Just because they have 30% down doesn't mean they are guaranteed to get a loan, I would like to know what the banks reason was behind that. They could have no credit which is worse than bad credit. From what he said it sounds like that was the case.

 

Edit... Just saw your post. Example #1 on why having a credit card CAN be a good thing.

 

I semi-interested to read the book just to see how he lays it all out there. Is it very long?

I read The Total Money Make Over. It isn't very long and a pretty good read. He has a ton of books but this is the only one I have read.

Real world here, Woodsider. Most companies seem to be getting away from company cars especially if you're in sales.

 

If they don't supply the car I have never heard of an instance where they tell you what car to buy. Yes, they want you to have a decent car but you can get a good, clean, reliable car for $10,000 or less, real world.

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?

 

Excellent point and just another example of Ramsey's overly-simplistic flawed approach to financial management. Ramsey is so "anti-debt" that he doesen't seem to understand how leverage can actually be a great tool if used properly. Simple example...... I have a client who recently purchased 3 properties at auction for the purpose of renting them. He put down the required 10% and financed the rest. These properties instantly generated positive cash flow after deducting mortgage payments, insurance, taxes, etc. In addition to the positive cash flow, he is building equity in the assets with each payment he makes. The vast majority of the most successful, wealthy individuals in this country are masters at utilizing leverage to their advantage to build wealth. Your example regarding the investment of funds into the 401K that is matched by your employer is a great illustration of why blindly paying off debt before analyzing your options is insane.

If they don't supply the car I have never heard of an instance where they tell you what car to buy. Yes, they want you to have a decent car but you can get a good, clean, reliable car for $10,000 or less, real world.

 

So you're a recent college grad. You need a ride that can a)go a lot of miles b)won't have to go in the shop very often because you don't have time for it and c)one that is nice enough to take a client out to lunch in.

 

Let's say you find one.

 

It's $9,999. Where is that cash coming from?

Coincidentally, I had never listened to Dave Ramsey until I saw this thread. From my very small sample of his show I don't think it is for everyone. There are some people out there with very bad problems with debt, largely from making decisions that aren't commonsensical, and they need to be encouraged to pay it off. There are people that get in over their heads with debt before they realize it, then don't know where to begin with paying it off and need some positive reinforcement to push them in the right direction. In that light - and even for those who simply enjoy a debt-free mentality - his show seems valuable. But, I may be missing some things since I only listened for a bit.

From my very small sample of his show I don't think it is for everyone.

 

But it certainly would not hurt anyone to tune in to his show from time to time. Show me someone who has never made a mistake with their their finances---and has never paid "Stupid Tax." I want to shake that person's hand!

You do not have to be an out of control spender, or careless with cash person, to get something out of his show. For those of you that are so far above Dave Ramsey, with not a blemish at all in your financial history, try listening in once in awhile to the stories of how the "stupid and irresponsible morons" found a way to grab on to their bootstraps and work their way out of a bad place in their lives. It just might be uplifting and put a smile on your face. It is real people, real stories, real America, maybe even your neighbor or your aunt or a dear friend. Maybe even a fellow BGPer!

Excellent point and just another example of Ramsey's overly-simplistic flawed approach to financial management. Ramsey is so "anti-debt" that he doesen't seem to understand how leverage can actually be a great tool if used properly. Simple example...... I have a client who recently purchased 3 properties at auction for the purpose of renting them. He put down the required 10% and financed the rest. These properties instantly generated positive cash flow after deducting mortgage payments, insurance, taxes, etc. In addition to the positive cash flow, he is building equity in the assets with each payment he makes. The vast majority of the most successful, wealthy individuals in this country are masters at utilizing leverage to their advantage to build wealth. Your example regarding the investment of funds into the 401K that is matched by your employer is a great illustration of why blindly paying off debt before analyzing your options is insane.

 

Ramsey wouldn't deny that debt can sometimes be used to build wealth. Just the opposite, he has experienced it before--built a multi-million dollar portfolio in real estate. He has never, in any print publication, public appearance, or radio show denied debt's ability to built wealth. What he has is the experience of being a self-made millionaire--once by utilizing debt & once by not. And he has come to the conclusion that doing it the no debt way is the way to go.

 

Again, I don't understand why you have such harsh words for Ramsey & his plan. "Insane" is a really strong word. As I stated before, one of the primary purposes of his program is to get people out of debt so they can be free to be as generous as they can be. Why such bitterness?

How about insurance? Your credit score greatly affects your rate. With the company I work for, if you have a qualifying credit score you can get discounts as well as additional coverages that are not available to everyone.

 

If you can't explain to an underwriter that a person has no debt, and they can't take that into account, then the customer will be better off choosing another insurance company. Also many companies offer discounts for paying the premium in full-auto-every six months-home every year.

I'm amazed at how people seem to think that anyone who may need, or simply want to follow, Dave Ramsey's method are labled "financial idiots", etc, or at the minimum, simple-minded. It doesn't take much to get into a financial situation that spirals out of control. A terrible accident or health problem...an ugly, nasty divorce and custody battle...loss of a job....Boom! It could happen to you! It's not necessicarily irresponsibility that gets people in financial trouble.

I'm amazed at how people seem to think that anyone who may need, or simply want to follow, Dave Ramsey's method are labled "financial idiots", etc, or at the minimum, simple-minded. It doesn't take much to get into a financial situation that spirals out of control. A terrible accident or health problem...an ugly, nasty divorce and custody battle...loss of a job....Boom! It could happen to you! It's not necessicarily irresponsibility that gets people in financial trouble.

 

Great point RM. I've heard Ramsey numerous times mention the "risk factor" as it relates to debt. Financial "gurus" seldom, if ever, include the risk that is always involved with debt. Even with a fully funded emergency fund of 3-6 months worth of expenses, there are problems that can financially overwhelm individuals and families. If those problems come, having no debt sure does help.

So you're a recent college grad. You need a ride that can a)go a lot of miles b)won't have to go in the shop very often because you don't have time for it and c)one that is nice enough to take a client out to lunch in.

 

Let's say you find one.

 

It's $9,999. Where is that cash coming from?

OK, I thought I already said this but after reading over my posts I guess I didn't. Yes, sometimes in some instances auto loans are necessary. Like I said I have two of them right now.

 

In your example above an auto loan would be necessary. But the ultimate goal would be to pay it off as quickly as possible. Once you did you would put the monthly payment you were making in savings. Once you had enough to buy a newer car combined with your trade in then you would trade up. You would continue to repeat this process. You would always be able to pay cash for a car never buying one out of your means. You also have to consider you will get a better deal on a car if you lay down cash instead of financing.

 

I would ask this of you. You say get a loan for the car instead of tying up the money in paying cash for one. Why? what would you do with that cash? I know you said education expenses but what if you didn't have education expenses?

OK, I thought I already said this but after reading over my posts I guess I didn't. Yes, sometimes in some instances auto loans are necessary. Like I said I have two of them right now.

 

In your example above an auto loan would be necessary. But the ultimate goal would be to pay it off as quickly as possible. Once you did you would put the monthly payment you were making in savings. Once you had enough to buy a newer car combined with your trade in then you would trade up. You would continue to repeat this process. You would always be able to pay cash for a car never buying one out of your means. You also have to consider you will get a better deal on a car if you lay down cash instead of financing.

 

I would ask this of you. You say get a loan for the car instead of tying up the money in paying cash for one. Why? what would you do with that cash? I know you said education expenses but what if you didn't have education expenses?

 

1. We agree overall. Sometimes they are necessary.

2. What have I done with my money that I left in my account vs writing a check for the car? Invest it. I've also considered using some of it to finance a business. I've also considered using it to invest in rental properties. Fortunately my credit score is high enough that my interest rate is very low so my cost of money has been considerably less than the rate of return I've gotten off of my investments.

 

I'm a buy and keep guy which helps the cause. I buy nice used cars and then take care of them and keep them so I'm never in a situation where I'm "upside down" in a loan when I'm buying another vehicle.

 

Back to the main point: We agree. There are situations and times where they are necessary. Blanket statements do not work.

I'm amazed at how people seem to think that anyone who may need, or simply want to follow, Dave Ramsey's method are labled "financial idiots", etc, or at the minimum, simple-minded. It doesn't take much to get into a financial situation that spirals out of control. A terrible accident or health problem...an ugly, nasty divorce and custody battle...loss of a job....Boom! It could happen to you! It's not necessicarily irresponsibility that gets people in financial trouble.

 

Great point RM. I've heard Ramsey numerous times mention the "risk factor" as it relates to debt. Financial "gurus" seldom, if ever, include the risk that is always involved with debt. Even with a fully funded emergency fund of 3-6 months worth of expenses, there are problems that can financially overwhelm individuals and families. If those problems come, having no debt sure does help.

Good posts.

 

Here's an example. I have a good friend that use to work in the tool and die field as a tool maker. He and 2 others he worked with decided to take a chance and open their own shop. For the first year things were going pretty good then bottom fell out of the tool and die industry. Companies started getting their molds from China and the work all but tried up. Shops that had been around for years and years and employed 30 or more tool makers (not counting apprentices) started laying off 2/3 of thier work force or closing altogether. My buddy hadn't been around long enough to have a big enough customer base to weather it. He and his two parteners lost everything they owned. It wasn't from a bad decision it was from bad luck. He had a $300,000 that probably had $100,000 or more in equity, gone. Stuff happens every day to smart people that thought they couldn't lose. Guess what, it happens.

1. We agree overall. Sometimes they are necessary.

2. What have I done with my money that I left in my account vs writing a check for the car? Invest it. I've also considered using some of it to finance a business. I've also considered using it to invest in rental properties. Fortunately my credit score is high enough that my interest rate is very low so my cost of money has been considerably less than the rate of return I've gotten off of my investments.

 

I'm a buy and keep guy which helps the cause. I buy nice used cars and then take care of them and keep them so I'm never in a situation where I'm "upside down" in a loan when I'm buying another vehicle.

 

Back to the main point: We agree. There are situations and times where they are necessary. Blanket statements do not work.

 

My point for asking the question about what would you do with the money is this...let's look at the investment option. I believe Dave's answer no this is would you borrow money to make an investment? Basically that's what you are doing if you finance the so you can invest the money.

My point for asking the question about what would you do with the money is this...let's look at the investment option. I believe Dave's answer no this is would you borrow money to make an investment? Basically that's what you are doing if you finance the so you can invest the money.

 

Let's say I can write a $20k check for a car or I can take a loan. For simple math let's just say the monthly payment is $500.

 

If I understand DR's argument he would say write the $20k check. You were going to be "investing" or "spending" $500 so take that and invest it monthly.

 

I want to buy $20k worth of Apple. It would take me 3+ years to buy that much stock if I did the DR method. I would miss out on some great returns. I haven't checked lately but recently my gain on Apple was very high ie 30%+.

 

So my $20k that I used for investment into Apple vs a car seems to have paid off even when I take into account the cost of the loan.

 

Yes, there is risk in that strategy but it's a risk I am willing to take. My guess is that people who are using his methods to get out of their debt problems are probably not investing in the stock market.

 

As RM pointed out he has value for certain people in certain situations even if you quibble with the theory.

 

I just don't buy into the blanket statements that one should never have a car loan.