My thoughts about Dave Ramsey.

[MakingProgress]

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@iced wrote:

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The problem I see is that most people have no clue what "live within their means" really means. I know people who think that they are living within their means spending 90% of their take-home pay on "essentials" like car/home/internet/phone/etc with the other 10% discretionary. None of that 90% is savings. If you aren't saving at least 20% gross every month while still covering all of your expenses, you are not living within your means. These people are in for a rough time when they get older as they realize they either retire with a restricted budget or can't retire at all.

+1000

DW and  I live on about 75% of our income, and we could cut some things if needed.     About 15% is taken out of our gross pay, some pretax and some post tax for retirement savings, in addition to what we have taken out, my employeer is kicking in a total of 9% of my pay, and DWs employer is kicking in 3%of her pay. 

Then from our takehome we are saving about another 10% of gross for things like furture car payments/vacations/and home repairs.

In seeing people listing what they are living on based upon a certian income I see several things they tend to forget to account for such as:

Auto and Home maintaince

Chartiable Giving

Entertianment - we all have some form of entertainment we partake in that costs us something. 

Taxes - when someone says they make 37K they are usually referring to gross, so even though the taxes come out before they see a paycheck it is still an expense they need to take into account. 

Real Estate Taxes if you own your home and they are not part of your house payment.

All of these things and more need to be budgeted when we look at how  much we can save. 

[xaximus]

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@MakingProgress wrote:

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@iced wrote:

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The problem I see is that most people have no clue what "live within their means" really means. I know people who think that they are living within their means spending 90% of their take-home pay on "essentials" like car/home/internet/phone/etc with the other 10% discretionary. None of that 90% is savings. If you aren't saving at least 20% gross every month while still covering all of your expenses, you are not living within your means. These people are in for a rough time when they get older as they realize they either retire with a restricted budget or can't retire at all.

+1000

DW and  I live on about 75% of our income, and we could cut some things if needed.     About 15% is taken out of our gross pay, some pretax and some post tax for retirement savings, in addition to what we have taken out, my employeer is kicking in a total of 9% of my pay, and DWs employer is kicking in 3%of her pay. 

Then from our takehome we are saving about another 10% of gross for things like furture car payments/vacations/and home repairs.

In seeing people listing what they are living on based upon a certian income I see several things they tend to forget to account for such as:

Auto and Home maintaince - Too easily forgotten 

Chartiable Giving - You can add this to your tax return, brings your taxable amount down. 

Entertianment - we all have some form of entertainment we partake in that costs us something. - This is necessary as life should be enjoyable but some people go to an extreme with this. 

Taxes - when someone says they make 37K they are usually referring to gross, so even though the taxes come out before they see a paycheck it is still an expense they need to take into account. 

Real Estate Taxes if you own your home and they are not part of your house payment.

All of these things and more need to be budgeted when we look at how  much we can save. 

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Always good to budget and know what your expenses are vs. what your bringing home. Example, besides the contributions to my 403b, I make sure I save atleast 30-40% of my paycheck every week. I have play money set aside for entertainment, most of the time, I barely use even half of it. I think the best way for someone to track their expenses is simple - write everything down, every expense, track and manage it for 3-6 months so you know exactly what you spend (give or take). I didn't really have anyone to show me, I just learned, made mistakes, learned from that and grew up. I think the issue is that, many people don't realize their mistakes and it's too late. 

[Revelate]

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@xaximus wrote:

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@MakingProgress wrote:

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@iced wrote:

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The problem I see is that most people have no clue what "live within their means" really means. I know people who think that they are living within their means spending 90% of their take-home pay on "essentials" like car/home/internet/phone/etc with the other 10% discretionary. None of that 90% is savings. If you aren't saving at least 20% gross every month while still covering all of your expenses, you are not living within your means. These people are in for a rough time when they get older as they realize they either retire with a restricted budget or can't retire at all.

+1000

DW and  I live on about 75% of our income, and we could cut some things if needed.     About 15% is taken out of our gross pay, some pretax and some post tax for retirement savings, in addition to what we have taken out, my employeer is kicking in a total of 9% of my pay, and DWs employer is kicking in 3%of her pay. 

Then from our takehome we are saving about another 10% of gross for things like furture car payments/vacations/and home repairs.

In seeing people listing what they are living on based upon a certian income I see several things they tend to forget to account for such as:

Auto and Home maintaince - Too easily forgotten 

Chartiable Giving - You can add this to your tax return, brings your taxable amount down. 

Entertianment - we all have some form of entertainment we partake in that costs us something. - This is necessary as life should be enjoyable but some people go to an extreme with this. 

Taxes - when someone says they make 37K they are usually referring to gross, so even though the taxes come out before they see a paycheck it is still an expense they need to take into account. 

Real Estate Taxes if you own your home and they are not part of your house payment.

All of these things and more need to be budgeted when we look at how  much we can save. 

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Always good to budget and know what your expenses are vs. what your bringing home. Example, besides the contributions to my 403b, I make sure I save atleast 30-40% of my paycheck every week. I have play money set aside for entertainment, most of the time, I barely use even half of it. I think the best way for someone to track their expenses is simple - write everything down, every expense, track and manage it for 3-6 months so you know exactly what you spend (give or take). I didn't really have anyone to show me, I just learned, made mistakes, learned from that and grew up. I think the issue is that, many people don't realize their mistakes and it's too late. 

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There's a number of tools, even free ones like Personal Capital (which is what I personally use these days) which will track all your expenses for you assuming you add your credit cards and checking account.

Will have to do some categorization for call it the first month but after that it's worked like clockwork for me tracking expenses over the past 3 months except when I do something different and need to categorize a transaction but that's not very often anymore.

Given that I also get my investments consolidated there, it's a no-brainer for my financial overview and expense tracking... doing it by hand on pen and paper for months is so last millenium .

[DR527]

I really dislike when people say “Live within your means”. I get what they are trying to say. But what I hear is “stay where you are and learn to just be happy with that.” I see older people family and friends retiring and not having anywhere near the money to live comfortably at all. Friends grandparents going back to work to pay bills and cover cost of medicine. I just don't understand the logic of telling poor people to save their money. I'm not talking about going out to buy nice new things. But if your means aren't great to start with, they won't just get better. I had this conversation a lot over the years. Lol. I've asked people from all walks of life. If they could think of anything they buy now. That's cheaper then it use to be. A few thins. But by in large most hints are much more expensive. And on to Dave Ramsey, I thing the OP said It all. I listen to him,  I think his advice is for certain people. He just has a different outlook on money then I do. And I think the advice he gives Is for a older world. Not the technology driven world we have. My wife and I were joking that we don't even see our physical money too much anymore. 

[Anonymous]

In a past job function, I was loosely involved in the addiction recovery field. There was a saying they had: “Take what you need and leave the rest”. The moment I heard that quote, I liked it and realized it could apply to anything in life. As I’ve gotten older, I’ve learned to keep more of an open mind on everything in life. I listen, I consider, and I take what I need and leave the rest.

Dave Ramsey is no different. He has some OK points. I’ll take the advice that I need and I’ll Ignore what I don’t need. Yeah, he’s a little extreme - and probably flat wrong about some things - but don’t discount him completely.

[Anonymous]

My parents are obsessed with him- I think he's full of it. 

My biggest issue with him is how much he makes bankruptcy out to be a big, traumatic event. Sure, banktupcy absolutely sucks and should be avoided if possible; but if you wait too long to file you won't get any benefit out of it. 

Dave Ramsay likes to share his bankruptcy experience which has very little in it that resembles what a typical person would go through in bankruptcy. 

My husband and I just got discharged in bankruptcy. Basically, our credit card debt was a gradual accumulation from around 2007 or so. We were underemployed or laid off almost constantly from 2008-2010. I only found a part time job again in 2012. I only finally got fulltime work again in 2015, filled out thousands of applications to get it too. We had a sudden realization that we still had no way of saving any money for the next recession. We were paying $5500 a month in minimum payments. Now, we have some hope of building up some savings before the next recession. We only make $60k a year, but, most of that was going to credit cards that we had ran up years ago. I was looking through my statements, and really, we had paid for that stuff several times over. 

Dave Ramsey would never have suggested bankruptcy in our situation, just keep spending less and making payments. Snowball it. We'd probably have a few thousand paid off in time to lose our house in the next recession.. lol 

Anyone earning at the median or less who already owns a home they can exempt should probably consider bankruptcy if all they can make is the minimum payments. Those people need savings now so that they can manage to keep their home the next time crap hits the fan. 

The next recession is expected at the end of 2020. We still hadn't recovered from the last one. We should have filed for bankruptcy years ago. 

[iced]

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@DR527 wrote:

I really dislike when people say “Live within your means”. I get what they are trying to say. But what I hear is “stay where you are and learn to just be happy with that.” I see older people family and friends retiring and not having anywhere near the money to live comfortably at all. Friends grandparents going back to work to pay bills and cover cost of medicine. I just don't understand the logic of telling poor people to save their money. I'm not talking about going out to buy nice new things. But if your means aren't great to start with, they won't just get better. I had this conversation a lot over the years. Lol. I've asked people from all walks of life. If they could think of anything they buy now. That's cheaper then it use to be. A few thins. But by in large most hints are much more expensive. And on to Dave Ramsey, I thing the OP said It all. I listen to him,  I think his advice is for certain people. He just has a different outlook on money then I do. And I think the advice he gives Is for a older world. Not the technology driven world we have. My wife and I were joking that we don't even see our physical money too much anymore. 

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If someone isn't happy with their current financial means, going into debt up to their eyeballs isn't going to help. Those who spend beyond their means are doing the same thing alcoholics and drug addicts do: they're trading long-term negative consequences for short-term escape and relief. The insult to injury in this case is that the lifestyle that many poor wish to emulate isn't even real to begin with.

Even the rich have to stay within their means, and those that don't (common among those who came into money quickly/easily like lotto winners, pro athletes, trust fund kids, and rock stars) will find themselves poor eventually. Shirtsleeves to shirtsleeves in three generations is a saying for a good reason.

If the poor person isn't satisfied with the means they can afford, they have two options:

1. Improve their means through higher income. That may mean a career change and/or acquiring new skills. If someone can't/won't do that,

2. Learn to be happy with it.

In life, there will always be haves and have nots, and it doesn't care in the least if that's fair or not. Some will luck their way to becoming a have (and usually lose it just as fast), some work hard and/or learn a valuable tradeskill to become a have, and others remain have nots their entire life.

[Anonymous]

Sounds exactly like my wife and I. We live in Chicago, and our friends back home can't understand why we currently have no desire to buy. We lucked out on a large apartment on the northside of the city, within walking distance to either the brown or the red line, as well as tons of buses. If we were to buy it would be a minimum of 300k, plus HOA as you mentioned. I have seen numerous places for sale along the lake where the HOA is higher than the mortgage would be if you put 20% down. It would double our cost of living just to have the title of "owner," and we would be cutting the space we have in half just to have that title as well. Renting we are able to actually have money in savings. And while I personally would love to live rural, our jobs (EMT and attorney) are better suited for the city life. Credit cards are a big part of that too. For one its safer! Knock on wood I have never had an altercation where my things were stolen in person, but I have had my cards compromised, and I love that with my credit card I am not personally liable. DR claims that debit cards offer that same security, and sure you will get your money back, but for so many people living paycheck to paycheck if that money takes 2 weeks to be returned they can be in serious trouble!

[Anonymous]

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@Anonymous wrote:

Sounds exactly like my wife and I. We live in Chicago, and our friends back home can't understand why we currently have no desire to buy. We lucked out on a large apartment on the northside of the city, within walking distance to either the brown or the red line, as well as tons of buses. If we were to buy it would be a minimum of 300k, plus HOA as you mentioned. I have seen numerous places for sale along the lake where the HOA is higher than the mortgage would be if you put 20% down. It would double our cost of living just to have the title of "owner," and we would be cutting the space we have in half just to have that title as well. Renting we are able to actually have money in savings. And while I personally would love to live rural, our jobs (EMT and attorney) are better suited for the city life. Credit cards are a big part of that too. For one its safer! Knock on wood I have never had an altercation where my things were stolen in person, but I have had my cards compromised, and I love that with my credit card I am not personally liable. DR claims that debit cards offer that same security, and sure you will get your money back, but for so many people living paycheck to paycheck if that money takes 2 weeks to be returned they can be in serious trouble!

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Just recall when you rent the owner typically wants to NET a 14% return on his/her money from the greater of cost or market value. 

The owner is going to have the same costs as you plus a staff and then pass over  a 14% mark up on to you.  

[Anonymous]

Yes, but owner may have bought house at the low. 

I would absolutely not buy right now. Next recession is right around the corner, I would stall and buy in the recession. I have stupid coworkers spending $140k for houses that would have sold for $90k 3 years ago. I live in Florida which has a crazy volatile market. 

We bought our house for $80k at the height of the recession and it's currently valued at $170k. We'd love to sell and cash in, but, then we'd be buying back in at the high. This is definitely not the time to buy unless you happen to want to be underwater in a couple years.