Dave ramsey

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Lawyer with law student loans.

I have a much higher net worth than I would with DR despite my loans because I:

1) ignored DR and took out $$$$ loans for a T10 law school which landed me biglaw despite median grades

2) ignored DR and bought a house despite still having tons of student debt

3) ignored DR and maxed out retirement saving $$$$$ on taxes given my double biglaw marriage

Honestly the market would have to get destroyed for me to not be better off having taken advantage of the tax savings given my tax rate.

Just curious. What would happen to you now if you lost your job and didn't get one for 6 months? Do you have the savings to pay for your mortgage and student loans during that time? How about your childcare?

How would someone following DR, with a paid-off house but little savings or investments, fare in these circumstances?

DR followers have emergency savings for this purpose.

What do you do in a recession when you lose your job AND the market is down. Do you really want to sell stock at a loss to pay your mortgage?

You know it's possible to have an emergency fund and invest, instead of have an emergency fund and then pay off your mortgage. In fact that's precisely the advice for having an emergency fund: so you don't have to realize losses.

Then why the heck did you ask "How would someone following DR, with a paid-off house but little savings or investments, fare in these circumstances?" Don't strawman me and I won't strawman you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My physical and mental health improved when my debt was eliminated. Some people--like me--are physically and emotionally burdened by debt and the worry that comes along with in ways you cannot imagine. Paying off my debt as a top priority was the right path for me.

These are emotional decisions, not financial decisions. If it makes you feel better, go for it, but don't pretend that you are following an effective strategy for maximizing wealth.

As an economist myself, behavioral economis is a real thing and drives a lot of financial decisions within the economy and world of business and finance.

I’m sure that’s right, but I’m not so sure recognizing that fact necessarily points to a Dave Ramsey-style solution. I could easily imagine lots of people, upon paying off their mortgages, turn around and start spending (e.g., move from their paid-off okay house to a new, lightly-mortgaged but awesome house) without investing aggressively enough to really catch up.

Put differently, I bet it’s hard to feel behind on investing when you’ve spent the past 24 months telling yourself being debt free is everything

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:
Someone doing Dave Ramsey would have a six-month emergency fund prior to attempting to pay off the house.

Dave Ramsey is a program for people who are not good at managing their personal finances. Little, if anything, about it is optimal from a numbers perspective.

But, it is a program that spendthrifts seem to be able to keep up with, and seems to have helped a lot of them go from having lots of consumer debt to being debt-free.

Personally, I have never done Dave Ramsey. I don't need to. I have chosen to pay off my mortgage because I really enjoy the freedom it gives me. I have never liked being in debt, and I appreciate being off the treadmill of having to have income to pay off a huge, looming bill every month, and know I'll have to work for the next 25+ years.

Are you fairly young? Life's circumstances can also do a number on a family's finances--especially, major illnesses or other setbacks that result in huge debts and sometimes the inability to continue working because one parent or other family member has to be a caregiver.

I'm confused.

I'm the quoted post, but I don't actually disagree with anything you posted, or really see how it brings into question anything that I posted.

I was disagreeing with your comment that it's "a program for people who are not good at managing their personal finances." You can be a great money manager, but get socked in the face with medical debts.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:
Someone doing Dave Ramsey would have a six-month emergency fund prior to attempting to pay off the house.

Dave Ramsey is a program for people who are not good at managing their personal finances. Little, if anything, about it is optimal from a numbers perspective.

But, it is a program that spendthrifts seem to be able to keep up with, and seems to have helped a lot of them go from having lots of consumer debt to being debt-free.

Personally, I have never done Dave Ramsey. I don't need to. I have chosen to pay off my mortgage because I really enjoy the freedom it gives me. I have never liked being in debt, and I appreciate being off the treadmill of having to have income to pay off a huge, looming bill every month, and know I'll have to work for the next 25+ years.

Are you fairly young? Life's circumstances can also do a number on a family's finances--especially, major illnesses or other setbacks that result in huge debts and sometimes the inability to continue working because one parent or other family member has to be a caregiver.

I'm confused.

I'm the quoted post, but I don't actually disagree with anything you posted, or really see how it brings into question anything that I posted.

I was disagreeing with your comment that it's "a program for people who are not good at managing their personal finances." You can be a great money manager, but get socked in the face with medical debts.

NP. If you go into debt because of medical issues and you are good with money, you would negotiate a payment plan with the hospital and slowly work to pay it off. People become so fearful when they have a medical bill in front of them but you have to advocate for yourself.

[Anonymous]

Anonymous wrote:
I was disagreeing with your comment that it's "a program for people who are not good at managing their personal finances." You can be a great money manager, but get socked in the face with medical debts.

If you are good with money, but find yourself in debt due to crazy medical bills, you can likely repay your debt more efficiently than Dave Ramsey advocates.

He's an advocate of the "debt snowball" method, which is economically sub-optimal but has a lot of positive psychological reinforcement to help you stay on track. If you're good with money, you likely don't need this extra reinforcement.

What I think a lot of people on this thread are missing about Dave Ramsey and his zero-debt position are that I think he thinks of it like alcohol. Some people benefit greatly from being debt-free because they are really bad at managing debt. When it's available and they start using it, they can't stop spending. If they limit themselves to cash, they have a natural stopping point to keep from overextending themselves. Sort of like how most folks can have a drink or two every now and then and be just fine, but a subset of the population just can't control themselves when it comes to alcohol and do best when they stay away from it completely.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:
That's a myth. If you left your accounts alone and kept investing right on through the recession, you did just fine.

Sure. but you'd have done even better to have spent the time leading up to the recession paying off your debts instead of investing that money. Then, when you paid your debt off a couple of years later, you could have bought in while the market was low and been further ahead.

That sounds like market timing because it is. That's the whole point. We don't know the future, and you can't time the market. The fact that someone missed out on the last year of growth because he or she was instead paying down debt seems like a really good point right now, but it was over a small window and things could just as easily gone the other direction.

That's why you keep buying all along, instead of waiting until you pay off your mortgage ridiculously early. So you're buying over that 30 year period of your mortgage.

Meh. I've been mortgage free since I was 35 in 2008. It has served me well. I've been able to take big risks in my career that have paid off well and often invest 10s ot thousands of dollars a month

Your mortgage wasn't 10s of thousands a month, and some of us are worried of the risk of having money tied up in home equity (without a corresponding return). Others prefer diversified market risk to career risk. But the point is: waiting to invest until you are debt free is still market timing (you just timed it your debt, and in your case to starting buying in 2008).

If you've got 10's of thousands to invest a month, i'm sure it feels like something 'served you well.' Have you run the numbers on alternatives?

No because you cannot run numbers on risk taking. I've taken risks in my career that have paid off well because I was able to put my family out on a limb. Done things I never would have done had I had debt.

I can invest 6 figures a year because my income affords me that.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:
The above scenario is false. Money invested in a total market index fund immediately before the crash would have returned an average of 8% annually. That's 10 years out from the worst market hit in a century and unless you have an insane interest rate you would still have been better off putting that money in the market. Things could not have "just as easily gone the other direction" - it's not inconceivable but past performance has shown it incredibly unlikely.

You're looking at a ten year window (though you should be looking at 12), in hindsight.

If you'd taken two years off to pay down your debt prior to the crash, you'd be in an even better position right now. You'd have avoided the investment hit, been out of debt, AND been able to enjoy the recovery. Your investment portfolio would not be quite as large, but that would be more than offset by the debt payoff.

For what it's worth, I would not count on ~8% annually. "Historical Returns" seem to mostly be based on the last 100-120 years or so, which have honestly done the U.S. a lot of favors. We've had a couple of industrial revolutions, economic growth from coal, oil, and other non-renewable resources, the rest of the world blown each other up TWICE in two world wars while leaving us relatively unscathed, we've been the leaders in the tech sector for the last few decades, and we enjoyed high population growth for most of that time.

That is not the normal course for human history.

Think about it this way: If your great-great-great-great grandfather had invested $1 in 1776, at 8% annual returns that would be about 125 million dollars today. Does that seem reasonable to you? By inflation, that should be around $30.

I don't understand your point. Money invested in the market 12 years ago would have yielded a 9% annual return. So you do not want it going to your debt. You want it in the market. Studies going back to the 1600s show 5% real returns as the norm. I certainly conceded that it's not guaranteed, but all of history is on your side.

If your debt costs you more than what the market returns, then you need to get rid of the debt. Meaning, if the interest you are paying is more than the historical average of 8-9% market returns, then you need to pay off your debt. I don't understand why you are arguing against this. And during the downtown, the market was definitely NOT returning 8-9%. My portfoli remained stagnant for years and some even lost money. It definitely made sense to pay down debt in that scenario, and people who had paid off debt prior to the recession were in much stronger financial positions to weather that recession than the people with loads of debt who had tried (and failed) to time the markets (especially the real estate market!).

I used Dave Ramsey's approach after I left grad school. I paid off $20k of credit card debt in 1.5 years, and now 13 years later have never gotten back into that kind of trouble. I don't like debt, and feel freedom not being bound to it. It was life changing.

[Anonymous]

"If your debt costs you more than what the market returns, then you need to get rid of the debt. "

This statement is not always true. I have a low interest rate mortgage but choose to pay off my home instead of investing. The reason for this is that I have no family money to depend on and my spouse and I have unpredictable jobs. We also live in an area with a poor economy. For us, getting down our monthly expenses is very important, even if we could be making more in the market. IF we lost our jobs and could no longer afford our mortgage it would be a serious setback.

[Anonymous]

I know nothing of DR’s program, but agree that it’s wise to pay down debt unless you can gain more $$ in other ways. This is obvious. My middle schooler could run some calculations.

Perhaps his plan is too risk adverse as he doesn’t consider/share some of the more obscure paths towards long & short term wealth given optimizing your cash flow.

Sounds like his target market are those who can’t balance a checkbook, overspend and don’t pay themselves first. Sounds like he’s driving towards the obvious. Debt free, you need cash to make money. Delayed gratification at any economic level.

[Anonymous]

Anonymous wrote:I know nothing of DR’s program, but agree that it’s wise to pay down debt unless you can gain more $$ in other ways. This is obvious. My middle schooler could run some calculations.

Perhaps his plan is too risk adverse as he doesn’t consider/share some of the more obscure paths towards long & short term wealth given optimizing your cash flow.

Sounds like his target market are those who can’t balance a checkbook, overspend and don’t pay themselves first. Sounds like he’s driving towards the obvious. Debt free, you need cash to make money. Delayed gratification at any economic level.

Someone should tell Kavanaugh about Dave Ramsey.

[Anonymous]

I slept with his daughter before she married

[Anonymous]

Anonymous wrote:I slept with his daughter before she married

No way. I thought they were pretty religious.

[Anonymous]

Anonymous wrote:Can we agree $1000 as a step-one emergency fund is nuts for people in this area? Particularly if the only debt is student loans?

There was just a study that said (I believe) that 1/3 of Americans could not pay for an unexpected one time $400 expense. I believe that a lot more people in the DC area fall into tbis category than you would think.

[Anonymous]

Anonymous wrote:I slept with his daughter before she married

Which one?

[Anonymous]

Anonymous wrote:We did the program 2 years ago. Afterwards we paid off our car a year early, paid off all debt ($20,000 + on credit cards, etc), bought a newer used car cash (14,000) plus have saved $20,000 to pay cash for home improvements. Before we lived paycheck to paycheck often having to use overdraft on our bank account.

Don’t know if anyone told you but great job!!