Unpopular Opinion: I don't like Dave Ramsey

[texag10]

A house is an asset..... for your kids when you die. Even if you down size, you have paid for you home at least 1.5 times due to financing. Yes there is an opportunity cost if you prepay or don't have a 2.5% mortgage and can get 8% in the market, but that assumes that the person will not run the risk of losing their job and not keep up with the payments. A home is a cost of living. You will not make money with it, only your children will. This is one of the largest issues most couples fail to realize, and end up with much too much home because they look at it as an investment. One of the biggest scams going on in this country if you ask me.

We have owned one home our entire 31 years of marriage. It was quite small compared to what we could "afford" or what everyone in my circles own. Single smartest decision of our lives not to upsize. The ability to eliminate personal debt completely cannot be overstated for this discussion. Only when you eliminate all personal debt can you really begin to attain financial freedom. Now, if you make $750,000 per year, the discussion is different. But the average family that is pulling in maybe $80,000 between the two of them..... get rid of debt and do not be lulled into thinking your dream home is the secret to financial security because it will be worth so much in the future.

Assets that generate income should be considered for leveraging. Leveraging an income producing asset increases your return on that asset because your initial input is lower. That is why a 7% cap rate on an investment property can result in double digit returns. You can't do that with a house.

I should add that I am not advocating not to have a mortgage. You need to finance such a large purchase. It also provides opportunity to use your cash for other things, like living. But get rid of it as soon as you can, and for the love of god, do not re-leverage it to buy a car, pay for college, etc. You do that and you are done.

It sounds like you have something different in mind than what I was discussing/am doing. To be clear, I am NOT advocating someone go out and buy the most expensive home their lender will approve them for and claim it's a good financial decision. I have always purchased well within my means. I wouldn't tell someone to buy a home and expect to sell it for a large gain in a short timeframe without doing some major renovations.

I'm also not saying to go get a HELOC or other equity loans to buy things.

I am saying if you look at interest rates vs investment returns and match your risk to your timeframe, you will generally stand to gain more liquid net worth the longer your timeframe is by not paying your mortgage down early. I don't give a crap that I'm paying more than the actual purchase price on my house, because I will have more money available to me, and ultimately be able to retire earlier, by doing so. The bank can win and I can win, it's not a zero sum game.

 

[wind gypsy]

For One final note concerning super low interest rates on auto loans; you all do realize that to get such a low rate you end up paying a higher price for the car?

I just got a new Subaru Outback for a commuter this summer. $28k, zero down, zero interest. I doubt paying cash would make it enough cheaper to make it worth tying up $28k that could otherwise be invested, available for investment opportunity, or pad the top of my rainy day fund.

That said, I wouldn’t have bought it if my pickup still qualified for my employers program in which they “rent” our vehicles from us and basically pay hundreds more a month than my monthly payment.

 

[ChromeKype]

I just got a new Subaru Outback for a commuter this summer. $28k, zero down, zero interest. I doubt paying cash would make it enough cheaper to make it worth tying up $28k that could otherwise be invested, available for investment opportunity, or pad the top of my rainy day fund.

That said, I wouldn’t have bought it if my pickup still qualified for my employers program in which they “rent” our vehicles from us and basically pay hundreds more a month than my monthly payment.

Yea I’ve thought about this as well as my employer pays me close to $500 a month for my car and pays all gas and insurance. Why not get a good commuter car? I’ve looked really hard at the Outbacks as well. It’s not so much the interest rate, it’s the fact that with those types of deals most people will spend far more than they should.

After taxes and fees probably looking at 30K, monthly payment close to $500 for 5 years. That is a whole lotta cash tied up in transportation. If you drove a 15K car that whole time that was paid for in cash that $500 a month starts piling up in investments.

Not saying your wrong as I think you got a great deal and I definitely see your logic.

I just think the whole car thing with zero interest makes people think it’s a zero sum game when it’s not. Cars lose so much value! You’re still losing money daily!


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[wind gypsy]

Yea I’ve thought about this as well as my employer pays me close to $500 a month for my car and pays all gas and insurance. Why not get a good commuter car? I’ve looked really hard at the Outbacks as well. It’s not so much the interest rate, it’s the fact that with those types of deals most people will spend far more than they should.

After taxes and fees probably looking at 30K, monthly payment close to $500 for 5 years. That is a whole lotta cash tied up in transportation. If you drove a 15K car that whole time that was paid for in cash that $500 a month starts piling up in investments.

Not saying your wrong as I think you got a great deal and I definitely see your logic.

I just think the whole car thing with zero interest makes people think it’s a zero sum game when it’s not. Cars lose so much value! You’re still losing money daily!


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5 year loan with zero down, zero interest on $28.4k car is like $455. In 5 years when it's paid off it will be worth substantially more than $0, so no I'm not losing money. Also, in 5 years, a $455 monthly payment will be worth notably less than $455 is right now. So in effect I'm paying less for the car.

My company doesn't rent vehicles more than 5 years old or over 100k miles, cover maintenance over 75k miles and prorates the monthly payment based on how many miles the vehicle has when the rental starts. I felt the depreciation hit of a suby was much better than a $50k new pickup.

 

[ChromeKype]

5 year loan with zero down, zero interest on $28.4k car is like $455. In 5 years when it's paid off it will be worth substantially more than $0, so no I'm not losing money. Also, in 5 years, a $455 monthly payment will be worth notably less than $455 is right now. So in effect I'm paying less for the car.

My company doesn't rent vehicles more than 5 years old or over 100k miles, cover maintenance over 75k miles and prorates the monthly payment based on how many miles the vehicle has when the rental starts. I felt the depreciation hit of a suby was much better than a $50k new pickup.

Gotcha


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[COwineguy]

I just got a new Subaru Outback for a commuter this summer. $28k, zero down, zero interest. I doubt paying cash would make it enough cheaper to make it worth tying up $28k that could otherwise be invested, available for investment opportunity, or pad the top of my rainy day fund.

That said, I wouldn’t have bought it if my pickup still qualified for my employers program in which they “rent” our vehicles from us and basically pay hundreds more a month than my monthly payment

I am glad I kept reading about your employer program I almost looked like an A.. One of the things that makes my eye twitch is when someone justifies buying a car for a commuter to save gas money. Most people make the assumption it will save them and never do the math. The employer program sounds cool though.

I think Ramsey is more of a psychologist than a financial planner. He has to be black and white to get people to change. Even if he is just convincing people to stop buying things like binoculars, appliances, and furniture on credit he is accomplishing something. Its crazy how many people will finance a 70" TV

 

[Jeff_Gibbons]

Dave's awesome.

He's great at teaching fundamentals to young families that didn't learn it from public school or home.

He's a cash is king guy and if you're a leverage investor - you will find 1,000 reasons he's wrong.

What's his legacy though - thats the real measure imo?

As a defender of his, I'd say him helping people pull themselves out of bad money habits and endless debt cycles has a lot of value in the world and was time better spent than increasing a liquid investor's net worth more than an index fund.

 

[nnelzon23]

Dave's awesome.

He's great at teaching fundamentals to young families that didn't learn it from public school or home.

He's a cash is king guy and if you're a leverage investor - you will find 1,000 reasons he's wrong.

What's his legacy though - thats the real measure imo?

As a defender of his, I'd say him helping people pull themselves out of bad money habits and endless debt cycles has a lot of value in the world and was time better spent than increasing a liquid investor's net worth more than an index fund.

I think his stuff should be taught in public schools. Of course when you’re out of consumer debt and geared toward investments some debt may be necessary, but that is not his audience. When I was young and struggling financially we used his plan to get out of debt and get started on real life. Many years later I think I owe him a debt of gratitude, as his plan cost me no more than the gas it took to get to the library. He’s good for young people, especially young people starting families that have never had to manage money.


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[HuntHarder]

Who is Dave Ramsey? Never heard of her.

 

[Smid]

If his programs work for you, great but I don’t want it forced on me. We have a guy at work who is trying to get everyone on the Dave Ramsey spending plan and it drives me insane. This guy is 50 years old and seemingly just got his life together in the last year

 

[LaGriz]

My 2 cents,
Too many folks are clueless on finances and can benefit from his hard nose style. The caller may be in debt up to his eye balls and wants Dave's blessing to by a new car and roll over his debt into the new loan. WTF are these guys thinking? So many of the callers are really lost. I do think he comes off a little too preachy some times. Tells people they must tide, and often gives romantic advice that may be suspect. A pre-nuptial agreement is not a bad thing in many instances. The show is entertainment after all.

I must say when I got debt fee I found it empowering! Once you realize you don't need to drive a new vehicle every 3-4 years, and your FICO score is not the be all end all, you will be so much better off. You CAN drive by a Walmart with out spending $100 every time and you won't die. One day I did yell out the window of my paid for vintage land cruiser (I'M DEBT FREE!) while driving home from work. Man you can really save some money when you have no mortgage and car note! I maxed out my Roth deposits while putting 15% in the 401-K.

I found I was able to be brave at work and give my true opinion to management with less fear. In my then job as a Project Manager, I found the cost cutting was too once sided . The targeted field personnel had been given several cuts in compensation. Management was planning more drastic cuts that IMHO would be punishing. Most of the management team had been out-the-field so long they did not comprehend what those impacts would be. At risk of being being canned, I spoke up and asked that they reconsider the proposed cuts. The hands were driving there own trucks to locations with passengers aboard. A proposed cut of the car allowances that the lead hands used was ill advised. These fees payed the insurance and for maintenance of each vehicle. We charged the client a mileage charge to recoup it anyway. Meanwhile, we in management would keep our car allowance if at a reduced amount. I found this backwards and said so. It worked for awhile. I did not get fired, but gave notice 18 months later. Stressful times!

LaGriz

 

[fwafwow]

Some have suggested that “this” should be taught in schools. I agree that personal finance, including the risks of debt, the benefits of saving, how to invest, how taxes work, etc. should be taught in schools. Better to learn early than get the harsh dose of reality by having to call into a radio show. I don’t think “this” should be solely based on the views of Dave Ramsey, as some students will eventually realize that since some of what he advises (never have a credit card, for example) is too simplistic - thereby causing at least my kids to question everything they were taught based upon his principles.
As @Smid said, I don’t want it forced on me, but I also don’t want it forced on kids.

 

[browning2480]

It is taught in some schools. It is a different approach though as you are teaching kids to save for what they want and never go into debt. Different than digging out and most of the stuff for younger kids is taught and designed by his daughter.

 

[fwafwow]

It is taught in some schools. It is a different approach though as you are teaching kids to save for what they want and never go into debt. Different than digging out and most of the stuff for younger kids is taught and designed by his daughter.

It was taught to my kids in high school. No nuance or pros and cons. Just simplistic statements taught without context or exceptions.

 

[MattB]

Some have suggested that “this” should be taught in schools. I agree that personal finance, including the risks of debt, the benefits of saving, how to invest, how taxes work, etc. should be taught in schools. Better to learn early than get the harsh dose of reality by having to call into a radio show. I don’t think “this” should be solely based on the views of Dave Ramsey, as some students will eventually realize that since some of what he advises (never have a credit card, for example) is too simplistic - thereby causing at least my kids to question everything they were taught based upon his principles.
As @Smid said, I don’t want it forced on me, but I also don’t want it forced on kids.

I tend to agree. Dave's methods are good for people who need to take drastic action based on past, poor behavior. It would undoubtedly help some to hear that message before they get into spiralling debt. But from what I know his methods if braodly employed are not a really effective way to build wealth.

 

[browning2480]

One thing he teaches High school kids is if they take the average new car payment when they are 18, invest that in good growth stock mutual funds every month, they will be multi millionaires by like age 45. I would consider that a pretty decent wealth building thing for young kids to grasp. Stay out of debt and invest at a young age and keep at it. I am glad I have taught my teenagers this and look forward to seeing the wealth they build living a debt free life with consistent investments earning compound interest for a long time.

 

[Gutshotem]

One thing he teaches High school kids is if they take the average new car payment when they are 18, invest that in good growth stock mutual funds every month, they will be multi millionaires by like age 45. I would consider that a pretty decent wealth building thing for young kids to grasp. Stay out of debt and invest at a young age and keep at it. I am glad I have taught my teenagers this and look forward to seeing the wealth they build living a debt free life with consistent investments earning compound interest for a long time.

Thats 27 years or 324 months. Investing $650 a month for 324 months even with an 8% annual return will not make you a multi millionaire. It won't even get you to a million (715,739.09).

 

[Hoot]

I don't think that "this" should be taught in schools, I think that "this" (whatever "this" is for your family), should be taught in the household.

Just my opinion, but start young, my kids are 5, 3, and 1, any money they earn doing chores they are required to save half of it. Start building the lifestyle of living below your means, and saving. As they get older they will learn more complex ideas.

Don't rely on, or expect, the public school systems to teach your kids anything other than how to be normal tax paying cattle for the government...

 

[browning2480]

Thats 27 years or 324 months. Investing $650 a month for 324 months even with an 8% annual return will not make you a multi millionaire. It won't even get you to a million (715,739.09).

Sorry doing what I described and also doing what they teach which is investing 15% of your income and what ever kind of home they own. Networth.

But if they only did what I originally posted and were debt free, they would be better than 90% of Americans and could probably retire and live off the interest that one investment would provide.

I guess I don’t see how that is such a bad place to be. But being this is the internet, I am sure everyone who is against it has multiple millions stashed away already. Since you all are following other people who provide better ways to invest and build wealth.

 

[Titan]

I am against most of his teachings for myself, but I am not against him and his intended purpose. For those who these lessons don't apply to, it drives them nuts (me included).

When you are speaking to a set of people who truly need the guidance, he can't have any gray area. If he said credit cards aren't great, but they can be a good tool - it gives his intended audience an excuse to keep doing what they are doing. So I think the way he addresses those things is exactly what needs to be said for the people who struggle with these financial concepts.

Watching someone pay off a 1% interest loan because the note size is smaller than their 8% loan absolutely drives me nuts. But if he didn't tell them to do exactly that, they wouldn't pay off either.

Thats 27 years or 324 months. Investing $650 a month for 324 months even with an 8% annual return will not make you a multi millionaire. It won't even get you to a million (715,739.09).

He said at 45 year old, but the concept would be after 45 years - around retirement age.

Anyway, neither side is "wrong". It just depends how you use the tools we have (debt, credit cards, etc.).