My Dave Ramsey moment

[Rianne]

I know many people who've benefited, skirted bankruptcy and starting saving because of DR. I don't agree with the CC part, but the discipline he teaches is good. Put cash into envelopes for each month going towards different expenses. Once that is gone, you're done spending. There is something psychological about spending cash. Taking that Alexander Hamilton out of your pocket and paying for an item is different than using a CC.

His techniques made him rich, but I'm OK with that. They gave a different perspective about spending. And the way he talks about interest, owing someone else above and beyond the cost of a car or house. I hate owing anyone. It bothers me. It comes from my parents almost going bankrupt. One of the scariest feelings ever.

[RobbieB]

I will agree that there are people who need DR. Just like alcoholics need AA.

[FIREarly]

Quote:

Originally Posted by dtbach I'm debt Free!!!

Congratulations!!

[indiajust]

I made it from 20% home ownership to 80% ownership. Selling was the best day in a long time, topped up by ex wife short selling condo the following spring. 2015-2016 was my escape. I would have liked to pay it off, but unemployment got in the way.

[imnontrad]

Congratulations on reaching BS 7! It may actually take a few months to really sink in and get used to knowing that you have control of all of your income. I left work the month after I reached that step.

[hpnutty]

dtbach - congrats big time on your success and blessings to you! As Forrest said (and I paraphrase), "It's one less thing we have to worry about". We have been debt free since 2008 and has enabled us to fund retirement, put two kids through college without loans, pay cash for cars and to sleep better.

I'm a big fan of DR's results. As you have read many on this board including myself don't agree with everything DR teaches. But his programs change the lives of millions of people for the better and that's why I have served as a coach in the past. Over Labor Day we stopped by his new place south of Nashville and it's outstanding. And they don't take credit cards at the gift shop.

Here's to your next step in life in making valuable financial and life investments so you can one day give lavishly!

[pb4uski]

Quote:

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

+1 DR may be good advice for the many who live beyond their means and incur credit card debt... and those folks probably need his extreme views to get their finances on track... but for those who can LBYM and use credit cards responsibly they are great... 2% cash back, convenience, extended warranty benefits for major purchases, better ability to dispute vendor errors, etc.

[rayvt]

Quote:

Originally Posted by Retire52 I do too. I also made a choice to carry a mortgage in retirement, but do not feel the weight of "owing the man" as I could pay it off without adjusting my life style. maybe sometime down the road we will go ahead and pay it off, but since I feel zero concern over carrying this debt I will forgo the opportunity cost of paying it off.

This is the way we feel. It's not a debt hanging over your head when you are just one phone call and one wire transfer away from paying off the balance.

The YTD total return of the S&P 500 is 4.24%, which is 5.93% annualized. https://www.ytdreturn.com/on-s-p-500/
Even with the terrible, horrible, no good, very bad COVID crash this beats the socks off my 3.25% mortgage.

It's like when you go to the barbershop and forget your wallet. Are you in debt to the barber? No, not really. It's just that the money to pay him is in your other pants.

[SpinDoctorTX]

Quote:

Originally Posted by dtbach I'm debt Free!!! Didn't think I would be here this fast but then this year has been pretty weird no? DW and I just started getting SS this year and I thought, well, it's new $$ so why not start paying down the car loan. Then got the COVID $$ and used that to pay down more. Before you knew it, the car is paid off. So then started throwing any extra cash towards the mortgage and yesterday, closed it out. Took me 67 years to be debt free. It's a good feeling.

What an accomplishment, dtbach- congratulations! It sure takes the heat off when you owe nothing to anyone... Enjoy the feeling, as you certainly earned it!

[rayvt]

Quote:

Originally Posted by Badger Way to go! Now start an automobile savings account for your next car with what you were paying on the loan so you can buy with cash the next time.

This is the *looks at title* "Early Retirement & Financial Independence" forum. If you have to put money away each month in a dedicated automobile savings account so you'll be able to pay cash, then you are not financially independent.

Financially independent means you have the money to write a check for the car, without having to go through the shenanigans of making a monthly mental pseudo car payment to accumulate enough to buy the car.

If you are F.I. you just write a check. If you are savvy F.I. you take the dealers low rate or 0% loan and set up an autopay.

[Murph]

Congratulations! I went debt free in 2012 , aged 53, after a lifetime of debt and living paycheck to paycheck. In 2008, due to a semi-lucrative job assignment, I was able to able to start doubling up on payments. 4 years later, I made the last payment on the house and bought a car with cash for the first time. The euphoria over that has made me a committed non-borrower. I entered ER debt free at age 59.

[ICanSeeTheBeginning]

Bravo Zulu

[doxiemama]

Being debt free is an amazing feeling! I think everyone needs to do what works best for them. My husband and I did "Financial Peace" back in 2012. It was 13 sessions back then. Now is it 9 sessions. I was the "nerd" and my husband was the "free spirit", I did constant reading of financial press and my husband could not care less. Was hitting the ATM all the time like it was a lotto machine. So debt was not our problem, communication was. We learned to communicate about money and I learned to understand the "free spirit" needs some freedom and he learned that this "nerd" needs stability and security.

I retired two years after our class at age 53. I have done some part-time "fun" jobs since but it was the ability to learn to communicate and work as a team that was worth far more than the price of admission ($99).

[Nick12]

Quote:

Originally Posted by HawkeyeNFO 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.

My case was I bought my home in the early 1990s so the value now of the home is much more.(about 3X) After I paid off the home in 2005, I sped up my investing monthly. Even with the downturn in 2009 in the market, I invested More in the market when others were pulling out and panicking. It's the best move I made. At that time I just stayed the course. I listened to the naysers, but just listened. No regrets.

[mystang52]

Quote:

Originally Posted by 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.

Quote:

Originally Posted by Rianne I know many people who've benefited, skirted bankruptcy and starting saving because of DR. I don't agree with the CC part, but the discipline he teaches is good. Put cash into envelopes for each month going towards different expenses. Once that is gone, you're done spending. There is something psychological about spending cash. Taking that Alexander Hamilton out of your pocket and paying for an item is different than using a CC. His techniques made him rich, but I'm OK with that. They gave a different perspective about spending. And the way he talks about interest, owing someone else above and beyond the cost of a car or house. I hate owing anyone. It bothers me. It comes from my parents almost going bankrupt. One of the scariest feelings ever.

As I've mentioned in other threads I still adhere to a budget, borne from my less-than-financially-comfortable days. Things are a lot different now; if I ever exceed a budget area it's no big deal, but I still like the discipline. It's this discipline that DR provides great service to his loyal listeners.
Re: paying off mortgage. I think it's incorrect to compare potential investing returns to paying off mortgage. Since mortgage is a fixed legal obligation, wouldn't a better benchmark be Bond or CD returns?

[pb4uski]

Quote:

Originally Posted by mystang52 .... Since mortgage is a fixed legal obligation, wouldn't a better benchmark be Bond or CD returns?

IMO, it all depends on where the money to pay off the mortgage comes from and whether or not you adjust your AA... the relevant rate for the mortgage payoff decision is the rate that the money used to pay off the mortgage was earning.

So if you keep the same AA then the relevant rate is the expected rate of return for the portfolio. OTOH, if you change your AA then the relevant rate is the rate on the component that you reduced.

For example, prior to December 2019 my AA was 60/35/5. The 5% cash was established shortly after I retired and was a security blanket thing and I had regularly rebalanced to 60/35/5. The cash was in an online savings account the earned an attrative rate but had gradually declined to 1.7% in Dec 2019 (and is now only 0.6%).

I decided that I no longer needed the security blanket of having 5% in cash and to use that 5% to pay off our 3.375% mortgage. Since the 5% cash was no longer there my revised equity allocation would be 60/(60+35) = 63.2%, which I rounded to 65%, making my new AA 65/35/0. So in that situation, since i changed my AA, I traded not earning I 1.7% for not paying 3.375%.

If I had paid off the mortgage, kept the same AA and rebalanced to 60/35/5 and we assume that in the long run that a 65/35/5 portfolio earns 7% then the relevant rate for the mortgage payoff decision would be 7% compared to 3.375%.

It all comes down to the old economic principle of comparing marginal revenue to marginal cost. The marginal revenue is avoiding the 3.375% on the mortgage, the marginal cost is the 1.7% or 7% given up depending on whether I changed my AA or not.

[68bucks]

How does a person get Covid $'s while on SS?

[blueskyk]

Quote:

Originally Posted by doxiemama I have done some part-time "fun" jobs since but it was the ability to learn to communicate and work as a team that was worth far more than the price of admission ($99).

^^^^This. After a DR class together, DH and I finally got hooked up to our financial sled and started pulling in the same direction. Looking back, working together financially was a real turning point for us that reaped benefits far beyond the $.

We still have our CC tho - didn’t agree with DR on that one...

[SpinDoctorTX]

Quote:

Originally Posted by 68bucks How does a person get Covid $'s while on SS?

Oh my- something I can answer for once! We did. We paid no taxes last year b/c our taxable income is dinky so our deductions- just standard- were refunded. Income was super low- just DH SS (he took at 62) and my sm. pension, total abt. 35k. We both rec'd stimulus checks too. All other spending came out of liquid assets- that ended up rising yr. over yr.

[68bucks]

Oh that's right I forgot they just sent out money to everyone with income below a certain level, whether they needed it or not. Thanks for reminding me. We obviously didn't get it.