has anyone used this guys's advice to get their finances in order? I've been listening to his show lately and it only seems like train wrecks are the ones who do his stuff. Is there any sound wisdom/advice that someone who already has their financial stuff in order (for the most part)can gain from this guy?

No. His system works for people that have no financial self control, and a lot of the advice is impractical. This is coming from someone that has no CC debt, and my two car loans have an interest rate that is less than the rate of return on my cash.

He has some good advice in theory, but unfortunately he is dead wrong on several of his sticking points. He would be most useful for a person earning small hourly wages with next to no assets who is dealing with large debt and possesses no financial self control.

He's good for getting out of debt. Not that great for building wealth.

Hey jh0400, you fail!
Tell me what you paid for your 2 cars, what they are worth now and what you think they will be worth when you sell them.
Now take what you paid for the 2 cars invested at a rate LESS than the rate of interest on your loans for the period of time that you will own the cars and tell me which would have been a wiser course.

quote:

---

Hey jh0400, you fail!
Tell me what you paid for your 2 cars, what they are worth now and what you think they will be worth when you sell them.

---

I will pay less than $2,000 interest on both vehicles if we don't pay them off early. At a 6.6% ROR (which is close to what I am getting on my KMP dividends), I break even sometime in year two. The car payments combined are less than $600 / month, and don't affect our ability to save 15%-20% of our MGI.

Cars aren't investments. They are expenses that allow us to get to and from work. My wife's car is financed at 0.9%. We put 30% down, and financed for 4 years.

I bought my truck when it was two years old with less than 9,000 miles. I let someone else take the $10,000 depreciation hit. I traded in a clear title trade that needed a significant amount of work to repair. On top of that, we put down enough cash to get our LTV to ~60% and financed the rest at <4%.

I'll own them both outright in less than two years. The only thing worse than financing depreciating assets is dumping a lot of cash into one.


[This message has been edited by jh0400 (edited 7/23/2010 6:22a).]

I think he gives good advise for 95% of Americans who don't have a clue. There are people who can calculate risk and come out on top enough that it is financially good....but it is very small number.


[This message has been edited by BBDP (edited 7/23/2010 8:06a).]

quote:

---

Hey jh0400, you fail!
Tell me what you paid for your 2 cars, what they are worth now and what you think they will be worth when you sell them.
Now take what you paid for the 2 cars invested at a rate LESS than the rate of interest on your loans for the period of time that you will own the cars and tell me which would have been a wiser course.

---

speaking of fail, I'm trying to figure out how investments (stocks, bonds, etc.) would be considered a mode of transportation.

I've never heard anyone say "yeah, I drove to work in my mutual fund"

or even "I'm looking for a bond that can seat 5 comfortably"

quote:

---

He has some good advice in theory, but unfortunately he is dead wrong on several of his sticking points. He would be most useful for a person earning small hourly wages with next to no assets who is dealing with large debt and possesses no financial self control.

---

quote:

---

He's good for getting out of debt. Not that great for building wealth

---

This.

Most of the principles he pushes make good practical sense. His principles on dealing with short term/consumer debt are sound and should be followed by 95% of Americans. As far as other financial advice goes he's out of touch for the most part.

Even he has admitted that most of what he preaches does not apply to everyone. It applies to those that lack self control, don't make a ton of money, and have loads of bad debt.

quote:

---

speaking of fail, I'm trying to figure out how investments (stocks, bonds, etc.) would be considered a mode of transportation.

I've never heard anyone say "yeah, I drove to work in my mutual fund"

or even "I'm looking for a bond that can seat 5 comfortably"

---

I never said a car was an investment. I also fail to see how your method of payment affects the depreciation.

I choose to run our household on credit when appropriate. Dave Ramsey's all cash philosophy may be great for you, but my way works better for me.

I'll absorb an $80 / month finance charge for a couple of years since the cash is better used elsewhere.

I am glad to see this topic. I listen to Dave from time to time, and I actually started reading one of his books. I really like the guy, but I came to basically the same conclusion. This book/philosophy is not for me and my wife, but would be helpful for people who are not good with finances/budgeting, lack self-control, and do not have a fairly decent income. Some of the advice is good, but one thing he keeps touting is a rate of return of 12% on mutual fund investments for retirement. I find that to be at least 4% or 5% too high, especially when planning for retirement, where I think you need to take a worse case scenario. 12% seems too optimistic, especially with what we've seen the past decade.

__________________________________________________

What do tigers dream of when they take a little tiger snooze.....

jh004

wtf are you talking about? my comment was sarcastically directed to goags since he alluded to an investment being worth more than a depreciating car over the same time frame (derrrrrr). but, you can't drive an investment

reading comprehension fail on your part.

My apologies. It has been a long morning.

LOLZZZZZ

My apologies. It has been a long morning.

Wow. 14 minute delay on the dp.

quote:

---

Wow. 14 minute delay on the dp.

---

obviously, REALLY that kind of morning

I think Dave presents some very sound broad financial advice that everyone can benefit from. Like those above have said, if you make a decent living, exhibit self-restraint, and have some financial acumen, his "plan" may not be exactly on point for you. However, the vast majority of our population could benefit greatly by following his advice.

Nevertheless, the basic premises of his plan hold true for everyone:

-Show self-restraint
-Don't live beyond you means
-Have a financial plan
-Save money
-Pay off debt
-Make smart investments

Those sound like common sense, but very few people follow them.

We all know that debt can be a valuable tool in growing wealth and used correctly provides valuable leverage. Most people don't understand that. Financing a $40,000 vehicle at 6.5% for 72 months is never a good idea.

quote:

---

I am glad to see this topic.

---

Yeah - me too - this topic needed to be addressed.

Dave is decent. He's good for the average "middle American" who has a decent income but can't control their spending. He gives very basic advice: spend less than you make, save the difference, keep money for emergencies, and don't get into debt. His advice is common sense but most people lack that nowadays.

On the other hand, he takes everything to extremes. For example he says NEVER open a credit card because you will end up in debt. Most people I know are smart enough to use a credit card to get reward points and pay it off in full every month. He also makes annoying claims such as "you WILL earn 12% a year on mutual funds" and he always says real estate is a great investment. Wonder how those two worked out for him last decade.

The thing I really hate is he used to be mostly about personal finance but now he spends a lot of time talking his tea bag politics. Keep it to yourself dude, nobody wants to hear that ****. Overall he's a solid starting point in personal finance but take what he says with a grain of salt. You won't get poor on his advice that's for sure

For you 5% that have everything figured out, can you tell me which of these Dave Ramsey tenets you disagree with, or are too smart to use, etc.?
1. Have a small emergency fund of $1000 or $500 if you make less than 25k (not to be used to pay for the pizza).
2. Start paying off the debts. Put the budget on paper if you don't seem to know where the income goes.
3. Build up a 3-6 month emergency fund. Put it in a money market account where it is liquid but still earning.
4. Put at least 15% of your income in retirement.
5. Save for children's college. Coverdell ESA or 529 plan. No children, move to step 6.
6. Pay off mortgage. Now is a great time to refinance into a 15 year if your term is any longer.
7. Build wealth, give it away, have fun!

GoAgs,

For what its worth, I completely agree with his "baby steps". That's by the far the best part of his program. If more people listened to that, we wouldn't be in half the mess we're in now.

What I disagree with is:

1) Dave's investment strategy. He has a hardon for growth stock funds and real estate. He also promises a VERY unrealistic 12% a year return. I wish he would recommend a better strategy including value stocks, index funds, fixed income, etc. Most people arent cutout to be landlords anyways, so why keeping pumping real estate? He needs to drop the 12% a year too, he's setting listeners expecations too high.

2) His TOTAL aversion to debt. I have to be careful here, because I feel his advice is mostly on target. But credit cards and student loans arent the devils brew. In fact, they can be quite helpful if used wisely. Dave would prefer that callers work a minimum wage job for years on end vs. ever take on debt to get a good college degree with high earnings potential.

Its mostly small stuff I have against Daves program, because 95% of his advice is very good. After baby step 4 though, time to start looking elsewhere.

I don't mind Dave Ramsey per se, but I can't stand the fanatical drones that literally brag about it and then proceed to 'judge' others.

I find that most people don't really follow his steps much anyways, they just buy his books

quote:

---

For you 5% that have everything figured out, can you tell me which of these Dave Ramsey tenets you disagree with, or are too smart to use, etc.?
1. Have a small emergency fund of $1000 or $500 if you make less than 25k (not to be used to pay for the pizza).
2. Start paying off the debts. Put the budget on paper if you don't seem to know where the income goes.
3. Build up a 3-6 month emergency fund. Put it in a money market account where it is liquid but still earning.
4. Put at least 15% of your income in retirement.
5. Save for children's college. Coverdell ESA or 529 plan. No children, move to step 6.
6. Pay off mortgage. Now is a great time to refinance into a 15 year if your term is any longer.
7. Build wealth, give it away, have fun!

---

My problem with Dave Ramsey is his no debt, no credit card approach. I have already explained my debt situation. Also, without student loans my wife and I wouldn't have been in the position that we are in now since neither one of us won the birth lottery. Also, I just ordered a new grill from Cabela's courtesy of the nice people at Visa for doing nothing more than put all of my monthly purchases on one card, and pay it off in full every month.

Maybe I am in the 5%. I really wish that we had had the foresight of Dave Ramsey, Suze Orman, et al to make a fortune selling common sense to those that are lacking.

Because most of the debt Ramsey is talking about are idiots who took way too much non-productive, consumer debt in the first place.

Then those same people proceed to turn around and claim we don't wtf we are talking because they managed to save an extra, paultry 500 bucks a year or some crap.

quote:

---

What I disagree with is:

1) Dave's investment strategy. He has a hardon for growth stock funds and real estate. He also promises a VERY unrealistic 12% a year return. I wish he would recommend a better strategy including value stocks, index funds, fixed income, etc. Most people arent cutout to be landlords anyways, so why keeping pumping real estate? He needs to drop the 12% a year too, he's setting listeners expecations too high.

2) His TOTAL aversion to debt. I have to be careful here, because I feel his advice is mostly on target. But credit cards and student loans arent the devils brew. In fact, they can be quite helpful if used wisely. Dave would prefer that callers work a minimum wage job for years on end vs. ever take on debt to get a good college degree with high earnings potential.

---

I don't necessarily agree with your first point. It has been a while since I listened to him, but I don't remember him ever advocating that you should buy real estate as an investment. I think b/c of his background he gets a lot of real estate wannabes calling to ask advice, but he always seemed cleared that you shouldn't buy a investment property unless you can buy it out right and are in a position to actually oversee the home.

The big thing I remember him saying about college is that it doesn't make sense to go to a private school like TCU if you could go to A&M for cheaper. I have a feeling if you were saving for college, going after every scholarship opportunity possible, and still didn't need a loan of some sort..that he wouldn't be look down on you. But its the people who just expect to have a student loan "b/c that's the way it is" that he really tries to persuade to take another path.

Just would echo most here- Dave's got great advice for the majority of Americans, who tend to be financially lost.

The annoyance factor only kicks-in when some brain-washed people attempt to lecture all people how they need to conduct themselves financially.

The best analogy I've heard is Dave's financial advice is like a 12 step plan for alcoholics. Non-alcoholics don't need to do the 12 step plan and can actually enjoy "a couple adult beverages" (credit cards, take advantage of loan interest loan offer, etc) without issue. Alcoholics can't.





[This message has been edited by Aston04 (edited 7/25/2010 11:44p).]

quote:

---

Non-alcoholics don't need to do the 12 step plan and can actually enjoy "a couple adult beverages" (credit cards, take advantage of loan interest loan offer, etc) without issue. Alcoholics can't.

---

I think he just sticks with it to be consistent...I can see a lot of alcoholics saying, "I don't have a problem...I don't have to drink."

That and most of the people that call in with 50k in CC debt are idiots, and don't need a CC. I use the same discretion you use, and keep my CC paid off each month.



[This message has been edited by henry07 (edited 7/26/2010 7:49a).]

I will start my post by saying that i use a credit card for every purchase and pay it off twice a month.

that being said, research shows you spend more money when you use a credit card instead of cash, and that is other reason Dave says dont use a credit card.

i've known a few good honest people - werent bad off, not in major debt, not completely fiscally irresponsible - who have gone through his course and have sung its praises. its not that they were desparate before they took the class, but what they learned is that they dont have to spend irresponsibly. and the course teaches them how to do that. and because of that they have been able to save more money and/or give more money to charitable causes.

interesting discussion... I disagree with the comment that most people can handle credit or any debt frankly smartly; if that is true, why is credit debt at an all time high, why are foreclosures at an all timer high, etc.

a HUGE majority of the people in this country spend well beyond their needs and use their credit card to extend themselves

we have become a country of greed, keeping up with/beating the Jones AND the Smiths AND the Johnson's...we are an instant gratification society and our WANTS have now become our NEEDS

I have a cc that we use to put EVERYTHING on and pay off in full every month. However, Dave has said before that even that is dangerous because you are more likely to spend money on a cc than if you stick with a cash budget. Which is absolutely true.

My wife and I are taking FPU this fall as a part of Momentum program at our church. (designed to get the whole church debt free) We decided to start budgeting as a part of that process. I put a good chunk into my 401k, tithe and save even more outside of that. HOWEVER, we do blow money on stuff. Eating out, books, cd's, etc. I calculated over $700/month in completely non-essential purchases. My goal is to save as much of that (plus what we're already saving) and eliminate the car loan and then save cash to buy a pool, take a fancy vacation, new car, etc.

I will never not use a CC and I have no problem borrowing money. (especially since I lend it for a living!) However, the basics (up to step 4) make sense and couldn't hurt anyone to do.

quote:

---

The annoyance factor only kicks-in when some brain-washed people attempt to lecture all people how they need to conduct themselves financially.

The best analogy I've heard is Dave's financial advice is like a 12 step plan for alcoholics. Non-alcoholics don't need to do the 12 step plan and can actually enjoy "a couple adult beverages" (credit cards, take advantage of loan interest loan offer, etc) without issue. Alcoholics can't.

---

This sums it up for me on Dave Ramsey

His hard line approach is definitely what some folks need which is fine. For others who understand finances, investing, budgeting, and living within their means it can be over the top IMO.

quote:

---

I have a cc that we use to put EVERYTHING on and pay off in full every month. However, Dave has said before that even that is dangerous because you are more likely to spend money on a cc than if you stick with a cash budget. Which is absolutely true.

---

Another issue w/CC (and we use them) is that they are 30-60 days behind, even when you pay them off in full. If you lose your job, you will have 30-60 days of expenses you have not paid for. If are only on cash, you are on real time finances.
This only matters when your income stream stops, but that is a critical point.

quote:

---

Another issue w/CC (and we use them) is that they are 30-60 days behind, even when you pay them off in full. If you lose your job, you will have 30-60 days of expenses you have not paid for. If are only on cash, you are on real time finances.

---

I disagree with this. I pay off every month. If I lose my job today, I can pay my card off tomorrow. If you are living paycheck to paycheck, then using a CC for everything is probably not for you.

The true winner of Dave Ramsey is ... Dave Ramsey.

Common sense people.