**updated**-Dave Ramsey anyone?

[77GreenMachine]

You don't get anything for free! You have to work for it and live within your means for a long time to get where you want to be. My wife and I were frugal and cautious for 35 years. We didn't suffer but we didn't take extravagant vacations and didn't "upgrade" our house and cars like a lot of our friends did. Now we are sitting pretty, no debt at all, house paid for, helped both kids buy houses and pretty much do whatever we want as far as vacations, eating out, new cars, etc. A lot of today's financial problems people encounter are because of an inability to delay gratification. Patience, grasshopper!

The wise words of JC! Oh how I miss you friend! You should PM me your number, I'd love to grab lunch soon. I have gotten a new phone and lost a lot of numbers.

 

[rockcity]

You can be debt free and still use your credit cards on a daily basis and finance a vehicle.

Be wise with your $. Why pay cash for a car when I can finance for 4% (or less) while my cash is earning 8%? Paying cash is not always the smartest move.

Likewise, using a credit card that gives you 2% cash back is a wise use for your spending as much as you can. The only caveat is that you must pay it off monthly and don't use it as a slush fund.

By simply changing how you use your $ you can end up with a good % more at the end of the year by doing nothing but changing the payment method of everything you already purchase.

 

[VortecJeep]

We did the Crown Financial class years ago, never Ramsey's class, but I listen to him occasionally. Usually after about 15 minutes I have to turn him off, just like every other radio talk show host. He only deals in absolutes, and when he starts calling people stupid, I turn it off.

 

[shawn]

when he starts calling people stupid, I turn it off.

Ya gotta admit... There are a bunch of dummies that call in. I heard this guy a couple of weeks ago who called in to say thanks. He said that he called a while back, and Dave set him straight. He'd since paid off his debts, started saving money every month, and had amassed a $12k savings account. It's all high fives and blow jobs. Then the guy asks Dave what he should do about his $200,000 student loan debt.

 

[OnlyOneDR]

I have only had a house debt for about um, uh, a decade? What are these other debts you speak of?

Seriously I am blessed to have had enough to work through school and come out debt free with nothing but lint in my pockets. Been working my way up ever since. I use the CC to purchase everything possible, pay it off every month and use the points to travel. My debit card gets used at the ATM, that's about it. That's after having both cards knocked off to fraud in a week...after that you don't want your debit card compromised again, ever.

In all this conversation about saving and spending don't forget to give generously!

 

[jeepinmatt]

@jeepinmatt congrats on how far you guys are in the process. Is the shop paid off as well? If so, that's awesome. You've got a nice place out there! I'd love to own a bunch more land...

Paid for it cash as I went. If I could ever finish it, it might become paid for, haha. Thanks for the compliments.

 

[RatLabGuy]

Why pay cash for a car when I can finance for 4% (or less) while my cash is earning 8%?

I'd be curious to hear where your putting your "cash" so that it gets 8% these days.

 

[rockcity]

I'd be curious to hear where your putting your "cash" so that it gets 8% these days.

Long term risky stuff. It's not quite 8% but is more of an example to show the benefit of considering how you use your $.

Hell, Duke stock is down a little and is giving quarterly dividends consistently for the last 20 years or so that are roughly in the $4.75 per share annually. If the stock is $70, then that right there is 6.75% return alone aside from any gains in the value of the stock...
Time your purchase just before the dividend cutoff date and you could earn 1.69% practically overnight.

 

[RatLabGuy]

Long term risky stuff. It's not quite 8% but is more of an example to show the benefit of considering how you use your $.

Hell, Duke stock is down a little and is giving quarterly dividends consistently for the last 20 years or so that are roughly in the $4.75 per share annually. If the stock is $70, then that right there is 6.75% return alone aside from any gains in the value of the stock...
Time your purchase just before the dividend cutoff date and you could earn 1.69% practically overnight.

Ah ok so when you said "cash" I was assuming we were talking about liquid easy-access stuff.
I'm all for investments like this, but if even if you're doing everything by CC as Shawn advocates (and I agree with) you still have to have cash on hand to pay that bill when it comes every 30 days.

Neither of us have carried a CC balance in probably a decade, and aside from the house the only loan we've had was her car, which is now paid off too. And once we finished payments we just kept paying the same amount into a savings acct to prepare for the next purchase. So liek others here I'm not sure the Ramsey stuff is relevant to us.

For us the biggest struggle was finding ways to "hide" money so it didn't get spent. We've always been good at leaving within our means, but never seemed to have any leftover even as our income expanded. As mentioned... discipline.
Also, a big challenge was that we are paid biweekly (26 / year) but all bills are monthly (12/yr). This made the eb-and-flow of cash difficult to manage at times.

For those that are bi-weekly paid, like us - one way we've managed to set aside money AND make things easier to track, was to set us a seperate savings acct that our paychecks go into. I then figured out our typical annual bring-home, divided by 12, and set a monthly auto-draft for that much into our checking acct. so now we get "paid" monthly. I intentionally underestimated the monthly allotment so some is left over in that slush fund. Then over years, as my pay has increased, I have kept the monthly pay the same - so this slush fund grows, all in an account we pretty much ignore.
We set the pay date at the end of the month so it lines up right before most of our bills come.

Oh and as of the monthly transfer date, any month left in the checking acct gets put back into the slush.

 

[rockcity]

Ah ok so when you said "cash" I was assuming we were talking about liquid easy-access stuff.
I'm all for investments like this, but if even if you're doing everything by CC as Shawn advocates (and I agree with) you still have to have cash on hand to pay that bill when it comes every 30 days.

I am talking about liquid investments, not an IRA or 401k, just a simple investment account. Just because it's an aggressive, long-term account with a higher return doesn't mean that it isn't liquid and easy to get ahold of instantly.

Day to day $ for every day expenses, that $ usually stays in the checking account to pay for the monthly expenses.

 

[77GreenMachine]

For us the biggest struggle was finding ways to "hide" money so it didn't get spent. We've always been good at leaving within our means, but never seemed to have any leftover even as our income expanded. As mentioned... discipline.

This. The thread kind of de-railed and turned into an argument rather than encouragement and advice. Whatever on the credit cards, to each their own. Main focus here was discussing living debt free.

I have wondered if paying things off is only half the battle, and the real battle begins when we begin to save. I feel like I would be content with a Duramax and a 1 ton rig but who knows what I'll want in a few more years. I think having a good plan and structure for our extra money will be key. Most of it will be going to college funds/mortgage anyway after all bills are paid and saving goal met.

 

[anvilrubi]

I like to listen to Dave but he makes me feel like shit when he jumps down somebody throat that is doing all they can to survive. I believe he is a good man with good intentions, I do plan on taking his class.

 

[77GreenMachine]

Dave may not be right on everything. His mission is though, and that is to teach people that you don't have to live in debt. That's the main point of this thread. We may not all agree with every little thing, but his book has motivated me to live debt free and not have to keep with the jones.
I may have to hang my head when I say I can't go here or can't eat there today cause it's not in the budget, but in 24 months or less it won't matter cause it will all be worth it.

 

[ramjo]

I'm not a financial wizard, but my last name is Ramsey . I've always stuck with the philosophy that if I can't pay for it in cash, I don't need it. If I can't make my money with it, I don't need it. What has that got me? Not a whole lot, haha, but I don't have to worry about making a payment every month. First house was about 1000 sf monster/liter box, that I used my skill sets to remodel, live in for 9 years and double up on when we sold it. Everybody can't do that, but you don't have to have jump head first into a $2000 a month worth of house and car payment off the bat. Debt free takes patience, and sacrifice.

 

[RobMcBee]

We have been doing the debt snowball, I read the book and got really interested. So far we've paid off 2 credit cards and our refrigerator. Freeing up the cc debt has allowed me to do some things that I've been wanting to do for a while. Yes cc's can be used monthly, but not all people have the ability to manage them properly. I bow my head and admit I am one of those people.
Dave can be a smug sometimes, but he has some great advice also. I plan on staying the course and finish paying off my cards, my directv ends in February and I plan on canceling it then, ending another unnecessary debt. I hope to have it all paid off by next year. Then I'll only have my house, my truck,and utilities.

 

[Ron]

Well I suspect a few folks in this thread have been waiting for me to chime in, sorry been out of town.

About 11 years ago I was about where you are now, sort of. I found Dave Ramsey and got "on fire" with his message/ Actually got certified as a financial peace teacher and counselor and led 6 classes over a 2 year period (Its a 12 week class but we started a new one ever quarter- at times I was leading 3 2-hour classes every week)

At ~26 I've sat and reviewed bills with 60 year olds who were broke and didnt realize it. Sad stuff.

I used to be in this very forum preaching the hard line of TMMO and FPr.

Ok that is a bit of background and now for my opinion.

Dave is a good orator and his plan is financially and logically sound. You will never go broke following his plan 100%. It is impossible. Very few other options out there can say the same. He is also more knowledgeable about human psychology than he is finances. IOW if you allow personal judgment and interpersonal rationale to dictate decisions every person will make wrong choices sometimes and many people will make them most times. The old Carlin line is relevant here, look around at the average dumbass and realize HALF THE COUNTRY IS DUMBER THAN THAT. (I'll come back here in just a moment)

So that is a bit of an abstract opinion, what does it mean?

This - If I tell my child at 4 they can eat 3 M&Ms and put a family bag in front of them I am probably going to end up with an empty bag and a kid with a red and orange stained face and a tummy ache.

We all have our vice(s). I can drink beer in moderation, some can't. Ive got a good friend, a lawyer who is 40 who is a recreational cocaine user. No shit. Has a budget and everything for it. He parties 2x a month and does blow. Me? I'd wake up 20 days later completely broke and destitute after hocking the house with a smile on my face saying, 'What a ride'

Now I'm rambling...
(back to the above point)
Only you know you. As you carry on along his path you will find where you venture from him philosophically. Maybe its credit cards. Maybe its car payments. Maybe its mutual funds. That's ok. When you find those intersections stop and logically analyze them.

I mean take a difficult look at yourself warts and all. I know Shawn pretty well and he is a fairly disciplined dude in every aspect of his life. So when he says he never carries a CC balance, he is likely right or at least almost 100% accurate. Other folks I've heard (when we were counseling) say the same and when we looked back over the year they had paid $1,000+ in interest fees.
"Well that month Billy's transmission went out and we needed to carry it a month. Then in June, Ruth's arthritis was acting up and she saw a couple extra doctors, we thought she might need surgery so we didnt pay it off then when we found out..."
That is an excuse. That person needs to abandon credit cards, Shawn? Maybe not.

But Dave's way isn't The Gospel. There are areas where it is OK to do things differently, just make sure you are making a sound, logical, intellectual decision and not a personal BS justification. Dave's rules HAVE to be his RULES or if he allows flexibility people will go broke and blame him and his credibility will be shot. The way his system is structured if you fail he can quickly point to a deviation from his plan.


My own personal SPECIFIC differences of opinion.
1- The biggest one has already been hit on. Debit Cards SUCK. Yes if your debit card carries the VISA logo VISA does protect the transaction like Dave teaches. What he doesn't teach is that the individual bank policy DICTATES the time line by which this is carried out. I lived this. We used to bank with First Union, which got swallowed by Wachovia, which later got swallowed by Wells Fargo. Well in 2007 we were head over heels Ramsey advocates. Only, Ive got a bit of a prepper side to my personality. I had a few CC with 10k limits and while I didnt want to run up debt I also recognized the flexibility this afforded. We paid them off and used debit cards EXCLUSIVELY but I did this very complex operation of freezing them in multiple layers of aluminum foil and water and hiding them back in the freezer. Getting to them in an impluse would never be an issue. (but it would prove to be very valuable pretty soon) I was rocking on up debt Snowball step 3 at about 4 months level when my debit card got compromised buying Christmas presents online. (Oh the irony of ironies I bought 10 copies of Financial Peace to give to friends and family...I told you I was ate up with it)...well I didnt use Amazon I used e-book.com It doesnt exist anymore. But they were $1 cheaper per copy and HEY I'm saving $10...one step closer to Step 4...)
Well I stopped to buy gas and swiped my debit card to read "Transaction denied" wait now way. I've got over $10,000 in my checking account.
Truck is on E. I used the last $10 in my wallet to get home and check my online balance (didnt have a smart phone, to check balance) and my account is -$1,800. A quick search tells the tale and western union money orders have been bought online until it was all gone.

The bank is now closed, its after 5. The next morning when they open Im sitting in their branch manager's office. She sees me sitting there in SC. Sees the transactions all taking place in Nevada and while we are there in her office 3 more attempts come in. Immediately the account is locked and I am given a 1-800 number for their fraud protection team. They review every fraud case FOR 30 DAYS before filing it with VISA. I had about $13,000 I couldnt touch for 30 days and it was 2 weeks until payday. I had a little cash in the gun safe and those frozen credit cards. A month later (actually about 45 days) everything was corrected except for some major inconvenience. Had that all have happened on a credit card you file a fraud case they suspend the transaction no bill is due until its reviewed and life is good. With a debit card they just assume your money is gone until they replace it. (FWIW Wachovia refused to refund the 7 insufficient fund charges that accrued when checks landed that should have been covered but it graciously split the fees in half for the 18 NSF charges that happened on fraudulent transactions)

Debit cards suck ANYWHERE but an ATM machine in my humble opinion.

2- I'm not sure paying cash for something is always the most conservative thing. My situation may be different than yours so I will explain. My income is irregular. I frequently make about 80% of my annual income in 3 or 4 checks that vary based on delivery timing and sometimes go months without a paycheck. We recently bought a new bedroom furniture suit. We were pushing 40 and still sleeping in the queen bed my wife got in HS. It was time. The local cheap furniture importer of the day offered 6 months 0%. Despite what Ramsey says their prices were fixed and not negotiable. Yep I counted 100 bills to the Store Manager, he offered free shipping to earn my business but said he couldnt touch the price. In the end I financed ~ $2,000 for 6 months when I could have easily paid cash for it.
Why?
Contrary to Dave's teachings it is actually more conservative to do so. Lets say something stupid happens tomorrow. Lets say I lose my job or otherwise encounter a major financial burden, maybe even one that wipes out the E-fund. I still have $2,000 in the bank and only $100/month due. I can direct my money to whichever hole needs it the most. Until I get back on my feet.

Now #2 requires an important clarification. I didnt buy something I couldnt otherwise afford. We set a furniture budget before we ever left the house and stuck to that budget. We would have, could have and were prepared to pay cash for that purchase but CHOSE to factor it over time to limit our exposure. I believe that was the safest and best decision for my family. That extra $$$ in my account balance makes me and my wife rest a tad easier. I think this is a personal choice.



This is a long ramble I know.
Let me summarize it this way.

"Great for you for getting your financial house in order. It makes you responsible. Don't get sucked into the trap that its 'Dave's way or the highway'. I've got quite extensive experience with FPU and will be glad to offer any advice insight I can to you or anyone interested."

 

[13bullets]

I did the Dave Ramsey course but my wife never bought in to it. The same month I got debt free (minus mortgage) is the month I found out I was getting divorced. No direct relation between the two.

Needless to say, I'm far from debt free now...

 

[R Q]

I was 5 years from being debt free, house included until I started dating the future Mrs. Queen!(6 years ago)
I have no freaking idea (actually I do) where I'm at now, but 5 years don't mean shit no more!

 

[BigBody79]

What are his/your feeling on a home equity loan for major house construction/remodeling?

 

[shawn]

long-term account with a higher return doesn't mean that it isn't liquid and easy to get ahold of instantly.

What's your definition of "instantly"?

Assuming you've got a brokerage account with a typical online place, let's say you need your money at 4:01pm on a Friday before a three-day weekend. Even if they allow you to sell it AH, it'll be the following Thursday before the sale clears, then five days for an ACH back to your bank account, you're looking at two weeks before you've got your hands on that money.

If you get a brokerage account through someplace where you have a checking account, then you could cut that down to a week, but then you're paying $20 or $25 a trade.

 

[shawn]

We were pushing 40 and still sleeping in the queen bed my wife got in HS. It was time.

LMFAO... we just did the same. It came to me used when I was in school. Now it's in the guest room.

 

[rockcity]

What's your definition of "instantly"?

Assuming you've got a brokerage account with a typical online place, let's say you need your money at 4:01pm on a Friday before a three-day weekend. Even if they allow you to sell it AH, it'll be the following Thursday before the sale clears, then five days for an ACH back to your bank account, you're looking at two weeks before you've got your hands on that money.

If you get a brokerage account through someplace where you have a checking account, then you could cut that down to a week, but then you're paying $20 or $25 a trade.

That $ isn't typically what I would need instantly at that very moment. But yes, you are right, I would need to make plans to pull the $ as it would not be as readily available as in an ATM.

 

[iwaxmyjimmy]

My problem is I make wayyy too much for a college student and I'm addicted to truck/jeep parts, seriously it's a problem. Only thing I owe on is my jeep and one CC but I could just pay off the CC. Glad I have the GI Bill to pay for school, it actually pays all of my bills if I'm in school the whole month.

Instead of going out and financing a $50k truck, I've traded, sold, and bought enough parts to build a 73-87 Chevy truck. Just need a 5.3 w/ harness/ECM, a 4L80e and a CUCV chassis. Need to buy a body too. My idea is have at the most 5k in a truck that's easily to maintain and paid for. I'll pay off my jeep this year and hopefully finish my k5.

My dad keeps trying to tell me to buy a house and rent it when I get out of college, but I'm not sure I want to deal with the hassle if I decide to move out of state.

Only thing I have been horrible about is not keeping an emergency fund because I know I have a decent income coming in every month for the rest of my life. It's a habit I really need to break.

 

[RatLabGuy]

LMFAO... we just did the same. It came to me used when I was in school. Now it's in the guest room.

I bet that mofo wasn't light to move.

The most unpleasant fact about mattresses - they are the only object you own that gains weight over time. Ewww.
We just replaced the one we bought 16 years ago when we go married. Cheap-ass Serta. Casper, FTW. Amazing what a difference.

 

[Ron]

What are his/your feeling on a home equity loan for major house construction/remodeling?

My thoughts are, insufficient information to render an opinion.

His thoughts are, "Debt is dumb. Never borrow. Ever. Pay off your debt and pay cash for the remodel."

Circumstances could change my opinion greatly.