Where are my anti-debt/credit card people at?

[MattB]

That guy made it sound like he was putting it all the stock market and beating the interest rate.

We probably agree more than disagree. See above. I've made it clear I don't follow most of Dave's investing or debt advice and really wouldn't recommend it to someone with a level head. I bought a pile of crypto in early 2020 and made a boat load. Dave hates crypto with the force of a million suns. I plan to buy a bunch more before the halving happens March 2024. I'm not a Dave Kool-Aid guy. But what he offers is better than what the vast majority of people in this country are doing. That's all. And as someone who was stuck in that wheel, it makes me sick seeing people still in it.

If he hasn't been back here a bunch telling us how smart he was, you are probably right.

re-reading my post 2 prior to this, it may not seem like it I was agreeing with you, but I mostly was. Silicon Valley is a weird microcosm so I probably have a skewed perspective on where the average American is at.

 

[Nick992]

Better to have it and not need it than to need it and not have it.

What a better way to increase your wealth than to borrow money at a low rate to aquire an asset that is self paying on that debt until you own it free and clear and it continues to make passive income for you?

A house is not really considered an asset. It doesn't make money for you until you sell it...

The problem with investing with debt is that your math doesn't factor in risk. The interest you make is not guaranteed. The interest you pay is required, or else the bank will take everything. This puts your family's livelihood at the mercy of the housing market, whether your tenet pays on time, how long they sit empty between tenets, etc. This works great in good times, is stressful in shaky times, and will cost you everything in bad times.

On the other hand, imagine having 6 months of expenses saved for emergencies and no debt, including your home. All the money you're spending on car note(s) and a mortgage is now disposable income for investing. Imagine buying a rental home for cash. Imagine how much rental income you could take home without that rental mortgage.

Yes, the above takes more time, but the peace you experience with your finances is worth it, in my opinion.

Your personal residence is an asset. It's not an investment, per your argument. You include the equity of your home in your net worth, right?

 

[Cowbell]

A mortgage would be the only acceptable form of debt as it is an appreciating asset. As long as you buy a house you can afford, which most people won’t do.

This is absolutely not true. There are some people in for rude awakenings if they think this when our inflation peaks.

 

[Cowbell]

Well I posted this at work and then looked back just now. Lol I should have known this would start a shit storm. But I will say a few things

Guys…I have a debit card I didn’t mean actual cash. Well sometimes.

I know most of you don’t care, but your cash back and points aren’t the credit card companies being nice. Someone is paying for it through interest. I guess there is an argument that it’s someone else’s fault they suck with money. Probably.

For what it’s worth, my credit is a 780. Without using a credit card for the last almost 5 years.

I didn’t buy my house in cash. We have a goal of having a paid for house by the time I’m 40. Housing/property/land is the only thing I believe debt is okay.

My truck is paid for now, I did have a loan on it but got sick of that and paid it off as soon as possible. Since then I’ve just grown to like having paid for stuff.

Having payments on things just stresses me out and I very much realized that once I paid my truck off a few years ago and since then have just said it’s all for the birds.

Also, to those making comments about how I and others are dumb. I didn’t come into your credit card thread saying how dumb I think you are. Just saying.

Credit cards are the safest, most secure form of payments there are. Much safer than debit cards.

And to the money on interest - that 2-3% is already calculated in to every good and service you use presently. CCs are just a way of getting some of that money back. So if you aren't using CC, you are just excepting that charge.

 

[Cowbell]

I was Dave-ish for the longest time. I had a credit card with good rewards that I paid off every month.

I finally cut them up after being reminded where those rewards dollars were coming from.
-Single mom's who hold a balance on their CC, etc.
-Companies that borrow money to deforest the Amazon or rape the earth in some other fashion, etc.

You may pay off your card every day, but your free money is hurting people and places. You may not personally be enslaved to debt, but you are continuing the normalization of a system that devours people.

Chase, Citi, Capital One, discover: all of these don't care about the environment. They may have some PR, but ultimately they back companies who deforest. Companies who would not be able to deforest of they didn't have a loan.
How big of a conservationalist are you?

At the time, I tried to find a 'green' credit card, but they were all prepaid junk. Maybe there are more options now, I'm happy to be wrong. I don't think we can take down the system of debt, but a move to 'responsible' debt could be possible.

CC points are paid back off credit card fees that are charged to retailers when cards are used. The fees are automatically built into prices of goods and services.

 

[Cowbell]

I got on the Ramsey wagon a few years ago. At the time we had two car payments, a camper payment, and a reasonable 15-year mortgage. My wife and I both have good stable jobs so those payments were never a hardship really. But every month when I'd pay each of those loans I'd get pissed. Fast forward 4-5 years and all those debts are gone. We have a very reasonble land mortgage left but that's it. Could I have invested or leveraged this or that to maximize profits instead? Yeah maybe. In hindsight I wouldn't change my decisions though. It has been fantastic and we put plenty of money into investments and things now.

As for credit cards, we reluctantly use them. Mostly for online purchases. I went debit only for some time and had my card number stolen. I think a few grand was taken from my bank account. Yes I got it back and the protection was similar to a stolen credit card, but when that money is taken it is YOUR money that's gone. With a credit card at least the thief is taking bank money. I think I had my money restored to my bank account in 8-10 days but it was a decent inconvenience.

As for rewards, I take them as they come. It's certainly nice to get a "free" flight or something here and there. People act like it's the greatest thing though. So you have to spend $100,000 to get back $1000-2000? Big whoop. Credit card companies don't give cash back out of the kindness of their hearts, but rather they know people will subconsciously spend more when rewards are available. So you spend more to get more back. It's a trivial perk that doesn't translate to actual wealth building in the long run.

Ramsey would argue 2000/year in earnings invested is absolutely wealth building

 

[Cowbell]

Not in Joe Biden’s America does 100 dollars stay 100 dollars.

In one near that 100 dollars becomes 92 dollars in Joe Biden’s 8% inflation adjusted America. And the next year becomes 83 dollars in Joe Biden’s 8% inflation adjusted America.

Yes in the last 3 years taking on debt was actually more financially sound than sitting on cash if done correctly.

 

[Cowbell]

Bit of a different perspective here. I think differently on debt as a small business owner. I grew my business with a series of small loans that were achievable at the time payment wise. My philosophy is never to pay with a loan or credit on anything that does not appreciate in value or earn me more money .I have grown to the point in my business now I pay directly for most things. I have two credit cards with very low limits that get used sparingly. The comments on Dave Ramsey on this thread are interesting . One thing hard to argue with is he provides a very solid roadmap to get to financial freedom whether you like the way he explains or not. I think it is important to remember he is helping people who are not financially disciplined and need his help to get there.

Same thought process when it comes to business loans. Interest is a line item expense for me and the more interest I pay, the more money I make. The last two years our business investment returned over 50% due to matching our investment with bank capital.

 

[Cowbell]

My goal is to retire early and teach free personal finance classes. Lord knows kids need it.

If you are in North Tx, I will sign my kids up

 

[CorbLand]

He is probably crushing it if he was borrowing to buy residential investment properties. Just 2 years ago sub-3% mortgage debt was available. Rents in many markets are up 20-40% over that same period and we've been looking at high-single digit inflation so we are repaying un-inflated borrowings with highly inflated dollars. Property values are certainly off their highs in most markets, but cash flow and not property values is what repay loans.

In anticipation of retirement, in 7/21 I sold a rental property and used the proceeds in part to pay off my 2.5% $1,760/mo. mortgage on my primary residence. Those are 2 of the worst financial decisions I have made in my adult life. I have to assume Ramsey would applaud them.

I followed the Ramsey approach on buying a house. That was a 200,000 dollar mistake.

 

[Grassymike]

There is one huge difference in buying a house in Canada with a mortgage vs. buying one in the U.S. with a mortgage. In Canada we do not get to write off the interest paid on mortgages for personal homes on our taxes. Because of this paying off a mortgage quicker is more of a priority in my financial planning. If we sell our primary residence the proceeds (equity gained) is tax free. How would selling your primary residence work in the U.S. tax wise ?

 

[MattB]

There is one huge difference in buying a house in Canada with a mortgage vs. buying one in the U.S. with a mortgage. In Canada we do not get to write off the interest paid on mortgages for personal homes on our taxes. Because of this paying off a mortgage quicker is more of a priority in my financial planning. If we sell our primary residence the proceeds (equity gained) is tax free. How would selling your primary residence work in the U.S. tax wise ?

It really doesn't benefit us either Trump raised the standard deduction to the point the vast majority of Americans no longer itemize, which is where the mortgage interest deduction provided benefit.

 

[z987k]

There is one huge difference in buying a house in Canada with a mortgage vs. buying one in the U.S. with a mortgage. In Canada we do not get to write off the interest paid on mortgages for personal homes on our taxes. Because of this paying off a mortgage quicker is more of a priority in my financial planning. If we sell our primary residence the proceeds (equity gained) is tax free. How would selling your primary residence work in the U.S. tax wise ?

Assuming you've lived there at least 2 of the last 5 years, there's a 250k exemption on the gains, 500k if married.

 

[fwafwow]

And how many average Roksliders came to this thread maybe ready to get their shit under control and saw people bashing Dave because they love their air miles or don't agree with his real estate investing and now those people are just going to go back to another 5-10 years of living paycheck to paycheck and fighting with their wife and will never even get to the point of having surplus funds to invest.

I expect there is plenty we agree with, but pointing out where he's wrong/overstating/profiting isn't bashing, it's opinion (and in some cases, fact or truth). And I personally don't think this is an ends justifying the means situation, as there are other ways to get out of debt or manage your finances without going to a one-size-fits-all financial evangelist website with links to various pay-for affiliates.

and the more interest I pay, the more money I make.

Could you show an example? I would have thought that you only save the interest expense * the tax rate, still leaving you out of pocket on a net basis.

 

[fwafwow]

Like I said, I haven't listened to him in probably 3 years, so maybe he took down the white paper. I can't imagine anyone ever looked at it. I know they did it all blind and with a 3rd party. This is all I found. https://www.ramseysolutions.com/retirement/the-national-study-of-millionaires-research

Thanks for the link. I took a look at the link to the "Full Study" (https://cdn.ramseysolutions.net/med...esearch/national-study-of-millionaire-new.pdf). Maybe that's not the best way to label that link, as that paper is a summary without any level of detail about how they got 10k "millionaires" (there is no database that accurately lists millionaires), how that term is defined, how many responded (and didn't respond), what questions were asked, how they were phrased, etc. Knowing more about the surveyed group would help.

Example: "8 out of 10 millionaires invested in their company’s 401(k) plan...." What does this mean? As written, it seems to indicate that every one of the 10k millionaire respondents was was a salaried employee that had the option to contribute to a 401k, and that 8,000 of them therefore did. That seems incredibly unlikely, but if it is correct, what does it mean about people who are self-employed, or otherwise don't have a 401k plan? Or does the statement mean that of the portion who answered that question, all of those answering had a 401k plan and 80% contributed? Or of those who had a 401k plan, 80% of them contributed? I have no doubt that investing in a 401k contributes to wealth, but I don't know what this study contributes to my belief. (And fwiw, the following points about millionaires not investing (much) in single stock positions isn't surprising, especially with respect to 401k plans - as that is often not even an option.)

Basically I don't believe any of it - but I'm a skeptic by nature and I rarely believe anything I'm told, especially if it's tied to making money. I don't believe the summary of any medical or nutritional studies, especially something that is so summarized in the media (like "red wine makes you live longer!") as the underlying "studies" are often rife with errors and the conclusions reached are often not without plenty of explanations. So my disbelief is not limited to DR.

 

[roymunson]

Yes in the last 3 years taking on debt was actually more financially sound than sitting on cash if done correctly.

Therein lies the problem. The people who are making the decision to pay 22% on a credit card for the TV or Xbox they couldn't live without don't have a track record of doing much of anything "correctly" with money.

I see what you're saying, but the human element usually messes this thing up.

Spend less than you make. But still live life before you turn 60... Both sides of the road have ditches, stay between them.

 

[HuntHarder]

Fine balance to saving too much for retirement and not living a great life prior to retirement vs. not saving enough for retirement and living like a rockstar before you retire. I know a couple guys that died in their 50's and 60's and never really got to enjoy retirement. A guy at work literally retired at 59 years old and died 2 weeks later. You never know what life is gonna hand you, so enjoy it!

 

[roadrunner]

The problem with investing with debt is that your math doesn't factor in risk. The interest you make is not guaranteed. The interest you pay is required, or else the bank will take everything. This puts your family's livelihood at the mercy of the housing market, whether your tenet pays on time, how long they sit empty between tenets, etc. This works great in good times, is stressful in shaky times, and will cost you everything in bad times.

On the other hand, imagine having 6 months of expenses saved for emergencies and no debt, including your home. All the money you're spending on car note(s) and a mortgage is now disposable income for investing. Imagine buying a rental home for cash. Imagine how much rental income you could take home without that rental mortgage.

Yes, the above takes more time, but the peace you experience with your finances is worth it, in my opinion.

Your personal residence is an asset. It's not an investment, per your argument. You include the equity of your home in your net worth, right?

That's why a house (your own private residence) should never be considered as an asset. Thousands of people made this mistake in 2007 and 2008. In 2009 they were broke and/or homeless. The "millionaire" next door became the "pauper" next door within weeks.

The mindset that many have about houses being assets is the reason Dave Ramsey is wealthy...

 

[browning2480]

That's why a house (your own private residence) should never be considered as an asset. Thousands of people made this mistake in 2007 and 2008. In 2009 they were broke and/or homeless. The "millionaire" next door became the "pauper" next door within weeks.

The mindset that many have about houses being assets is the reason Dave Ramsey is wealthy...

But if your house is paid off then it is no different than the stock market. You don’t lose money on a house until you sell it. Your example of 2007,2008 and 2009 is a perfect example of people borrowing way more money than they could afford.

That same house they had in 2009 has rebounded.

 

[roadrunner]

But if your house is paid off then it is no different than the stock market. You don’t lose money on a house until you sell it. Your example of 2007,2008 and 2009 is a perfect example of people borrowing way more money than they could afford.

That same house they had in 2009 has rebounded.

Which is why a private residence isn't a true asset as there are a bunch of them in similar categories so when there is an enormous "asset" dump, the value tanks, just like stocks for a company.

Not everyone is in the house paid off reality, in fact a very high percentage isn't.

And the housing crash in 2008 reflective of the impacts of the global economy shows the inadequacy of financial literacy among many young adults and teens over borrowing as you mention. Did my master's thesis on that.