Dave Ramsey, debt, credit cards, retirement, etc

[SteveC]

Most people who are way in debt don't have a math problem, they have a discipline problem,

Understanding the math must precede applying the discipline. You can be a brutally disciplined person, but without realizing that debt has costs, and deciding you don’t like those costs, you won’t have motivation to apply that discipline to getting out of debt.

And advising someone to keep their house in debt so they can gamble in the stock market... It’s really not that cut and dried. You can own your house, lose most of your income, and watch the market tank and still get by and not lose your house and equity. But if you have house debt, lose income, and watch the market tank, you’re still going to have to make that payment, or else! It comes down to risk tolerance, priorities, etc. But otherwise, yes, borrowing against your house to have money to put in the stock market is a thing.

 

[Storbeck]

Understanding the math must precede applying the discipline. You can be a brutally disciplined person, but without realizing that debt has costs, and deciding you don’t like those costs, you won’t have motivation to apply that discipline to getting out of debt.

And advising someone to keep their house in debt so they can gamble in the stock market... It’s really not that cut and dried. You can own your house, lose most of your income, and watch the market tank and still get by and not lose your house and equity. But if you have house debt, lose income, and watch the market tank, you’re still going to have to make that payment, or else! It comes down to risk tolerance, priorities, etc. But otherwise, yes, borrowing against your house to have money to put in the stock market is a thing.

I would recommend you follow Dave Ramsey's advice.

 

[SteveC]

I would recommend you follow Dave Ramsey's advice.

Notice I didn’t ask

Don’t try to make it personal and confrontational. I just pointed out flaws in your blanket statements. It’s just more subtle than “keep your mortgage and gamble that money”. I stayed out of debt and kept ahead of the game long before I heard who Dave was... but he’s formulated something that has helped millions, so the man deserves credit.

 

[Big Kahuna]

Negative Ghostrider. The Obamacare premiums were calculated on more that just being Employed or just having "Earned Income". There is also "Unearned Income" such as profit-making Stocks and Capital Gains. I would have had to have been completely broke, not just unemployed before qualifying for the free Obamacare. The Rules are not applied equally and justly for all Americans. The Self-Employed and 10-99 Independent Contractors got the hell kicked out of them by Obamacare. I'm just one of many Middle-Class Americans that got the short end of the deal.

You missed the sarcasm..... We had a sub contractor that worked just enough for us to have a very small 1099 so that his family qualified for almost free insurance. Pissed us off to no end.......... I was lucky, company I work for still provided us insurance, though it is not worth much now. Very High Deductible, Barely pays, Went to PT for 3 weeks, I owe almost $1000.00, Same for my wife...............

 

[Storbeck]

You didn't point out flaws with my statement.

On the debt snowball thing, the math is very clear, the way that Dave Ramsey says to pay off debt will result in paying more money over a longer length of time than paying the highest interest debt first. He knows that, he has pointed it out himself, and he has explained the reason why he recommends what he does. I think he has a good point. His point is that most people with a debt problem have a discipline problem (behavior problem, psychological problem, call it what you want) not a MATH problem. They understand that spending more than you make puts you in debt, but they do it anyway. This is his point, not mine.

Paying off your house early, for most people, will do very little to prevent them from loosing their house in the event of loss of income until the point that the house is completely paid off. During the time that you are still paying off the house, the extra payments on the mortgage do nothing to save you from loss of income, your mortgage payment is just as high if you have 2 years left on your mortgage as if you have 20 years left on your mortgage so it's the same problem if you don't have income.

The thing that prevents you from loosing the house is buying a house that you can really afford (so the payments are low) and having savings so you can make the payments if you loose your income. Dave recommends both of those things. You have to do that whether you pay the house off early or not because most people will still take a while to pay off their houses even if they do it early.

And if you consider the stock market gambling, what are you doing for retirement? Dave himself recommends investing in the stock market for retirement. I think you're implying that investing money that you may need in the short term is a bad idea, and I agree, but that's not what I was talking about. You shouldn't use money that you might need in the short term to pay off your house early either, because early payment on a mortgage is very non-liquid, even more so than investing in the stock market.

 

[Storbeck]

I should clarify I'm not criticising Dave, quite the opposite I think part of his brilliance and his effectiveness is from recognizing that financial problems and financial advice needs to take into account more than the cold math, he takes into account behavior of humans.

 

[waxhead]

We have a reasonable mortgage due to owning a reasonable amount of property. At the moments we have reduced the amount we are paying of the principle to the minimum and firing it into the stock market via a broker. The return is a lot higher and I feel like its a reasonable risk at the moment. I think the discipline is the key. Its not about how much you make but more how much you spend. If you want a nice new car then awesome but it has its cost and as long as you are aware of it. If you are carrying personal debt then well, i have to say i dont think your doing your self any favors at all

 

[kevbo]

Its peoples attitudes and behavior that make or break them. Dave pushes a single minded attitude toward debt reduction, which will do the vast majority the most good. Its hard because most people are extroverted so keeping up with the Jonses make them more accepted in society. We all learned in junior high that popular people are ueually the ones that have the right clothes, car, and house. The "right" ones are never cheap.

 

[Jordanhiggins2002]

Another HUGE point people miss on the debt snowball is the early victory. As said above, Dave takes into account human behavior and if your paying the largest debt first it will take the longest and most humans will get distracted (discipline) and lose hope. You can tackle the first debt pretty quickly if you actually budget and do beans and rice and then you get the early win and it motivates people to keep ongoing.

 

[Jordanhiggins2002]

Beware of Property Taxes. The Liberals have tried twice this year (Chinese Virus and Hurricane Lora pretexts to declare Disaster Area and thus no-vote Tax Raise) to raise the Harris County (Houston) Property Taxes to 8%!

My humble average Houston home is artificially appraised at $200K by the County, and the House is paid off, but I'm still stuck with a confiscatory Property Tax.

A $16K Annual Property Tax will break me, no matter what Dave says...the Matrix wins.

I'm bugging out to Thailand where I can live well for only $300 a month. That's my Retirement Plan.

Have you been to Thailand? You can't really live on $300 a month imo (Sorry as I took your $300 literally)
It is way cheaper than anywhere in the US, that's for sure.

 

[SXIPro]

Have you been to Thailand? You can't really live on $300 a month imo (Sorry as I took your $300 literally)
It is way cheaper than anywhere in the US, that's for sure.

He was just talking about the cost of the teenage prostitutes.

 

[Quinc]

Damn might be time to retire!

" To get a retirement visa in Thailand, you need either a monthly income of at least 65,000 baht (about $2,000), a bank account balance of at least 800,000 baht (about $25,000), or some combination of income and money in the bank that equals 800,000 baht. An income of $2,000 a month is enough for a retired couple to live comfortably in Thailand.

The typical Thai resident lives on less than $1,000 a month. While expats could follow suit, most would not be comfortable with this budget since it would mean living in a tiny apartment, eating only local food, and foregoing health insurance, travel, and entertainment. Instead, most budget-conscious expats should plan on a bare minimum of $1,500 a month, according to LePoidevin. "

 

[Jordanhiggins2002]

He was just talking about the cost of the teenage prostitutes.

lmao!!

 

[Jordanhiggins2002]

Yes, you can live with $300 per month comfortably:

$95 House Rental Middle Class Thai Family Neighborhood - (3 BR/2Bth/2 Car Port) , City of Kanchanaburi
$15 Electricity
$ 5 Water
$25 Internet
$15 Cleaning Maid: Laundry and House Cleaning
---------------------------------------
$155 Basic Monthly Bills
+
$150 Restaurants $5/day x 30 if you eat out every day
------------------------------------
$305/month

This is a true budget from a Friend of Mine that actually lives there. Been there for 4 years now.

Obviously you can live cheaper if you eat home most weekdays. You can also rent a cheaper small Apt instead of a House.

You will need a Taxi, Moto-Bike, Motorcycle, ATV Quad or Car for transportation

You will need to pay $300 every 18 months to renew your Thai Expat Visa.

Economy Airfare to Bangkok is about $1000 to move there. Just bring 2 Suitcases and a Laptop. Everything else you can find there including quality Tools and Jetskis.

Thank you for the breakdown. I do not see anything you left out and I appreciate the information.

 

[Jordanhiggins2002]

I see above you have $305 ish and then another poster said $1500 is the bare minimum and see where I get confused. I trailed there many years ago but it was vacation so I was 110% splurging.