DawgTalkers.net Forums DawgTalk Everything Else... Dave Ramsey: Financial Peace U

it's amazing how little real financial information is taught in school... budgeting, debt, mortgages, investing.... I got very little if any in school.

it's amazing how little real financial information is taught in school... budgeting, debt, mortgages, investing.... I got very little if any in school.

Probably a large percentage of people in this country don't know how to manage their money. Why would you want them teaching their kids if they don't even have it figured out?

I have always thought that wasn't something the schools should have to do, it should be done by the parents.

Paying off debt is not always the best advice? Please explain.

i know you asked Diam but let me take a stab... if I have a debt that has a low interest (say 3%)... I have the option to pay the minimum and hold the loan longer or pay over and pay it off faster... If I have something else I want to invest that overpayment into that will make me more than 3% then maybe I don't want to pay off my loan as fast and invest the money... if I don't have anything to invest in then do the overpayment.

Working in a small town bank for over 25 years I always thought Dave Ramsey's advice to be over simplistic.

I feel his advice is great if you really have no clue about spending & saving. I have heard a few episodes of his show and he seems to not ask enough questions of his callers and tends to give the same advice which is usually just to pay off debt and even though some of you may doubt it, that is not always the best advice.

I do applaud that he at least gets people thinking about finances but he certainly has no magic cure. It comes down to personal responsibility and spending beyond your means.

I think parents do a poor job of educating their kids about finance and others go overboard telling kids to never borrow and pay cash for everything.Not teh best advice if they ever want to by a home.

His advice is simplistic, were not splitting atoms here. He says its 20% knowledge and 80% behavior and the 20% knowledge consists of things like budgeting, spending less than u make. Its almost all pretty simple stuff.

Curious as to if you know what % of the folks you deal with budget? I've been budgeting since my late 20s and just ASSumed everyone did. *L* ... pretty bas ASSumption on my part, I’m stunned at how few actually have a budget.

Fate asked U when its not a good idea to pay off debt. Please explain when its not a good idea to pay off debt. I’m not being snarky, I would like to know when paying off debt is a bad idea.

Dave does not tell you to not take out a mortgage. He has guidelines he’d like you to follow, but if you cant you do what you need to. Do you know what those guidelines are? I’d be more than happy to share them with you if you’d like.

Ramseys advice doesn't apply to scenarios like that. Ramsey advice is for people that are addicted to debt and are overwhelmed. I think of Ramsey as AA for people in debt.

You offered to send his "plan" which isn't really necessary as I wasn't looking to cause a rift, just point out my opinion. My response is based on listening to his radio show from time to time.

I’m not looking for a rift either. There’s more than one way to skin a cat and Daves way is not the only way but he does have a great blueprint and as u said its not a one size fits all. I have veered from Dave’s way a few times. I value your opinion and anyone else’s, I may not agree with it but I value it. I love learning and asking questions and going point, counterpoint is a great way to do it IMO. Please don’t take anything I say in here as me de-valuing you or your opinion. I would imagine your very fiscally responsible and have raised your children to be also.

I also was curious as to how much you actually knew about his plan.

Say your only debt is your home mortgage but you basically have no savings and are living paycheck to paycheck. You put every extra dollar to the mortgage which is advice I have heard him give on the radio.

Then you get a "work bonus" or other unexpected significant amount of money. You instinctively put that on the principal of the loan and then have a major expense you could not expect such as a car or home repair. Now your loan amount is less but you have no cash.

It may sound rare but I have been asked many times advice regarding similar situations. As I said he is very simplistic & I don't mean the plan is simplistic, it is simplistic because every persons situation is different.

Daves baby steps (BS .. ) are as follows:

1. 1,000 starter emergency fund .. so if your beaks go or your need new tires you don’t have to go into debt to take care of “minor” issues that arise.

2. Pay off debt ... he uses the snowball affect, more on that later. This does not include your house.

3. Fully funded emergence fund ... 3 - 6 months to pay your bills if you have a true emergency.

4. Invest 15% for retirement

5. Fund kids college

6. Pay off your mortgage

7. Live and give like no other.

You do steps 4 -6 at the same time.

So your scenario above tells me you haven’t listened to enough of his shows or read much if any about his plan. Before you start paying off your house you have all ready paid off all your other debt and have a fully funded emergency fund (you’d have money in the bank). So your scenario is not a part of Dave’s plan as you would all ready have savings before attacking your mortgage.

If you were in BS 2 the extra money at the end of the month or the bonus check would go towards your debt or if you were in BS 3 it would go to fully fund your emergency fund, once you hit BS’s 4,5 and 6 you could put it where you like.

I also have not always agreed with advisors who tell people with 8-10 credit cards to pay the highest interest CCs off first. That may very well be the best way but if you have 3-4 of those cards with lower rates but low balances, paying them off and cutting them up gives a sense of accomplishment to toward the goal of CC reduction. It makes the goal less daunting long term.

You just outlined Dave’s plan almost to a T. He uses what he calls the snowball affect. In BS2 you list all your debt from smallest to largest regardless of interest rate. Then you pay off the smallest debt first, it give you the sense of accomplishment you spoke off and as I’m sure your aware it then gives you the monthly payment you were making on that debt to put towards your next debt and so on and so forth down the line.

This is one part of Dave’s plan that wasn’t for me. When I got married my wife brought in a 13k car loan at like 4%. I had taken out a 100k mortgage when i bought my ma a house in South Carolina. The interest rate was around 3 at the time. I owed about 60k on it after 3 years when we got married. Dave’s plan says to pay off the car first. Because of the amount of the mortgage I was paying way more interest on the house than on the car so we attacked that first as mathematically it saved me a ton of money and that trumped a short term win in my book ..

Previous to that and I was 59 when I took out the mortgage I had only been in debt twice and both those were gone in less than a year. I was allergic to debt from day 1. I was very very weird in that regard ...

It sounds like you have some great clients at your bank, thats awesome, thanks for sharing, it gives me hope ...

I don’t agree that you have to have credit, it does make things easier but you can do everything w/o it. I am living proof of that. You just have to dig a little further to do it. I have no issue at all with what you did with your kids, I’m sure it has worked for you and them and that is all that really matters. Its just a different way to skin the cat than I would skiin it. As you well know the only must is spending less than you make.

Thanks for the back and forth, please reply again as its how I learn and seeing different angles is always a good thing.

Have a good day dawg!

I also think having a good emergency fund is really important. Your line about people living paycheck to paycheck and not having an emergency fund is really important... I didn't really realize how many people can't handle being off work even for a week or two until the pandemic. I worked with someone who is making over $100k a year... but when her hours were reduced by 25% she flipped out because she wasn't going to be able to pay her bills... I was floored she didn't have an emergency fund...

100% agree... as I said above... I like Ramsey for getting out of debt... but that's as far as it goes... to build wealth I'd look into things like Rich Dad Poor Dad, Richest Man in Babylon, or Set for Life.

I have a Capital One Visa with travel miles. We, my GF and I, use it for groceries, gas, and other ancillary purchases we know we can pay off at the end of the month. I’ve never paid them a cent of interest. In turn we’ve gotten thousands of dollars worth of travel. One of our tickets to Thailand a couple years back was paid for exclusively from mileage. We currently have $1300 and counting towards our next travel... we’re thinking the South Pacific for my 50th in about 18 months... COVID allowing. By then we’ll have one ticket totally covered ($1300-$1600 per) and part of the second will be covered too.
There’s ways of making it work. Like you said, you just have to treat it like any other Bill that needs paid in full each month.
If you don’t have cash for it... you shouldn’t use credit for it. (Cars and houses don’t count)

i know you asked Diam but let me take a stab... if I have a debt that has a low interest (say 3%)... I have the option to pay the minimum and hold the loan longer or pay over and pay it off faster... If I have something else I want to invest that overpayment into that will make me more than 3% then maybe I don't want to pay off my loan as fast and invest the money... if I don't have anything to invest in then do the overpayment.

I'm still not big on credit. I certainly use credit enough to keep a good standing but in most every case treat it more like a monthly bill than actual credit. When the statement comes in I pay it off. No different than receiving a utility bill. I keep enough in savings to pay off the vast majority of emergencies that may come up but one never knows. There are certainly things that can happen in life that we don't see coming and sometimes emergencies can come in bunches.

The part of Dave Ramsey's class that most people struggle with is giving the first 10% to charity.. even if you are in debt, even if you are struggling to get by, even if it means you miss a credit card payment.. the first 10% always goes to your church or some other charity.. that's hard for a lot of people who are struggling to swallow.

That's my biggest issue with it. He wants you to cut off savings/retirement while you're paying off debt but wants you to give to charity? Seems illogical to me.