My Dave Ramsey moment

[Chuckanut]

I financed two of my three last cars. One at 0% and the other at 0.9%. Given what I could earn on savings accounts and 3-5 year CD's back then it made sense. I paid cash for the latest car due to the current low interest rates on savings and no great financing offers.

[Markola]

Congrats on your accomplishment, dtbach!

Dave Ramsey is wrong about his advice to buy only growth stock funds but there is no better evangelist of the power of debt freedom. My purchase of his “Total Money Makeover” book in about 2005 has paid for itself probably tens of thousands of times. Thank you Dave! Our only debt is the mortgage and it remains an itch I’d like to scratch.

[ShokWaveRider]

Never been a fan of Ramsey, not for what he "Preaches", I agree with a lot of it, it is pretty much mostly common sense. I am not a fan of the way it is presented. I think perhaps he takes advantage of those who are poorly off, and somewhat gullible. Just my Opinion, I could be wrong.

[timbervest]

Quote:

Originally Posted by ShokWaveRider Never been a fan of Ramsey, not for what he "Preaches", I agree with a lot of it, it is pretty much mostly common sense. I am not a fan of the way it is presented. I think perhaps he takes advantage of those who are poorly off, and somewhat gullible. Just my Opinion, I could be wrong.

I equally don't subscribe to his approach but remember he is directing this toward people who are out of control with their finances to get control. His steps work for those who are in chaos (not tracking spending, relying on CC debt to meet monthly obligations, carrying more debt than they can service, no emergency fund, etc.). I think once you can get the basics down then different approaches work for different people.

I am debt free and happy to be so, although I think responsible use of mortgage debt makes sense. On the other hand, his view on leasing cars, spending more than you make, not paying yourself first, and not understanding the difference between wants and needs is spot on.

[USGrant1962]

Quote:

Originally Posted by Chuckanut I financed two of my three last cars. One at 0% and the other at 0.9%. Given what I could earn on savings accounts and 3-5 year CD's back then it made sense. I paid cash for the latest car due to the current low interest rates on savings and no great financing offers.

Last month I paid off my 0.9% car loan from 2018 with VG Prime Money Market cash that is earning zilch. Totally debt free again!

[LRDave]

wrt to DR: AA for debtors - no room at all for responsible use of debt. If you've "hit your bottom" debt wise, well then, maybe....

[Markola]

Quote:

Originally Posted by LRDave wrt to DR: AA for debtors - no room at all for responsible use of debt. If you've "hit your bottom" debt wise, well then, maybe....

I agree, his is a doctrine of No Debt. It’s also true that zero debt is a wise path and responsible use of debt is a wise path. If you think you have a problem with debt, then you probably do and Ramsey’s message and methods can help. If you don’t think you have a problem with debt, you probably aren’t going to be listening anyway.

[RobbieB]

I agree. I'm not going to listen to anything a guy who hates credit cards has to say.

[Perryinva]

Yep. Me three. Congrats to the OP. For me, real FIRE was definitely a higher thrill. I paid off the last house that was supposed to be the last house. Had been totally debt free a while, but then when we moved to this nicer home, I didn’t want to sink all that money in to a no returns earning house. It would have been more convenient to have more tax free money when dealing on this house, rather than empty some accounts then refill them after the sale closes. So I just put down 35% and invested the rest. No regrets. Got me fatter FI faster. Whatever floats your boat!

[ILikeStarTrek]

First, I'd like to say congratulations to the OP and other posters here who have paid off their debts!

I'm divided in my opinion of Dave Ramsey. I have a mostly positive opinion. He helps a lot of people who call into his show, and it's fun to listen to the "debt free screams". His baby steps, whether or not one entirely agrees with all of them, make for a clear plan, and it's oriented to help people who have been struggling with debt (which is many millions of people in the US). I have recommended his books and 9-week class to family & friends who have been struggling with debt, and at least one of the people to whom I recommended the class went through it and it transformed their finances.

But I'm not a Dave Ramsey purist. E.g., I have a cash-back credit card that I still use. I pay off the full balance every month so I never pay interest, but DR says one shouldn't have a CC at all even if one pays it off every month.

But the biggest area where I diverge from DR is mortgage debt. The rest of this post is my house loan story, which is more complicated than any of the others posting to this thread because I own rental houses.

DR says one should only buy a rental house with cash, never with a loan, because of "risk". But I wouldn't have anywhere near the net worth that I do without having bought rentals with loans. Buying a rental with a loan aka leverage is an opportunity to increase net worth over time by a lot of money. I started buying rentals before I heard DR's advice, but once I did, he didn't change my opinion. Yes, there is an element of risk, but there is risk in all of life. One needs a reserve for unexpected vacancies & repairs and a good cash flow, but if one has these things, a rental is a great way to increase net worth over time.

I bought my first rental in 2003, then acquired a couple more over the next few years. Then in 2008-9 when the real estate crisis hit, I said to myself, "This is the time to buy rental houses!" I was able to buy seven rentals for about half the price of what they would have cost a year earlier. I even took out equity lines on two houses I already owned, in order to finance the rental house purchases (which is also completely against the DR plan). When I was done buying in mid-2009, I had pretty much exhausted the cash and credit I could get. I ended up with my primary home and ten rentals. Of these, nine houses had loans and the other two were clear.

Since then, depending on the situation, some of these loans I tried to pay off ASAP, others I'm just paying off over the full 30-year term via tenant rents. I am trying to have less mortgage debt as I get older. On the other hand, I'm not doing the DR way of trying to pay off all mortgage loans super-early.

Two years ago (mid-2018), at age 55, I quit my day job and I'm now retired except for doing tenant management of my own houses. (I don't do my own maintenance repairs, but I do manage the tenants.)

I've paid off three houses since 2009. At present, my primary home and four rentals are paid off. The other six rentals still have mortgages.

Of the six rentals with loans, three will be paid off the year I turn 67 (nine years from now), which is also the year I can claim full Social Security. I currently clear about $55k/yr positive cash flow on my rentals, but when I get Social Security and have the 3 mortgage payoffs in the same year, that will give me another $52k/yr which will put me in really great shape for cash-flow. (BTW, I'm also using about $25-30k/yr which is about a 2% Withdrawal Rate on my money-type assets. When I reach age 67, I probably won't need to continue to withdraw any of that money due to the extra SS & rental cash flow. Although, "you can't take it with you", so I'll figure out some way to spend that money!)

But those last three rental house loans, two of the loans will pay off when I'm age 80, the other at age 84 (assuming I live that long!). These houses are my most expensive ones, and they get good rental cash flow but the loans are also the largest. From a cash flow perspective, it doesn't make sense to me to try to pay them off early. So for now, I'm just letting them run to their full loan term and the tenant rents are gradually paying them off. Maybe when I turn 67 and get all that extra cash flow coming in, I'll change my mind and decide to start paying down these mortgages faster. Or maybe when I get into my 70s, I won't want to manage rental houses anymore and I'll start selling off some of these houses. We'll see. But for now, I'm not going to do anything to pay off these mortgages early.

Between my house mortgages and the fact that I still like to use a cash-back credit card, I won't be doing a "debt-free scream" any time soon. But for those who do, like I said, they are really fun to listen to on DR's show!

[momoftwo]

Great accomplishment!
Feels wonderful I bet.

We retired last year, downsized and bought our retirement home for cash.
Just now paid off the few thousand left on loan for sons college.
Now down to $700 on an interest free Best Buy credit card for washing machine.
Paying a bit each month; will avoid any interest.

It IS amazing how much smaller our monthly expenses are with no debt.
Terrific peace.

[VanWinkle]

Congrats on owning it all Dtail!!!

[HawkeyeNFO]

Quote:

Originally Posted by Nick12 Paid off a 30 year mortgage in year 11 in 2005. More money put into mutual funds monthly until FIRE'd a few years ago!

Everyone's specific details (like mortgage rates) are different, but I would argue that the opposite is true: you had LESS money to put into mutual funds, because it went into paying off the mortgage.

In my case, buying mutual funds in 2005 cost much less than it does today. I bought when they were cheap, and was able to buy more because I didn't pay off my mortgage 15 years ago. S&P500 was in the 1500s at that time. It's in the 3400s right now. Hopefully you had good value appreciation on the house, but in most areas, real estate has not gone up as much as the stock market since 2005.

I'm happy I didn't pay off the house back then because of the math. But I also see your point, and having zero mortgage debt is nice too.

[JustCurious]

Quote:

Originally Posted by HawkeyeNFO In my case, buying mutual funds in 2005 cost much less than it does today. I bought when they were cheap, and was able to buy more because I didn't pay off my mortgage 15 years ago. S&P500 was in the 1500s at that time. It's in the 3400s right now. Hopefully you had good value appreciation on the house, but in most areas, real estate has not gone up as much as the stock market since 2005.

You make some good points, but a couple points in response. 1) Yes, the stock market likely did better over the last 15 years compared to paying off a mortgage, but that was not guaranteed. Likely, yes...guaranteed, no, whereas paying off a mortgage is a guaranteed return. 2) For some people the feeling of being completely debt free and the freedom from monthly payments and the simplicity associated with that is worth more than the possibility or even the probability that you may come out ahead mathematically by juggling debt payments.

[RobbieB]

I'm no fan of a lot of debt. The mortgage was the only one. But hey, now it's paid off and the only cost is repairs and improvements. Plus the 2 grand a year in property tax.

But DR is all about zero and zero makes no sense at all. Payed in full when due makes sense. Payed in full with 2% cash back adds 2%.

And two percent is way better than zero.

[teetee]

Quote:

Originally Posted by RobbieB I'm no fan of a lot of debt. The mortgage was the only one. But hey, now it's paid off and the only cost is repairs and improvements. Plus the 2 grand a year in property tax. But DR is all about zero and zero makes no sense at all. Payed in full when due makes sense. Payed in full with 2% cash back adds 2%. And two percent is way better than zero.

If your are referring to credit card that produces 2% cash back, I think it is good for some people. 2% discount feels a lot better at the emotional level rather than its dollar amount.

You only get cash back with your spending. The execuse for additional spending with this brings far more profit for the CC companies than that 2% cash back helps to save for the consumers.

While I do it just to get some satisfaction emotionally, I wouldn't brag about it cause that is what the CC companies want: me being the free ad service for them while somewhere someone with less self control, get screwed and start having recurring CC debt. Another angle to view the irony: you wouldn't pay much attention with most of the buy-one-get-one-half-price (50% off on the second one) items on the weekly grocery flyers but you would get excited with a 2% discount with cash back. Something is affecting our minds at emotional level here.

[Souschef]

YMMV. I use my CC for just about everything, because I do not have to carry a bunch of cash or write a bunch of checks. I pay it off every month, and yes, I do get a little cash back, but that is just a bonus.
I do take advantage of sales, and go over the weekly grocery ad with a fine tooth comb.
I recently bought four two inch thick rib eye steaks and saved $100 on the purchase as an example.

[jollystomper]

Quote:

Originally Posted by Markola I agree, his is a doctrine of No Debt. It’s also true that zero debt is a wise path and responsible use of debt is a wise path. If you think you have a problem with debt, then you probably do and Ramsey’s message and methods can help. If you don’t think you have a problem with debt, you probably aren’t going to be listening anyway.

There are some folks who need that bowl of cold water thrown in their face, grabbed by the shoulders, and have "WHAT THE H*LL ARE YOU THINKING, STOP IT!" shouted at them to help them deal with their situation. For these kind of debt situations Dave Ramsey is very effective.

But like any other "celebrity" financial advisor, all of his advice is not applicable to everyone. Nor will it be always right about particular aspects. He is human, not perfect.

I listen to multiple "celebrity" financial advisors. All of them provide some degree of good advice, depending on one's situations and discipline. But none of them provide, in my opinion completely good advice. Ultimately i am responsible for my own situation, so I choose items from the advice of many that make sense for me, and apply it.

[Gumby]

People who have a spending problem shouldn't have any credit cards, just as those with a drinking problem shouldn't have any alcohol. For those who are in control of themselves, credit cards and alcohol are fine in moderation. Dave Ramsey deals with the spendaholics, so his advice for them is good. It is unnecessary for most, if not all, of the people on this board.

[dtbach]

OP here.


I don't really listen to Dave Ramsey and not sure what he preaches other than to dig hard to get out of debt. I titled the thread because of his "We're Debt Free" yell he has the various "liberated" fans do.


I use credit cards of course and pay them off monthly so no debt there. Now I'm worried the DW will think the way is clear to REALLY start spending


The next First World problem I have is to whether or not take my SS (I'm presently using restricted claim on DW SS) at 68 or wait until 70. Good problem to have I guess.