Psych said:

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TexasAggie73 said:

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One of the companies that he endorsed is a timeshare exit company that one pays upfront to exit their timeshare. Dave got sued for this scam company and he lost.

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Best I can see is that Dave is currently being sued and hasn't lost the case already. Am I missing something?

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That was my understanding also.

Dave Ramsey on the radio has gotten to be quite abrasive. Nice to see some new personalities step in and lighten the tone.

Dave Ramsey in his various classes seems much more measured and empathetic.

Psych said:

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TexasAggie73 said:

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One of the companies that he endorsed is a timeshare exit company that one pays upfront to exit their timeshare. Dave got sued for this scam company and he lost.

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Best I can see is that Dave is currently being sued and hasn't lost the case already. Am I missing something?

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Sorry, I was mistaken. Suit is pending for $150M.

TheBonifaceOption said:

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94chem said:

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So...he lost a lot of money being over-leveraged.

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He got "over-leveraged" by getting loans that only his close personal friends and family would lend. All the other banks wouldn't have loaned him because he wouldn't have gotten through the underwriting process.

Imagine if he had gone to 100 banks and only the bank his "brother-in-law" ran said yes. You would say he got a risky loan due to nepotism and had no business getting loans at those amounts, rates, etc.

Years later when he complains about debt because of his past experience, maybe you shouldn't listen to the moral direction of a guy who got caught gaming the system and then decides its the systems fault for his screw-up.

I can't tell you how many people I know are renting and unwilling to get a mortgage because Dave Ramsay said "debt is evil, I'll own a house when I can pay for it." They aren't taking advantage of home ownership because of a radio personality lashing out at banking because he was a bad-actor getting bad loans.

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It's been years since I have listened to his show, but along those same lines, it always bothered me that he advised callers to lie to credit card companies & other creditors in order to settle debts for cents on the dollar. He would refer to the credit card company or other lender as "scum", and advise the caller to tell the creditor that they only had say $5000 to fully settle a $15k debt. Always struck me as an unethical approach, and portrayed the caller as a victim instead of being financially irresponsible.

one MEEN Ag said:

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Dave Ramsey does not believe in risk adjusted returns. That is really the difference between his approach and one that uses debt. Financial instruments are tools. Just like tools in the real world, there is a required level of responsibility to be trusted with a tool.

The person that needs his advice has a financial IQ/responsibility of the bottom 1/3rd in society. If you can hold onto a credit card and pay it off every month, you have already graduated from Dave Ramsey's program. Sticking with his advice past that level of competency means you're now in the realm of leaving money on the table.

Taking it to the extreme, we have a family friend who for the longest time did not believe in debt and also thought the stock market was too risky to invest in. He did really well for himself income wise but there were some real head scratching investment moments. Like paying for their house (well over a million dollars) in cash. Dude could've held on to that cash, got a mortgage, park it in the S&P500 and after 30 years, paid off a mortgage fully and had nearly 2 million left over as the money grew. Of course our family friend could have been investing an extra 4-5k per month in the stock market since he didn't have a mortgage. But do you think they did that?

Guy basically wiped a huge amount of his opportunity cost in one financial transaction. Finally a financial adviser talked some sense into him, but not before eating up nearly a decade in retirement runway. But that is the style of investing that Dave Ramsey touts.

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What you described is not the style of investing that Dave Ramsey touts.

Steps:




None of this is to say Dave is right or wrong but to be fair about what his steps say.

I don't agree with paying for college for your kids

You can't get that kind of cheap money anywhere else.

I paid for a bit of college for my kids, but they took loans for the majority of it.

My kids will get what I have left when I die and they can use that to pay off their loans if they still have them.

And yes, he's very arrogant.

But in his defense, he's dealing with people who need tough love because they've made stupid decisions.

Serotonin said:

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one MEEN Ag said:

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The person that needs his advice has a financial IQ/responsibility of the bottom 1/3rd in society.

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I think more people are financially incompetent than the 1/3 you cite.

Baby boomers have lived through one of the greatest (and accessible) stock market booms in human history but median net worth for a 65-69 year old American excluding housing is $106k.

Assuming a 7% return that would be an investment of ~$40-45 per month over a 40 year period. That's the threshold here to be above median.

So I agree with your entire post but would amend "bottom 1/3" to "bottom 80%", because most people are not doing much at all other than trying to keep expenses equal to revenue on a monthly basis. Any extra money ends up being spent.

https://wallethacks.com/average-net-worth-by-age-americans/

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He's boomer material for investing today. Definitely stay away from him. You will get wrecked on crashes. I remember him saying that there's no need to fear about the stock market because the whole world would basically stop. He just has some dumb takes. He's good for getting out of debt because he makes it simple and you get a rush out of his system by paying off small loans first.

Serotonin said:

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one MEEN Ag said:

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The person that needs his advice has a financial IQ/responsibility of the bottom 1/3rd in society.

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I think more people are financially incompetent than the 1/3 you cite.

Baby boomers have lived through one of the greatest (and accessible) stock market booms in human history but median net worth for a 65-69 year old American excluding housing is $106k.

Assuming a 7% return that would be an investment of ~$40-45 per month over a 40 year period. That's the threshold here to be above median.

So I agree with your entire post but would amend "bottom 1/3" to "bottom 80%", because most people are not doing much at all other than trying to keep expenses equal to revenue on a monthly basis. Any extra money ends up being spent.

https://wallethacks.com/average-net-worth-by-age-americans/

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That can't be right, can it?

Logos Stick said:

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Serotonin said:

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one MEEN Ag said:

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The person that needs his advice has a financial IQ/responsibility of the bottom 1/3rd in society.

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I think more people are financially incompetent than the 1/3 you cite.

Baby boomers have lived through one of the greatest (and accessible) stock market booms in human history but median net worth for a 65-69 year old American excluding housing is $106k.

Assuming a 7% return that would be an investment of ~$40-45 per month over a 40 year period. That's the threshold here to be above median.

So I agree with your entire post but would amend "bottom 1/3" to "bottom 80%", because most people are not doing much at all other than trying to keep expenses equal to revenue on a monthly basis. Any extra money ends up being spent.

https://wallethacks.com/average-net-worth-by-age-americans/

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That can't be right, can it?

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Fortunately with home equity the median rises to $285k.

But yes, assuming the $106k is invested well and you can pull 4% per year that would just be an extra $350-400 per month on top of social security.

Used to listen to his radio show for the call-ins. People with 300K in credit card and car debt making $30k a year made for some entertainment. His actual advice is pretty common sense, which is severely lacking. Over time he seemed to have moved from a tough love type to just a jerk "know it all" most of the time.

Doesn't help that I live close enough to pass by his HQ on my way to work. I know quite a few current and former employees. Let's just say he can be quite hypocritical when lecturing people on morals and ethics. There's a reason why our church uses other financial advice programs and won't get near Financial Peace.

I used to listen to Dave for entertainment and when he started leaning more and more on the "personalities" he lost me. Terrible.

Having been in the personal finance/investment game, and living in the Bible Belt for some time, one of the common first questions I get asked when meeting with someone new is, "What do you think about Dave Ramsey/Dan Celia?"

It can be a difficult question to answer. If they are asking, they most likely have listened to and agree with what (on some level) Dave/Dan say on their shows. Thus, there is established trust there.

Meanwhile, I'm some guy they just met and have yet to establish a relationship, much less trust. It's a struggle for me to explain that Dave/Dan's methods aren't the "end all, be all" while also avoiding the potential to come off as insulting someone they trust.

one MEEN Ag said:

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He did really well for himself income wise but there were some real head scratching investment moments. Like paying for their house (well over a million dollars) in cash.

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If your friend had well over a million in cash to pay for the house, he's doing something right. He may not be investing things perfect, but having a million cash is pretty solid.

Dave is a man of faith. That's why his sound legal advice tells people to maximize their 401k.

Because real experts call this strategy 401k-and-pray.

CSPAggie05 said:

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Used to listen to his radio show for the call-ins. People with 300K in credit card and car debt making $30k a year made for some entertainment. His actual advice is pretty common sense, which is severely lacking. Over time he seemed to have moved from a tough love type to just a jerk "know it all" most of the time.

Doesn't help that I live close enough to pass by his HQ on my way to work. I know quite a few current and former employees. Let's just say he can be quite hypocritical when lecturing people on morals and ethics.

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Yeah there are a lot of stories circulating about Dave's tantrums in the office and how controlling he is over his employees lives. For instance, interviewing wives to ensure they are a "fit" and having a say in how the family manages their finances. Granted a lot of those stories are from disgruntled folks, but I think there is fire where that smoke is.

Paying off the house vs investing.

Why do people enjoy living in debt?

I would agree with not paying off the house if I could match 1:1 my mortgage payment and investing. But what I see is people saying don't pay off the house, when I can throw an extra $100-200 / month at the principal ca throwing that into the stock market.

I haven't seen the math work out where $200/month out paces a gain of my mortgage payment per month after a paid off house.

If I have a $1500/mo mtg, 15 year, when does throwing $200/mo in the market equal that payment I gain after paying the house off sooner than 15 yrs that I then can put that $1500 into the market?

howitzercannon said:

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Paying off the house vs investing.

Why do people enjoy living in debt?

I would agree with not paying off the house if I could match 1:1 my mortgage payment and investing. But what I see is people saying don't pay off the house, when I can throw an extra $100-200 / month at the principal ca throwing that into the stock market.

I haven't seen the math work out where $200/month out paces a gain of my mortgage payment per month after a paid off house.

If I have a $1500/mo mtg, 15 year, when does throwing $200/mo in the market equal that payment I gain after paying the house off sooner than 15 yrs that I then can put that $1500 into the market?

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Depends on your definition of "investing".

Let's say you, howitzer, had $50k to invest. You could take that $50k and throw it at some stocks or mutual funds. You have 100% equity in that $50k, you need to beat the inflation rate to keep the purchasing-power-parity (PPP) of that $50k. So you need to make 8% just to tread water with that $50k. Then you have capital gains taxes on it. (This is all assuming you make a gain on it, you may lose.)

Now let's try $50k in a second home that you want to rent. Worst case scenario, they require 20% LTV, so the biggest house you can buy is $250k (worst case), if you are creative you could get that LTV rate at 3% and you could get as big a house as you like. But let's stick to worst case:

You own $50k equity in a $250k investment, you're on the title, your assets and net worth has increased $200k. Your biggest concern is finding a tenant. But even if you can't find a tenant, you are throwing your personal income into equity (and interest) on this property. While not ideal, you are still paying for something you own. Further, home prices adjust with inflation. So you don't need to make 8% this year, the property will appreciate regardless.

Oh! And you have a depreciating asset, so you can use 1/27.5 of your properties purchase price as a write off on your taxes. That's $9.1k/year you don't pay to uncle Sam, but damn depending on your mortgage, that $9k is 3-4months of mortgage payments.

To think of it another way, the taxes on your vocational employment you are obligated to pay instead just paid 1/3rd of your annual expense on this asset--by virtue of you choosing this investment over Wall Street.

"But Dave Ramsay said mutual funds are better." Bull.

But you are assuming I have $50k to invest.

That's a bad assumption. People don't have $50k to invest. They have consumer debt in the form of credit cards, car loans, student loans, and other forms.

So an average Joe, like me, who doesn't just magically have. $50k to invest, needs to pay off the house to free up the $1500/mo expense on my mortgage that I now own outright, and gained $1500/mo just by throwing a few extra $100s at principal each month. Because I can't invest $1500/mo in the market because I don't have it. Be

Dave Ramsey allows the average Joe to get there. When there is a car payment, loan payment, house payment and childcare, it takes years to build up that $50k to invest.

So I have yet to see the math equal where not paying off the house sooner rather than later works out.

howitzercannon said:

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But you are assuming I have $50k to invest.

That's a bad assumption. People don't have $50k to invest. They have consumer debt in the form of credit cards, car loans, student loans, and other forms.

So an average Joe, like me, who doesn't just magically have. $50k to invest, needs to pay off the house to free up the $1500/mo expense on my mortgage that I now own outright, and gained $1500/mo just by throwing a few extra $100s at principal each month. Because I can't invest $1500/mo in the market because I don't have it. Be

Dave Ramsey allows the average Joe to get there. When there is a car payment, loan payment, house payment and childcare, it takes years to build up that $50k to invest.

So I have yet to see the math equal where not paying off the house sooner rather than later works out.

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This is where I'm at. I max my 401k, Roth and have a healthy emergency fund.

I do get a bonus that can be significant depending on the performance, and in those cases, I do replenish any emergency funds I might have used + fund the kids college funds and then invest the rest.

But that's once a year at most I have that option.

However, even a 3.5% interest rate on my mortgage, and cd's above 5%, I do still put extra each month towards my mortgage because as you pointed out, financial freedom is not just having wealth, but having little to no debts. I've also seen that, even at this rate, ever dollar returns at least another dollar in interest not owed later.

Is it optimal? probably not, but it is reducing my overall debt and putting me in a position to lower my overall expenses sooner than later.

AggieRain said:

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I followed the Ramsey model long before I ever heard of Dave. It is called common sense and personal responsibility, and it was handed down to me from my parents. I like Dave well enough, but there is no magic to his process. Work your ass off and adjust your life such that net income exceeds net outflow.

I'd add that you should be selective in finding a partner. Find that rock you can set your back against when the world aligns against you. Love them, respect them, and build a life you love.

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Maybe the best advice I have ever read. Especially that second paragraph. The most important earthly decision one will ever make.

TheBonifaceOption said:

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94chem said:

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So...he lost a lot of money being over-leveraged.

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He got "over-leveraged" by getting loans that only his close personal friends and family would lend. All the other banks wouldn't have loaned him because he wouldn't have gotten through the underwriting process.

Imagine if he had gone to 100 banks and only the bank his "brother-in-law" ran said yes. You would say he got a risky loan due to nepotism and had no business getting loans at those amounts, rates, etc.

Years later when he complains about debt because of his past experience, maybe you shouldn't listen to the moral direction of a guy who got caught gaming the system and then decides its the systems fault for his screw-up.

I can't tell you how many people I know are renting and unwilling to get a mortgage because Dave Ramsay said "debt is evil, I'll own a house when I can pay for it." They aren't taking advantage of home ownership because of a radio personality lashing out at banking because he was a bad-actor getting bad loans.

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Ok? So he learned some hard life lessons and is sharing them.

A lot of reputable banks gave a lot of people loans they couldn't afford in the mid-00's. Nepotism aside, it is pretty damn easy to get over-extended through debt from reputable sources in the US and the banks and debtmakers certainly aren't in it for their customers.

To your last paragraph, I mean I'd give it credence, but that's not at all where Dave Ramsey has ever held mortgages… so.. again, don't get the point.

Ramsey is for people who don't know any better really and a lot of people don't know any better when it comes to finance. I know it has gotten en vogue to say he's lame or whatever but I appreciate him for the masses because fundamentally, he's not wrong, his advice is easy to understand and follow and best of all… it is all easily actionable. Can't say the same for most finance personalities.

My mother in law was next level ignorant when it came to money until she came across Dave Ramsey about a decade ago. She's still not brilliant with it, but she now has direction when it comes to her finances and isn't perpetually living in a basket case of being beyond her means and always in a little bit of credit card debt and actually has found a modest direction to a retirement plan. You take that win with anybody who lives in complete ignorance to finance… and that ignorance is the vast majority of people unfortunately.

I worry about the vilification of Ramsey. To me it's a bit of a tell that Americans have become too comfortable with debt during the last decade of honky dory times.