years ago.)
I disagree with giving up the 401k match, unless perhaps if the match is less than 50% and the debt is 24% or so. The question is giving up a 50% or more match in order to pay off a loan at less than 3%. Even if you end up cashing out that 401k later on, you're going to be better off for having gotten that match.
Exactly. 401k matching gives you like a 125%+ return, before any market returns. You get the tax benefit AND free money. Why in the world would you sacrifice that unless you literally needed to eat or pay for life saving surgery or something????
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Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
Not really. It depends on who the plan is for. His approach is behavioral, which works for people who may have financial self-control problems. They need an all-or-nothing approach. Get out of debt completely, and never go back.
If Dave were to leave any room in his advice for people to leave debt on the back burner while they put their money elsewhere, it wouldn't be effective. Playing with debt is playing with fire for many of his listeners. If they were financially sophisticated they wouldn't be in so much debt to begin with. (Myself included. His advice was exactly what I needed to hear four years ago.)
I disagree with giving up the 401k match, unless perhaps if the match is less than 50% and the debt is 24% or so. The question is giving up a 50% or more match in order to pay off a loan at less than 3%. Even if you end up cashing out that 401k later on, you're going to be better off for having gotten that match.
Exactly. 401k matching gives you like a 125%+ return, before any market returns. You get the tax benefit AND free money. Why in the world would you sacrifice that unless you literally needed to eat or pay for life saving surgery or something????
You're thinking about this logically -- and YOU SHOULD.
The people Dave is talking to are financially broken. They don't seem to have the ability to think about these things logically. He's trying to build a habit that starts now and works forever. He's trying to get them to willingly be a part of some psychological games that (I think) actually work on some folks.
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Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
Not really. It depends on who the plan is for. His approach is behavioral, which works for people who may have financial self-control problems. They need an all-or-nothing approach. Get out of debt completely, and never go back.
If Dave were to leave any room in his advice for people to leave debt on the back burner while they put their money elsewhere, it wouldn't be effective. Playing with debt is playing with fire for many of his listeners. If they were financially sophisticated they wouldn't be in so much debt to begin with. (Myself included. His advice was exactly what I needed to hear four years ago.)
I disagree with giving up the 401k match, unless perhaps if the match is less than 50% and the debt is 24% or so. The question is giving up a 50% or more match in order to pay off a loan at less than 3%. Even if you end up cashing out that 401k later on, you're going to be better off for having gotten that match.
Exactly. 401k matching gives you like a 125%+ return, before any market returns. You get the tax benefit AND free money. Why in the world would you sacrifice that unless you literally needed to eat or pay for life saving surgery or something????
You're thinking about this logically -- and YOU SHOULD.
The people Dave is talking to are financially broken. They don't seem to have the ability to think about these things logically. He's trying to build a habit that starts now and works forever. He's trying to get them to willingly be a part of some psychological games that (I think) actually work on some folks.
So why not just reorder his rules? Why not tweak them to make actual sense?
Oh, I know, because that's too much like selling common sense, and common sense doesn't sell. Sorta like the blog here. No one wants to read "pay down debt that exceeds returns, build up a nest egg of investments, and don't live beyond your means." Instead you have to say "fuck" a lot and talk about how stupid it is to not ride a bike everywhere and pretend that's good practical universal advice, because that's what gets clicks and attention.
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Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
Not really. It depends on who the plan is for. His approach is behavioral, which works for people who may have financial self-control problems. They need an all-or-nothing approach. Get out of debt completely, and never go back.
If Dave were to leave any room in his advice for people to leave debt on the back burner while they put their money elsewhere, it wouldn't be effective. Playing with debt is playing with fire for many of his listeners. If they were financially sophisticated they wouldn't be in so much debt to begin with. (Myself included. His advice was exactly what I needed to hear four years ago.)
I disagree with giving up the 401k match, unless perhaps if the match is less than 50% and the debt is 24% or so. The question is giving up a 50% or more match in order to pay off a loan at less than 3%. Even if you end up cashing out that 401k later on, you're going to be better off for having gotten that match.
Exactly. 401k matching gives you like a 125%+ return, before any market returns. You get the tax benefit AND free money. Why in the world would you sacrifice that unless you literally needed to eat or pay for life saving surgery or something????
You're thinking about this logically -- and YOU SHOULD.
The people Dave is talking to are financially broken. They don't seem to have the ability to think about these things logically. He's trying to build a habit that starts now and works forever. He's trying to get them to willingly be a part of some psychological games that (I think) actually work on some folks.
So why not just reorder his rules? Why not tweak them to make actual sense?
Oh, I know, because that's too much like selling common sense, and common sense doesn't sell. Sorta like the blog here. No one wants to read "pay down debt that exceeds returns, build up a nest egg of investments, and don't live beyond your means." Instead you have to say "fuck" a lot and talk about how stupid it is to not ride a bike everywhere and pretend that's good practical universal advice, because that's what gets clicks and attention.
Lol. Have fun with that.
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So why not just reorder his rules? Why not tweak them to make actual sense?
Psychology. I don't know if you simply don't talk to a diverse group of people, or if you only talk to like-minded people, but I've run in to many people who genuinely need to see immediate benefits to things before they can accept it. Putting money in a 401k for someone who's 25-50 years old is roughly equal to throwing the money in a hole in the ground. They can't see how having that money there helps them more than using it now.
Paying off debt is something people can practically see and touch, and they can see how it benefits them NOW, especially for high interest credit card debt, or people who have 5, 7, maybe even 10 different debt obligations. There's a huge psychological component to somebody who has 2 car loans, 3 student loans, a mortgage, a HELOC, and 4 credit cards they carry balances on. They feel crushed on all sides by debt, hence why it's very helpful to actually start paying off debt first.
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Like I said before, any "kill debt" plan that has you foregoing employee matching and tax shielding in your 401k so you can wipe out a low interest car loan is just retardedly stupid.
Not really. It depends on who the plan is for. His approach is behavioral, which works for people who may have financial self-control problems. They need an all-or-nothing approach. Get out of debt completely, and never go back.
If Dave were to leave any room in his advice for people to leave debt on the back burner while they put their money elsewhere, it wouldn't be effective. Playing with debt is playing with fire for many of his listeners. If they were financially sophisticated they wouldn't be in so much debt to begin with. (Myself included. His advice was exactly what I needed to hear four years ago.)
I disagree with giving up the 401k match, unless perhaps if the match is less than 50% and the debt is 24% or so. The question is giving up a 50% or more match in order to pay off a loan at less than 3%. Even if you end up cashing out that 401k later on, you're going to be better off for having gotten that match.
Exactly. 401k matching gives you like a 125%+ return, before any market returns. You get the tax benefit AND free money. Why in the world would you sacrifice that unless you literally needed to eat or pay for life saving surgery or something????
You're thinking about this logically -- and YOU SHOULD.
The people Dave is talking to are financially broken. They don't seem to have the ability to think about these things logically. He's trying to build a habit that starts now and works forever. He's trying to get them to willingly be a part of some psychological games that (I think) actually work on some folks.
Exactly.
I cannot explain this to people who have never had the problem. When you're a serial debtor there is something fundamentally wrong with your behavior. Logic, math etc. All take a back seat.
It's not until you conquer that behavior that you can grow as a person and start thinking logically about these things.
I am glad there are so many people that don't understand why people have trouble with money or weight et cetera when "it's just common sense". I wouldn't wish the problems I had on anyone.
At the same time though I feel like sometimes these people who don't understand what it's like may be unwittingly contributing to the problem.
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I cannot explain this to people who have never had the problem. When you're a serial debtor there is something fundamentally wrong with your behavior. Logic, math etc. All take a back seat.
It's not until you conquer that behavior that you can grow as a person and start thinking logically about these things.
I am glad there are so many people that don't understand why people have trouble with money or weight et cetera when "it's just common sense". I wouldn't wish the problems I had on anyone.
At the same time though I feel like sometimes these people who don't understand what it's like may be unwittingly contributing to the problem.
I've never had that problem. And I get it. But I'm starting to be an old fart... so maybe I've just seen it a bit. We're not all a hopeless non-understanding lot.
There are lots of psychological games that are played in therapy. They sound silly. But they seem to work.
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So why not just reorder his rules? Why not tweak them to make actual sense?
Psychology. I don't know if you simply don't talk to a diverse group of people, or if you only talk to like-minded people, but I've run in to many people who genuinely need to see immediate benefits to things before they can accept it. Putting money in a 401k for someone who's 25-50 years old is roughly equal to throwing the money in a hole in the ground. They can't see how having that money there helps them more than using it now.
Paying off debt is something people can practically see and touch, and they can see how it benefits them NOW, especially for high interest credit card debt, or people who have 5, 7, maybe even 10 different debt obligations. There's a huge psychological component to somebody who has 2 car loans, 3 student loans, a mortgage, a HELOC, and 4 credit cards they carry balances on. They feel crushed on all sides by debt, hence why it's very helpful to actually start paying off debt first.
I guess the issue I have is the umbrella called "debt." To me it's like calling everything from speeding to murder 1 "crime". I'm an accountant by training and trade, so I work all day with leverage, capitalization of assets, etc. So there's good debt, and there's bad debt. Bad debt is 1) high interest and 2) not associated with any useful asset. Whereas good debt is low interest and paying for a useful asset. So for instance, a car loan with 0-2% interest paying for a car you expect to keep, say, 10 years, and you're going to retire the debt in 4, well yeah, why call that a "crisis"? You should be investing that money and basically stretching the payments out as long as possible, that's called "leverage". OTOH, a credit card at 18-24% you're making minimum payments on, that's going to keep fucking you every day until it's gone, THAT you would likely sacrifice investments to pay off (but still not employee matching!!).
I guess these concepts are so simple and basic that we should make rules that ignore them under the premise that people are too stupid to understand them is absurd to me.
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By posting on this forum, everyone in this thread is not the target of Dave Ramsey's advice...
The people Dave is talking to are financially broken. They don't seem to have the ability to think about these things logically. He's trying to build a habit that starts now and works forever. He's trying to get them to willingly be a part of some psychological games that (I think) actually work on some folks.
Yes - and it does work! Quite successfully.
So why not just reorder his rules? Why not tweak them to make actual sense?
Because it doesn't work for a lot of people.
I guess the issue I have is the umbrella called "debt." To me it's like calling everything from speeding to murder 1 "crime". I'm an accountant by training and trade, so I work all day with leverage, capitalization of assets, etc. So there's good debt, and there's bad debt. Bad debt is 1) high interest and 2) not associated with any useful asset. Whereas good debt is low interest and paying for a useful asset. So for instance, a car loan with 0-2% interest paying for a car you expect to keep, say, 10 years, and you're going to retire the debt in 4, well yeah, why call that a "crisis"? You should be investing that money and basically stretching the payments out as long as possible, that's called "leverage". OTOH, a credit card at 18-24% you're making minimum payments on, that's going to keep fucking you every day until it's gone, THAT you would likely sacrifice investments to pay off (but still not employee matching!!).
I guess these concepts are so simple and basic that we should make rules that ignore them under the premise that people are too stupid to understand them is absurd to me.
If you've got a deep enough understanding of debt to make that type of calculation, you're not Dave Ramsey's target market.
His target market, which he seems to be quite good with, is people who have no training on finances beyond, "If you can afford the monthly payment, you can afford it!" Lots of high interest consumer debt, and "buried by debt" is a decent description of their finances - and they literally don't know there are other options. If you are buried by debt, everyone you know is buried by debt, and talking about money or finances is utterly forbidden in your social group... how do you know there's an alternative?
People in this thread are arguing about subtle differences about if it's really their hair on fire, because it seems to be coming down the side, so maybe it's more that their beard is burning, and a bit of ear hair. Dave Ramsey is trying to convince them that their hair is on fire in the first place.
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I guess these concepts are so simple and basic that we should make rules that ignore them under the premise that people are too stupid to understand them is absurd to me.
You're not wrong here.... but think about it differently.
What if I were to say: The concept of avoiding suicide is so simple and basic. The premise that people are too stupid to understand it is absurd to me.
Dave is targeting people that are financially suicidal. Tossing out "but life is short and great and we should do all we can to enjoy it" ... well, that's just lost on them.
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So for instance, a car loan with 0-2% interest paying for a car you expect to keep, say, 10 years, and you're going to retire the debt in 4, well yeah, why call that a "crisis"? You should be investing that money and basically stretching the payments out as long as possible, that's called "leverage".
But Dave Ramsey's audience aren't investing the money. They are spending it on other things.
Car loans just enable people to buy cars that they can't afford in the first place. In general, this is the case with all consumer credit. And these consumer items are not investments. These are not mini Donald Trumps who are leveraging by buying properties. They are consumers up to their eyeballs in stuff and debt. Even if the interest rate is 0%-2%, if it's a 30K car loan, it's still pretty stupid for the average Joe.
Note - I am NOT saying that credit cards are evil. We use them for everything, but we pay off the balance monthly.
The Mustachian approach would eschew a car loan, precisely because you should probably not pay more than 10K for a car. Ever. Thus, it has to be used, and I've never seen interest rates that are very good on used cars. For this reason alone, you pay in cash.
I agree, though, that Ramsey is dumb to ever tell someone they shouldn't contribute to at least the match on their 401K.
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The problem is, his radio audience is much larger than the hopeless debtoholics. It's reaching people like my BIL & SIL, who are solidly middle class and could do much better than what his advice would serve. That is the issue--he is reaching out to a lot more people than this "target audience" that you are defending. In the process, he's screwing over the others who may be listening to his advice.
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The problem is, his radio audience is much larger than the hopeless debtoholics. It's reaching people like my BIL & SIL, who are solidly middle class and could do much better than what his advice would serve. That is the issue--he is reaching out to a lot more people than this "target audience" that you are defending. In the process, he's screwing over the others who may be listening to his advice.
Exactly. Sort of like AA/MAAD, his audience has expanded from people desperately in need of paying down debt to "regular" people who want to engage in financial planning. Since DR (and MMM) has backed himself into an "all debt is terrible" corner, he has to give terrible advice to people who are not "debtoholics".
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The problem is, his radio audience is much larger than the hopeless debtoholics. It's reaching people like my BIL & SIL, who are solidly middle class and could do much better than what his advice would serve. That is the issue--he is reaching out to a lot more people than this "target audience" that you are defending. In the process, he's screwing over the others who may be listening to his advice.
Exactly. Sort of like AA/MAAD, his audience has expanded from people desperately in need of paying down debt to "regular" people who want to engage in financial planning. Since DR (and MMM) has backed himself into an "all debt is terrible" corner, he has to give terrible advice to people who are not "debtoholics".
I wonder if the current obsession with prepaying a mortgage (even in the face of historically low rates) in large part connects back to the influence of Dave Ramsey. After all, "the paid of home mortgage is the new status symbol of choice." I have found even people on here pretty resistant to the idea that prepaying their mortgage is not the best financial choice in their circumstance.
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I wonder if the current obsession with prepaying a mortgage (even in the face of historically low rates) in large part connects back to the influence of Dave Ramsey. After all, "the paid of home mortgage is the new status symbol of choice." I have found even people on here pretty resistant to the idea that prepaying their mortgage is not the best financial choice in their circumstance.
There's definitely a psychological component at work here. I constantly read about how "good it feels" to have paid off the mortgage, even when the rate was 30y fixed at 3.x% If given the choice of no mortgage and no savings, or a 30y, $200k mortgage @ 3.2% and $200k in investments, I know which I would choose...
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The problem is, his radio audience is much larger than the hopeless debtoholics. It's reaching people like my BIL & SIL, who are solidly middle class and could do much better than what his advice would serve. That is the issue--he is reaching out to a lot more people than this "target audience" that you are defending. In the process, he's screwing over the others who may be listening to his advice.
Exactly. Sort of like AA/MAAD, his audience has expanded from people desperately in need of paying down debt to "regular" people who want to engage in financial planning. Since DR (and MMM) has backed himself into an "all debt is terrible" corner, he has to give terrible advice to people who are not "debtoholics".
I wonder if the current obsession with prepaying a mortgage (even in the face of historically low rates) in large part connects back to the influence of Dave Ramsey. After all, "the paid of home mortgage is the new status symbol of choice." I have found even people on here pretty resistant to the idea that prepaying their mortgage is not the best financial choice in their circumstance.
DR's response has always been, well, would you borrow against your house to invest? And that's kind of a silly question given that you don't normalize risk in that scenario, but essentially...yeah, I pretty much would. I've got a friend whose a dentist, millionaire many times over, and owes quite a bit on his house, but has X,XXX,XXX in investment accounts. His response is always "that house is the only tax shelter I have, and damn right I can beat 3% in the market!"
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The problem is, his radio audience is much larger than the hopeless debtoholics. It's reaching people like my BIL & SIL, who are solidly middle class and could do much better than what his advice would serve. That is the issue--he is reaching out to a lot more people than this "target audience" that you are defending. In the process, he's screwing over the others who may be listening to his advice.
Exactly. Sort of like AA/MAAD, his audience has expanded from people desperately in need of paying down debt to "regular" people who want to engage in financial planning. Since DR (and MMM) has backed himself into an "all debt is terrible" corner, he has to give terrible advice to people who are not "debtoholics".
I wonder if the current obsession with prepaying a mortgage (even in the face of historically low rates) in large part connects back to the influence of Dave Ramsey. After all, "the paid of home mortgage is the new status symbol of choice." I have found even people on here pretty resistant to the idea that prepaying their mortgage is not the best financial choice in their circumstance.
DR's response has always been, well, would you borrow against your house to invest? And that's kind of a silly question given that you don't normalize risk in that scenario, but essentially...yeah, I pretty much would. I've got a friend whose a dentist, millionaire many times over, and owes quite a bit on his house, but has X,XXX,XXX in investment accounts. His response is always "that house is the only tax shelter I have, and damn right I can beat 3% in the market!"
:-) That sounds so much like Phil on the YMAM board.
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I wonder if the current obsession with prepaying a mortgage (even in the face of historically low rates) in large part connects back to the influence of Dave Ramsey. After all, "the paid of home mortgage is the new status symbol of choice." I have found even people on here pretty resistant to the idea that prepaying their mortgage is not the best financial choice in their circumstance.
There's definitely a psychological component at work here. I constantly read about how "good it feels" to have paid off the mortgage, even when the rate was 30y fixed at 3.x% If given the choice of no mortgage and no savings, or a 30y, $200k mortgage @ 3.2% and $200k in investments, I know which I would choose...
...and your choice is probably a sound one.
I'm currently 43 days from FIRE. And in my case: I'll take the paid off house. It makes post-FIRE simpler. And if it were me investing money to pay the mortgage, I'd put the house payment in very risk averse investments. But that's me. I feel like I'm at the end of the game and I have won. If I were 25 years old, I might feel differently.
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There's definitely a psychological component at work here. I constantly read about how "good it feels" to have paid off the mortgage, even when the rate was 30y fixed at 3.x% If given the choice of no mortgage and no savings, or a 30y, $200k mortgage @ 3.2% and $200k in investments, I know which I would choose...
...and your choice is probably a sound one.
I'm currently 43 days from FIRE. And in my case: I'll take the paid off house. It makes post-FIRE simpler. And if it were me investing money to pay the mortgage, I'd put the house payment in very risk averse investments. But that's me. I feel like I'm at the end of the game and I have won. If I were 25 years old, I might feel differently.
Of course. I certainly have not "won the game" and if I had I might feel differently. In your case paying down a mortgage can be more about avoiding loss and reducing expenses than maximizing potential gains. For me I could see another 30 year mortgage to completion and still be aways from SS.
My response above was about the psychological component people give for paying off a mortgage.
Congrats on pending FIRE.
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DR's response has always been, well, would you borrow against your house to invest? And that's kind of a silly question given that you don't normalize risk in that scenario, but essentially...yeah, I pretty much would. I've got a friend whose a dentist, millionaire many times over, and owes quite a bit on his house, but has X,XXX,XXX in investment accounts. His response is always "that house is the only tax shelter I have, and damn right I can beat 3% in the market!"
The finances of a millionaire dentist are honest offensive to the other 80% of Americans who are making $75k/year and less. Do you know how the last housing crash happened? Because people kept leveraging their houses - generally the only major asset that Americans actually have at any given age. (source (http://www.fool.com/investing/general/2015/05/17/americans-average-net-worth-by-age-how-do-you-comp.aspx)) For the REAL median American, having their house paid off means that the single-most valuable asset they have cannot be taken away from them by missing a mortgage payment anymore. That's something a 1%'er millionaire dentist cannot even fathom.
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DR's response has always been, well, would you borrow against your house to invest? And that's kind of a silly question given that you don't normalize risk in that scenario, but essentially...yeah, I pretty much would. I've got a friend whose a dentist, millionaire many times over, and owes quite a bit on his house, but has X,XXX,XXX in investment accounts. His response is always "that house is the only tax shelter I have, and damn right I can beat 3% in the market!"
The finances of a millionaire dentist are honest offensive to the other 80% of Americans who are making $75k/year and less. Do you know how the last housing crash happened? Because people kept leveraging their houses - generally the only major asset that Americans actually have at any given age. (source (http://www.fool.com/investing/general/2015/05/17/americans-average-net-worth-by-age-how-do-you-comp.aspx)) For the REAL median American, having their house paid off means that the single-most valuable asset they have cannot be taken away from them by missing a mortgage payment anymore. That's something a 1%'er millionaire dentist cannot even fathom.
I agree for the most part, but the real reality that you could lose your home means that, instead of prepaying the mortgage, you should take the excess money that would have gone to the mortgage and keep it liquid somewhere. If you're 5-10 years away from prepaying your mortgage, imagine how much it would suck if you lost your job and either had to foreclose or sell at a loss. I'm guessing Average Joe would wish he had that money he threw into the mortgage prematurely to make the next mortgage payment.
For the non-1%er that doesn't have millions in the bank, a very hefty emergency fund that includes several years of mortgage payments makes more sense than prepayment and throwing windfalls and an extra hundred here or there at the mortgage.
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Do you know how the last housing crash happened? Because people kept leveraging their houses - generally the only major asset that Americans actually have at any given age. (source (http://www.fool.com/investing/general/2015/05/17/americans-average-net-worth-by-age-how-do-you-comp.aspx)) For the REAL median American, having their house paid off means that the single-most valuable asset they have cannot be taken away from them by missing a mortgage payment anymore. That's something a 1%'er millionaire dentist cannot even fathom.
er... not really. The last housing crash happened largely because too many bad loans were made, and those loans were repacked so many times that there was no way of separating them out once they became a problem. Sure, people leveraged their homes. But there were also NINA (no income, no asset) loans made for far more than people could ever hope to pay back with even a mild financial shock.
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Do you know how the last housing crash happened? Because people kept leveraging their houses - generally the only major asset that Americans actually have at any given age. (source (http://www.fool.com/investing/general/2015/05/17/americans-average-net-worth-by-age-how-do-you-comp.aspx)) For the REAL median American, having their house paid off means that the single-most valuable asset they have cannot be taken away from them by missing a mortgage payment anymore. That's something a 1%'er millionaire dentist cannot even fathom.
er... not really. The last housing crash happened largely because too many bad loans were made, and those loans were repacked so many times that there was no way of separating them out once they became a problem. Sure, people leveraged their homes. But there were also NINA (no income, no asset) loans made for far more than people could ever hope to pay back with even a mild financial shock.
...mostly due to the government's idea that "owning a home" was so important that they needed to make all sorts of rules/laws that made owning homes easier/better/cheaper/etc.
The current way the Fed has rates set to where they are below where the market would set them is similar -- though not in the extreme degree as the last crash.
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I agree for the most part, but the real reality that you could lose your home means that, instead of prepaying the mortgage, you should take the excess money that would have gone to the mortgage and keep it liquid somewhere. If you're 5-10 years away from prepaying your mortgage, imagine how much it would suck if you lost your job and either had to foreclose or sell at a loss. I'm guessing Average Joe would wish he had that money he threw into the mortgage prematurely to make the next mortgage payment.
For the non-1%er that doesn't have millions in the bank, a very hefty emergency fund that includes several years of mortgage payments makes more sense than prepayment and throwing windfalls and an extra hundred here or there at the mortgage.
Hot damn! Another Mustachian who gets it. Keep the money in your own control, people. Justajane, you go girl!
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Is that really his house? Wowsa!
Dave is just looking after it, it's god's house.
I do covet the turret. That's one thing my bitsy house doesn't have: a turret. A turret on a house is badass. Maybe when I go FIRE I'll build one in, just for grins and giggles.
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Is that really his house? Wowsa!
Dave is just looking after it, it's god's house.
I do covet the turret. That's one thing my bitsy house doesn't have: a turret. A turret on a house is badass. Maybe when I go FIRE I'll build one in, just for grins and giggles.
Oh, it can be done! Drove by this baby several times a day in central California. For the Mustachian who wants to feel like a king without paying for a mega-home...
(https://c1.staticflickr.com/1/44/167984076_03f40a8adf_z.jpg?zz=1)
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Is that really his house? Wowsa!
Dave is just looking after it, it's god's house.
I do covet the turret. That's one thing my bitsy house doesn't have: a turret. A turret on a house is badass. Maybe when I go FIRE I'll build one in, just for grins and giggles.
Oh, it can be done! Drove by this baby several times a day in central California. For the Mustachian who wants to feel like a king without paying for a mega-home...
(https://c1.staticflickr.com/1/44/167984076_03f40a8adf_z.jpg?zz=1)
A man's home is his castle. At least this man's home anyway...
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The finances of a millionaire dentist are honest offensive to the other 80% of Americans who are making $75k/year and less.
You can find them offensive all you want, doesn't mean the principles aren't valid. For most people, it simply doesn't do any good to have $XXX,XXX tied up in an illiquid, poorly appreciating asset. It may help you sleep at night but it's not doing you favors financially.
Do you know how the last housing crash happened? Because people kept leveraging their houses - generally the only major asset that Americans actually have at any given age.
A wild oversimplification that isn't particularly accurate.
For the REAL median American, having their house paid off means that the single-most valuable asset they have cannot be taken away from them by missing a mortgage payment anymore. That's something a 1%'er millionaire dentist cannot even fathom.
They can still lose their house for missing property tax payments, and where I live, property tax escrow payments are a pretty substantial portion of the mortgage (about 33% of my P&I) and in the end years of a mortgage likely to be even more substantial.
And, no one is suggesting spending the mortgage money on hookers and blow, or even junk bonds and penny stocks. Invested into an S&P 500 index fund, you can easily beat a common 2.5-3% tax-adjusted mortgage interest rate.
Maybe if these "real Americans" spent more time trying to emulate the 1%ers instead of just angrily hating them, they could be 1%ers too.
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It's also retardedly stupid to make blanket generalizations that you should never pay off low interest debt.
Don't confuse my statements, it's not that you shouldn't pay it off, it's that you shouldn't pay it off early.
The point of moustachianism is the reduction of spending and the investment of your hard earned dollars, and monthly debt payments are not the way to do it.
And I am not a true "moustachian". I am discussing the "treat all debt as a hair on fire crisis no matter the terms of the debt" fallacy, not stating that what I believe (and by believe I mean what is mathmatically provable to be advantageous) aligns with "moustachianism". Sorry if this disturbs the echo chamber or circle jerk.
Also,
I'd personally choose to pay off the debt just because it's an inconvenience to have to make payments to someone.
Okay, but what is the "inconvenience"? My wife has a small student loan. It started out at ~$15k, and now it's ~$6k. It's at ~.5%. It auto-pays $88 from my account every month, on the 16th? Maybe? Not sure. I don't know how this is possibly an "inconvenience."
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It's also retardedly stupid to make blanket generalizations that you should never pay off low interest debt. For example, what if your personal situation is that you have $5,000,000 in net worth, $4,950,000 in investments, $50,000 in cash and $50,000 on a student loan? Would you keep paying minimum payments forever and invest that $50,000?
If the SL was either in deferment or at <3% (which mine are) - yes, I would continue to make minimum payments for the duration of the loan.
Another scenario - what if you have $1,500,000 in net worth and you think you can retire on a 4% safe withdrawal rate with $1,000,000 invested and a paid off house, and you own a house worth $500,000 on a 3.5% loan? Would you keep that mortgage forever?
I would definitely not pay off the house with a 3.5% fixed 30 year loan - even if I had $1MM invested.
In that scenario the home would be a fantastic inflation hedge. It would add more security to my FI, not less, because it would offer protection against a prolonged period of high inflation.
Here is a scenario Dave Ramsey often says - if you think you can gain 12% in the stock market, would you allow a bank to lend you $100,000,000 at 3% so that you could invest it? It doesn't take long for the caller to say no in that scenario because it illustrates the risk you are taking.
This is the kind if idiotic logic thrown about that is supposed to bolster a case but is in reality completely meaningless. Ignoring the absurd 12% market returns he frequently touts, I wouldn't take $100MM because that's so insanely beyond what I want. Why not make the example $1B or $100B?
Saying "I'm comfortable with a $100k loan at 3%" does not mean I have to be comfortable with a $100M loan, and being unwilling to take on the latter (if it were ever an option) does not make the former unwise.
The risk on an interest-only $100k loan at 3% is small and manageable ($3k/year).
The risk on an interest-only $100M loan at 3% is small but unmanageable ($3M/year). That is a fundamental difference with risk that DR is completely ignoring (or glossing over).
True moustachians find it unnecessary to leverage debt in order to get wealthy. The point of moustachianism is the reduction of spending and the investment of your hard earned dollars, and monthly debt payments are not the way to do it.
I don't agree. A true mustachian has financial independence and lives very well without succumbing to the endless flow of consumerism and waste.
If you think that paying monthly debt payments on very low interest rates is somehow wasting you money, then you clearly are not getting it.
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If you think that MMM believes any of your arguments, then you clearly don't get it. I can't seem to remember a post where MMM extolled the virtues of how his 30 year mortgage and student loan balance is how he got rich. Or when he went to a bank and borrowed $500k to invest in the stock market.
You can decide yourself what you need to "Get".
If what you get out of this blog and forum and a prescriptive way to live, then yes, what I and others are discussing conflicts with that directive. Mea culpa.
If what you get out of this blog is the desire to be financially independant (not necessarily RE, just FI), then you can discuss and debate methods of how to get there.
My personal interest is A) maximizing my enjoyment of life and B) maximizing my wealth. For some people, including many here, they take joy in saving money on all aspects and being as outright frugal as possible. That's cool for them. For others, like myself, the joy is in saving and generating money in SOME places so that you can spend it in OTHERS which makes you happy. I have no desire to squeeze every nickle until it screams, I desire the ability to spend more on the things I enjoy doing while minimizing in places I don't. For me, FI is the avenue I want to take in order to do A, B, and C. For others, the avenue itself is the reward.
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If you think that MMM believes any of your arguments, then you clearly don't get it. I can't seem to remember a post where MMM extolled the virtues of how his 30 year mortgage and student loan balance is how he got rich. Or when he went to a bank and borrowed $500k to invest in the stock market.
I can't tell if you are joking or not. MMM kept a mortgage for a good 5 years post retirement.
He even wrote a blog post here (http://www.mrmoneymustache.com/2012/02/24/pay-down-the-mortgage-or-invest-more-a-winwin-question) and there have been frequent postings about how low interest rates has opened up a lot of opportunity with land-lording and challenged people to refinance to a lower rate on their mortgage back when mortgages were still at 4.5%.
regardless, if you believe that a 4%WR is "safe", then holding a debt at 3% also makes 'sense' while investing in the market. It's different sides of the exact same coin.
edit: to clarify my earlier statement about "not getting it" - I was referring directly to how making the minimum payments on debt at less than 4% was not 'spending your hard earned dollars' away if you also believe that you can retire on a 4% WR. It's a straightforward concept.
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True moustachians
You do know that this statement is a logical fallacy right?
Some reading:
http://rationalwiki.org/wiki/No_True_Scotsman
What you mean to say is, my definition of what true mustachianism is, on which I haven't consulted anybody but myself.
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If you think that MMM believes any of your arguments, then you clearly don't get it. I can't seem to remember a post where MMM extolled the virtues of how his 30 year mortgage and student loan balance is how he got rich. Or when he went to a bank and borrowed $500k to invest in the stock market.
I can't tell if you are joking or not. MMM kept a mortgage for a good 5 years post retirement.
He even wrote a blog post here (http://www.mrmoneymustache.com/2012/02/24/pay-down-the-mortgage-or-invest-more-a-winwin-question) and there have been frequent postings about how low interest rates has opened up a lot of opportunity with land-lording and challenged people to refinance to a lower rate on their mortgage back when mortgages were still at 4.5%.
regardless, if you believe that a 4%WR is "safe", then holding a debt at 3% also makes 'sense' while investing in the market. It's different sides of the exact same coin.
edit: to clarify my earlier statement about "not getting it" - I was referring directly to how making the minimum payments on debt at less than 4% was not 'spending your hard earned dollars' away if you also believe that you can retire on a 4% WR. It's a straightforward concept.
You do realize in the post you linked MMM says exactly why he doesn't have debt? You are right in that he has mixed feelings on the subject, but his actions are that he has paid off houses instead of taking out 30 year mortgages and paying minimum payments forever and investing the rest. Just think of it this way - if you assume 4% as a safe return and you borrow at 3.5%, if you are right, you gain 0.5%, while risking hundreds of thousands of dollars to gain that small edge. It's something that smart and well meaning people do, but I am in the conservative side of the house, along with MMM, in that it's not worth it. We've had a good run in the stock market since the 2008 crash, but there will be another one at some point, and having no debt and complete financial flexibility will allow me to scoop up bargains as much as possible.
How will you be able to time the market? How will you know when it's done falling? What will you do if it keeps falling (or starts falling again) after you buy? Will you really have the gumption to mortgage your house to invest in the market when the economy is tanked and everyone is panicked? That takes some confidence that many don't have.
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I find it humorous how Dave Ramsey can really piss people off. His advice is simple, straight forward and work for the people that need it. Paying off debt will not hurt your finances. These people are taking a 180 with their finances and moving the boat in the right direction. Some will have faster boats and different boats and that's ok.
Remember its personal finance and everyone has different goals. The important factor is to at least have a goal and a plan to get there.
'An idiot with a plan will beat a genius without one. Failure to plan is planning to fail.'
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You do realize in the post you linked MMM says exactly why he doesn't have debt? You are right in that he has mixed feelings on the subject, but his actions are that he has paid off houses instead of taking out 30 year mortgages and paying minimum payments forever and investing the rest. Just think of it this way - if you assume 4% as a safe return and you borrow at 3.5%, if you are right, you gain 0.5%, while risking hundreds of thousands of dollars to gain that small edge. It's something that smart and well meaning people do, but I am in the conservative side of the house, along with MMM, in that it's not worth it. We've had a good run in the stock market since the 2008 crash, but there will be another one at some point, and having no debt and complete financial flexibility will allow me to scoop up bargains as much as possible.
Your problem is that you're assuming a one-time transaction choice. Do I invest $250k in the market, or $250k in paying off my house.
That's not how it works for most people. A better question is "Do I spend $3k paying down my mortgage quickly, or make my mortgage minimum payment for $2k and invest $1k"? This does 2 things, 1 it allows you to gain compounding interest on your investment, and 2 it preserves assets in a liquid form rather than tied up in an illiquid one (leaving aside HELOCs and the like). On one hand, you are risking your "house money" on the market, but on the other hand as long as the market doesn't go to zero you still have access to the money if necessary, and you can always pay your house off at any time you desire.
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I find it humorous how Dave Ramsey can really piss people off. His advice is simple, straight forward and work for the people that need it.
It pisses people off because then you get mindless lemmings parroting "all debt is bad no matter what" and insisting that way because Jesus, I mean DR, says so and he's smart. Some of us are also smart, and know what we're doing, and it's annoying to hear the lemmings tell us we don't because of what DR said.
basically, DR told a bunch of alcoholics not to have a drop of booze, and those lemmings are shouting at me, a non-alcholic, the beer I have on the weekend is terrible and unforgiveable.
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I find it humorous how Dave Ramsey can really piss people off. His advice is simple, straight forward and work for the people that need it.
It pisses people off because then you get mindless lemmings parroting "all debt is bad no matter what" and insisting that way because Jesus, I mean DR, says so and he's smart. Some of us are also smart, and know what we're doing, and it's annoying to hear the lemmings tell us we don't because of what DR said.
basically, DR told a bunch of alcoholics not to have a drop of booze, and those lemmings are shouting at me, a non-alcholic, the beer I have on the weekend is terrible and unforgiveable.
Who is shouting at you? Haha.
it shouldnt piss you off...if people listen to one guy and dont expand their horizon a bit then there is no real need to listen to them or get pissed when they make blanket statements.
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I find it humorous how Dave Ramsey can really piss people off. His advice is simple, straight forward and work for the people that need it.
It pisses people off because then you get mindless lemmings parroting "all debt is bad no matter what" and insisting that way because Jesus, I mean DR, says so and he's smart. Some of us are also smart, and know what we're doing, and it's annoying to hear the lemmings tell us we don't because of what DR said.
basically, DR told a bunch of alcoholics not to have a drop of booze, and those lemmings are shouting at me, a non-alcholic, the beer I have on the weekend is terrible and unforgiveable.
Who is shouting at you? Haha.
it shouldnt piss you off...if people listen to one guy and dont expand their horizon a bit then there is no real need to listen to them or get pissed when they make blanket statements.
Ever been on an internet messageboard and discussed personal finance? Know what a "hivemind" is?
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I will admit he is the first person who got me to wake up and stop being stupid with my money and I will always be grateful for that but it opened up a doorway for me to find all kinds of ways to look at your financials. Hence I ended up here somehow.
So I see value in his teachings but like everyone is saying...there are other ways.
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1. There is nothing new about much of his advice, but it is fine. If he says it in such a way that helps people get it, more power to him.
2. A couple of things that he says to do are phenomenally bad advice for 99% of people, such as foregoing all 401k matching in order to pay off low interest debt, and counting on 12% market returns and 8% withdrawal rate in retirement.
3. He only presents a one-size-fits-all method. Some people could do much better, but don't even realize it.
4. He is treating the symptoms and not the disease, which makes it easier to fall off the wagon.
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I consider myself a DR fan, and not a mindless lemming, in fact I got an MBA so I understand why people think leveraging debt to support investments is a good idea. Fortunately I also studied the story of Long Term Capital Management while in school, you should google this to broaden your horizons. It tells the story of how one company almost took down the financial system because they used debt to finance investments that were a "sure thing". Another good book is "Black Swan". Another one is anything Michael Lewis writes. The history of finance is littered with the stories of people going bankrupt because they took on too much debt. Therefore, I don't borrow any money, and still have plenty to invest.
Thanks for making my point. The solution to someone going under because they borrowed too much is not complete debt avoidance. Why is "moderation" a completely foreign concept on the internet?
Also, thanks for the assumption I have never heard of LTCM.
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I consider myself a DR fan, and not a mindless lemming, in fact I got an MBA so I understand why people think leveraging debt to support investments is a good idea. Fortunately I also studied the story of Long Term Capital Management while in school, you should google this to broaden your horizons. It tells the story of how one company almost took down the financial system because they used debt to finance investments that were a "sure thing". Another good book is "Black Swan". Another one is anything Michael Lewis writes. The history of finance is littered with the stories of people going bankrupt because they took on too much debt. Therefore, I don't borrow any money, and still have plenty to invest.
There are certainly things to be learned from individuals and companies that were too heavily leveraged. However, your premise here seems to be that people who aren't rapidly paying off debt are spending it (or at the very least they are buying highly risky investments). For many of us here, our inherent goal is to maximize our savings rate, and NOT making extra payments helps us achieve that goal. Since we currently can't max out all of our tax-deferred accounts, any extra payments towards our mortgage would come at the expense of not contributing to those accounts. For me the equation is straightforward - the advantage of a tax deduction (~15%) plus future growth is very likely to be > my current interest rate. Adding inflation to the pot only sweetens the deal.
Could it turn out that returns get so bad that I would have been better off paying down the mortgage? Sure. But if that happens our economy is in such a heap of trouble it will be a moot point.
Debt isn't inherently bad - and that's the point I think DR glosses over. For many of his followers it's a good thing; they are often so deeply in debt that they shouldn't be taking on more at any interest rate. But it's far from a universal message.
The solution to someone going under because they borrowed too much is not complete debt avoidance. Why is "moderation" a completely foreign concept on the internet?
Earlier Moustaches asked "would you borrow $100MM at 3%". The answer of course is "no" - not because borrowing at 3% is ever bad, but because that amount lacks moderation. Most of us would find it very easy to cover the interest on a $100k loan @3% ($3k) - but few could cover the interest on a $100MM loan ($3M). That's the important difference when discussing risk and leverage. My loan does not exceed 30% of my assets, and the monthly payments are a small fraction of my income.
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I consider myself a DR fan, and not a mindless lemming, in fact I got an MBA so I understand why people think leveraging debt to support investments is a good idea. Fortunately I also studied the story of Long Term Capital Management while in school, you should google this to broaden your horizons. It tells the story of how one company almost took down the financial system because they used debt to finance investments that were a "sure thing". Another good book is "Black Swan". Another one is anything Michael Lewis writes. The history of finance is littered with the stories of people going bankrupt because they took on too much debt. Therefore, I don't borrow any money, and still have plenty to invest.
There are certainly things to be learned from individuals and companies that were too heavily leveraged. However, your premise here seems to be that people who aren't rapidly paying off debt are spending it (or at the very least they are buying highly risky investments). For many of us here, our inherent goal is to maximize our savings rate, and NOT making extra payments helps us achieve that goal. Since we currently can't max out all of our tax-deferred accounts, any extra payments towards our mortgage would come at the expense of not contributing to those accounts. For me the equation is straightforward - the advantage of a tax deduction (~15%) plus future growth is very likely to be > my current interest rate. Adding inflation to the pot only sweetens the deal.
Could it turn out that returns get so bad that I would have been better off paying down the mortgage? Sure. But if that happens our economy is in such a heap of trouble it will be a moot point.
Debt isn't inherently bad - and that's the point I think DR glosses over. For many of his followers it's a good thing; they are often so deeply in debt that they shouldn't be taking on more at any interest rate. But it's far from a universal message.
The solution to someone going under because they borrowed too much is not complete debt avoidance. Why is "moderation" a completely foreign concept on the internet?
Earlier Moustaches asked "would you borrow $100MM at 3%". The answer of course is "no" - not because borrowing at 3% is ever bad, but because that amount lacks moderation. Most of us would find it very easy to cover the interest on a $100k loan @3% ($3k) - but few could cover the interest on a $100MM loan ($3M). That's the important difference when discussing risk and leverage. My loan does not exceed 30% of my assets, and the monthly payments are a small fraction of my income.
Woah--someone will lend me $100,000,000 at 3%? I would take that in a heartbeat. I could take 75 million of that and keep get it in a CD ladder to pay back the principal, take $20,000,000 of that and put it in VTSAX, and take $5,000,000 of that and put it in a nice 60/40 account to give me $200,000 income for life.
I'd be confident that my $95,000,000 in principal invested would be able to pay back the loan.
And if it's not? Well thats one hell of a ride for many years (which I'm sure I would have been able to stash some serious coin in cash somewhere before filing for bankruptcy).
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No, my point is that people that borrow money or don't pay off debt in order to put money in most investments are not considering the hidden risks (name a risk-free investment over 3% that's liquid and I'll change my mind),
I try to consider all the risks. I consider the risks and opportunity cost of not fulling taking advantage of tax-deferred accounts, of not having as much in investments, of having too much of my NW tied to my home. I also consider the risks of deflation vs inflation and what they mean if I have a debt. I consider my income and what happens if I loose that income and what will put me in the best position. ... and through all of this, for me personally I've concluded that it's far better to hold on to the mortgage.
and are also not taking into account that when they pay off their debt they are given a massive firehouse of income every month that they can use as they wish and they can quickly catch up to the leveraged investor through massive investing once they are debt free.
This doesn't make sense, and it isn't true in my case (and I suspect most people's cases). First, paying off your debt doesn't suddenly give you a 'massive firehouse of income' - unless you get a raise you have exactly the same amount of income, but you are just allocating it differently. Second, unless an person can shed their mortgage within ~5 years it is highly improbable that they can ever 'catch' the person who chose to hold onto their 30 year mortgage. In my personal case, the fastest I believe I could pay down my mortgage was roughly 10 years, and would involve more than doubling my mortgage payments (an extra $12k/year). Over ten years at 7% the difference between scenario #1 (keeping the 25yr mortgage but investing $12k/month) and #2 (using it all to pay down the mortgage) would be $200k. Even though under scenario #2 the mortgage will be gone after 10 years and I can start investing twice as much ($24k) I will never catch scenario #1.
You can run your own scenarios and certainly for some of them it will come out in favor of paying it off early, but any realistic scenario I have run for my own situation favors paying off the mortgage slowly.
Debt free people are also not as tied to their jobs and can ramp down to part-time immediately if they want to take care of their kids, or have a medical issue, etc. The only type of leveraged investment that makes much sense to me are when there are artificial sweeteners such as a company match or tax breaks, which are definitely a good deal if you are getting over 15%.
I would argue the opposite. Because I have more money in investments, I am LESS tied to my job. I would argue the person who has a paid off (or almost paid off) home but no investments is much more tired to their location and job. This was another reason why we decided not to pay down our mortgage early.
I'm not sure what is "artificial" about tax breaks - in our case they are very real. We are able to take better advantage of our tax-advantaged accounts because we are not dumping large amounts of money into a mortgage.
Debt IS inherently a bad use of money. See: http://jlcollinsnh.com/2015/03/26/stocks-part-xxviii-debt-the-unacceptable-burden/
I like most of what JL Collins writes - but I strongly disagree with him (and you) on this point.
EDIT: Re-read his post and saw he made an addendum:
"Less than 3%, pay it off slowly
3-5%, whatever feels most comfortable"
So perhaps I do agree with JL afterall on this point... but you disagree with him (i guess).
To your point about borrowing enough that the debt payments won't bankrupt you - sure you can afford that investment but your reward is also less and equivalent to your rate of return less your debt interest rate. In your example, you are risking 100k in order to make 4k per year assuming a 7% investment return and 3% debt rate.
As my earlier calculation demonstrated, if I invest the extra $1,000/year vs using it to pay down the mortgage, and I get a 7% return, I will come out ahead. After 25 years I will have ~$150k more than I would had I paid down the home early, *and* at that point I would have the home paid off.
Your scenario also ignores the inflation hedge that hte mortgage provides. While a 7% return is a typical amount returned after inflation, the interest on the home is not. That's huge.
Where you really get into deep thinking is to consider what happened to the price of your house when you bought it when rates were 3%. The low interest rate was likely priced into the sale price, causing you to pay a bit more than a "normal" interest rate. In the link above, Collins goes through the idea of financing a house in great detail and how people should only buy what they need.
I absolutely agree: Only buy what you need. This is what we did.
However if we start considering actual home prices and how interest rates influence we've veered off topic - the price is the same whether you buy it in cash or get a mortgage (ignoring PMI). It makes no difference to our discussion.
It annoys me when people assume all debt free people are morons. I think it depends on your net worth - if you already have over a million or two dollars, taking on debt doesn't make much sense to me. If your total net worth is under the cost of your house, than keeping the mortgage is more appealing from a diversification standpoint.
I do not think you are a moron. I think you've reached an opposite conclusion by weighting the various risks differently. I completely disagree that all debt is bad, but I don't think you are stupid for wanting to be debt-free. I've concluded that my real-adjusted returns over the next 25 years would have to be <2% for this not to be worth it. This could certainly happen, but I think it's very unlikely.
If I had $1MM-2MM my biggest concern would be very high inflation. That's why I would hold a mortgage at today's 3% rates. That's based on my personal analysis of risk. Certainly it is influenced by personal experiences - my parents are comfortably retired with well over $1MM and a mortgage that's more than more than what they paid for the house in 1978.
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Here is the graph illustrating the scenarios I was talking about.
In Scenario #1 (keeping the mortgage) $12k was invested every year
In Scenario #2 (paying off mortgage as fast as possible) $0 was invested from years 1-10, then $24k was invested annually after the mortgage was paid off
Under both scenarios there is a veyr simplistic 7% return.
At 25 years #1 rapidly diverges from #2, as the mortgage has been paid off and all $24k can be put towards investments.
Naturally the relationship will change based on the expected return (which will never be the same every year) and how much surplus you have each year to invest/pay down the mortgage. This is just how I arrived at what made sense under my specific situation and assumptions.
YMMV
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Love Dave Ramsey
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I like that he basically guarantees you'll get 12% in the stock market over the next three decades if you just invest in growth, aggressive growth, growth and income and international funds at 25% each. He runs calculations, often incorrectly, over the phone at this amazingly high projected annual return and says to the caller they'll have $6M in no time at all. And then tells callers to pay off their 3% mortgage.
I'd pay a lot of money to see his actual market returns over the past 20 years.
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I like that he basically guarantees you'll get 12% in the stock market over the next three decades if you just invest in growth, aggressive growth, growth and income and international funds at 25% each. He runs calculations, often incorrectly, over the phone at this amazingly high projected annual return and says to the caller they'll have $6M in no time at all. And then tells callers to pay off their 3% mortgage.
I'd pay a lot of money to see his actual market returns over the past 20 years.
Actually I wouldn't be surprised if he does have good returns (money talks), but remember, he is advising financial newbies on investments, that is a recipe for disaster.
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Robert Kioysaki advice is more for the bold and risktakers and those who have already done the first babystep advices of David Ramsey. David Ramsey is also very USA oriented much of his ramblings of 401k etc has nothing to do with Europe where I live.
Robert Kiyosaki's advice is often borderline illegal, his stories are completely apocryphal, and his company recently went bankrupt.
There took less then one minute to find one hater here:)
David Ramsey is CHICKEN advice there you go lol. Smart and wise advice, but not bold lol. However the part don't use your credit card etc pretty common sense.
I take the good parts of both of them and Robert Kioysaki is a multimillionaire. So what if one of his companies went bankrupt he is still a millionaire. Now I would not pay for his expensive courses, but seeing youtube videos or reading a book lent from library cost nothing.
He's a millionaire because he's a master huckster/slick salesman, not a financial genius.
Like most "get rich" slicksters, he makes his millions selling books, tapes and seminars to those not sophisticated enough to see that he's a thinly veiled con artist.
He ain't the first, and he won't be the last. These guys have been around forever.
Anyone remember Charles Givens? He was selling snake oil back when Kiyosaki was still just a broke ass loser. Givens was one smooth talking, slimy SOB, but he (like Kiyosaki) was really, really good at selling snake oil.
As long as there a gullible people looking to get rich quick, some fast talking slickster will be there to take their money.
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If anyone is interested, dave is selling all his stuff for low prices, including mp3 or audiobooks. Free shipping can be had through the shipping code FREESHIPAUG through Aug 31st.
NOTE: Use your local library first, don't waste any money you don't have to.
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If anyone is interested, dave is selling all his stuff for low prices, including mp3 or audiobooks. Free shipping can be had through the shipping code FREESHIPAUG through Aug 31st.
NOTE: Use your local library first, don't waste any money you don't have to.
Interesting plug for a thread titled "Dave Ramsey advice that pisses me off!"
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Dave Ramsey is great and has helped so many people change their lives for the better!!! : )
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Anyone use Dave's Every Dollar free on line budget tool?
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Anyone use Dave's Every Dollar free on line budget tool?
Not I. I'm not paying $100 a year just to get what Mint already gives me for free and I'm not going to input stuff manually.
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I figured people who want it would read it. there are ways to get everydollar for free. I think I have a free 6 month code somewhere for the full service.
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I love Dave. So many people need a swift kick in the arse, and he gives it to them. Some people respond well to his type of message.
If you don't like Dave, then feel free to ignore him.
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Yeah, I really don't get the hate... he provides a much more consumer-friendly kick in the ass, which is a bit more feasible for a lot of people, and he serves as a great catalyst to get couples actually talking about money.
His investment advice may be fishy, and I don't agree with his "DEBIT CARDS ONLY" thing (mostly because I seem to have to replace about one credit card a year from fraud), but arguing about that is missing the forest for the trees.
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Yeah, I really don't get the hate... he provides a much more consumer-friendly kick in the ass, which is a bit more feasible for a lot of people, and he serves as a great catalyst to get couples actually talking about money.
His investment advice may be fishy, and I don't agree with his "DEBIT CARDS ONLY" thing (mostly because I seem to have to replace about one credit card a year from fraud), but arguing about that is missing the forest for the trees.
ok - did you actually read the replies on this thread and in the numerous parallel threads on DR? I think people have been pretty clear on the various reasons why he's unpopular with many people on this forum. You'll also notice that quit a few people acknowledge that he serves a useful purpose getting people in serious financial trouble out of debt. But the reasons why many here don't care for him are long: promoting high-cost mutual funds (with kickbacks?), pushing people to pay off sub-3% loans, constant comments of 'good evangelical christian', the 'you'll earn 12% annual returns', fuzzy math, etc. etc. He's good for people who are very bad at handling their finances, but not the inverse.
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Yeah, I really don't get the hate... he provides a much more consumer-friendly kick in the ass, which is a bit more feasible for a lot of people, and he serves as a great catalyst to get couples actually talking about money.
His investment advice may be fishy, and I don't agree with his "DEBIT CARDS ONLY" thing (mostly because I seem to have to replace about one credit card a year from fraud), but arguing about that is missing the forest for the trees.
ok - did you actually read the replies on this thread and in the numerous parallel threads on DR? I think people have been pretty clear on the various reasons why he's unpopular with many people on this forum. You'll also notice that quit a few people acknowledge that he serves a useful purpose getting people in serious financial trouble out of debt. But the reasons why many here don't care for him are long: promoting high-cost mutual funds (with kickbacks?), pushing people to pay off sub-3% loans, constant comments of 'good evangelical christian', the 'you'll earn 12% annual returns', fuzzy math, etc. etc. He's good for people who are very bad at handling their finances, but not the inverse.
His buisness is to help people who are poor at handling finances or else he would of never had started this if he thought he could help out those who are good with handling money. I mean his whole selling point is the baby steps. I think that is what attracts mainly those who are shitty with money.
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Yeah, I really don't get the hate... he provides a much more consumer-friendly kick in the ass, which is a bit more feasible for a lot of people, and he serves as a great catalyst to get couples actually talking about money.
His investment advice may be fishy, and I don't agree with his "DEBIT CARDS ONLY" thing (mostly because I seem to have to replace about one credit card a year from fraud), but arguing about that is missing the forest for the trees.
ok - did you actually read the replies on this thread and in the numerous parallel threads on DR? I think people have been pretty clear on the various reasons why he's unpopular with many people on this forum. You'll also notice that quit a few people acknowledge that he serves a useful purpose getting people in serious financial trouble out of debt. But the reasons why many here don't care for him are long: promoting high-cost mutual funds (with kickbacks?), pushing people to pay off sub-3% loans, constant comments of 'good evangelical christian', the 'you'll earn 12% annual returns', fuzzy math, etc. etc. He's good for people who are very bad at handling their finances, but not the inverse.
His buisness is to help people who are poor at handling finances or else he would of never had started this if he thought he could help out those who are good with handling money. I mean his whole selling point is the baby steps. I think that is what attracts mainly those who are shitty with money.
But I think the problem is that people get stuck with his mindset for their lives and don't realize that after they have learned to be good with money that doing things differently isn't sacrilege or stupid. Look at how many people on here still adhere to the idea of prepaying their mortgage, even though it is 3%. You can argue with them until you are blue in the face, but they will still choose the emotion over the math. I think Dave Ramsey largely popularized that notion ("paid off mortgage as the new status symbol" or whatever it is), and it has stuck. I would also still be doing those things if I hadn't investigated further and found ways to leverage debt to accumulate wealth.
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Yeah, I really don't get the hate... he provides a much more consumer-friendly kick in the ass, which is a bit more feasible for a lot of people, and he serves as a great catalyst to get couples actually talking about money.
His investment advice may be fishy, and I don't agree with his "DEBIT CARDS ONLY" thing (mostly because I seem to have to replace about one credit card a year from fraud), but arguing about that is missing the forest for the trees.
ok - did you actually read the replies on this thread and in the numerous parallel threads on DR? I think people have been pretty clear on the various reasons why he's unpopular with many people on this forum. You'll also notice that quit a few people acknowledge that he serves a useful purpose getting people in serious financial trouble out of debt. But the reasons why many here don't care for him are long: promoting high-cost mutual funds (with kickbacks?), pushing people to pay off sub-3% loans, constant comments of 'good evangelical christian', the 'you'll earn 12% annual returns', fuzzy math, etc. etc. He's good for people who are very bad at handling their finances, but not the inverse.
His buisness is to help people who are poor at handling finances or else he would of never had started this if he thought he could help out those who are good with handling money. I mean his whole selling point is the baby steps. I think that is what attracts mainly those who are shitty with money.
Well could he help poor people without fleecing them with awful mutual funds once they finally have some money? Or maybe not advise 8%+ Withdrawal Rates for elderly people? Or give an actual annualized rate of return instead of a meaningless average rate of return when quoting the S&P 500's performance since inception? Or not tell people to hold off on retirement contributions for multiple years while completing Baby Steps 1, 2, 3, and 3B? For some of these people it's damn near 10 years that they are missing out on free money from their 401(k)s while they get out of debt, build a 6 month emergency fund and a down payment for a house.
His advice is decent enough, but when he's telling people that "risk" is the reason why they should pay off all debt before investing in ALL circumstances then he's being intellectually dishonest. Your heart doesn't measure risk, Dave, it pumps blood throughout your body. These people are not over-leveraging themselves like you did, Dave, they are just realizing that 12 is bigger than 3.5.
He could help out financially stupid people without the shitty advice. Don't have a car payment because then you're forced into full coverage and you're much more likely to buy something you can't afford. That's good advice, right? Avoid consumer debt because you're not using it to build wealth, you're just tricking yourself into thinking that. Preach the 4% SWR. Stop being so flippin political all the time. Dave could stop having sucky advice and still be the same "No debt" guy that is a great motivator.
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Yeah, I really don't get the hate... he provides a much more consumer-friendly kick in the ass, which is a bit more feasible for a lot of people, and he serves as a great catalyst to get couples actually talking about money.
His investment advice may be fishy, and I don't agree with his "DEBIT CARDS ONLY" thing (mostly because I seem to have to replace about one credit card a year from fraud), but arguing about that is missing the forest for the trees.
ok - did you actually read the replies on this thread and in the numerous parallel threads on DR? I think people have been pretty clear on the various reasons why he's unpopular with many people on this forum. You'll also notice that quit a few people acknowledge that he serves a useful purpose getting people in serious financial trouble out of debt. But the reasons why many here don't care for him are long: promoting high-cost mutual funds (with kickbacks?), pushing people to pay off sub-3% loans, constant comments of 'good evangelical christian', the 'you'll earn 12% annual returns', fuzzy math, etc. etc. He's good for people who are very bad at handling their finances, but not the inverse.
His buisness is to help people who are poor at handling finances or else he would of never had started this if he thought he could help out those who are good with handling money. I mean his whole selling point is the baby steps. I think that is what attracts mainly those who are shitty with money.
Well could he help poor people without fleecing them with awful mutual funds once they finally have some money? Or maybe not advise 8%+ Withdrawal Rates for elderly people? Or give an actual annualized rate of return instead of a meaningless average rate of return when quoting the S&P 500's performance since inception? Or not tell people to hold off on retirement contributions for multiple years while completing Baby Steps 1, 2, 3, and 3B? For some of these people it's damn near 10 years that they are missing out on free money from their 401(k)s while they get out of debt, build a 6 month emergency fund and a down payment for a house.
His advice is decent enough, but when he's telling people that "risk" is the reason why they should pay off all debt before investing in ALL circumstances then he's being intellectually dishonest. Your heart doesn't measure risk, Dave, it pumps blood throughout your body. These people are not over-leveraging themselves like you did, Dave, they are just realizing that 12 is bigger than 3.5.
He could help out financially stupid people without the shitty advice. Don't have a car payment because then you're forced into full coverage and you're much more likely to buy something you can't afford. That's good advice, right? Avoid consumer debt because you're not using it to build wealth, you're just tricking yourself into thinking that. Preach the 4% SWR. Stop being so flippin political all the time. Dave could stop having sucky advice and still be the same "No debt" guy that is a great motivator.
Well said EricP.
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Yeah, I really don't get the hate... he provides a much more consumer-friendly kick in the ass, which is a bit more feasible for a lot of people, and he serves as a great catalyst to get couples actually talking about money.
His investment advice may be fishy, and I don't agree with his "DEBIT CARDS ONLY" thing (mostly because I seem to have to replace about one credit card a year from fraud), but arguing about that is missing the forest for the trees.
ok - did you actually read the replies on this thread and in the numerous parallel threads on DR? I think people have been pretty clear on the various reasons why he's unpopular with many people on this forum. You'll also notice that quit a few people acknowledge that he serves a useful purpose getting people in serious financial trouble out of debt. But the reasons why many here don't care for him are long: promoting high-cost mutual funds (with kickbacks?), pushing people to pay off sub-3% loans, constant comments of 'good evangelical christian', the 'you'll earn 12% annual returns', fuzzy math, etc. etc. He's good for people who are very bad at handling their finances, but not the inverse.
His buisness is to help people who are poor at handling finances or else he would of never had started this if he thought he could help out those who are good with handling money. I mean his whole selling point is the baby steps. I think that is what attracts mainly those who are shitty with money.
Well could he help poor people without fleecing them with awful mutual funds once they finally have some money? Or maybe not advise 8%+ Withdrawal Rates for elderly people? Or give an actual annualized rate of return instead of a meaningless average rate of return when quoting the S&P 500's performance since inception? Or not tell people to hold off on retirement contributions for multiple years while completing Baby Steps 1, 2, 3, and 3B? For some of these people it's damn near 10 years that they are missing out on free money from their 401(k)s while they get out of debt, build a 6 month emergency fund and a down payment for a house.
His advice is decent enough, but when he's telling people that "risk" is the reason why they should pay off all debt before investing in ALL circumstances then he's being intellectually dishonest. Your heart doesn't measure risk, Dave, it pumps blood throughout your body. These people are not over-leveraging themselves like you did, Dave, they are just realizing that 12 is bigger than 3.5.
He could help out financially stupid people without the shitty advice. Don't have a car payment because then you're forced into full coverage and you're much more likely to buy something you can't afford. That's good advice, right? Avoid consumer debt because you're not using it to build wealth, you're just tricking yourself into thinking that. Preach the 4% SWR. Stop being so flippin political all the time. Dave could stop having sucky advice and still be the same "No debt" guy that is a great motivator.
Look, I am not defending him, he is a buisnessman first and his goal is somewhat to help people go out of debt and also make money off of that. Like you, I don't agree with him, but he does have a huge viewership so even though you don't like his religious crap and total republican stance, he does strike a chord to alot of people (mainly those types of people). What I don't understand is why is there no one competing against him on the radio and using the FIRE way to live your life? Usually in buisness there are always competitors, but in the financial media world, Dave Ramsey is on top with no one to really challenge him therefore people are more proned to listen to Dave's advices since there are not many who have their own radio/tv show.
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Yeah, I really don't get the hate... he provides a much more consumer-friendly kick in the ass, which is a bit more feasible for a lot of people, and he serves as a great catalyst to get couples actually talking about money.
His investment advice may be fishy, and I don't agree with his "DEBIT CARDS ONLY" thing (mostly because I seem to have to replace about one credit card a year from fraud), but arguing about that is missing the forest for the trees.
ok - did you actually read the replies on this thread and in the numerous parallel threads on DR? I think people have been pretty clear on the various reasons why he's unpopular with many people on this forum. You'll also notice that quit a few people acknowledge that he serves a useful purpose getting people in serious financial trouble out of debt. But the reasons why many here don't care for him are long: promoting high-cost mutual funds (with kickbacks?), pushing people to pay off sub-3% loans, constant comments of 'good evangelical christian', the 'you'll earn 12% annual returns', fuzzy math, etc. etc. He's good for people who are very bad at handling their finances, but not the inverse.
His buisness is to help people who are poor at handling finances or else he would of never had started this if he thought he could help out those who are good with handling money. I mean his whole selling point is the baby steps. I think that is what attracts mainly those who are shitty with money.
Well could he help poor people without fleecing them with awful mutual funds once they finally have some money? Or maybe not advise 8%+ Withdrawal Rates for elderly people? Or give an actual annualized rate of return instead of a meaningless average rate of return when quoting the S&P 500's performance since inception? Or not tell people to hold off on retirement contributions for multiple years while completing Baby Steps 1, 2, 3, and 3B? For some of these people it's damn near 10 years that they are missing out on free money from their 401(k)s while they get out of debt, build a 6 month emergency fund and a down payment for a house.
His advice is decent enough, but when he's telling people that "risk" is the reason why they should pay off all debt before investing in ALL circumstances then he's being intellectually dishonest. Your heart doesn't measure risk, Dave, it pumps blood throughout your body. These people are not over-leveraging themselves like you did, Dave, they are just realizing that 12 is bigger than 3.5.
He could help out financially stupid people without the shitty advice. Don't have a car payment because then you're forced into full coverage and you're much more likely to buy something you can't afford. That's good advice, right? Avoid consumer debt because you're not using it to build wealth, you're just tricking yourself into thinking that. Preach the 4% SWR. Stop being so flippin political all the time. Dave could stop having sucky advice and still be the same "No debt" guy that is a great motivator.
Look, I am not defending him, he is a buisnessman first and his goal is somewhat to help people go out of debt and also make money off of that. Like you, I don't agree with him, but he does have a huge viewership so even though you don't like his religious crap and total republican stance, he does strike a chord to alot of people (mainly those types of people). What I don't understand is why is there no one competing against him on the radio and using the FIRE way to live your life? Usually in buisness there are always competitors, but in the financial media world, Dave Ramsey is on top with no one to really challenge him therefore people are more proned to listen to Dave's advices since there are not many who have their own radio/tv show.
Because, as I said early, common sense doesn't sell. How do you monetize "pay off debt with an interest rate higher than your RoR and not debt lower than your RoR"? You have to take an extremist view to get people's attention. Hell, even MMM does this with his "complainypants" and "facepunch" and other bullshit surrounding generally good ideas.
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Look, I am not defending him, he is a buisnessman first and his goal is somewhat to help people go out of debt and also make money off of that. Like you, I don't agree with him, but he does have a huge viewership so even though you don't like his religious crap and total republican stance, he does strike a chord to alot of people (mainly those types of people). What I don't understand is why is there no one competing against him on the radio and using the FIRE way to live your life? Usually in buisness there are always competitors, but in the financial media world, Dave Ramsey is on top with no one to really challenge him therefore people are more proned to listen to Dave's advices since there are not many who have their own radio/tv show.
In Canada we have Gail, but she has a completely different business model. I don't think she is out to make big bucks. She has some books, TV shows and a blog. She doesn't give much for investment advice more budgeting and "Don't spend more money than you make, you idiot" kind of advice.
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Look, I am not defending him, he is a buisnessman first and his goal is somewhat to help people go out of debt and also make money off of that. Like you, I don't agree with him, but he does have a huge viewership so even though you don't like his religious crap and total republican stance, he does strike a chord to alot of people (mainly those types of people). What I don't understand is why is there no one competing against him on the radio and using the FIRE way to live your life? Usually in buisness there are always competitors, but in the financial media world, Dave Ramsey is on top with no one to really challenge him therefore people are more proned to listen to Dave's advices since there are not many who have their own radio/tv show.
No one to challenge him? Admittedly DR is the "big fish" when it comes to a nationally syndicated financial radio show, but he's far from being the mass-media source available. On radio there's the Motly Fool Radio Show, Money Girl, Clark Howard's show, Rich Dad (which I think is far worse than DR's show), So Money (Mrs MMM did an episode there) and lots of others. Marketplace Money (NRP) spends more time on personal finance than it's daily sibling, 'Marketplace'. Then there's forums like this one and bogelheads, glossy-print magazines covering every flavor of economics from Forbes to Homesteading. At my local library there's probably 500 'self-help' style books strictly dealing with finances.
DR's not alone in the space.
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Because, as I said early, common sense doesn't sell. How do you monetize "pay off debt with an interest rate higher than your RoR and not debt lower than your RoR"? You have to take an extremist view to get people's attention. Hell, even MMM does this with his "complainypants" and "facepunch" and other bullshit surrounding generally good ideas.
If "Spend less than you make" and "don't stay in debt, and if you are, pay off the high interest stuff first" worked, Dave Ramsey wouldn't be needed.
Even though it's "sub-optimal," his debt snowball is popular because it works. It works for people who have tried and repeatedly failed to pay off debt using the logical method, because it's tapping into something different. The "Debt free!" calls are regular motivators for other people as well.
If you have your finances in order, Dave Ramesy is mostly useless, and can safely be ignored. But the reality is, he's helping a lot of people get out of debt. And his methods work where "common sense" hasn't. So, from that perspective, he's worth a good bit.
And regarding mortgage payoff/etc, there are other things to consider than just "on paper wealth." I fully intend to pay off my mortgage early (when we eventually have one), because that's something concrete, even if the economy tanks. I'd rather not have to suck out money from investments during a downturn just to pay my mortgage, and paying off a mortgage has much higher yields than a savings account (best I've seen is about 0.95%). *shrug* I'm aware it's not "optimal," and I intend to do it anyway, because I'd rather own my house/car/etc outright than possibly make a bit extra on investments.
... and I'm pessimistic about our post-peak-energy future, so I sit firmly in the "Past performance does not guarantee future results" camp about the stock market.
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Because, as I said early, common sense doesn't sell. How do you monetize "pay off debt with an interest rate higher than your RoR and not debt lower than your RoR"? You have to take an extremist view to get people's attention. Hell, even MMM does this with his "complainypants" and "facepunch" and other bullshit surrounding generally good ideas.
If "Spend less than you make" and "don't stay in debt, and if you are, pay off the high interest stuff first" worked, Dave Ramsey wouldn't be needed.
Even though it's "sub-optimal," his debt snowball is popular because it works. It works for people who have tried and repeatedly failed to pay off debt using the logical method, because it's tapping into something different. The "Debt free!" calls are regular motivators for other people as well.
If you have your finances in order, Dave Ramesy is mostly useless, and can safely be ignored. But the reality is, he's helping a lot of people get out of debt. And his methods work where "common sense" hasn't. So, from that perspective, he's worth a good bit.
And regarding mortgage payoff/etc, there are other things to consider than just "on paper wealth." I fully intend to pay off my mortgage early (when we eventually have one), because that's something concrete, even if the economy tanks. I'd rather not have to suck out money from investments during a downturn just to pay my mortgage, and paying off a mortgage has much higher yields than a savings account (best I've seen is about 0.95%). *shrug* I'm aware it's not "optimal," and I intend to do it anyway, because I'd rather own my house/car/etc outright than possibly make a bit extra on investments.
To make an accurate comparison, I'd want to weigh "OMG pay off all debt" against someone who took a more reasoned approach balanced against investing (401k and other). I don't think the "OMG pay off all debt" folks are necessarily going to come out ahead.
... and I'm pessimistic about our post-peak-energy future,
As someone spending his days frantically running scenarios to understand the effect of ever-plumeting oil and nat gas prices on his business, I'm curious when this peak energy thing is going to happen.
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To moustachians 'spend less than you make... duh' is true. The is NOT true for a lot of other people out there. Those other people need an ass kicking of epic proportions. DR gives them the push the need to do the baby steps.
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As someone spending his days frantically running scenarios to understand the effect of ever-plumeting oil and nat gas prices on his business, I'm curious when this peak energy thing is going to happen.
An awful lot of the low prices are demand destruction - only part of it is production increases.
I'd argue it is happening, but the "prices will skyrocket" assertion doesn't come from a solid understanding of economics and demand destruction - which is happening on more than just energy right now. See "Most commodities."
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If it were just the financial trainwrecks going to DR for advice, I'd encourage them. However, when people that don't spend everything they have and more, who are more than intelligent enough to understand the basics of investing bring him up, I cringe. If they follow his advice, they could do themselves a huge disservice.
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If it were just the financial trainwrecks going to DR for advice, I'd encourage them. However, when people that don't spend everything they have and more, who are more than intelligent enough to understand the basics of investing bring him up, I cringe. If they follow his advice, they could do themselves a huge disservice.
I've heard more than few people with several hundred thousand in TSP accounts go to him and he'll recommend they take it out because there's "not enough choices" and "you can beat the market with one of my ELP's." And then there's some crooked ELP on the other hand who just got handed $5k/yr for the rest of his life because he's got the "heart of a teacher."
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As someone spending his days frantically running scenarios to understand the effect of ever-plumeting oil and nat gas prices on his business, I'm curious when this peak energy thing is going to happen.
An awful lot of the low prices are demand destruction - only part of it is production increases.
I'd argue it is happening, but the "prices will skyrocket" assertion doesn't come from a solid understanding of economics and demand destruction - which is happening on more than just energy right now. See "Most commodities."
Can't help but notice you seem to be dodging Chris22's question about when peak energy will happen. In your statement above you say we've had production increases, but then assert that we've already hit peak energy. Production increases don't seem to support a post peak-energy world.
I'm also not certain where I am supposed to go when you say See "Most commodities" - can you be more specific?
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As someone spending his days frantically running scenarios to understand the effect of ever-plumeting oil and nat gas prices on his business, I'm curious when this peak energy thing is going to happen.
An awful lot of the low prices are demand destruction - only part of it is production increases.
I'd argue it is happening, but the "prices will skyrocket" assertion doesn't come from a solid understanding of economics and demand destruction - which is happening on more than just energy right now. See "Most commodities."
The reason there isn't more production increase is because a huge portion of known reserves cost more to retrieve than they can sell for on the current market. bring back $100 oil and you'd see a big spike in production.
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Peak energy? I don't have a great answer. We've got an awful lot of coal. So at some point in the future.
Peak oil? About 2005. Though we're still staggering along the top of the production curves, driven by the boom in fracking.
Copper: http://www.nasdaq.com/markets/copper.aspx?timeframe=3y
Silver: http://www.nasdaq.com/markets/silver.aspx?timeframe=3y
Lead and coal prices are doing similar things.
*shrug* Maybe I'm wrong. Feel free to entirely ignore me. And this is pretty far off topic for this thread anyway.
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Peak energy? I don't have a great answer. We've got an awful lot of coal. So at some point in the future.
Peak oil? About 2005. Though we're still staggering along the top of the production curves, driven by the boom in fracking.
Copper: http://www.nasdaq.com/markets/copper.aspx?timeframe=3y
Silver: http://www.nasdaq.com/markets/silver.aspx?timeframe=3y
How can we have passed peak oil ten years ago if production has continued to increase? Those two statements directly contradict each other. Either we peaked or we didn't.
Also - I cannot understand how a decrease in the futures of copper or silver would indicate a peak in those metals. I'm not saying it hasn't happened, just that the data you are using doesn't seem to address the question.
*shrug* Maybe I'm wrong. Feel free to entirely ignore me. And this is pretty far off topic for this thread anyway.
agreed - so... why bring up "peak energy" in a thread about DR advice?
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How can we have passed peak oil ten years ago if production has continued to increase? Those two statements directly contradict each other. Either we peaked or we didn't.
Peak conventional oil happened 10 years ago. We've proceeded to get really creative with debt backed fracking companies, but the year over year declines on those wells are 30-40%, so... not a long term solution.
Also - I cannot understand how a decrease in the futures of copper or silver would indicate a peak in those metals. I'm not saying it hasn't happened, just that the data you are using doesn't seem to address the question.
It doesn't mean those metals are peaking, but it's a good clue that demand destruction is happening, which also effects energy.
agreed - so... why bring up "peak energy" in a thread about DR advice?
Because it's part of why I intend to pay off my mortgage instead of keeping "low interest debt." I don't expect the continuing stock market gains to continue over, say, 30 years, so I'd rather pay it off quickly so I don't have to worry about losing my house.
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How can we have passed peak oil ten years ago if production has continued to increase? Those two statements directly contradict each other. Either we peaked or we didn't.
Peak conventional oil happened 10 years ago. We've proceeded to get really creative with debt backed fracking companies, but the year over year declines on those wells are 30-40%, so... not a long term solution.
Huh? Oil is oil. Yes, some is harder to get, but if production is increasing, it doesn't matter (except in terms of price) that it's easier or harder to get out of the ground.
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It does, if the amount of energy involved in the extraction is significantly greater than what has historically been the case. Some of the fracked wells only return a 2-3x return on energy invested.
Anyway, I'm planning for another 60-70 years of life on this planet if all goes well, so trying to figure out how to navigate the likely future is interesting. I think these things will certainly matter in my expected lifespan. So, planning for them makes sense. It's not as useful if you're trying to figure out 6 months or a year from now.
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To use a science phrases: "Your data does not match your conclusions".
It does, if the amount of energy involved in the extraction is significantly greater than what has historically been the case. Some of the fracked wells only return a 2-3x return on energy invested.
Oil was more costly to extract in the 1960s than the 1940s. It was more expensive to extract in the 80s than the 60s, etc etc. Every decade has seen the cost of extraction rise slightly. What you are arguing is increased production cost, not peak oil.
Also, you seem to be confusing "peak energy" with "peak oil" - they aren't the same thing. Take a look at the global capacity of solar (http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2015/solar-pv-generation-capacity-bp-2015.jpg) and wind (http://cleantechnica.com/files/2013/02/new-and-total-world-wind-power.png) over the last decade. Then there's always coal and natural gas.
Anyway, I'm planning for another 60-70 years of life on this planet if all goes well, so trying to figure out how to navigate the likely future is interesting. I think these things will certainly matter in my expected lifespan. So, planning for them makes sense.
Agreed that planning for multi-decade timelines makes sense, and the future is bound to be interesting. Your argument, if true, also torpedos DR's expected 12% returns.
Because it's part of why I intend to pay off my mortgage instead of keeping "low interest debt." I don't expect the continuing stock market gains to continue over, say, 30 years, so I'd rather pay it off quickly so I don't have to worry about losing my house.
I'm always skeptical when someone says stock market gains aren't likely to continue. It's a variant of "it's different this time" and even financially educated smart people have been making the same prediction every decade over hte last century.
Regardless, if a mortgage at/around historical inflationary rates beats the market over 30 years than we have much bigger problems. Owning your house isn't a promise that you won't loose that ohuse if you don't have significant assets leftover to pay for the upkeep, taxes, and to fund your own lifestyle.
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It does, if the amount of energy involved in the extraction is significantly greater than what has historically been the case. Some of the fracked wells only return a 2-3x return on energy invested.
Anyway, I'm planning for another 60-70 years of life on this planet if all goes well, so trying to figure out how to navigate the likely future is interesting. I think these things will certainly matter in my expected lifespan. So, planning for them makes sense. It's not as useful if you're trying to figure out 6 months or a year from now.
As long a we're off on tangents: how far below 1x EROI do you think the oil industry will go before demand is eliminated entirely? My money is on coal-powered oil rigs and maybe even EVs hauling gas to stations, sucking up the last of the shale oil to run gas vehicles for just a little longer. I hope I live long enough to see just how batshit it gets.
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As long a we're off on tangents: how far below 1x EROI do you think the oil industry will go before demand is eliminated entirely? My money is on coal-powered oil rigs and maybe even EVs hauling gas to stations, sucking up the last of the shale oil to run gas vehicles for just a little longer. I hope I live long enough to see just how batshit it gets.
Probably a good bit below 1x, but at that point, it won't be going to run gas vehicles - it will be used as a chemical feedstock for processes in which paying the energy cost to get it is easier than the alternative. You can create synthetic gasoline from a variety of processes a whole lot easier than bothering to dig out the oil for it.
https://en.wikipedia.org/wiki/Fischer%E2%80%93Tropsch_process
Though it's probably easier to just switch to diesel-type engines that will burn "damned near anything" at that point. I mean, you can run them just fine on crushed coal and water...
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I think Dave Ramsey's message of the importance of getting out of debt is the single most important message to Americans right now who are in debt up to their eyeballs and buying things they can't afford. I do have a problem with his investment strategies, I will say that. But his message is to have savings available, get out of debt, invest in your retirement, invest in your children, live within your means and don't buy what you can't afford. I really don't see how that's a problem...
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A man called in wanting to know if he should take a reverse mortgage. Dave asked him a few questions:
Age: 83
Family: none whatsoever
Income: $830/mo from social security
Owns home outright
No savings
Dave told him it was "stupid" to take out a reverse mortgage and a "mathematically awful product". He suggested he take out a conventional mortgage and pay on it OR sell his home and move down to a 50k condo.
I found myself yelling at the radio.
1) what 83 year old man can get a conventional mortgage (that even if someone would give it to him leaves him open to a foreclosure)
2) what 83 year old man with no family wants to move
3) since when did "math" figure into any of Dave's arguments?
The guys 83 years old. He could take the 150k from the reverse mortgage, put it in a savings account, and double his income for 15 years making no interest, and never have to worry about being foreclosed on or making mortgage payments.
this is amongst the stupidest things I have ever heard:
He suggested he take out a conventional mortgage
I hope the old guy did not take any of those suggestions
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I think Dave Ramsey's message of the importance of getting out of debt is the single most important message to Americans right now who are in debt up to their eyeballs and buying things they can't afford. I do have a problem with his investment strategies, I will say that. But his message is to have savings available, get out of debt, invest in your retirement, invest in your children, live within your means and don't buy what you can't afford. I really don't see how that's a problem...
This is a forum of MMM readers. Let's compare it to fitness:
Dave Ramsey = Weight Watchers
In this comparison, MMM is basically a forum for financial Ironman athletes. Only a teeny, tiny group of people really do things like saving 75% of their income, yet that is common on this forum. Similarly, only a teeny, tiny group of people complete Ironman events, but on an Ironman forum, it's very common.
So basically Dave Ramsey's system is like the Weight Watchers of financial health. It's enough to get you the basics you need to be healthy and for somebody who's overweight in debt, that's exactly what they need. Once you're out of debt? Well just like I don't go to Weight Watchers to train for a marathon, I wouldn't stop with DR books to plan for FIRE. In the fitness world it's obvious that Weight Watchers isn't for athletes, and it should be similarly obvious that DR isn't for FIRE planning.
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I used to get upset with his advice to others, but I stopped because I realized that I am not his target audience. His target audience is a group of people who are really bad with money and living above their means. They are almost like a 12 year old with money and he teaches them how to be an 18 year old with money.
He can be very persuasive with people who are very bad with money to be a little bit better. I'm not sure if I could be as impactful on people who are really bad at money. I would have a list of 150 things that they are doing wrong and they would probably get overwhelmed and not listen.
He keeps it simple and recommends things that are related to changes in human behavior. Sometimes the math is a little weird, but he can get people to make some changes for the better.
I am also a huge fan of "Rich Dad: Poor Dad." I read it when I was 20 years old and it was perfect for me at the time.
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I think Dave Ramsey's message of the importance of getting out of debt is the single most important message to Americans right now who are in debt up to their eyeballs and buying things they can't afford. I do have a problem with his investment strategies, I will say that. But his message is to have savings available, get out of debt, invest in your retirement, invest in your children, live within your means and don't buy what you can't afford. I really don't see how that's a problem...
This is a forum of MMM readers. Let's compare it to fitness:
Dave Ramsey = Weight Watchers
In this comparison, MMM is basically a forum for financial Ironman athletes. Only a teeny, tiny group of people really do things like saving 75% of their income, yet that is common on this forum. Similarly, only a teeny, tiny group of people complete Ironman events, but on an Ironman forum, it's very common.
So basically Dave Ramsey's system is like the Weight Watchers of financial health. It's enough to get you the basics you need to be healthy and for somebody who's overweight in debt, that's exactly what they need. Once you're out of debt? Well just like I don't go to Weight Watchers to train for a marathon, I wouldn't stop with DR books to plan for FIRE. In the fitness world it's obvious that Weight Watchers isn't for athletes, and it should be similarly obvious that DR isn't for FIRE planning.
Well kind of, yeah. But the flipside is the portion of his advice that is misleading, ill-advised and inappropriate for the situation of the person he's advising. And all that comes in the specifics of advice to individuals, where he exposes just how poorly equipped he is to act as any kind of financial adviser despite being in that position. He's the Dr Oz of finances.
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The one thing DR says that I'm not a huge fan of is the delay or stopping of your 401k even if there is an employer match.
Outside of that, he's got great advice on money and life in general. I don't listen to him like a zombie, nor MMM for that matter. I'll walk my own path, but will do it with an open mind!
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Yeah IRA's, 401k's and Roth's are really special and most financial advice places maxing them out before all debt except high interest credit card debt. If there weren't contribution limits maybe this wouldn't be as huge a deal...
Telling people to pay off their debt as priority 1 and giving them false hope on returns while maybe not the best advice it could be a whole lot worse. If a person wants to get all their financial advice from one source they are in trouble anyway. Though people in Dave's position should take more precautions to look out for people who take him too seriously.