No Debt (Ramsey) or Debt as a Tool

[Sapper PE LS]

Mudpuppy, I saw an article similar to that one, actually I think it was a blog recap of your article there. I've always kind of disagreed with Ramsey's investing advice but only because it goes against what I've always heard from the really wealthy investors who say to diversify and take on varying percentages of risk based on your age, etc., but like you said, and the article said, and pretty much everybody who blogs about this stuff says, he's great at helping you get out of debt. And I'm with you on the religion thing, I think it should be left out of his financial advise.

 

[knight1fox3]

This article about Ramsey was published in this month's Money magazine. I think anyone following Ramsey's advice should read it:

http://money.cnn.com/2013/10/01/pf/dave-ramsey.moneymag/

Honestly, I knew very little about Ramsey before reading it. From what I'd heard of him it sounded like he had some decent advice. And I still agree that his advice on saving and getting out of debt sounds good. But it also sounds like he is an egotistical *** who is mainly interested in his brand and making money for himself, like many big-name radio personalities. Which is fine as long as you take what they have to say with a little skepticism.

The fact that he recommends buying front-end loaded funds just pisses me off, because these types of funds line the pockets of shady financial advisers, and at the same time it is so easy to invest in no-load funds yourself. They take advantage of Ma and Pa Main Street by taking 5% of every dollar invested for themselves, leaving a hole that's hard to make up. If Ramsey is really that good at talking to the average Joe about money, then he needs to go the next step and educate people not just about being responsible in saving, but also in investing. Really, if you're going to bring religion and morals into the picture (which I personally don't feel belong here, but whatever), isn't this the moral, responsible thing to do? Oh but wait, that wouldn't benefit the pocketbooks of his cronies (e.g. the Dave Ramsey ™ approved financial advisers).

In the end, I pretty much agree with what the article concludes--follow his advice on saving and getting out of debt, but forget his advice on investing.

I have read this before and to be honest, when he first wrote his book, he was a small fish in a large pond. The book was a good read and gave excellent advice on how to eliminate debt. Since going mainstream with his syndicates, pod-casts, etc, like all things that go mainstream, the money eventually trumped the quality of advice/services being offered. Which probably also gave way to the "untouchable" egotistical attitude (unfortunately).

As for investment options with front-end loaded funds, I disagree that this is solely to line the pockets of shady advisers. It depends on the options that accompany the funds and how aggressive they are in the market. Some front-end loaded funds are much better than other back-end loaded funds. I had to really dig into this to see how the math and the benefits worked out. And I say this because LadyFox and I just recently consolidated 401k funds from our previous employers into a very aggressive mutual fund. Which will yield much more return than what was to be had in the 401k fund. And those funds will be instantly available when we hit retirement. No messing around with accountants and putting in requests to withdraw a 401k. Additionally, the financial adviser we chose is getting a percentage yes. But you know what? My time is worth quite a bit at the moment (life, small business, grad school, work), and I simply do not have time to pick and choose which investments are the most optimal. That is now his concern and I will gladly give him his percentage (albeit small) to look at the corresponding information for me and make the best decisions. That's not to say I won't be monitoring the decisions he makes. But I have no problem letting him do the research for me and making informed decisions with my approval.

 

[knight1fox3]

This article about Ramsey was published in this month's Money magazine. I think anyone following Ramsey's advice should read it:

http://money.cnn.com/2013/10/01/pf/dave-ramsey.moneymag/

Honestly, I knew very little about Ramsey before reading it. From what I'd heard of him it sounded like he had some decent advice. And I still agree that his advice on saving and getting out of debt sounds good. But it also sounds like he is an egotistical *** who is mainly interested in his brand and making money for himself, like many big-name radio personalities. Which is fine as long as you take what they have to say with a little skepticism.

The fact that he recommends buying front-end loaded funds just pisses me off, because these types of funds line the pockets of shady financial advisers, and at the same time it is so easy to invest in no-load funds yourself. They take advantage of Ma and Pa Main Street by taking 5% of every dollar invested for themselves, leaving a hole that's hard to make up. If Ramsey is really that good at talking to the average Joe about money, then he needs to go the next step and educate people not just about being responsible in saving, but also in investing. Really, if you're going to bring religion and morals into the picture (which I personally don't feel belong here, but whatever), isn't this the moral, responsible thing to do? Oh but wait, that wouldn't benefit the pocketbooks of his cronies (e.g. the Dave Ramsey ™ approved financial advisers).

In the end, I pretty much agree with what the article concludes--follow his advice on saving and getting out of debt, but forget his advice on investing.

I have read this before and to be honest, when he first wrote his book, he was a small fish in a large pond. The book was a good read and gave excellent advice on how to eliminate debt. Since going mainstream with his syndicates, pod-casts, etc, like all things that go mainstream, the money eventually trumped the quality of advice/services being offered. Which probably also gave way to the "untouchable" egotistical attitude (unfortunately).

As for investment options with front-end loaded funds, I disagree that this is solely to line the pockets of shady advisers. It depends on the options that accompany the funds and how aggressive they are in the market. Some front-end loaded funds are much better than other back-end loaded funds. I had to really dig into this to see how the math and the benefits worked out. And I say this because LadyFox and I just recently consolidated 401k funds from our previous employers into a very aggressive mutual fund. Which will yield much more return than what was to be had in the 401k fund. And those funds will be instantly available when we hit retirement. No messing around with accountants and putting in requests to withdraw a 401k. Additionally, the financial adviser we chose is getting a percentage yes. But you know what? My time is worth quite a bit at the moment (life, small business, grad school, work), and I simply do not have time to pick and choose which investments are the most optimal. That is now his concern and I will gladly give him his percentage (albeit small) to look at the corresponding information for me and make the best decisions. That's not to say I won't be monitoring the decisions he makes. But I have no problem letting him do the research for me and making informed decisions with my approval.

 

[mudpuppy]

A lot of front end loaded funds charge 5%, which is huge when you're talking an average market return of 8% or so over time. I personally have a hard time paying someone to do something I can do myself, though if the payback is small I'll do it, for instance pay someone to work on my car.

But in this case we're talking about tens of thousands of dollars when compounded over time.

If I did want to pay someone to manage my money, there are plenty of advisers who charge by the hour. Commissions on front end loaded funds are a conflict of interest that even the most honest adviser would be tempted by... All they have to do is steer you toward the funds that give them the biggest kickback.

 

[knight1fox3]

^ understandable. If I had time to do it myself, I surely would. So this particular instance is circumstantial. Both LadyFox and I did our own individual research and arrived at nearly the same conclusion. The forecasted returns look to be pretty substantial. So for now, this looks to be a move in a better (not necessarily the right one) direction for our investments.

 

[Master slacker]

Tl;dr ***

 

[Road Guy]

So does Dave recommend not even having a mortgage payment?

We dont have any debt,zero right now because we are renters no credit cards, no car payments...

But that won't last long... We make a good salary but it seems we don't put away as much as we should every month (aside from what goes into 401k and work retirements)

We do tend to put most everything on the credit card throughout the month and then pay it off every month, which is sometimes painful.

Does he suggest using all cash, or is he the one that says put Monopoly money in your wallet in case you have to use your credit card?

I kind of have an issue buying a book from someone who gets rich of my buying a book telling me how to save money...

I am probably only in this position because my wife is cheap as hell and doesn't spend like typical women do. To her shopping is hell...

But before we had kids we used to always have a decent savings and $10 grand in checking of something close by and it seems these days the only real savings we have are our retirement accounts...

I would love to get back to those days...

 

[Capt Worley PE]

I kind of have an issue buying a book from someone who gets rich of my buying a book telling me how to save money...

Make Abbie Hoffman proud and steal it.

 

[roadwreck]

So does Dave recommend not even having a mortgage payment?

Sort of. But he realizes that most people couldn't buy a house outright, so he proposes you buy a home with a 15 year mortgage where the payment is no more than 25% of your take home pay.

Does he suggest using all cash, or is he the one that says put Monopoly money in your wallet in case you have to use your credit card?

He does suggest using all cash. He contends that it "hurts more" to spend cash than to use a credit card (which doesn't feel as much like real money). So if you are spending cash you are likely to spend less than you would even if you were to use credit cards and pay them off. I completely believe this is true, but I love the convenience of credit cards, and really don't like dealing in cash. I'm such a tight wad anyway that I would probably be totally intolerable if I were to operate in a cash only mode.

I kind of have an issue buying a book from someone who gets rich of my buying a book telling me how to save money...

I agree. I have bought one of his books before, but with the intention of giving it to some family members that are just awful with money. You really don't need to buy his book, I think you can get 99% of what he says in his books just by listening to his radio show, which you can listen to free on his website.

http://www.daveramsey.com/show/radio/

With all that said, I don't know that much of what Dave Ramsey teaches is applicable to your situation. His plan tends to focus on getting people out of debt and really isn't aimed at people who are already there but just want to do better. Sure you could apply some of what he preaches, but none of it will be new information for you.

 

[Flyer_PE]

I kind of have an issue buying a book from someone who gets rich of my buying a book telling me how to save money...

We borrowed one from the library.

 

[mevans154]

I just paid off my mortgage last week! My wife and I had our house built in 2002 and I "aggressively" paid extra on the mortgage each month. It took a little over 11 years but I am now mortgage free at 45 years old!!

I refinanced my mortgage 3 times over the 11 years and in the end had a 2.24% loan. I know I could have made more money investing it, but there is just something about being debt-free that has always been of goal of mine.

What is the concensus out there...Should I have kept my mortgage longer and invested the extra payments or pay down my mortgage aggressively as I did?

 

[Ship Wreck PE]

I felt the same way years ago before the housing crash. I put every extra penny trying to pay down the mortgage. But now I pay the payment and any extra money I put in savings or invest elsewhere.

Houses in our area just don't sell very quickly and I have seen quite a few people that really needed to get the cash out of their house and they could not.

 

[mevans154]

I felt the same way years ago before the housing crash. I put every extra penny trying to pay down the mortgage. But now I pay the payment and any extra money I put in savings or invest elsewhere.

Houses in our area just don't sell very quickly and I have seen quite a few people that really needed to get the cash out of their house and they could not.

I have a $150,000 HELOC so if I ever needed cash it would just be a mouse click away. Also, I don't plan on moving for at least the next 20-25 years, so the housing market can do whatever it wants for a while before I have to worry...

 

[mevans154]

:2cents:

 

[Road Guy]

[SIZE=medium]I was 9 years away from having my old house paid off![/SIZE]

[SIZE=medium]At least I took some money with me after paying those dirty scum sucking realtors…[/SIZE]

[SIZE=medium]I would place importance on paying off the house over investing. We did a refinance to a 15 year and I am glad we did as it helped us walk away with some money for our next house..[/SIZE]

[SIZE=medium]Our next house here in Colorado though is unfortunately probably going to be 100,000 more than the house we just sold, next year if we stay and buy here, I plan to do a 30 year mortgage and do whatever creative methods I can to avoid PMI, but my plan is just to “chill” for a few years and make sure were staying here and then just pay more on the mortgage and not pay for the refinance to a 15 year. And by Chill I mean just pay the basic payment….[/SIZE]

[SIZE=medium]We don’t like having debt, last month we bought a used car for me and we were going to finance some of it and when we got our coupon book in the mail we just mailed in a check for the full amount.. Too annoying![/SIZE]

[SIZE=medium]I need to learn to be more of a tight wad I reckon, my wife is way off the spectrum tight wad (like she makes Clark Howard look like he spends too much money) so if were both like that then life is just no fun..[/SIZE]

[SIZE=medium]Are mortgages these days in the post meltdown world back to requiring 20% down payment or does it depend on what your credit rating is?[/SIZE]

 

[snickerd3]

^ I can relate with your wife I'm a super frugal person too, but that allows me to splurge on occassion. Other than coats and shoes I don't buy clothes if they aren't on supergood clearance. Minisnicks clothes are all $2 or less each, brand new from places like old navy, target, kohls. I know this method wont work when he is older and growing unpredictablely, but it saves a **** load of money now.

 

[wilheldp_PE]

With all that said, I don't know that much of what Dave Ramsey teaches is applicable to your situation. His plan tends to focus on getting people out of debt and really isn't aimed at people who are already there but just want to do better. Sure you could apply some of what he preaches, but none of it will be new information for you.

http://www.mrmoneymustache.com/

That's a website that essentially teaches you how to be a tightwad. I know some people who have implemented a lot of his ideas.

 

[roadwreck]

I bought a new house 3 months ago. We put 20% down so I don't know what the stipulations are these days for folks that don't have the down payment to put down.

We did a 30 yr mortgage this time around. The place I just sold was on a 15 year, but if I had it all to do again I probably would have done a 30 year on that instead. Had it been on a 30 year I probably wouldn't have sold it (which i did at a considerable loss). On a 30 year I probably would have held onto it for a year or two as a rental to see if prices would recover at all but on the 15 year loan the rental income would be considerably less that the mortgage payments and I didn't want that hanging over my head.

 

[Road Guy]

With all that said, I don't know that much of what Dave Ramsey teaches is applicable to your situation. His plan tends to focus on getting people out of debt and really isn't aimed at people who are already there but just want to do better. Sure you could apply some of what he preaches, but none of it will be new information for you.

http://www.mrmoneymustache.com/

That's a website that essentially teaches you how to be a tightwad. I know some people who have implemented a lot of his ideas.

LOL, I have to laugh, that guy is in Boulder, there are not that many other cities in the US you can bike everywhere..

 

[wilheldp_PE]

Knowing some of the crap he does, he probably researched which cities were most bike friendly and moved there specifically because he could bike everywhere. Some of his advice isn't the most practical, but if you need to save money, he has some good ideas.