NA - Dave Ramsey

bflynn said:
I believe his advice should follow that by not being in debt to anyone, you'll have plenty of money to send your kids to college.
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I believe that is a somewhat optimistic assumption looking at the currrent cost of college, particularly for someone who has more than one kid. I am shoveling plenty of cash into my kids 529s but I have no delusions that it will be enough to pay for their education. Now, I am financially comfortable , if I look at how my kids friends parents make do often on one government salary, I dont see how they could pre-finance a college education for 2-3 kids without either financial aid or loans.

Putting student loans in the context of economics, the more money that is available to pay for college, the more money college will cost. There is no more supply. There is more money available. Prices get bid up. It is Economic 101, supply and demand. Loaning more money will raise prices.
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I can't fix macroeconomics. Whether I or my kids decide to take out student loans will not affect education financing on a wider scale. But yes, the easy availability of cheap federal student loans created an education bubble that has driven college tuition cost to a silly level.

The reality is that to some extent, 'you get what you pay for'. My wife is on faculty at a name medical school, one of her jobs is to review applicants for her departments residency program in ophthalmology. There are just not that many applicants who got their undergrad at northeast central nebraska state university on in-state tuition while living at home. The top 25 selective colleges are definitely over-represented in that very rarified pool of applicants. The same applies to lawyers who get hired by the large corporate firms. Few of them got their law degree in evening classes at their state school. If you aim high, you may have to spend a kings ransom on your undergrad and graduate education. That may not be fair, but it is a fact you can't really get past.

I don't know anyone who believes that what Dave Ramsey says is good to be militant. I know some will disagree if you say something wrong about his program or condemn it as something that doesn't work. The proof is out there, when you follow his plan, you WILL be rich in the end. You WILL have a paid off house and be able to live like no one else (except those others who followed his advice OR those who won the lottery and were smart).
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I am very familiar with his teaching, countless hours driving and listening to his show on AM radio (beats listening to some right-wing nuts or country music). I just dont believe his is the exclusive way to financial achievement.

For every ramseyite who lives in a paid off house with his matched 401k maxed out, there is someone else with a higher net worth reasonably mortgaged home, some partially financed income real estate and an actively managed stock and bond portfolio. Ramseys way is one way to achieve financial success, it is not the only one. His approach is informed of the experience of having over-extended himself and gone broke early in life.
 
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His is not the exclusive way to financial achievement. But I believe a very, very high percentage of those who follow his advice are financially successful. If you google "Dave Ramsey ruined my life", you don't get a huge list of people who followed his rules and went broke...you get people who followed his rules and don't like living within their means.
 
bflynn said:
His is not the exclusive way to financial achievement. But I believe a very, very high percentage of those who follow his advice are financially successful. If you google "Dave Ramsey ruined my life", you don't get a huge list of people who followed his rules and went broke...you get people who followed his rules and don't like living within their means.
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I don't doubt that.

I also believe that for any successful ramseyite, there are others who either spent money on FPU and didn't get anything out of it or invested with one of his 'endorsed local providers' and got talked into front-loaded actively managed mutual funds or insurance products they didn't need.
 
Matthew said:
Pick up his book at the library for free.
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Yep..

But when you get to steps 3 or 4, you really need to learn how to invest for yourself, it isn't hard and the concepts are much easier than the talking heads filling the 24/7 market reports would have you believe.

But it is long term detrimental to get sucked into the expensive investments, Edward Jones, most anything an insurance company or bank wants to sell you, anyone that claims to know what the market is going to do better than you do, etc..
 
bflynn said:
His is not the exclusive way to financial achievement. But I believe a very, very high percentage of those who follow his advice are financially successful. If you google "Dave Ramsey ruined my life", you don't get a huge list of people who followed his rules and went broke...you get people who followed his rules and don't like living within their means.
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Living in your means does not mean having ZERO debt.

Sometimes the mortgage + property tax is less than rent, and the liquid cash is worth more than the interest on the mortgage debt. That's not a bad decision.

Same with student loan debt. It's really cheap debt.

Where he is correct is that you should strive to eliminate the most expensive debt (Credit cards, unsecured loans, Car payments). Then when you're down to debt that is closer to the investment/saving rate you're able to pay down or let it ride with the least marginal cost.
 
NHWannabe said:
teejayevans said:
I heard him say to pay off the smallest debts first.
You should pay off the highest interest debts first.

His way gives you encouragement, the second way saves you money.
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Agree but if you're turning to Dave Ramsey or any debt relief program/service you probably don't have the discipline to pay the higher interest rate...so someone in that predicament probably winds up saving money overall.
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The third option is to roll your higher interest debts into one low interest loan and knock that down with all the resources you have. But opening another credit account violates the orthodoxy of Ramseyism and is therefore a no-no.

The reason people on consolidation loans usually fail is the same reason that causes serial personal bankruptcies: The inability to live within ones means. Without the financial counseling that Dave is very good at, neither strategy will work.
 
I like his method, as it is something everyone can grasp. I've done his program several times, to be honest..... I paid off all debt, bought 7 houses.... bought some new cars with the cash flow.... sold 6 of the houses.... went into debt by building a custom home..... now I'm back to step 2 :)

As for other talking about would you pay off a $200K house or keep the money and invest....... I will say, I would keep the house and invest in ME... aka.... starting a business, etc.... sometimes you have to follow your dreams and go after it.... But, to give a financial adviser $200K, where you pay him 3% annually to watch your account, and he/she puts it where they want.... Forget about it!!!

That 200k could have bought me 4 150K houses with 50K down each... I could be cash flowing 3-4K ish per month....

with everything comes a pro and a con...


But, his premise of trying to live debt free is very worthy..
 
It's very, very different to be in charge of the debt instead of the other way around.
 
weilke said:
The third option is to roll your higher interest debts into one low interest loan and knock that down with all the resources you have. But opening another credit account violates the orthodoxy of Ramseyism and is therefore a no-no.

The reason people on consolidation loans usually fail is the same reason that causes serial personal bankruptcies: The inability to live within ones means. Without the financial counseling that Dave is very good at, neither strategy will work.
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On the same page...it's the same reason you see these no interest for X offers I think about 20% of people wind getting hit with accrued interest charges. It's like anything else...discipline, discipline, discipline.
 
Good advice in this thread. Lots of different ways to say - spend less than you make.
I got an engineering degree decades ago and the best class I ever took was called Engineering Economics. It was generally about justifying capital equipment, but was basically a time value vs. money class. At the time the auto company's just started all the rebate cash back vs. 0% financing deals. The Prof made us work through tons of examples. Cranking through those formulas many times over really drove home what a terrible deal financing anything was. This was back in the early 80's when credit cards were 20% interest and home mortgages were 15%. I have never paid credit card interest in my life.

I also keep cars about 10 years. They aren't worth much when I get rid of them. I get another low mileage late model used one and start over.
 
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