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Dave Ramsey

  • queencitybuckeye
    pmoney25 wrote: I don't think there is anything wrong with being debt free, investing money, and giving back.
    Neither do I, if that's what you're comfortable with. I will point out the (I assume) unitended fallacy that one would need to be debt free to invest money and to give. Not the case.
  • LJ
    pmoney25 wrote: Just a quick question. How is owing someone else money a good thing? If you can pay cash for something, why not?

    I'm confused how having a credit card and paying that company interest plus what you owe a positive?

    I think some delve to deep into his message which I interpret as its better to keep your money, invest it for retirement, kids college, being able to do what you want and giving back when necessary.
    Credit card debt, no that isn't a good thing. But having a credit card as an emergency line of credit is a VERY good thing. Using a rewards credit card and paying off the monthly balance is also a VERY good thing.

    In terms of a house or any other property, that debt becomes leverage. In other words, You have an asset in your house (the lein aka mortgage is your liability, yes, your house IS an asset, even if it isn't paid off) You had the $250k to buy the house cash. Instead you put 30% down ($75000) and took a Mortgage out at 5% for the other $175,000 (15 years) You put your $175,000 in 3% CD's for 15 years, you come out $22,600 AHEAD and that is before you add in the tax savings from the mortgage interest that you write off.
  • Con_Alma
    Although I agree with most of what you said but you probably don't have a true savings from your tax deduction. Most of the time you still spend more in interest than the amount your taxes are reduce.
  • fan_from_texas
    I would echo most of the comments above. Much of what Ramsey says is good, common-sense advice that applies in most situations. But there are other things where he utterly misses the obvious, e.g., telling people to prepay their mortgage. If you're a higher earner (AMT-ish) with a ~5% mortgage (relatively common for people who bought or refi'd in the past 5 years), why pay down your tax break? It may make more sense to invest the difference and keep the tax break.

    Re credit cards, between "floating" the payments for a month and earning rewards, we typically make $300-500 annually off our cards. His complete abhorrence of credit cards is misplaced. The problem isn't a credit card; the problem is spending more than you make. A card may facilitate that, but it isn't the cause of the problem. Treating the symptoms rather than the root problem isn't a good path toward financial freedom.
  • LJ
    Con_Alma wrote: Although I agree with most of what you said but you probably don't have a true savings from your tax deduction. Most of the time you still spend more in interest than the amount your taxes are reduce.
    You already wiped out the interest with your CD account PLUS you made $22,600. The tax write off would pay off your total interest on that mortgage (~$74000) even faster. In other words, your net gain would be even greater than $22,600.
  • Con_Alma
    "...Treating the symptoms rather than the root problem isn't a good path toward financial freedom. "

    Boy that applies to a lot of things in life!!
  • fan_from_texas
    Con_Alma wrote: Although I agree with most of what you said but you probably don't have a true savings from your tax deduction. Most of the time you still spend more in interest than the amount your taxes are reduce.
    Generally, yes, but that's going to depend. Sticking the money in a CD won't put someone ahead, but moderate investing less taxes can beat the "real" (tax adjusted) interest rate of 4-ish% on many mortgages. Additionally, investing it is almost always going to increase liquidity, rather than simply paying it toward the house, which will, 15 years later, increase cash flow.

    There are circumstances in which it makes some sense to prepay a mortgage. But I don't think that is universally the rule. I don't disagree with his general advice so much as I disagree with his "one-size-fits-all" approach.
  • Con_Alma
    LJ

    That net gain goes down each year...remember I said most of the time.
  • Con_Alma
    "...Additionally, investing it is almost always going to increase liquidity, rather than simply paying it toward the house, which will, 15 years later, increase cash flow...."

    That's the biggest advantage right there. Options are always better than not. Liquidity always provides more options.
  • LJ
    Con_Alma wrote: That net gain goes down each year...remember I said most of the time.
    How does the net gain go down each year when you are compounding on your CD account? The net gain of the tax write off does, but that doesn't matter, as your CD account is wiping out your interest to begin with. In other words, that tax deduction just increases your cash flow for the the year.
  • Con_Alma
    People don't choose to invest $175,000 in a CD or pay cash for their house.

    They choose to accelerate their payments on the mortgage or pay the minimum monthly and save/invest the difference. The amount of tax deduction for most people doesn't even come close to what the average person spends in interest. The amount of post tax returns from investing as opposed to paying ahead on the note doesn't tend to cover the interest cost. What benefit that does exist from tax deducting goes down each year as the interest that can be deducted gets paid.
  • LJ
    Con_Alma wrote: People don't choose to invest $175,000 in a CD or pay cash for their house.

    They choose to accelerate their payments on the mortgage or pay the minimum monthly and save/invest the difference. The amount of tax deduction for most people doesn't even come close to what the average person spends in interest. The amount of post tax returns from investing as opposed to paying ahead on the note doesn't tend to cover the interest cost. What benefit that does exist from tax deducting goes down each year as the interest that can be deducted gets paid.
    Why are you arguing this? I gave an example, you didn't like it, then you bring up a strawman argument.

    I paid 50% down on my house. I had it all. When I am done in 15 years, I will have a net gain of $26,700, and not to mention my increased cash flow of $1800 last year and around $1750 this year. And look at it this way. I'll do the math for you with a more realistic example.

    $200k house
    You have 35% in cash ($70k)
    You put 20% down ($40k)

    If you just put all 70k into the house, your total interest expense would be $55,045 on a 15 year mortgage at 5%

    If you put the $40k down, and invest the other $30k at 3% (current 5 year CD rates) Your total interest paid at the end of the loan is $67,000. Your total CD worth is $46,000. You net $16,000 from the CD, making your net interest paid $51,000, not including tax deductions.

    I am 100% correct on this. I do tax planning on the side.
  • Manhattan Buckeye
    "They wanted an additional level of position security. Sounded like a union issue to me. They didn't want a home economics teacher or a shop teacher covering the classes. "

    Unfortunately, that isn't surprising to me, My Dad has been an NEA guy for 40+ years and although politically he disagrees with a lot of their stances he isn't going to go against his union. I hope you weren't discouraged from your efforts. This sort of thing is increasingly important, and even a "foot in the door" is a proverbial step in the right direction.
  • matdad
    LJ wrote:
    believer wrote:
    LJ wrote:Financial planners don't claim to be good christians helping people who need it the most.
    That makes no sense. Did you intend to say, "Financial planners don't claim to be good Christians screwing people who need it the most."?

    Most of my fellow Christians believe helping people who need it most to be a good thing....financial planner, nurse, garbage collector, or otherwise.
    matdad wrote: By the way, Dave Ramsey is great. If you follow his common sense principles you will get out of debt and build wealth.

    According to some people though, because he is a Christian he shouldn't get paid for the services he provides. Shame on him for earning an honest living by charging nominal fees for his expertise.
    Neither of those quote is anything near what I said. A small fee? His 5 hour entrepreneur class is $1000 per person. $1000 PER PERSON

    That is not the going rate for that type of class, that is robbery.

    And Believer, I have no clue what the hell you were trying to make up that I said.
    5 hour entrepreneur class = $1,000? Never heard of that but the 12 week class including all materials (12 cd's, workbook, and book, plus other material) was $99.
  • LJ
    matdad wrote:
    LJ wrote:
    believer wrote:
    LJ wrote:Financial planners don't claim to be good christians helping people who need it the most.
    That makes no sense. Did you intend to say, "Financial planners don't claim to be good Christians screwing people who need it the most."?

    Most of my fellow Christians believe helping people who need it most to be a good thing....financial planner, nurse, garbage collector, or otherwise.
    matdad wrote: By the way, Dave Ramsey is great. If you follow his common sense principles you will get out of debt and build wealth.

    According to some people though, because he is a Christian he shouldn't get paid for the services he provides. Shame on him for earning an honest living by charging nominal fees for his expertise.
    Neither of those quote is anything near what I said. A small fee? His 5 hour entrepreneur class is $1000 per person. $1000 PER PERSON

    That is not the going rate for that type of class, that is robbery.

    And Believer, I have no clue what the hell you were trying to make up that I said.
    5 hour entrepreneur class = $1,000? Never heard of that but the 12 week class including all materials (12 cd's, workbook, and book, plus other material) was $99.
    Quiken is $30
  • Con_Alma
    LJ...I am not arguing at all nor am I disputing your example. I am further clarifying the statements I made regarding the topic at hand.

    I understand your position. I paid cash for the land we built our house on. I took a 15 year loan and paid it off as scheduled. Our assets were such that I could have easily paid the note in full after around 8 years. We chose not to.


    It's been my experience that most people don't have the other $30K you speak of or 35% of their home value in cash at the time of purchase.
  • LJ
    Con_Alma wrote: LJ...I am not arguing at all nor am I disputing your example. I am further clarifying the statements I made regarding the topic at hand.

    I understand your position. I paid cash for the land we built our house on. I took a 15 year loan and paid it off as scheduled. Our assets were such that I could have easily paid the note in full after around 8 years. We chose not to.


    It's been my experience that most people don't have the other $30K you speak of or 35% of their home value in cash at the time of purchase.
    They used to, back before this whole "PMI" crap started and housing prices were overinflated. But the basic point is, you can do it with 20 and 25% as long as you check your math. If you put as much cash as you can into your mortgage, you are decreasing your liquidity and leverage and not doing anything to offset your interest payments.
  • Con_Alma
    Manhatten...It wasn't really my efforts I was simply supporting the OBTA and their push.

    I still support the idea although I don't know how much I could impact the push. I think it's needed. I don't think it will happen. I have seen some suburban schools offering some personal business skills classes that have some finance and some interviewing and job search focus included in the class. Those districts tend to have business teachers that are members of the OBTA. Who loses out are the poorer school districts that tend to not offer at all any of these sorts of things.
  • queencitybuckeye
    Another item I forgot to mention in my first post is my disagreement with Ramsey's investment advice. Odd that I forgot that, as I have at least as much of an issue with that as with his position on debt. If I had to down a shot of liquor every time he says "growth stock mutual fund", I'd be on the floor well before the end of a broadcast. Now, there's not a thing wrong with growth funds, I have modest positions in a few of them. That said, my experience has been that my value funds have outperformed the growth funds for the last decade-plus. I've never heard what he has against value types of funds, as I've never heard him acknowledge that they even exist.

    The other issue is his absolute disdain for owning individual stocks. While one should not put too many eggs in one particular basket, the idea that stockpicking should be left to the so-called experts is incorrect IMO. In certain market segments, I believe I can choose at least as well as the average fund analyst.
  • LJ
    queencitybuckeye wrote: Another item I forgot to mention in my first post is my disagreement with Ramsey's investment advice. Odd that I forgot that, as I have at least as much of an issue with that as with his position on debt. If I had to down a shot of liquor every time he says "growth stock mutual fund", I'd be on the floor well before the end of a broadcast. Now, there's not a thing wrong with growth funds, I have modest positions in a few of them. That said, my experience has been that my value funds have outperformed the growth funds for the last decade-plus. I've never heard what he has against value types of funds, as I've never heard him acknowledge that they even exist.

    The other issue is his absolute disdain for owning individual stocks. While one should not put too many eggs in one particular basket, the idea that stockpicking should be left to the so-called experts is incorrect IMO. In certain market segments, I believe I can choose at least as well as the average fund analyst.
    It's because people blindly follow everything this man says and he gets paid to endorse certain investment vehicles. He will always mention "growth stock mutual fund" then will tell you to go to his website to see which ones.
  • Con_Alma
    I agree with you QCB. I thought this was interesting..



    Periods ending: December 2, 2009
    Index name 10 Years


    Large-cap indexes

    Russell 1000® Growth Index -3.43
    Russell 1000® Value Index 2.45
  • matdad
    I'm curious, how many people who have blasted Dave Ramsey's financial advice on this thread have a net worth of several million dollars?
  • Con_Alma
    I can answer that question but need to know if I qualify.

    Do you believe I blasted Dave Ramsey's financial advice??
  • LJ
    matdad wrote: I'm curious, how many people who have blasted Dave Ramsey's financial advice on this thread have a net worth of several million dollars?
    Guilty
  • pmoney25
    :) everyone on this site is a political/financial/sports guru. Part of the prerequisite for joining.