Do you follow Dave Ramsay?

[Anonymous]

Curious - members of my family do, and after reading about it, it seems like he eschews debt to the point where he would favor pay down of a fixed rate (low) mortgage above and beyond participation at a higher level in the stock market in 401k accounts.

This seems...stupid. Am I missing something? I have no doubt that DR followers might be getting out of debt faster than me, but I suspect I am building wealth (exponentially) faster than them.

[Anonymous]

I don't think his plan has you pay down mortgage before funding a 401k. It does have you pay off other debt. Cars, credit cars, student loans before you start worrying about retirement. Then, after you are putting 15% of your gross income into retirement funds, you start aggressively paying down your mortgage.

I think it is dumb to leave money on the table if you have an employer match for a 401k, so I am putting in some while I pay off my non mortgage debt.

I don't think any one financial "guru" had all of the answers, so I kind of pick and choose.

[Anonymous]

I don't know that I "follow" DR, but I have listened to him quite a bit. He doesn't always go straight by the numbers. For example when paying off debt he says to pay the smallest one first (so that you can have small wins to keep your momentum going), even though starting with the highest interest rate might be better mathematically.

His stance on debt is that it is inherently risky. So owning your house free and clear is less risky than even a low rate mortgage. So his argument is not about the math but the risk.

[Anonymous]

Paying off mortgage is step 6. After funding retirement.
http://www.daveramsey.com/new/baby-steps/

[Anonymous]

RamsEy

[Anonymous]

Anonymous wrote:Paying off mortgage is step 6. After funding retirement.
http://www.daveramsey.com/new/baby-steps/

Maybe do but the OP is generally right that Dave hates debt. He is not the type to argue, for instance, that you'd be better off getting a larger mortgage at 3% and investing the saved cash in the market. And yet, that's the smart money move (within limits of course). The concept of leverage doesn't sit well with Dave, mostly because I imagine most of his audience would lack the income or discipline

[Anonymous]

Anonymous wrote:

Anonymous wrote:Paying off mortgage is step 6. After funding retirement.
http://www.daveramsey.com/new/baby-steps/

Maybe do but the OP is generally right that Dave hates debt. He is not the type to argue, for instance, that you'd be better off getting a larger mortgage at 3% and investing the saved cash in the market. And yet, that's the smart money move (within limits of course). The concept of leverage doesn't sit well with Dave, mostly because I imagine most of his audience would lack the income or discipline

I don't think it has anything to do with his audience, but the fact that he used be "leveraged" as you say and lost everything. Debt simply adds more risk to he's willing to take on.

[Anonymous]

Anonymous wrote:Paying off mortgage is step 6. After funding retirement.
http://www.daveramsey.com/new/baby-steps/

Op here- I believe its after funding retirement at only 15% - my issue is he doesn't recommend maxing out retirement.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Paying off mortgage is step 6. After funding retirement.
http://www.daveramsey.com/new/baby-steps/

Op here- I believe its after funding retirement at only 15% - my issue is he doesn't recommend maxing out retirement.

I think you are quibbling. 15% of income is the max of many retirement plans. Also having no mortgage frees you of expenses in retirement.

If you have no debt. 15% of your income saved for retirement. College savings for your kids. Its an entirely reasonable plan to pay off your mortgage. Its also a reasonable plan to add more to retirement savings. Basically when you get that far you have several good options. Most people aren't at that point.

[Anonymous]

I think he has a lot of good rules, but I do disagree on the retirement piece. For me, paying off student loans and consumer debt will take years, even if I didn't contribute to retirement. You can't make up for time lost from not being in the market, you just can't. Most mortgages will be paid off by retirement if you dont refinance. So retirement savings are more important to me.

That said, I agree with much he says and discard the rest.

[Anonymous]

Ramsey is great for people looking to get our of debt, but I wouldn't turn to him for investment advice.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Paying off mortgage is step 6. After funding retirement.
http://www.daveramsey.com/new/baby-steps/

Op here- I believe its after funding retirement at only 15% - my issue is he doesn't recommend maxing out retirement.

I think you are quibbling. 15% of income is the max of many retirement plans. Also having no mortgage frees you of expenses in retirement.

If you have no debt. 15% of your income saved for retirement. College savings for your kids. Its an entirely reasonable plan to pay off your mortgage. Its also a reasonable plan to add more to retirement savings. Basically when you get that far you have several good options. Most people aren't at that point.

You are wrong. The IRS max for 2013 is 17,500 for 401ks. Depending on how high your income is, sure that could be 15%, but the max is not 15%.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Paying off mortgage is step 6. After funding retirement.
http://www.daveramsey.com/new/baby-steps/

Op here- I believe its after funding retirement at only 15% - my issue is he doesn't recommend maxing out retirement.

I think you are quibbling. 15% of income is the max of many retirement plans. Also having no mortgage frees you of expenses in retirement.

If you have no debt. 15% of your income saved for retirement. College savings for your kids. Its an entirely reasonable plan to pay off your mortgage. Its also a reasonable plan to add more to retirement savings. Basically when you get that far you have several good options. Most people aren't at that point.

You are wrong. The IRS max for 2013 is 17,500 for 401ks. Depending on how high your income is, sure that could be 15%, but the max is not 15%.

Well, if you want to really get technical, the limit is $50,000 including employer contributions. That's why I like to wrap any rental income into a C corp, I can then get my $17,500 in my personal, plus my company match and then I just whack the balance with whatever is needed from the c-corp as an employer contribution on top.

[Anonymous]

I think for the "average" American, following his advice would make a significant positive impact on their life. 1) save $1000 dollars 2) Pay off all your debt 3) save a 3-6 month emergency fund. 4) fund your retirement with 15% of pay 5) save for kid's college 6) pay off your mortgage. I'd quibble and say to contribute to your 401k up to the company match starting after you have step 1 complete. Raise that amount after you've paid off your debt.

The average savings rate in our country is about 3.5%. Americans carry a huge amount of a variety of forms of debt. A lot of people aren't in a position to build wealth, they're just trying to get by.

I do listen to Dave fairly regularly. He gets a lot of calls on a lot of different topics. I definitely don't follow all of his advice. We liberally use credit cards and pay them off every month. The rewards for us are well worth it because we're responsible with them. I'm not religious, so most of that aspect of his show doesn't necessarily appeal to me.

We have no debt except our mortgage, but we're in no race to pay it since it's at such a low interest rate. We're definitely much heavier into the investing side at this point.

Take what works for you, leave the rest.

[Anonymous]

I doubt it's even 3.5%. Id guess more like 1 to 2%. I do about 20% of my gross (and have a goal of 40%), and I'm not sure that's even enough sometimes.