Anonymous wrote:

Anonymous wrote:

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?

Why? For people, even higher earners making $150+ if they are living paycheck to paycheck, you have to start somewhere. Telling someone who can't save money that they have to have an emergency fund that covers six months of expenses without a paycheck can be overly daunting. That's like telling someone that has a fear of heights that they have to start by climbing up a 50 ft cliff and looking out over the edge.

$1K may not be a full emergency fund, but it's a good baby step. It's enough to replace most of the appliances in your house that fail. It's enough for an unexpected car repair. It's enough to handle a small unexpected medical emergency (like needing to rent a wheelchair or buy assistive technology/equipment). After you have that, then you work on increasing the amount in the emergency fund. But for people who don't know how to start, baby steps can help a great deal to just getting over that hump. Later steps will be bigger once people experience and understand what it takes.

Quoted poster. Suppose you’re a doctor with $450k in debt. You make a ton, but it’ll be a few years before you can pay it all off. Is it really worth spending years of your life with just $1k in your emergency fund when you could easily just take an extra few months to get debt free and have a more conventional emergency fund waiting for you if you need it? The $1k in that situation just strikes me as sort of risky and dogmatic

If you make a ton, you should be able to cash-flow an emergency above the $1000 threshold.

The idea isn’t to save a $1000 emergency fund and then continue to live large while you pay a little extra at the debt for the next 15 years. The idea is to take your savings down to $1,000, cut your expenses to the bone and throw everything you have at the debt. So you give up private school, or a $1 mil plus house, and the luxury cars, and the vacations, and the bespoke suits, and any other trappings of the UMC, and you live like the poors for a few years, except with a high income.

If your beater car breaks down, you only pay the minimum on your debt that much, and replace the beater for cash, etc. If you lose your job, you go back to paying minimums, and your expenses are already cut, so you should be able to stay afloat on your spouse’s income/unemployment insurance, etc.

You also insure your income while you are in this stage: buy disability and life insurance.

The first iteration of the babysteps didn’t have any mini-emergency fund. But it’s beneficial for Dave’s core audience (middle class middle America), who don’t have the high salaries to cash flow emergencies. Those with a high HHI probably need the $1,000 emergency fund even less. The true emergency fund they will save in babystep 3 is really self-insurance so they don’t have to make lifestyle cuts in an emergency (kids can still attend private school, they don’t have to sell the expensive house right away, etc).

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.

Anonymous wrote:

Anonymous wrote:If your finances are a huge mess then you could do worse - and likely already have - then following his advice. That said he costs a lot of people a lot of money. To all the people who posted here about all the debt you paid off, take a look at how the stock market has done over that time period. If you have been investing in ETF's instead of paying student loans or mortgages you would be worth a lot more money. Don't get me wrong, I don't think it's objectively wrong to pay off your mortgage or student loans, but Ramsey pretends it is objectively wrong to keep them - that is profoundly misguided.

To be fair, a heck of a lot of people came out way ahead by focusing on paying down their debt and instead of leveraging the debt to invest prior to the 2008 recession.

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

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.

I’m prone to debilitating depression and anxiety, so these health over wealth works for me.

You do you.

Anonymous wrote:If your finances are a huge mess then you could do worse - and likely already have - then following his advice. That said he costs a lot of people a lot of money. To all the people who posted here about all the debt you paid off, take a look at how the stock market has done over that time period. If you have been investing in ETF's instead of paying student loans or mortgages you would be worth a lot more money. Don't get me wrong, I don't think it's objectively wrong to pay off your mortgage or student loans, but Ramsey pretends it is objectively wrong to keep them - that is profoundly misguided.

To be fair, a heck of a lot of people came out way ahead by focusing on paying down their debt and instead of leveraging the debt to invest prior to the 2008 recession.

Anonymous wrote:I’ve listened to hundreds of hours of his show over the years. He is right about everything having to do with behavioral finance and dead wrong about most things havingn to do with investment. (In some cases, he is being paid to be wrong.)

ITA with this poster. But I think that people (like some of the PP's upthread) who fixate on the areas where his advice is not ideal (retirement/investment, basically) are overstating how big of a problem that is. I think DR is by and large a "gateway" finance guy -- whether the people listening are high income or low, they're typically INCREDIBLY bad with money. Paycheck-to-paycheck, in hundreds of thousands of dollars of non-mortgage debt, the works. So for those people, using DR and his focus on strategies that people will actually stick with (quick wins, gazelle intensity, all-in mentality) is such a huge improvement over the path that they were on, that the money they lose at the margins from not investing sooner is a non-issue.

I really wish he didn't tell people to suspend retirement savings, though. That's one place that even some people who are terrible with money were doing something right, and it feels like a step backward.

Anonymous wrote:I’ve listened to hundreds of hours of his show over the years. He is right about everything having to do with behavioral finance and dead wrong about most things havingn to do with investment. (In some cases, he is being paid to be wrong.)

+1.

I can't stand his rants about how you're an idiot if you buy index funds, and that it's simultaneously easy to pick active mutual funds that will outperform the market (net of fees and taxes, of course), and you also need a financial advisor to do it for you.

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.

NP. I'd say that you're ignoring the very real science of behavioral economics.

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.

I’ve listened to hundreds of hours of his show over the years. He is right about everything having to do with behavioral finance and dead wrong about most things havingn to do with investment. (In some cases, he is being paid to be wrong.)

Anonymous wrote:

Anonymous wrote:If your finances are a huge mess then you could do worse - and likely already have - then following his advice. That said he costs a lot of people a lot of money. To all the people who posted here about all the debt you paid off, take a look at how the stock market has done over that time period. If you have been investing in ETF's instead of paying student loans or mortgages you would be worth a lot more money. Don't get me wrong, I don't think it's objectively wrong to pay off your mortgage or student loans, but Ramsey pretends it is objectively wrong to keep them - that is profoundly misguided.

Plus, he leads you to overpriced advisers and has ridiculous ideas about debt snowballs.

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.

I am the same way. I have 37K left on my student loan and my husband and I have been doing side hustles to get that paid off. Would I make more in the market if I invested our side hustle money? Probably. Do I care? Not in the least. I want that loan GONE. Psychologically it is going to do way more for me to be debt free than the market ever could. Unfortunately, no matter how much you explain this, there is one guy who always feels the need to tell me how stupid my decision is. Oh well.

Anonymous wrote:If your finances are a huge mess then you could do worse - and likely already have - then following his advice. That said he costs a lot of people a lot of money. To all the people who posted here about all the debt you paid off, take a look at how the stock market has done over that time period. If you have been investing in ETF's instead of paying student loans or mortgages you would be worth a lot more money. Don't get me wrong, I don't think it's objectively wrong to pay off your mortgage or student loans, but Ramsey pretends it is objectively wrong to keep them - that is profoundly misguided.

Plus, he leads you to overpriced advisers and has ridiculous ideas about debt snowballs.

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.

If your finances are a huge mess then you could do worse - and likely already have - then following his advice. That said he costs a lot of people a lot of money. To all the people who posted here about all the debt you paid off, take a look at how the stock market has done over that time period. If you have been investing in ETF's instead of paying student loans or mortgages you would be worth a lot more money. Don't get me wrong, I don't think it's objectively wrong to pay off your mortgage or student loans, but Ramsey pretends it is objectively wrong to keep them - that is profoundly misguided.

Plus, he leads you to overpriced advisers and has ridiculous ideas about debt snowballs.

We used his method to great success: built up substantial savings to weather long-term unemployment, totally debt-free after reemployment, now on a path to pay off the house 20 years early.

I could skip all the Jesus, but the financial principles work.

Anonymous wrote:

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?

Why? For people, even higher earners making $150+ if they are living paycheck to paycheck, you have to start somewhere. Telling someone who can't save money that they have to have an emergency fund that covers six months of expenses without a paycheck can be overly daunting. That's like telling someone that has a fear of heights that they have to start by climbing up a 50 ft cliff and looking out over the edge.

$1K may not be a full emergency fund, but it's a good baby step. It's enough to replace most of the appliances in your house that fail. It's enough for an unexpected car repair. It's enough to handle a small unexpected medical emergency (like needing to rent a wheelchair or buy assistive technology/equipment). After you have that, then you work on increasing the amount in the emergency fund. But for people who don't know how to start, baby steps can help a great deal to just getting over that hump. Later steps will be bigger once people experience and understand what it takes.

Quoted poster. Suppose you’re a doctor with $450k in debt. You make a ton, but it’ll be a few years before you can pay it all off. Is it really worth spending years of your life with just $1k in your emergency fund when you could easily just take an extra few months to get debt free and have a more conventional emergency fund waiting for you if you need it? The $1k in that situation just strikes me as sort of risky and dogmatic