Dave Ramsey, debt, credit cards, retirement, etc

[crammit442]

My gf used to not be able to stand Dave either. She probably still doesn't like him, but just this week she opened a Roth IRA and when I asked her why she said "because of Dave Ramsey". Sweet :cheer:

I'm just the opposite. His show started playing on the radio here several years ago and I enjoyed it for a while. IMO he used to be much more compassionate and seemed to actually listen to callers. Now, more times than not he is spitting out quick answers before he finishes hearing what the caller says. I don't know if his success has gone to his head or if he's become jaded by hearing the same stories over and over or what. Another thing is that once you hear his show for a few months you've pretty much heard all he has to say. I listened to Larry Burkett for MANY years way back when Dave was still busy going bankrupt so I've been mostly following the plan for a long time anyway:veryhappy:. Either way the get out of debt stuff really does work and makes life much less stressful.

 

[SuperJETT]

I'm just the opposite. His show started playing on the radio here several years ago and I enjoyed it for a while. IMO he used to be much more compassionate and seemed to actually listen to callers. Now, more times than not he is spitting out quick answers before he finishes hearing what the caller says. I don't know if his success has gone to his head or if he's become jaded by hearing the same stories over and over or what. Another thing is that once you hear his show for a few months you've pretty much heard all he has to say. I listened to Larry Burkett for MANY years way back when Dave was still busy going bankrupt so I've been mostly following the plan for a long time anyway:veryhappy:. Either way the get out of debt stuff really does work and makes life much less stressful.

He knows the story before they are on the air, that's why he gives such quick answers now. Laura screens the calls and their info is on his computer screen while he's talking to them.

As long as you get a plan that makes sense and stick with it, it will work. Sticking with it is the hard part.

 

[crammit442]

He knows the story before they are on the air, that's why he gives such quick answers now. Laura screens the calls and their info is on his computer screen while he's talking to them.

As long as you get a plan that makes sense and stick with it, it will work. Sticking with it is the hard part.

That's the truth!

 

[Gainera2582]

I encourage those to read his book. I just started today and have read close to 100 pages and everything makes perfect sense. No gimmicks, just facts!!!

 

[SuperJETT]

I copied this straight from www.consumerist.com If you just want ot see what part of Dave's Financial Peace University is about, this is an easy way to do it. Watching a video, how hard can that be? And for all you guys that hate him and have all the answers already, good for you. But don't assume you know everthing and can't learn more.
http://consumerist.com/consumer/vid...dumping-debt-presentation-for-free-299591.php

Get Rich Slowly found Personal Finance maven Dave Ramsey's full 90 minute presentation on "dumping debt" available on YouTube.

Inside, we're watching each part and summarize the highlights so you don't even have to watch if you don't feel like it...

YouTube - Dave Ramsey Dumping debt part 1 of 9
Part 1
Debt is stupid
Debt is an aggressively marketed product
Living without debt requires a paradigm shift
We used to think debt was a sin
1910 Sears catalog called buying on credit "folly"
Today, Sears has made more money on credit cards than on merchandise

YouTube - Dave Ramsey Dumping debt part 2 of 9
Part 2
Credit card issuers sent out 4.2 billion offers last year
Credit cards are a product
Banks are in the business of selling debt
Debt has become enmeshed with the fabric of everyday life
Don't get him wrong, Dave only blames himself for when he got into debt
We have become a culture of borrowers, aka, sharecroppers
"The rich rules over the poor and the borrower is slave to the lender" Proverbs 22:7 (NKJV)
Dave uses a chain to demonstrate how he got into debt, wrapping it around himself more and more as he buys a couch, TV, stereo, and no-money-down home, on credit
According to Larry Burkett (?), we spend the first 5-7 years of our marriage trying to reach the same standard of livings as our parents, only problem being that it took them 35 years to do it...
Of the 52% of marriages that end in the first 5 years, 90% of them cite money troubles as the primary cause
Eventually Dave and his wife decided to go completely broke and get rid of everything and work like crazy to escape their payments
Myth: If you loan money to a friend or family member, you're helping them
Truth: The relationship will be strained or destroyed.

YouTube - Dave Ramsey Dumping debt part 3 of 9
Part 3
Myth: By cosigning a loan, I'm helping a friend or relative
Truth: The bank requires is requiring a cosigner because the person isn't able to pay. Be ready to pay the loan and have your credit damaged.
If you cosign a loan for your children, you're not blessing them, you're bringing them into a master/servant relationship
If you really want to help them, give it to them as a GIFT
Myth: Cash Advance, payday loans, pawnshops, rent-to-owns are needed services for poor people to get ahead
Truth: These are horrible, greedy, ripoffs
Myth: You can get rich playing the lottery
Truth: Powerball is a tax on the poor and people who can't do math
If you took $32/month, the average amount a lottery player spends, and instead invested it in a good growth stock mutual fund from age 20 to 70, you can retire with over a million dollars
Myth: Car payments are a way of life
Truth: Staying away from payments by driving reliable used cars is what the typical millionaire does

YouTube - Dave Ramsey Dumping debt part 4 of 9
Part 4
Myth: Leasing is what sophisticated people do
Truth: A car lease is the most expensive way to pay for a vehicle
If a car dealer sellls a car for cash, he makes on average about $82. If he sell it with a financing plan, he makes $775. Leasing, $1300
Myth: Sophisticated people write off part of the lease
Truth: Smart people buy items that depreciate in value used
Myth: I can get a great deal on a new car!
Truth: A new car loses 60% of its value in the first 4 years you own it
Instead buy a 1 or 2 year old car
Unless you make $600k plus a year, then it doesn't really matter!
Sometimes Dave feels like his radio show is the "sell the car show" as that's his number one piece of advice to people
Dave himself bought a 2 year old car with 23,000 miles on it

YouTube - Dave Ramsey Dumping debt part 5 of 9
Part 5
Myth: Home equity loan is a good because it's a tax deduction and it's a substitute for an emergency fund
Truth: You don't go into debt for emergencies and a tax deduction is not good math
People who justify going into debt for tax purposes are really saying "let's send the bank $5,000 to keep from sending Washington $1,250"
Myth: I'll take out a 30 year mortgage and promise to pay extra
Truth: No one pays extra, don't take out more than a 15 year fixed rate loan
An FDIC study says that on average 97.3% of people do not systematically prepay a 30 year mortgage. See graphic:
Myth: It is good to take out an adjustable or balloon mortgage because "I know I'll be moving"
Truth: You will be moving when they foreclose
Adjustable rate mortgages were invented in the early 1980's to transfer the risk of higher interest rate mortgages to you
Myth: You need to take out a credit card or car loan to build credit
Truth: Open credit cards with zero balances and car loans count against you when qualifying for a mortgage
Myth: You need a credit card to rent a car.
Truth: A debit card will work at nearly all major places
Myth: You need a credit card to check into a hotel, make a purchase online or over the phone
Truth: Your debit card will work just as well
Myth: I pay my credit card off every month, and earn miles and points, and a free hat
Truth: 78% of Americans do not pay off the balance every month. If you pay with cash only, you spend less
Consumer Reports says that 75% of frequent flier air miles are never redeemed

YouTube - Dave Ramsey Dumping debt part 6 of 9
Part 6
Though I have no problem with debt or money management, he's almost got me convinced to cancel my American Express card.
63% of bankruptcy filers blame credit card bills and 89% of filers STILL get offers
The credit card industry is out of control, they're trying to give lines of credit to dead people, poodles, and children
Myth: I'll get my teenager a credit card so they'll learn to be responsible with money
Truth: Teens are the number one target of credit card companies today
Citibank spent 100 million dollars this year JUST for marketing credit cards to high school and college students
Having a credit card doesn't make you an adult, it merely means you can probably breath air
Credit card companies are priming children for brand loyalty. A back of a Raisin Bran box says Visa is the official sponsor of Grinch's "Whoville." Citibank sponsored a learning tool cash register with their name on an included credit card "toy." "Cool Shopping Barbie" was pulled off the market in 1997 after consumer advocates complained about her being sponsored by MasterCard, though they waited until afte Christmas to do it. She came with her own little MasterCard.
19% of the bankruptcies filed last year were college-age people.
The number one personal finance curriculum sweeping schools today was sponsored and designed by VISA.

YouTube - Dave Ramsey Dumping debt part 7 of 9
Part 7
Myth: Debt consolidation saves money.
Truth: Debt consolidation is a con. Smaller payments equal longer time in debt.
Myth: Debt, properly used, is a tool for financial prosperity
Truth: Debt is proof that the borrower is slave to the lender
75% of the Forbes 400 most wealthiest people say that getting debt-free is the number one way to build wealth

YouTube - Dave Ramsey Dumping debt part 8 of 9
Part 8
The number one thing you need to pay off your debts is INTENSITY
Dave has 6 steps to get you out of debt, which he wants you to employ with the focus and drive of a gazelle running from a cheetah
1. Quit borrowing more money

YouTube - Dave Ramsey Dumping debt part 9 of 9
part 9
2. Save money
3. Pray. (Obviously, this step is not for everyone)
4. Sell a bunch of your stuff
5. Temporarily get a part-time job
There's a great place to go to when you're broke... to work
6. Pay off your debts using the debt snowball: pay minimum payments on everything except for the smallest debt. Then put as much money as you can towards paying it off. After you knock that one down, go onto the next one. He says the psychological win is more important than paying off the highest interest payment, as it motivates you to keep paying off debt.

 

[dbrutherford]

Well it has been a while since I have posted or updated "my debt woes" but I have been making some progress.

I just got a new credit card that has 5.99% apr for the life of the loan and I balance transferred my two other cards to it. I could have gotten 0% apr for 6 months but then it would have went to 12.99% so I feel I am better off with the the 5.99% for the life over the short term free interest. I also got the two balance transfers with no fee.

So now I owe $7,700 at 5.99% to Citi card... still have the debt but I will save about $50 to $60 per month in finance charges. Better yet I only have to make ONE payment instead of two. I plan to pay $500 a month on it. I will pay more once I pay my 4-wheeler off.

As for my 4-wheeler, I have been paying $450 each month on it. I now owe $3,050 on it. I am supposed to get around $3k back for taxes so I will pay it off with my tax return. If my tax return is less, I will just use it plus money from savings to pay it off. I still debate on selling it but once it is paid off, it will be one less bill each month.

As for student loans... I still owe just under $12k but it is a lower interest rate and it is only a $110 payment each month for two more years. After that it will increase to more but at the $500 per month rate, I will have the Citi card paid off in a year and a half.

As for emergency savings, I have $6k put back. Now this is still emergency money and I want to add to it. I would love to just pay off my 4-wheeler and my credit card all at once but I know as soon as I do, my truck will take a crap or I will get hurt and not be able to work ect…

Another debt woe is however that I owe my mom $2k. I did owe her $2500 but I have made her two payments of $250. So 10 total payments, one each month, and she will be paid off. She loaned me money when I moved a few months back and then the company reimbursed me. I made a deal with her however to keep it and pay payments. This way I have more money in my bank account for emergencies and such. Plus if something should happen, mom doesn’t charge interest or late fees.

All in all I am working on it. It sucks because I try not to go out much, never eat out, ect… I make $4459 per month and I clear after taxes, retirement, and health care around $3100. I upped my 401k so that will probably drop to around $2900. All in all I am way less stressed about money than when I was in college. The only bummer I have now is that my company made me sign a relocation agreement where if I quit or get fired within a year of my moving to another factory, I will have to pay back a percentage of the money given to me. Oh well, only 10 more months…

 

[Mark44]

Sounds like you need to sell the 4 wheeler and pay Mom off and some of that credit card dept.

Also take the savings out of the bank pay off the credit card and start putting money back in savings with what you would have paid the credit company each month unless you like paying the credit card company fee's.

Just an idea.

Mark44

 

[dbrutherford]

Sounds like you need to sell the 4 wheeler and pay Mom off and some of that credit card dept.

Also take the savings out of the bank pay off the credit card and start putting money back in savings with what you would have paid the credit company each month unless you like paying the credit card company fee's.

Just an idea.

Mark44

Well that would be what I would like to do but what happens if my truck blows up or if I get in a wreck since I only have liability? I need a vehicle to get to work... I would rather have my emergency fund and be making payments. The mom loan isn't a big thing, she did it to help, she knows I got reimbursed from the company. Plus I have already paid on the 4-wheeler for years and its market value isn't worth what I have invested. I fell better off just keeping it rather than selling it and taking a huge loss. It will be owned free and clear within two months.

Once I get my tax return, I will pay off the 4-wheeler. Then I will also dump say 2700 on the credit card to help reduce the balance. Compared to what I was paying in monthly finance charges, the amount I will pay if I stick to paying 500 a month for a year and a half is not all that bad.

If you knew how stupid I was and how much debt I racked up in the past 5 years, you would see I am making a lot bigger strides than the baby steps I made towards lowering my debt in college. I haven't made a charge on a credit card for over two years! I only buy something if I have the money in my bank account instead of just charging it to a credit card. Sometimes you have to learn the hard way... I sure did... I have friends that owe 50k+ on student loans. I don't think I am that bad off. Plus my credit is still above average.

 

[BruceSki]

so about the cars...i think thats the most interesting how much people will waste.

i just got a call from my buddy and he said he was checking out another buddies brand new car.

he got a call from ford and upgraded his 2 year old truck to a brand new for get this "lower payments"

im sure they lengthened the time on his payment schedule to do this.


Now this has my buddy thinking ill call up and see if they will offer me the same

i began talking about how it was a bad idea and he shouldnt do it...


his answer....."you are always going to have a car payment"....get used to it.


If ive learned one thing from reading this thread and being 53 pages into the book is never to buy a brand new car financed...

just felt like sharing

 

[SuperJETT]

You've got it!

Bingo.

Cars depreciate like crazy and yet people still buy way more than they need/can afford/etc just to show off to someone at a stop light for 10 seconds.

I'll buy a new car, but it will be when I'm not worried about the depreciation and will pay cash for it. A friend at work bought his wife a new Toyota Avalon last year, paid cash for, and it's loaded, like $40k worth, but he can afford it now since he's been a Dave Ramsey follower for years.

so about the cars...i think thats the most interesting how much people will waste.

i just got a call from my buddy and he said he was checking out another buddies brand new car.

he got a call from ford and upgraded his 2 year old truck to a brand new for get this "lower payments"

im sure they lengthened the time on his payment schedule to do this.


Now this has my buddy thinking ill call up and see if they will offer me the same

i began talking about how it was a bad idea and he shouldnt do it...


his answer....."you are always going to have a car payment"....get used to it.


If ive learned one thing from reading this thread and being 53 pages into the book is never to buy a brand new car financed...

just felt like sharing

 

[thrllskr]

Another thing is that once you hear his show for a few months you've pretty much heard all he has to say.

This is very true. I like Dave and listen to his show, but I don't feel like I can learn much more, but I still find the show interesting. 95% of the time I know the answer he is going to give...

 

[Scraggly]

well i have to get this going for me as well this thread is definitely an inspiration to others.

im not to bad in debt at this point, but its the most i have ever owed and it really ways on me. i was raised to not borrow and only buy what you have the money for and i followed this up until this past year. i guess i just went a little wild and bought a few things i shouldnt have ski's included. at the moment i owe about 1400.00 on credit cards and around 2500.00 for a dirt bike that i didnt need. if i thought i could get that for the bike i would sell in a heart beat, but i doubt it will bring what i owe even though it only has about 8 hours on it. my truck will be payed off this month so im planning on putting all of that payment towards my debt soon. i know if i can get focused i can get this taken care of pretty fast.

 

[Mile9c1]

IMO he used to be much more compassionate and seemed to actually listen to callers. Now, more times than not he is spitting out quick answers before he finishes hearing what the caller says.

You must have caught a bad show, he's usually very compassionate with the callers. I've only heard him once or twice get a pissy. But whatever, it's for the callers own good. If you think Dave is mean you should listen to Dr. Laura... she's a b****! Also some of his callers have done really really really stupid things.

Another thing is that once you hear his show for a few months you've pretty much heard all he has to say.

Dave will be the first to tell you that! I rarely learn anything from his show, I mostly listen for the entertainment value.

 

[Mile9c1]

I upped my 401k so that will probably drop to around $2900.

Dude, you're skipping baby steps. Delay retirement savings until after you have your debt paid off.

Dave is firm about this! I'm not so firm, I think you should always contribute enough to get the employer match. But more than that while in debt is dumb.

 

[onesojourner]

I think Dave says to match what your employer will match too.

 

[ATS_Aaron]

I do disagree with one thing Dave says: "Leasing is the most expensive way to buy a car."

That isn't always true. You have to look for manufacturer backed leases and read all the fine print, but I am driving a 2007 Tundra on a lease. The total of my downpayment + lease payments (including all fees, interest, etc) + my residual (what I will have to pay at the end of the lease if I want to buy the truck) is LESS than the sticker price of the truck.

The trick/catch whatever is that the manufacturer was offering special lease incentives. Basically a zero interest lease + a rebate. If I purchased instead of leased I could have chosen a rebate or 0% interest, but with the lease I basically got to double dip.

Of course all of this is dumber than just buying a 2 year old Tundra, but I wanted to spoil myself.

The dumbest thing we did was buy a new 2004 Jeep Grand Cherokee. We should have leased it, but instead we bought. We wanted to "own" it. Well guess what, 3.5 years into "owning" it we still owed more than it was worth. Had we done a lease we could have walked away in a break even situation 6 months prior to that and paid $50 less per month.

Leases are mysterious and dealerships try to RAPE you on a lease. So do your homework first. When I bought my 06 Tundra the saleman has bought an identical one the week before. My lease payment was $150 less than his for the same truck. He didn't do his homework and his employer raped him.

Aaron

 

[ATS_Aaron]

Oh and another thing:

Using debits cards for deposits at car rental places and hotels is NOT THE SAME AS USING A CREDIT CARD. The merchant/vender/comapny runs an authorization on your credit card. What this does on a credit card is reduce your total available credit so that if in the event of needing to charge you the merchant/vender/company knows the money is available.

What is does on a debit card is LOCK UP YOUR REAL MONEY. I am dealing with this right now on one of my debit cards. In reality I have $2400 in my account, but $2300 of it is locked up in an authorization so I can't spend it. THAT COULD RUIN A VACATION FAST.

Aaron

 

[SuperJETT]

The dealer makes way more money on a lease than selling a car, so how could you get a better deal?

If you had haggled, you could have gotten the same deal by buying the truck as the lease. Just because your total is less than **sticker price** doesn't mean it's a better deal, it just means you got a better deal than sticker. If you had the money when you walked in there, you could get a way better deal than sticker price for sure.

I do disagree with one thing Dave says: "Leasing is the most expensive way to buy a car."

That isn't always true. You have to look for manufacturer backed leases and read all the fine print, but I am driving a 2007 Tundra on a lease. The total of my downpayment + lease payments (including all fees, interest, etc) + my residual (what I will have to pay at the end of the lease if I want to buy the truck) is LESS than the sticker price of the truck.

The trick/catch whatever is that the manufacturer was offering special lease incentives. Basically a zero interest lease + a rebate. If I purchased instead of leased I could have chosen a rebate or 0% interest, but with the lease I basically got to double dip.

Of course all of this is dumber than just buying a 2 year old Tundra, but I wanted to spoil myself.

The dumbest thing we did was buy a new 2004 Jeep Grand Cherokee. We should have leased it, but instead we bought. We wanted to "own" it. Well guess what, 3.5 years into "owning" it we still owed more than it was worth. Had we done a lease we could have walked away in a break even situation 6 months prior to that and paid $50 less per month.

Leases are mysterious and dealerships try to RAPE you on a lease. So do your homework first. When I bought my 06 Tundra the saleman has bought an identical one the week before. My lease payment was $150 less than his for the same truck. He didn't do his homework and his employer raped him.

Aaron

 

[Mile9c1]

I think Dave says to match what your employer will match too.

Not while one's in debt. Investing while in debt = too risky. And then it also takes longer to get out of debt.

But IMO if an employer is matching, you gotta do up to the max.

 

[dbrutherford]

Dude, you're skipping baby steps. Delay retirement savings until after you have your debt paid off.

Dave is firm about this! I'm not so firm, I think you should always contribute enough to get the employer match. But more than that while in debt is dumb.

That is all I did. I was only putting in 3% and the company matches up to 6%. So I upped my contribution to 6%. No sense in loosing free money.

I know if I sold everything, and I mean everything I could get out of debt easily. However I would loose everything I have bought that put me into debt in the first place. I know it sounds stupid but I have crunched the numbers and at the oayment rate I am paying I will only spend 358 bucks in finance charges on my credit card. To me that is worth it. I haven't crunched the student loan interst amount yet but it would most likely be double that easy.

I feel I have made big steps compared to 3-4 years ago. It may not sound like much ot some but I haven't charged anything at all not once in 2 and a half years on a credit card. From that point on, I used my debt card which comes out of my bank account. And that is something Dave does say to do!

X2Rags, I feel ya. I am in the same situation with my 4-wheeler that you are in with your bike. In the long run I feel like I am better off keeping it since one it would be paid for and two I wouldn't be taking the loss. What happened was I bought it new. You should always just save up and pay cash just like Dave says to do. Let someone else take the loss.