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You didn't factor into the equation that God wants Dave to be rich...
Dave Ramsey ELP
- Thread starter nc health agent
- Start date
You didn't factor into the equation that God wants Dave to be rich...
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I'm not much of a Ramsey fan, but, on the rare occasions that I run into a Ramseyite, I pull out the ole 20 year term and take the application on the sale that Dave has made for me.
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Amen and he takes advanatge of the Churches to do it!
How long have you been a broke agent ?
If you'll be kind enough to let me play devil's advocate and also input my own comments, I'd like to reply to why Dave thinks that way and my own personal opinion on it.
Dave says that when people use cash they typically spend 18% less on average than those who rack up their credit cards and pay it off. Personally I tend to agree with this because most people find it easier to spend money that isn't their's and then pay it off at the end of the month. The other issue is most people intend to pay it off at the end of the month but then don't. I know you're the exception to the rule just like every other person I've had this discussion with. But I will agree that most credit cards do give you more buyers protection than a debit card or cash.
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Obviously you made a smart move and I have to agree with you.
I also have to look back to the story that Doug Andrew who wrote The Last Chance Millionaire and Missed Fortune 101 talked about. It was a story of him and his wife who bought a house for around 300k and paid it down each month to 150k. Then the local economy took a dive. He lost his job. Couldn't get a loan even though he had plenty of equity in his house. So the bank foreclosed on him because it was a positive asset for them to repo his house. However they didn't foreclose on his neighbors who only paid their monthly minimums and since the housing market took a dive were upside down on equity. The bank didn't want negative assets on their books so worked with those clients.
So to me if you plan to pay off your house early it would be better to have it in a liquid account until the balance is high enough to pay it off. Hmmm maybe like an equity indexed UL over funded that Doug Andrews talks about in his book. Not that I totally agree with Doug's strategy but I think it is better than Dave's in this case.
Dave says that when people use cash they typically spend 18% less on average than those who rack up their credit cards and pay it off. Personally I tend to agree with this because most people find it easier to spend money that isn't their's and then pay it off at the end of the month. The other issue is most people intend to pay it off at the end of the month but then don't. I know you're the exception to the rule just like every other person I've had this discussion with. But I will agree that most credit cards do give you more buyers protection than a debit card or cash.
Here I have to agree with you 100%. I've gone to his advanced wealth seminars and he say's over any 5 year period 80% of growth mutual funds have shown a gain and over a 10 year period 100% of them have shown a gain. As we know in the recent downturn looking back over 10 years most didn't pull an average of 1% a year. Also his advisers are only allowed by their broker dealer to state 10% even though Dave states 12%. He also bashes insurance products like equity indexed annuities, which have actually outperformed the stock market over a 10 year period. However, I still do believe in the long run the stock market will outperform most other investments, but to always expect 12%? No way.
My wife and I used one of Dave's ELP realtors. I know he gets a 1% kickback from Remax. But the realtor was great and she got us our dream house and office at a great price. We're totally satisfied and recommend anyone to use his ELPs. I'm sure the real estate attorney would be great at closing, but I doubt he would drive out to show us houses.
Umm wouldn't that be Bee Crap instead of Bull Crap? I have to agree with you on this one.
I agree that it's a necessity in many businesses. I think it's smart to try to avoid as much business debt as possible, but sometimes you just can't help it.
In Dave's defense he does say saving up and paying cash is the ideal solution. To rent cheap and save up and pay cash. However, he does admit that most people won't do this, so his alternative is to save up a 20% down payment and take out a 15 year mortgage. I have to say this is a fair solution. It stops most people from buying too much house that they can't afford and then default on their mortgage which could lead to a global economic crisis. Oh wait that already happened didn't it?
In an ideal world his buy term and invest the difference is great advice. But you've been around long enough to know that while it may be great advice for most poeple it isn't for everyone. There are health problems and people don't invest the difference. I do see a need for permanent insurance for things such as final expenses, health issues, estate planning etc. To me the best life insurance policy is the one in force when the client dies.
I understand where you're coming from. For the most part I think Dave has a lot of great advice, but his agressive type "A" personality that pushes one size fits all does rub a lot of people the wrong way.
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Obviously you made a smart move and I have to agree with you.
I also have to look back to the story that Doug Andrew who wrote The Last Chance Millionaire and Missed Fortune 101 talked about. It was a story of him and his wife who bought a house for around 300k and paid it down each month to 150k. Then the local economy took a dive. He lost his job. Couldn't get a loan even though he had plenty of equity in his house. So the bank foreclosed on him because it was a positive asset for them to repo his house. However they didn't foreclose on his neighbors who only paid their monthly minimums and since the housing market took a dive were upside down on equity. The bank didn't want negative assets on their books so worked with those clients.
So to me if you plan to pay off your house early it would be better to have it in a liquid account until the balance is high enough to pay it off. Hmmm maybe like an equity indexed UL over funded that Doug Andrews talks about in his book. Not that I totally agree with Doug's strategy but I think it is better than Dave's in this case.
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Personally, I have never understood this desire to pay off a mortgage early. Even before the collapse of the housing market, it never made much sense to me to take a liquid asset and exchange it into an illiquid one.
Now, it makes even less sense.
Plus you are paying off what (for most) is the lowest interest rate you will probably ever have. We refinanced our home a month or so ago. Rate is 4.5% for 15 yrs.
Why pay this off early?
Now, it makes even less sense.
Plus you are paying off what (for most) is the lowest interest rate you will probably ever have. We refinanced our home a month or so ago. Rate is 4.5% for 15 yrs.
Why pay this off early?
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The mortgage is the last thing you pay off.
I paid off my mortgage several years ago. Felt good. It had nothing to do with Dave Ramsey. Just made sense to do it.
Dave Ramsey is fun to listen to and is somewhat motivating to live within your means. But LOTS of the junk he dishes out as factual is horse manure just designed to pad his pockets and sell his books. He knows he is giving financial advice for the most clueless but presents it as the ONLY way to be financially secure. He's often wrong.
Just listen to how often he mutes the caller if they sound like they have some sense and are successful WITHOUT using Dave's methods. Happens all the time. He mutes them and then talks to them as if they are still on the line and then tells them WHY their plan is doomed to fail (lies) and their silence (muted) comes across like they are agreeing with Dave. Then he goes directly to the next caller. He's a master at selling his point of view.
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Especially since mortgage interest is one of the few tax-deductible items left...
Scott, I understand your point, but I wonder how many folks who have paid off their home are now wishing they had the cash instead?
They may have lost value in their 401(k) as well, but it is liquid. Not so with a similar collapse in home values. The market may . . . may recover more quickly than the housing market . . . or it may not.
My personal opinion is, it is going to take quite some time before either are back to par. This talk about "green shoots" in the economy is crap. The second wave is about to hit which will take us even further into a recession.
Living totally debt free is certainly nice but homes are not liquid.
If you sell your home you still need a place to live and a way to pay for it. You can't live in your brokerage account.
They may have lost value in their 401(k) as well, but it is liquid. Not so with a similar collapse in home values. The market may . . . may recover more quickly than the housing market . . . or it may not.
My personal opinion is, it is going to take quite some time before either are back to par. This talk about "green shoots" in the economy is crap. The second wave is about to hit which will take us even further into a recession.
Living totally debt free is certainly nice but homes are not liquid.
If you sell your home you still need a place to live and a way to pay for it. You can't live in your brokerage account.
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Playing devil's advocate...if you or your spouse lost your job, would you be better off with having a paid for house or a larger bank account? With the paid for house, your monthly expenses are lower so your smaller bank account would last longer. If you have a larger bank account and a house payment, your larger bank account would last a shorter period of time due to making house payments.
Personally, I would rather have the paid off debt.
Personally, I would rather have the paid off debt.
