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My thoughts about Dave Ramsey.

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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.

I agree Dave does take the extreme approach of no credit whatsoever. I think that comes from a view that all people are falliable and COULD BE tempted to be over-extend on credit. Some people don’t need a motivational speaker to develop fiscally sound behaviors, others like myself take advice relevant to their situation and apply it where useful.

Where can you buy a decent  house with a safe neighborhood for a few years of modest income. Starter homes that are not TAR paper shacks in my area $125K Ave  Household Income $34K /year.  The cheapest house in my subdivision is $200K 

Message 11 of 74
Contributor

Re: My thoughts about Dave Ramsey.


@Backwoods 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.

I agree Dave does take the extreme approach of no credit whatsoever. I think that comes from a view that all people are falliable and COULD BE tempted to be over-extend on credit. Some people don’t need a motivational speaker to develop fiscally sound behaviors, others like myself take advice relevant to their situation and apply it where useful.

Where can you buy a decent  house with a safe neighborhood for a few years of modest income. Starter homes that are not TAR paper shacks in my area $125K Ave  Household Income $34K /year.  The cheapest house in my subdivision is $200K 


It lies with DR having a net worth around 60 million dollars. When some people become wealthy, they become out of touch with the rest of society. They become saturated in it, and then lose all concept of what life is like for others.

Sure, Dave could easily buy a $500,000 or more house in cash, he can do it 5 times over. But then it turns into "well I did it, WHY can't you?"

 

Credit Card companies have a name for those who pay their bill in full each month: Deadbeats
Message 12 of 74
Frequent Contributor

Re: My thoughts about Dave Ramsey.


@Backwoods 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.

I agree Dave does take the extreme approach of no credit whatsoever. I think that comes from a view that all people are falliable and COULD BE tempted to be over-extend on credit. Some people don’t need a motivational speaker to develop fiscally sound behaviors, others like myself take advice relevant to their situation and apply it where useful.

Where can you buy a decent  house with a safe neighborhood for a few years of modest income. Starter homes that are not TAR paper shacks in my area $125K Ave  Household Income $34K /year.  The cheapest house in my subdivision is $200K 


Ave  Household Income $34K /year

 

This is the key point imo.  Based on my frugal living for many years- basic survival with a roof, used car/gas, food, heat, cheap cell phone is around 30k/year where I live.  You are not socking away a lot of money at 34k/year to ever buy a house cash.




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Message 13 of 74
Contributor

Re: My thoughts about Dave Ramsey.


@Workin4abetterFICO wrote:


Ave  Household Income $34K /year

 

This is the key point imo.  Based on my frugal living for many years- basic survival with a roof, used car/gas, food, heat, cheap cell phone is around 30k/year where I live.  You are not socking away a lot of money at 34k/year to ever buy a house cash.


You must live in an expensive area. I spent $700 a month on rent, $200 on elec/gas, $250 on our car, $200 on food. $150 between internet and cell phone. My yearly expenses run about $16-$17k.

Credit Card companies have a name for those who pay their bill in full each month: Deadbeats
Message 14 of 74
Senior Contributor

Re: My thoughts about Dave Ramsey.


@Cleaningitup2016 wrote:

@Workin4abetterFICO wrote:


Ave  Household Income $34K /year

 

This is the key point imo.  Based on my frugal living for many years- basic survival with a roof, used car/gas, food, heat, cheap cell phone is around 30k/year where I live.  You are not socking away a lot of money at 34k/year to ever buy a house cash.


You must live in an expensive area. I spent $700 a month on rent, $200 on elec/gas, $250 on our car, $200 on food. $150 between internet and cell phone. My yearly expenses run about $16-$17k.


I wish DW and mine yearly expenses were $17K and our house is paid in full.  

Message 15 of 74
Frequent Contributor

Re: My thoughts about Dave Ramsey.


@Cleaningitup2016 wrote:

@Workin4abetterFICO wrote:


Ave  Household Income $34K /year

 

This is the key point imo.  Based on my frugal living for many years- basic survival with a roof, used car/gas, food, heat, cheap cell phone is around 30k/year where I live.  You are not socking away a lot of money at 34k/year to ever buy a house cash.


You must live in an expensive area. I spent $700 a month on rent, $200 on elec/gas, $250 on our car, $200 on food. $150 between internet and cell phone. My yearly expenses run about $16-$17k.


Not too expensive.  My rent is slightly higher (I have a good rate) Utilities are higher, Car/gas is higher (but I add in maintenance costs to car as well), food is about twice as much (I have a child as well as myself), Internet and phone is less.  I actually probably average close to 2k outgoing per month with the occasional higher month if there are car maintenance or medical/dental expenses.  I have survived on 24k income for a couple of years but did next to no car maintenance that I had to catch up on when my income allowed or I would have been walking.




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Message 16 of 74
Valued Contributor

Re: My thoughts about Dave Ramsey.

We had a thread on a similar note a while ago: https://ficoforums.myfico.com/t5/Credit-in-the-News/Dave-Ramsey-Ticks-Me-Off/td-p/5047656

 

He's right about paying off debt and living within your means, but he talks about an "880 FICO score" and other things that make him seem almost ignorant about credit.

 

While I can't/won't get into religion on this forum, I do think his foray into the space is abusing religious non-profits. These non-profits would never touch somebody else like Clark Howard, yet they are willing to PAY Ramsey to advertise and teach his course in their tax-free building. Somebody I know who leads one of these classes also paid out of his own pocket to fly to and attend one of Ramsey's own conventions. How great business model is that???

 


@Cleaningitup2016 wrote:

 

People are "broke" and spend $5 EVERY SINGLE DAY at Starbucks. That's $150-$155 a month. They don't realize how all of the little items add up.

 


This is so true. My first job didn't pay much but I was pretty much the only person there who didn't go to Starbucks/Dunkin/Whatever at least 2 out of 3 days... Even in my current position in software there are very few who brown bag their lunch.

 


@Backwoods wrote:

Mr Dave has made millions of one idea. never use credit. Most people in the real world however can't pay cash for houses unless they selling a debt/wealth course. Then if you do follow his no debt suggestion and try to buy a house with financing you have no credit score.   


That's why you have to go with his mortgage company! Smiley Frustrated


TU FICO 8: 741 (7/19) — Ex FICO 8: 739 (7/19) — Opinions are my own and not the views of my employer
Message 17 of 74
Valued Contributor

Re: My thoughts about Dave Ramsey.


@Janus wrote:

@CreditMaven1 wrote:
I hear what you are saying, but I think Ramsey advice is good for people who live paycheck to paycheck (whether you make $10k or $1 mill - you can still be living paycheck to paycheck if you spend more than you make). It's too easy to rack up credit card debt if you dont have a right view of money.

Debt can be really bad if you use it to keep up with the Jones' (car pmts, trips, eating out, frivolous stuff).

I think Ramsey would say live within your means (for some a 5 mil home is within their means), and learn to master money otherwise it will master you!


This. I've often wondered about the details of how people with larger means live compared to those with less. A lot of peope seem to live paycheck to paycheck, yet some only make $30K annually versus $200K. A vast difference, and the $30K earner would assume they could live the dream life on $200K. Unfortunately that person as no experience with this kind of Money, so when it happens they dig a big hole fast. I've seen/heard of the Lottery stories that go awry.  However, someone who naturaly builds up to that wage should have learned how to manage it properly along the way. Regardless of income level we all have our burdens, usually the people with higher income has student loans to pay off half their lives. The lower end can barely scrap together rent, utilities etc. Mostly due to housing increases that come from outside sources driving it up. 

 

I once was a low income earner who live paycheck to paycheck, and barely had extra Money left for entertainmnt budget etc. I used to think wow, what I could do with $100K+ income! Fast forward to several years later, still no $100K income, but I manage to live comfortablely and no longer have that paycheck to paycheck lifestyle. So it is true that you can double your income without increasing your bills. That said, if i had had a higher income back then with less experience. I just as easily could have blown through it without even understanding it all. 

 

 


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.

 

I also hear the tired old argument that as income goes up, so does cost of living. If a $900 mortgage payment worked for you when you made $50k/year, it works for you when you make $200k/year. People just think they need/deserve bigger and more expensive because they make more. My income is now north of $200k/year but my mortgage is still $900/month. I'm content. I spend less than $100/month on cable/internet/phone, and until earlier this year didn't have HD. I walk a lot, and I take the bus and subway a lot. I still live like someone making $50k/year because it worked then and it works now. All the extra money goes to savings, where it belongs.

 

As you state though, far too many don't adhere to this. I can't begin to count all the kids I've worked with who, the second the first paycheck hit, had as their first priority going down to the BMW or Mercedes dealership and getting a car that cost over half their annual salary.

Message 18 of 74
Valued Contributor

Re: My thoughts about Dave Ramsey.


@Cleaningitup2016 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.

I agree Dave does take the extreme approach of no credit whatsoever. I think that comes from a view that all people are falliable and COULD BE tempted to be over-extend on credit. Some people don’t need a motivational speaker to develop fiscally sound behaviors, others like myself take advice relevant to their situation and apply it where useful.

The issue with "no debt" is that debt can be leveraged. If I can buy a new car with 0% interest..which would make more sense..paying $20,000 cash, or being loaned $20,000 at 0%, and putting the cash in some sort of fund at a modest 5%?

 

A car is a horrible example to use because they're depreciating assets. You borrowed $20,000 at 0% for 5 years to buy something worth maybe $8,000 after those 5 years, not counting all of the maintenance you put into it. That is, you'll almost never recoup the money you put into it, and that 5-10% per year you made off the $10,000 you didn't already put toward payments is not going to make up for it.

Message 19 of 74
Valued Contributor

Re: My thoughts about Dave Ramsey.

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.

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