Dave Ramsey

The Wells Fargo post got me thinking. My wife and I are starting Dave Ramseys total money make over, has anyone on here done this and how has it worked for you? Or have you looked into it and what are your thoughts? We are in our mid 20s and drowning in student loans, with random little loans in the mix as well. We are wanting to purchase a house in the near future that we have been prequalified for a decent amount but need to free up cash and are going to give this a try. Any insight or stories would be great to hear!

It’s a very basic system that everybody should have been taught in school.
Buy what you can afford.
Know where your money goes.

Follow his plan and it will work wonders for you. No payments are the greatest feeling you will have after years and years of owing money.

Aaron, going through Dave Ramsey’s financial peace university has changed my life. I was able to pay off 25 thousand in “bad” debt in a year and a half! Of course I made the decision to sell my 1 year old 2013 Lund pro v 1875. Broke my heart to sell it, but debt free living is a goal you have to work towards and that boat wasn’t helping. The thing about his program is you will have to retrain your thinking. I always thought I can just finance things I didn’t need such as toys thinking I can make the payment therefore I am fine… Dave’s philosophy is “if you don’t have the cash you don’t buy it”. He encourages investing after debts are gone and his savings principles are a good too. When mortgaging your house Dave encourages no more than a 15 year mortgage. It’s hard to not go out and finance new fun toys, but I did pay cash for a small 16’ tiller that gets me out on the water. I encourage you to take financial peace university! You will not regret it.

Awesome to hear! I have just finished reading the total money makeover book and am about to implement it, I will have to get the Financial Peace University book as it seems interesting and I would assume be worth the read. My wife is on board and was her idea. I am the weak link in our financial situation as I like to keep up with the joneses. But made huge improvements so far. Looking at selling the fast car and the wifes Yukon, and replacing her Yukon with a slightly older cheaper model we can pay cash for. Selling the sleds, but keeping the boat as it is worth maybe 3k but would cost about 5k to replace (old boat that I fixed up and added new stuff to). We don’t have credit cards which is good and I think freeing up some cash by sacrificing now and paying off our debts will be great!

Dutchboy wrote:

It’s a very basic system that everybody should have been taught in school.
Buy what you can afford.
Know where your money goes.

This is easy for someone to say when they were brought up this way. I feel for people who had bad financial teachers… generally their parents. If you haven’t been taught how to manage money it can be a hard thing to do on your own. Lucky for me my Dad might as well be Dave Ramsey.

I find managing money is very similar to managing your weight. Dieting rarely is a long term fix. Either you change your eating and exercise habits or the weight comes back. Same with debt. If you try to pinch and save and then go back to your old ways the debt will come back. Change your financial life style and you will never be worried about money again.

True statement Joe! My dad and mom were and are financially fit, I never built up the emergency fund that is very important to staying financially stable. So I have taken loans for “emergency” vehicle replacement and repairs, which should just be forseen and taken into account in your monthly budget, which we need to set in stone as well.

I haven’t used his system but I know people who have.

Couple things I don’t entirely agree with (from what I’ve seen people post about Dave Ramsey’s system). Not ALL debt is created equal. Student and house loan interest payments are/were tax deductible. I consider this ‘good’ debt. You need somewhere to live and an education will pay for itself in the long run.

I usually shake my head when people are posting about Dave Ramsey and throwing everything they can afford towards their house payment. Interest rates are historically low, most people are locked in at less-than 4% plus its a tax write-off. If you put that money in the S&P 500 over the last seven years instead of paying off your tax deductible, low interest rate mortgage; you would have been much better off! As with most things there is a balance when it comes to paying down debt.

Some things to keep in mind when paying down debt: interest rates, tax deductible debt vs. non-tax deductible debt, current state of the stock market.

I am 61 years old and have done it (and taught it). You would have thought my kids would have learned from watching me, but NOPE. Now in the past two years both of them have gone through it and are getting on the system. IT WORKS!! It is so great to live debt free and it opens up so many chances to HELP OTHERS. You will be rewarded by following.

PS – BOTH kids have now said, Dad I wished we would have listened and followed what you said. Love it.

Pay off your debt as fast as possible. I think Ramsey suggest paying off the lowest balance first and then rolling that payment into another loan once it’s paid off (debt snowball). That’s a good strategy to build some momentum/morale, but I think the best thing in the long run is to pay off the highest interest rate first(of course, the different might be negligible depending on balances/rates, a few hundred bucks over the course of 5 years isn’t too meaningful). Either way, the key is to be extremely diligent about paying it off, make more than minimum payments if possible.

Do everything you can to not take on more debt(drive that car into the ground). On this front, using the value of your current vehicle to trade in to something new might result in ‘the same monthly payment, that we can totally afford right now so why wouldn’t we want a new car?’ is not always a slam dunk. My sister does this crap all the time and it just locks you in to another 3-5 years of car payments. Repairs seem costly at the time, but it’s rare to pay more in repairs for a reliable used car than it is to pay monthly payments on a new one.

Renting is not throwing money away, no matter what anyone tells you. House prices are continuing to climb, don’t buy in to the bubble. Loan interest, PMI, property tax, repairs, maintenance, closing costs, all fit under the ‘throwing your money away’ category, and are things you don’t need to worry about if you are renting.

I won’t say ‘never buy a house’, but really do some research and make sure it’s the right move. There is NOTHING wrong with renting. I’ve lived in my house for two years and I’ve paid thousands in interest already on my mortgage, $2k on a new AC, $2.5k on a new furnace, $1k on a new washer dryer that broke, $3k on required tree removal, property tax, snowblower, lawnmower, etc.

I won’t see a return on any of that money. If you already have a lot of debt and will be ‘stretching things thin’ to get a house, what will happen if you lose your job? Or a medical emergency? Again, renting is okay.

Lastly, BUDGET. I’m terrible at this, but trying to get better. Setup a mint.com account(it’s free) or something and track where your money is going, you would be surprised how much money goes to non-essential spending. Our problem is food. It’s very easy to try and think you can budget in your head, “car payment is $300, rent is $1200, student loans is $500, that should leave me $1200 every month, we can totally afford to buy a boat/car/house!”. But when you actually dig in, you don’t think about the $300 in gas, $300 in groceries, $300 eating out, $100 at HH, etc.

I listen to Ramsey on AM radio most days on the way home from work.

Most of the arguments made against the Dave Ramsey philosophy come from a perspective of having financial discipline and spreadsheet ROI calculations. But here is where I believe many miss the point of Dave Ramsey’s financial education:

Most of the people who call in asking for help have ZERO financial discipline!
What is the point of talking about ROI on investment products when the core issue is they spend more than they make?

Once a person has all their debt paid off and spending under control then one can talk ROI on investments and I will agree with them that there are better options than taking out a 15 year mortgage and investing in Index funds. But this is so far advanced that it is pointless to talk about when someone is drowning in debt and spending more than they make.

But by no means will I ever bad mouth or talk down Dave Ramsey. In my opinion he is changing lives for the better each and every day and is truly a wonderful and impactful individual. His straight talk advice is second to none for the audience he serves and his system for budgeting and getting out of debt is second to none!

Oh, one more thing, sites like this are extremely dangerous. Keeping up with the Joneses is a slippery slope, don’t compare yourself to others as you have no idea what their financial situation is. It’s easy to see a screen name or read some banter from a user online and be like, “dang, that guys has a nice boat, I should get one too!.” What you don’t realize is those guys could be 50 years old with a paid off house, no kids to take care of, etc. Oh yeah, and if you are planning on having kids anytime soon, think about that when it comes to budgeting for a house. $900-13000 a month for daycare + everything else eats into the budget preeettty quick.

No matter how hard you work, there will always be someone better off, with cooler toys, a bigger house, more vacation, etc. Learn to appreciate what you have and enjoy life within your means.

You never know if those neighbors of yours are swimming in more debt than you(quite possible), or inherited money from their parents(I have friends like this).

holstc wrote:

stuff

Totally agree. If you laid out the financial management spectrum from:

Terrible with money, spend it before anyone takes it away!
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Finance savant, maximum efficiency/ROI

Ramsey’s plan is definitely not at the far right end, but that’s not the point, his plan/advice is still worlds better than no plan or no discipline. It’s a lifestyle change, and I think he’s cashed in on understanding that people won’t change their lifestyle trying to pickup a system they can’t understand.

Without knowing what the Dave Ramsey approach was I took a quick look at the highlights. It looks a lot like my natural approach to finances. I’ve basically followed this type of financial planning without even knowing it was a program. I would think if you’re already conservative with your finances and are a natural saver this program would be easy to follow. If you’re a natural “buyer” it may have it’s challenges.

I’m to a point now where I’m able to make capital building payments instead of lending obligation payments. It took 20 years to get there but it definitely allows a lot more flexibility and leverage. Any borrowing can be structured with a shorter term meaning it will minimize interest and not tie up future earnings.

Once you get stuff paid off it becomes harder to accept debt again.

Most will always have a house payment and one decent vehicle payment.
It’s all the other debt you need to get rid of.

You won’t regret it! I’d also encourage you or anyone to read Beyond Paycheck to Paycheck, similar thought process to Dave Ramsey. Only thing I disagree on is Term Life Insurance (he’s a big proponent) over Permanent Life Insurance (which I believe in wholeheartedly), but that is a minor detail in his overall thesis, and any Life Insurance is better than none!

I think you are on the right track in learning how to handle debt in a good way! Do it.

With that said,, If you ever want to feel wonderful about your financial stability as well as your rank in the human gene pool just listen to a few callers on the Dave Ramsey show. It’ll blow your mind how stupid people are with their money. I read the book but never took the class.. I guaranty I could field the questions just as well as Ramsey does.

I remember taking a fair amount of crap a few months ago here on this very sight when my response to a “financing a boat” thread was Randy Moss’ “Straight Cash Homey” Just sayin.

This is something that is huge for my age group (recently out of college) especially. I really wish things like this were taught in school. There are many people that I know that cannot setup a monthly budget. Its the whole “I will put it on my credit card” thought. I cannot speak to his plan because I personally have never taken it. But from the reviews it seems like it would only help.

outdoorsmn wrote:

I usually shake my head when people are posting about Dave Ramsey and throwing everything they can afford towards their house payment. Interest rates are historically low, most people are locked in at less-than 4% plus its a tax write-off. If you put that money in the S&P 500 over the last seven years instead of paying off your tax deductible, low interest rate mortgage; you would have been much better off! As with most things there is a balance when it comes to paying down debt.

Some things to keep in mind when paying down debt: interest rates, tax deductible debt vs. non-tax deductible debt, current state of the stock market.

The problem with this analogy is you are assuming one can predict what the stock market is going to do.

BigWerm wrote:

You won’t regret it! I’d also encourage you or anyone to read Beyond Paycheck to Paycheck, similar thought process to Dave Ramsey. Only thing I disagree on is Term Life Insurance (he’s a big proponent) over Permanent Life Insurance (which I believe in wholeheartedly), but that is a minor detail in his overall thesis, and any Life Insurance is better than none!

Can I ask why you are a colder on term life? I think that’s the common recommendation for younger folks who are maybe starting a family/very unlikely to pass away.

walleyebuster5 wrote:

I remember taking a fair amount of crap a few months ago here on this very sight when my response to a “financing a boat” thread was Randy Moss’ “Straight Cash Homey” Just sayin.

It’s all situational I think.

Person A: has mortgage, student loans, 2x car payments, credit card debt, contributing meagerly to retirement savings. Probably don’t finance a boat for 10 years.

Person B: has mortgage, large amount of disposable income after retirement savings. Probably would be okay financing a boat.

Love all the responses, I wouldn’t say we are foolish with are money just need to be more strict with our spending given the cash flow we have. It is nice to see the good experiences that you all have had, there are feel good stories in the book but they come in the book you bought to teach you to do the same, so it is nice to hear from a 3rd party source. I agree that this is pretty basic stuff, it is definitely a more precise way of my thinking on finances and more spelled out, it is nice to have though because it looks to work and can give us some reassurance and motivation through the belt sinching process.

Beyond going to a live event don’t get sucked into all his outside stuff he promotes. Stick with his envelope / budget teaching and you will be fine.

Good luck Aaron. As you said, the concepts are really simple. Just paying attention to your money is a huge first step.

We stared our journey in July (ok I started in July; the FW didn’t get serious until August) and have already paid off about $8,000 above our monthly minimums. We are fortunate that we make a very good income, but we always thought we made enough that it would all just work itself out. Once we did our budget, we realized that we had about $3-4,000 left over, dependent on monthly commission, to put towards our snowball. I highly suggest the “EveryDollar” app that the Ramsey team has developed. It allows you to sync your bank transactions for easy tracking of income/spending.

We are on track to get all of our consumer debt paid off in 20-24 months. I have already started to project what our future looks like and it looks like we will have a lot more available to save for college & retirement, while living the way we want to, instead of the way we have to.

Maybe we should start a debt snowball thread for all of us working the plan to celebrate our successes, and perhaps (not hopefully though) work through some of our failures.

Good to know Dutch!

Jake great to hear, and thanks for the insight on the app!

philtickelson wrote:

Can I ask why you are a colder on term life? I think that’s the common recommendation for younger folks who are maybe starting a family/very unlikely to pass away.

I have Term Life, so I’m definitely not opposed to it. However, something like less than 2% of Term Policies payout, whereas 100% of Permanent Life (Whole or Universal) payout. Additionally, permanent Life policies have a ton of Living Benefits that Dave Ramsey dismisses by comparing them to the stock market, which is an apples to penguins comparison imo. If you look into the uber wealthy and financially saavy (Bill Gates, Warren Buffett etc.), they all have a ton of permanent life insurance. You and I can do the same thing on a smaller scale, buying dollars with pennies and getting significant tax advantages. This article on Jim Harbaugh’s contract do a good job of explaining some of the living benefits:
https://www.thinkadvisor.com/2016/11/16/cash-value-life-insurance-makes-harbaugh-college-f/?slreturn=20180810152744

When you are young and in the accumulation phase of your life, a term product is nice because it is cheap and you can protect your family in the event that you die. Typically your nest egg is not large enough yet to protect your family in the event you die from additional financial hardship without some type of cash infussion of an inurance product(cash payout).

If you have good investment habits and live Ramsey style in my opinion you will have no need for life insurance when you get into your distributon years. Your nest egg will be big enough that if you pass away, who cares, your spouse or kids have enough money in your retirement accounts to live happily ever after.

Once your nest egg is big enough to take care of those you need to I think money allocated to “protection style products” would be better spent on a long term health care product vs. a life insurance policy.

All of this talk is really splitting hairs. The first step is stop the bleeding, then get out of debt, then accumulate wealth. If you are in a position to worry about this you are doing well.

And do not forget to enjoy the ride, it goes way faster than you think!

My wife and I did it about 3 years ago and we are debt free on everything but our mortgage and my vehicle that we purchased last year. For a couple of 32 year olds to be basically out of debt I am extremely greatful that we took his class. It’s amazing this stuff isn’t taught in high school. As others have said its basic stuff but kids aren’t getting any of that in school these days. I would recommend the class for anyone.

holstc wrote:

If you have good investment habits and live Ramsey style in my opinion you will have no need for life insurance when you get into your distributon years. Your nest egg will be big enough that if you pass away, who cares, your spouse or kids have enough money in your retirement accounts to live happily ever after.

I agree with your post holstc, and we are splitting hairs. However when you work hard to build a sizeable nest egg I’d rather transfer as much of that to my wife and kids as possible especially if I can do so tax-free. Also, having a sizeable and well funded permanent policy can enable you to be your own bank, which is another big advantage at the time of a major purchase or another recession.

BigWerm wrote:

<div class=”d4p-bbt-quote-title”>philtickelson wrote:</div>
Can I ask why you are a colder on term life? I think that’s the common recommendation for younger folks who are maybe starting a family/very unlikely to pass away.

I have Term Life, so I’m definitely not opposed to it. However, something like less than 2% of Term Policies payout, whereas 100% of Permanent Life (Whole or Universal) payout. Additionally, permanent Life policies have a ton of Living Benefits that Dave Ramsey dismisses by comparing them to the stock market, which is an apples to penguins comparison imo. If you look into the uber wealthy and financially saavy (Bill Gates, Warren Buffett etc.), they all have a ton of permanent life insurance. You and I can do the same thing on a smaller scale, buying dollars with pennies and getting significant tax advantages. This article on Jim Harbaugh’s contract do a good job of explaining some of the living benefits:
https://www.thinkadvisor.com/2016/11/16/cash-value-life-insurance-makes-harbaugh-college-f/?slreturn=20180810152744

Whole life policies are significantly more expensive than term. In our current low interest rate environment you don’t receive much of a return either.

Term policies are a fixed payment for x amount of years. Whole life policies get more expensive as you get older and eventually start eating away at your cash value unless you up your contribution.

The reason the super wealthy have whole life policies is because insurance proceeds are a tax-free way to pass down funds to your family vs. paying estate tax.

outdoorsmn wrote:

Whole life policies are significantly more expensive than term. In our current low interest rate environment you don’t receive much of a return either.
Term policies are a fixed payment for x amount of years. Whole life policies get more expensive as you get older and eventually start eating away at your cash value unless you up your contribution.
The reason the super wealthy have whole life policies is because insurance proceeds are a tax-free way to pass down funds to your family vs. paying estate tax.

My Universal life was getting about a 3-4% return last I checked, which is pretty good in the current savings rate climate imo. Both Universal and Whole Life policies can (and should imo) have level premiums, so you pay the same now as you will at 85 years old. They are not investments though, so they will always pale in comparison to open market investments, especially since no open market investment illustration usually factors in a recession or estate tax (that’s one reason why it’s apples to penguins imo). My buying dollars with pennies comment was in regards to the death benefit compared to the premium to fund the policy.

They also have very cheap term policies that give you 100% of the premium you paid back at the end of the term. I have a 30 year term, so when I turn 65 the term is up. At that point I better not need life insurance, so if I die before 65 good for my family… if I don’t die then I get all my money back.

The only catch is you don’t get any interest on that premium. But, like I said it’s pretty cheap so it wouldn’t amount to much anyhow. Win win in my book.