I am sure that your brother-in-law is a really smart dude--no doubt about that with a PHD in economics. But how many people has your PHD brother-in-law help to get out of debt? So you can agree with Dave Ramsey or not, you can hate him, you can pick apart his philosophy and find fault. But you cannot argue the fact that he has helped thousands to find a way to put their head on their pillows and sleep better each night---by giving them hope and showing them how they can be in control of their hard earned cash.

 

I agree. You don't have to agree with methodology but the results seem to be there.

I think the point some are missing is that the majority of people that truly need Dave's help have proven they are idiots when it comes to money. Is it for everyone, no. If you aren't in debt up to your eye balls and have money going towards savings, retirement, childerns education, ect... then great but you are in the minority.

 

For those that say credit cards are necessary, that just isn't true. Those that use them and pay off the balance every month, that's great but again the people that need Dave's program aren't disciplined enough to do that and have proven so.

For those that say credit cards are necessary, that just isn't true. Those that use them and pay off the balance every month, that's great but again the people that need Dave's program aren't disciplined enough to do that and have proven so.

 

Whether they're necessary or not is a matter for debate. However Dave has made a blanket statement that there is no positives to credit card use, even for disciplined individuals such as myself. That is why I disagree, because if you are disciplined, there is zero issue. Cash or credit, above all else the primary goal in finance and staying out of debt is living within your means.

Whether they're necessary or not is a matter for debate. However Dave has made a blanket statement that there is no positives to credit card use, even for disciplined individuals such as myself. That is why I disagree, because if you are disciplined, there is zero issue. Cash or credit, above all else the primary goal in finance and staying out of debt is living within your means.

 

Another reason he gives for not using credit cards is some statistical info/studies revealing that the average person spends about 20% more when using plastic instead of cash. I have had others who mostly follow Ramsey's teaching, yet still use credit cards, say this is probably an accurate assessment. Would you say that you spend the same when using credit as opposed to cash? Not challenging you by any means, just curious to hear your response.

Whether they're necessary or not is a matter for debate. However Dave has made a blanket statement that there is no positives to credit card use, even for disciplined individuals such as myself. That is why I disagree, because if you are disciplined, there is zero issue. Cash or credit, above all else the primary goal in finance and staying out of debt is living within your means.

 

I have always figured that he has to make that blanket statement. With the type of people he is trying to reach it has to be an all or none thing. He couldn't say "well it's ok to use one if you are disciplined enough". As soon as he did everyone would think they were disciplined enough. If everyone were like you we probably wouldn't have gone through what we did the last few years.

When I first heard of him I thought his advice on paying off debt didn't make sense. He seemed to disregard the most expensive debt ie high interest rate. He said pay off the lowest balance first. Financially and mathematically that didn't compute. However, as I stated earlier, I do think there is a positive mental aspect derived by his method. It might not make sense but for many it leads to the promised land of no debt or very little debt.

Actually the "Snowball" method does work. It's very basic methodology. Pay the smallest debt off first. then take the payment that was going to the smallest debt and add it to the next smallest. I agree in the beginning you would think pay off the debt with most interest, but if that debt is much higher, you will never get it paid off. The 1st time I heard Ramsey, I thought he was a kook. However after getting his book applying some of ot ot what I was already attempting, it makes sense. Gazzelle intense!!

Impractical to buy new car without a loan or any car without a loan?

 

An auto loan is one of the worst debt anyone can take on. Paying interest on a loan for something depreciates as much as an auto does is financial error. Heck, I hate paying cash straight up for a car. Cars suck!

So we've both shown examples of where a loan is needed and prudent and where it is not. That's my point. DR seems to say all car loans are bad ideas. I disagree.

 

Yes we have both shown examples with the auto loan thing. If you are disciplined and have the cash to make the payments, and are not concerned with the interest, that is great. But the idea is that if you are in debt and struggling, that car payment is one of the first things to get rid of.

 

Kind of like dieting. If you are thin, and you want to order the big dessert...go for it. If you are overweight and TRYING to do something about it---the first thing to do is skip desserts.

An auto loan is one of the worst debt anyone can take on. Paying interest on a loan for something depreciates as much as an auto does is financial error. Heck, I hate paying cash straight up for a car. Cars suck!

 

You're preaching to the choir, my brother. :thumb:

Impractical.

 

Agreed that's why I am not a fan of Ramsey. Sure that all sounds great but not very realistic for the vast majority of people.

I know this is going to offend some, sorry................... Dave Ramsey is to the field of financial management what the Bay City Rollers are to rock n roll. As a CPA, I find him to be more of an entertainer who is incredibly charismatic. He offers up financial advice that rivals that of an Econ 101 student.

 

Agreed.

Agreed that's why I am not a fan of Ramsey. Sure that all sounds great but not very realistic for the vast majority of people.

 

It's realistic for anyone. It just depends on what sacrifice you are willing to make.

It's impractical for a great majority of people.

 

Now if he said you don't need to buy a NEW car I'd be cool with that in many/most cases.

 

However, if I understand him correctly he's anti-car loan which is not practical for most people.

 

I drive 30,000 miles per year. When I need to replace my car I am not buying a $5k car and I choose not to stroke a $15k to $20k check. I do not want to lock up that much money when I need to use it for education expenses and when the interest rate on my loan is low.

 

Before you say I'm the exception due to the # of miles I'll throw out this example as well.

 

I'm a relatively recent college grad who gets a good job that requires me to drive a lot. I can't have a clunker for this job. I can't show up at a customer's site trying to represent my company professionally in my 1994 Taurus . I can't drive a $5k car because a)I don't have $5k yet and b)I need a dependable car to make sure I get to where I need to be.

 

Lots of examples where buying a cheap used car is impractical OR tying up $20k just to avoid a loan is impractical.

 

If the company is that worried about what type of car you drive they should furnish you the car. Otherwise you don't have to have a $20,000. Actually there aren't too many if any examples of it being a good idea to drop $20,000 on a car period.

Ok, somebody please tell me how this scenario makes sense. I have a car loan. Dave Ramsey would have me to stop putting money in a 401k so that money could be used to help payoff the car loan. The car loan is at 6.99%. The money I am putting into my 401k is matched by my employer at 50%. I just checked and the return on investment over the last 12 calender months is 25.14%. Why would I stop funding my 401k simply to save 6.99% on a car loan?

I'm not a big fan of his, but have to say that what is bolded is not accurate. The interest you pay is calculated on the mortgage balance. Interest rates on CD's are not even close to mortgage rates. If your mortgage has a rate of 5%, show me a CD paying that rate. Most CD rates I see are 1.5% or less.

 

Check out an amortization schedule on a mortgage. The effective interest rate at the end of the mortgage is not the rate on the mortgage note. Interest is front loaded on your mortgage payments. If you have ever looked at what part of your payment goes to principal and what part goes to interest, you will see this rather quickly. Someone now in the last 5 years of payments on a 30 year note is paying much more to principal than to interest. You are correct that current interest rates on a CD are so low that the numbers may not work but if you could get that 5% as a return on an investment, you would be better off investing instead of paying off the note. You have to run the numbers and consider your investment options and comfort level, but even a moderate risk investor should be able to do better investing their money instead of paying off a short year remaining mortage. And to clarify, this is my philosophy, not Ramsay's. I believe Ramsay would say go ahead and pay it off.