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My thoughts about Dave Ramsey.

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Re: My thoughts about Dave Ramsey.

Ramsey is an extremist IMHO. He has too many absolutes in his financial dogma. There is nothing wrong with using credit cards. The cards are a tool. They can be used wisely or imprudently. I once heard someone say everybody needs a psychaitrist. Ramsey fills that need for some. The debt free scream is about the silliest thing I ever heard of. He runs a cult. We have the option to join or not. 

 

 

Message 21 of 98
Moderator Emeritus

Re: My thoughts about Dave Ramsey.


@JTC-137 wrote:
No debt equals more cash though. One could save and pay cash for a modest home even with a modest income with a few years of frugal living and dedicated saving. Alternatively, there are lenders that will underwrite a mortgage for those with no score and cash to put down.



That very much depends where you live.  I don't even live in a good section of LA (there are friends even that refuse to come visit me because of the gangs that were here 25ish years ago), and people are going to come up with 450k cash for a 2/2 condo 1200 sq ft condo?  So I have to get an Amazon Locker to keep some packages from wandering off, compared to spending twice as much in a good neighborhood?  Bleck.

 

I'm coming around to the idea of small places, I have two jobs working from home and unless I need a monitor it's not lost on me I spend a non-trivial amount of time in one room anyway: if I move to SF I'm buying a postage stamp on the order of 500 sq ft and I'll be fine, but even that's a stretch to pay cash for: selling my current house, liquidating all the non-retirement accounts I could probably swing it in Oakland with some left over but I think that misses the larger point still.

 

Ultimately getting that first step into the mortgage market is where families start accumulating wealth: delaying that by literally years possibly decades to purchase a home as a result of not establishing credit makes no sense especially when just throwing rent away in many areas... you don't even have to really use the credit cards other than some small habit around the margin (the aforementioned occasional Starbucks or similar).

 

As a result, being anti-credit is just, well, sub-optimal in the extreme.

 




        
Message 22 of 98
Contributor

Re: My thoughts about Dave Ramsey.


@Save-n-Invest wrote:

Ramsey is an extremist IMHO. He has too many absolutes in his financial dogma. There is nothing wrong with using credit cards. The cards are a tool. They can be used wisely or imprudently. I once heard someone say everybody needs a psychaitrist. Ramsey fills that need for some. The debt free scream is about the silliest thing I ever heard of. He runs a cult. We have the option to join or not. 

 

 


I can agree with this as well. While I do agree that sometimes people need a little bootcamp style "tough love", he can come across as condenscending at times. 

Credit Card companies have a name for those who pay their bill in full each month: Deadbeats
Message 23 of 98
Valued Contributor

Re: My thoughts about Dave Ramsey.


@Revelate wrote:

@JTC-137 wrote:
No debt equals more cash though. One could save and pay cash for a modest home even with a modest income with a few years of frugal living and dedicated saving. Alternatively, there are lenders that will underwrite a mortgage for those with no score and cash to put down.



That very much depends where you live.  I don't even live in a good section of LA (there are friends even that refuse to come visit me because of the gangs that were here 25ish years ago), and people are going to come up with 450k cash for a 2/2 condo 1200 sq ft condo?  So I have to get an Amazon Locker to keep some packages from wandering off, compared to spending twice as much in a good neighborhood?  Bleck.

 

I'm coming around to the idea of small places, I have two jobs working from home and unless I need a monitor it's not lost on me I spend a non-trivial amount of time in one room anyway: if I move to SF I'm buying a postage stamp on the order of 500 sq ft and I'll be fine, but even that's a stretch to pay cash for: selling my current house, liquidating all the non-retirement accounts I could probably swing it in Oakland with some left over but I think that misses the larger point still.

 


My wife and I live in just over 600 sq ft of urban paradise where I work from home and we also have to call ahead and have packages dropped off a the local FedEx/UPS store if we don't want them stolen off our doorstep. We're even going to start a family in that postage stamp. When I discuss my housing situation with some coworkers and friends, they don't understand how we're going to do it - they think even 1500 sq ft is on the small side for a family. Most friends don't like to visit because they can't reliably find parking, or it costs $40 to park in a garage.

 

What I have learned from living in that space is that it is almost never the young family looking for their next home coming to the table with $450k (or, where we live, $900k for a 2/1 750 sq ft condo). When those properties come up for sale, it's a line of investors clamoring to buy it and rent it out for $3,500/month to next year's incoming students or young professionals who don't have $1 million sitting around to outbid them. You find a unit in a building that has owner-occupied ratios or prohibits rentals, and the time on market plunges from days to months and often go for $200-300/sq ft less than the others. The only other thing I've seen depress values around here are exhorbitant HOA fees - there'll be some units going for a more reasonable $1,000/sq ft because it has a $2,500/month HOA crippling its value.

 

Sure, we could move to the burbs where things cost a third of what they do in the city with twice the house features, but the burbs aren't walkable like the city is. I'm not quite ready to give that up. Perhaps like the wealth/poverty spectrum, it's all relative.

Message 24 of 98
Contributor

Re: My thoughts about Dave Ramsey.

Cali is, well, Cali lol. My experience has been areas where HH income averages 50k and housing is 125-150k. I agree that breaking into the mortgage arena initially is so crucial to wealth building. Just last month I managed to create $1k per month in our HH budget by making ‘passive’ changes: changed my withholding so as to not receive a huge refund (+$450) cancel cable, change internet and cell providers (+$350) and stop eating out altogether (+$200). Those are things anybody can do at any income level to at least accelerate the rate at which they save a down payments invest.

As for the leveraging example, there’s no way I’m borrowing $20k even at 0% for a severely depreciating asset. That’s $400+ that can be saved or invested.
Message 25 of 98
Valued Contributor

Re: My thoughts about Dave Ramsey.


@James_A wrote:

The car is a fine example to use. The decision to purchase the vehicle (or not) is independent of the decision of how to pay for it -- in this case, borrowing @ 0% int vs. paying cash.

 

I would agree that borrowing at 0% int is the superior choice if the funds were being loaned from a purely benevolent lender -- "Here, I have money. Lots of money. Take some & pay me back when you can." But that is surely not the case when one is at a car dealership.

 

No, surely the lender is arranged by the car dealer, either directly through their finance arm or through a co-opted lender. And car dealers do not lend money for free. The money not made on the auto loan will be made up (and perhaps some extra) via higher sticker price or lesser trade-in value.

 

It is not too simplistic to say that your 0% int is not really 0% at all. So maybe this example isn't a perfect one to use after all. That said,  I do 100% agree with the crux of your argument: unilateral statements are silly.


Another issue, which also ties back into the core issue of this thread, is that for every person who looks at the 0% financing as some form of leverage for purchasing something they otherside would have had to puchase anyway, there's 10 or more people who fall for the allure of 0% financing to buy more than they meant to or can afford.

 

People who can pay cash for the car don't usually go chasing after financing in the first place. The dealer might wave it in front of them and they'll take it, but, as you point out, they're also waving it in hopes that the guy who came in with $10,000 in hand to buy a $10,000 car he needed ends up buying a $20,000 car he didn't need because of the financing, or at least slapping $5,000 worth of add-ons on to that $10,000 car. And that's really where the problem is - as much as people blame dealers for that form of aggressive salesmenship, I blame the buyer for making an irresponsible purchase. They hear $450/month payment and think they can afford it because it's presented in a way that sounds manageable, except now they have more car than they came in for and will be out twice as much as they could afford an hour ago, even if it is at 0%.

 

I have the same problem with anyone who tries to tell me they "saved" money buying something on sale. No, you spent $X on something. You probably wouldn't have spent $Y on it, so you can't suddenly say you came out ahead by buying it for $X.

Message 26 of 98
Senior Contributor

Re: My thoughts about Dave Ramsey.

I read one of his books - from the library, I'd have felt unclean giving him revenue from what I'd heard of him.

 

No detailed advice...just avoid credit, stop spending, and invest with his friends so they can give him kickbacks.

 

Let's contrast that with Suze Orman, who once told a caller that her churner bf sounded pretty savvy for being able to get a lot of free travel while avoiding interest.

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Message 27 of 98
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Valued Contributor

Re: My thoughts about Dave Ramsey.

Personally, as others have said, I'm not a fan of the Dave Ramsay approach. Credit is important but one needs to be smart and responsible with it. I've moved from high 6 figure jobs down to 50K job and then back into 6 figures now. I've always tried and maintained a stable yet simple life. Currently now, I save almost one whole paycheck every month (bi-weekly, 2 checks per month). I always try to bring down my expenses, even if it's a few dollars. I'm constantly calling every company to see if they have better deals. Simple example - I recently switched cable service providers from CableVision to FiOS simply because CableVision wouldn't give me another deal. It's now been a year and they constantly send me mailers and have called me to bring me back. I've told them, beat the price I have and we'll talk. I think the issue today is so much money is wasted for frivolous expenses. I do enjoy Starbucks myself and frequent it around 5-6 times a month, but it's money I have budgeted for it.

I think the issue really falls into people not understanding and knowing their expenses compared to what they make. One of my coworkers lives paycheck to paycheck simply because he doesn't budget. He doesn't know what he's spending and with 2 kids and a wife (that doesn't work nor cares on how she spends money), he's constantly down to his like $100. I've seen his expenses and at times, his expenses for food and other shopping (kids clothing, shoes, toys, etc), is nearly a grand if not more a month. His wife refuses to get cheaper non-branded stuff cause she "read" somewhere that it's not as good as the branded stuff. I think this is common with people today. Many people think they make x, they need to spend x every month. They don't realize they should be building a savings and thinking about the future. Too many people live for the moment and not realize that doesn't work.


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Message 28 of 98
Moderator Emeritus

Re: My thoughts about Dave Ramsey.

At some point you have to be honest about your life.

I am spending around 800 in monthly food expenses, but frankly that is offset by more billable hours or even career development instead of cooking which right now in my life I have more than I could rationally want between two jobs.

If that changes I will be slashing that food budget, but for now given that a quality meal service allows me to push the envelope when it comes to trying to be a $20 whore, it works for me.

End of the day pick what you want out of life and optimize for it: if being comfortable in your after work years is a goal, then start optimizing for that now as less spent today is a whole lot more tomorrow.

Though I am about to go across the street for a Starbucks now, F’n dragging and just got a crapload of, well, crap dropped on me at one of the gigs... meh, must stay focused, 3 more years.



        
Message 29 of 98
Moderator

Re: My thoughts about Dave Ramsey.

Aren't I lucky I work currently 1 mile from his corporate headquarters and he is building a HUGE new corporate headquarters about 3-4 miles from where i work and about 8 miles or so from where i live.  It is rumored his new corporate HQ's is paid with cash I call BS as it is easily I am guessing a 20 million dollar plus building and coming close to completion.  I don't know where the dude makes his money I understand live within your means, but imo he certainly takes anti credit to the extreme the funny thing is the mortgage company i used is endorsed by dave ramsey obviously he is making money off this endorsement a bit of  hypocrisy(I didn't use the company due to his endorsement had firends that worked there)?  He has called me about a job before (not him personally), but not thank you lol.  He and his company has become rich off a bit of common sense and a bit of scare tactics.. Just my 2 cents on the dude.

Message 30 of 98
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