Dave Ramsey, debt, credit cards, retirement, etc

Midlake Crisis

Midlake Crisis

Site Supporter
Location
Bakersfield, CA
I'm asking. . .

Matt_E said:
Cheap? Over the life of the loan (15 years), you're still paying more than double the purchase price of the home.

Why would you NOT pay it off?
Click to expand...

I definitely don't know the answer, my thoughts against paying it off any earlier would be

1) The interest rate is very low, and the interest that is paid is deductible from income for tax purposes, so it is cheap money.

2) There is some value to being able to spend the extra cash on other things now and enjoy them longer.

3)The inflation factor makes the cash in hand "spend better" now than it will later.

I don't know if these factors outweigh the benefits of an early payoff or not.

Thoughts?
 
Last edited:
Matt_E

Matt_E

steals hub caps from cars
Site Supporter
Location
at peace
1) The interest rate is very low, and the interest that is paid is deductible from income for tax purposes, so it is cheap money.

You get to deduct the interest amount of your taxable income, which means you don't pay taxes on that amount of interest.
Wouldn't you rather not pay the interest, rather than paying the interest tax free?
Think about it - the interest will always be more than the taxes on the interest.
If you're not paying off the mortgage because of the tax deduction - that's like paying 10,000 so that you can get 2,500 back.

2) There is some value to being able to spend the extra cash on other things now and enjoy them longer.

That's subjective, hence I can't argue with that.

3)The inflation factor makes the cash in hand "spend better" now than it will later.

Or you could have a paid off home, and use the money you used to pay for that mortgage to buy stuff, or better yet, invest. That way, you can beat inflation.
 
Last edited:
SuperJETT

SuperJETT

So long and thanks for all the fish
Location
none
Midlake Crisis said:
Congrats!! I am not really familiar with Ramsey, but it sounds similar to how we have tried to do things the last 10 yrs. It is definitely a good feeling not to have car payments!!

What is the Ramsey plan for mortgages? Pay as early as you can? We have about 10 yrs. left on ours and it is at 5.3%, it seems like cheap money. Would you guys put cash into paying it off early even if it is cheap money like that?
Click to expand...

After paying off all your other debts and investing 15% of your gross into retirement accounts, then he recommends paying the house off as fast as you can so you can then invest that money into mutual funds/etc without worry.
 
Mark44

Mark44

Katie's Boss
Location
100% one place
The stock market is a real good place right now, a lot of high dollar stocks at great prices go open a Scottrade account and get in there.

Mark44
 
SuperJETT

SuperJETT

So long and thanks for all the fish
Location
none
Americans' debt shrinks - 1st time ever

Household debt falls by 0.8% as Americans' net worth falls on declining home and stock prices.

By David Goldman, CNNMoney.com staff writer
Last Updated: December 11, 2008: 1:33 PM ET

NEW YORK (CNNMoney.com) -- In a sign that Americans' spending habits are shifting, household debt fell for the first time ever, based on data going back to 1952.
According to the Federal Reserve's flow of funds report released Thursday, consumer debt fell an annualized $30 billion, or 0.8% in the third quarter to $13.91 trillion.
Americans holding less debt may sound like a positive, but it also means consumers are spending less, as debt has become more expensive and harder to come by.
As the credit crunch intensified in the third quarter - and exploded late in the period with the bankruptcy of Lehman Brothers - Americans were increasingly unable to finance big purchases like homes, cars and big-ticket goods.
"Consumers are going through a major change in their spending and savings habits," said Lyle Gramley, a former Fed Governor. "Throughout the housing bubble, consumers had a savings rate of zero, relying on the rising price of their homes. Now they're saving money for the future instead of spending it."
That's a worrisome sign for the economy, as consumer spending makes up 70% of overall U.S. gross domestic product. And the fourth-quarter numbers are likely to grow, as the peak of the credit crisis came in mid-October.
Consumers watched their net worth decline for the fourth quarter in a row as it dropped by $2.8 trillion, or 4.7%, to $56.5 trillion, dragged down by precipitous declines in home values and the stock market.
Home values declined by $347 billion in the quarter to $19.1 trillion. The net value of stock holdings for households fell by $943.5 billion, or 11.5%, to $7.3 trillion.
 
The Penguin

The Penguin

triple secret probation
Location
down by the river
link?

I heard a terrible scream emanating from Kentucky. Surely it was JETT who is now curled in a fetal position in the bottom of the linen closet upon hearing this news about his hero.

:biggrin:
 
SuperJETT

SuperJETT

So long and thanks for all the fish
Location
none
Yeah, like 18 years ago, that's part of his whole deal of why he does what he does now.

Point?
 
dbrutherford

dbrutherford

Parts Whore
Location
Fairmont, WV
That would be funny if he really did. "Do as I say, not as I do." It must have been the Escalade that did him in.

But I will say this whole living debt free has helped me pay down and almost all my debt. Problems is I am wanting to buy a home and a new vehicle. Looks I will be saving for a little while longer...
 
WaveDemon

WaveDemon

Not Dead - Notable Member
Location
Hell, Florida
just checking in for the fist time on this thread. I just read the whole thing in one sitting.



where's the story about how you pay off 40k for your wifes student loan and some CC debts from a failed business while bringing home next to nothing?


on a good note, I own my cars and almost have a baby EF from selling ski parts.
 
Matt_E

Matt_E

steals hub caps from cars
Site Supporter
Location
at peace
WaveDemon said:
just checking in for the fist time on this thread. I just read the whole thing in one sitting.



where's the story about how you pay off 40k for your wifes student loan and some CC debts from a failed business while bringing home next to nothing?


on a good note, I own my cars and almost have a baby EF from selling ski parts.
Click to expand...

Tim,

From the little bits I've gained going through the Ramsey class, reading the book, and listening to his podcasts, I'd say he'd tell you this:

1. Get a job or two, no matter what it is
2. Come up with a written budget and stick to it.
3. Live on rice & beans
4. Sell anything you can sell
5. Use any extra money to pay off the debts.
6. Once you're done with that, build 3-6 months in emergency cash.
 
SuperJETT

SuperJETT

So long and thanks for all the fish
Location
none
In situations like that, you back up to the '4 walls', housing, food, utilities, transportation, then when you're in position to work on other stuff you do.

As long as you have a plan and stick to it, you'll make progress and better your position.

WaveDemon said:
just checking in for the fist time on this thread. I just read the whole thing in one sitting.



where's the story about how you pay off 40k for your wifes student loan and some CC debts from a failed business while bringing home next to nothing?


on a good note, I own my cars and almost have a baby EF from selling ski parts.
Click to expand...
 
WaveDemon

WaveDemon

Not Dead - Notable Member
Location
Hell, Florida
we've been in sell off mode for a while. we're about to sell the wifes 5k car to get her a cheaper one. everything is kinda held up waiting for my new job to start next month. I stopped selling parts and other small things at the beginning of this month and if I can wait it out I'll wait to start selling until people start getting tax returns so they'll sell for more.

I figure I'll get DR book soon. I like the envelope Idea.


I wish I could do the snow ball payoff, the problem is I only owe money to 2 people and they're about equal. I'm going to pay off the CC first, when it's paid off I'll probably transfer the studen loan to the CC since its at a lower rate.

a few bad decisions have KILLED us in the past couple of years, 3-4 years ago I was debt free.
 
WaveDemon

WaveDemon

Not Dead - Notable Member
Location
Hell, Florida
after reading my post is sounds like I'm trying not to work in the mean time. I'm remodeling the office I'm going to be working in next month so I have a place to work.

4 walls sounds about right. I guess I"m just trying to position myself now so that I can get on the right track soon.
 
Last edited:
You must log in or register to reply here.
Top Bottom