Poll

What baby step are you up to?

$1,000 Rainy day fund
Pay off all debt using the debt snowball
3 to 6 months of expenses in savings
Invest 15% of household income into Roth IRAs and pre-tax retirement (401k Etc.)
College /Simcha fund for children
Pay off home early (prepay mortgage)
Build wealth and give!

Author Topic: Dave Ramsey Plan  (Read 106123 times)

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15618
  • Total likes: 7711
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
Re: Dave Ramsey Plan
« Reply #20 on: June 09, 2020, 03:45:22 PM »
whole point of paying off house was to not have the risk..So now this WL policy is the emergency fund? One can also borrow from their retirement accounts but its not generally smart to do that.
So at what point would one pay off a house and not have "the risk"?

So now you are talking about 3 asset types: A Whole Life insurance policy, A house (presumably you're referring to primary residence), and An employer sponsored retirement account (IRAs don't generally allow for loans, CARES act being the exception allowing for a withdrawal that can be redeposited).

The WL should not be an emergency fund, but it could be used as a backup to such. Unlike the other two assets, which would be leveraged to secure a loan, that could decline in value while a loan is outstanding, a Whole Life policy, by design and definition, cannot decline in value (with the exception of the cost of some riders that could eat into the policy's value, none of this should be an issue if working with a competent agent).
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline 12HRS

  • Dansdeals Lifetime Presidential Platinum Elite
  • *********
  • Join Date: Jun 2013
  • Posts: 5108
  • Total likes: 575
  • DansDeals.com Hat Tips 6
    • View Profile
Re: Dave Ramsey Plan
« Reply #21 on: June 09, 2020, 10:56:47 PM »
So at what point would one pay off a house and not have "the risk"?

Most people on his plan pay off their house within 7-10 years.

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15618
  • Total likes: 7711
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
Re: Dave Ramsey Plan
« Reply #22 on: June 09, 2020, 11:08:16 PM »
Most people on his plan pay off their house within 7-10 years.
So they converted cash into equity in their home at an accelerated pace. Saving (tax deductible) mortgage interest. If "the risk" is not being able to make housing payments, they will still have property taxes and homeowners insurance (as well as other utilities).

The only logical argument I can hear about prepaying the mortgage is saving the mortgage interest. With mortgage rates at the low 3s (and potentially tax deductible, making the interest bite even lower) one needs to consider the alternatives to see how much sense it makes. Obviously every person's situation and personality is different.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline moko

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Jul 2011
  • Posts: 4567
  • Total likes: 1484
  • DansDeals.com Hat Tips 2
    • View Profile
  • Location: BOS
Re: Dave Ramsey Plan
« Reply #23 on: June 09, 2020, 11:11:44 PM »
So they converted cash into equity in their home at an accelerated pace. Saving (tax deductible) mortgage interest. If "the risk" is not being able to make housing payments, they will still have property taxes and homeowners insurance (as well as other utilities).

The only logical argument I can hear about prepaying the mortgage is saving the mortgage interest. With mortgage rates at the low 3s (and potentially tax deductible, making the interest bite even lower) one needs to consider the alternatives to see how much sense it makes. Obviously every person's situation and personality is different.
He's very clear that paying off one's mortgage is a behavioral decision and not a logical decision. The question he asks to anyone asking why not rather invest the money is " Would borrow money on your home to invest? If the answer is no, then this is the same thing"
Some might borrow money on their home to invest

Offline 12HRS

  • Dansdeals Lifetime Presidential Platinum Elite
  • *********
  • Join Date: Jun 2013
  • Posts: 5108
  • Total likes: 575
  • DansDeals.com Hat Tips 6
    • View Profile
Re: Dave Ramsey Plan
« Reply #24 on: June 09, 2020, 11:18:46 PM »
He's very clear that paying off one's mortgage is a behavioral decision and not a logical decision. The question he asks to anyone asking why not rather invest the money is " Would borrow money on your home to invest? If the answer is no, then this is the same thing"
Some might borrow money on their home to invest

This, and its about the freedom one has when the pressure of paying monthly bills is removed. (not in the sense of freedom to stop working but the freedom to be able to search for the right opportunities without the pressure on your head of making ends meet)

they will still have property taxes and homeowners insurance (as well as other utilities).

obviously there are some expenses that will never disappear.

Offline David61

  • Dansdeals Platinum Elite
  • ****
  • Join Date: Jan 2011
  • Posts: 457
  • Total likes: 153
  • DansDeals.com Hat Tips 0
    • View Profile
  • Location: NYC
Re: Dave Ramsey Plan
« Reply #25 on: June 09, 2020, 11:21:07 PM »
So they converted cash into equity in their home at an accelerated pace. Saving (tax deductible) mortgage interest. If "the risk" is not being able to make housing payments, they will still have property taxes and homeowners insurance (as well as other utilities).

The only logical argument I can hear about prepaying the mortgage is saving the mortgage interest. With mortgage rates at the low 3s (and potentially tax deductible, making the interest bite even lower) one needs to consider the alternatives to see how much sense it makes. Obviously every person's situation and personality is different.

Much harder to get tax benefit for mortgage payments (e.g. in NJ), especially with average size frum family, given recent (2018) changes to IRS standard deductions.
Most are likely not getting much if any tax benefit relating to their mortgage anymore. Few probably realize that.

Offline moko

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Jul 2011
  • Posts: 4567
  • Total likes: 1484
  • DansDeals.com Hat Tips 2
    • View Profile
  • Location: BOS
Re: Dave Ramsey Plan
« Reply #26 on: June 09, 2020, 11:42:43 PM »
obviously there are some expenses that will never disappear.
Time to conquer an island!  :) off the grid! all solar.
off topic... I just stayed at a gorgeous cottage in VT (work related) totally on solar. even the well pump. They don't have a gas hookup. Induction cooktop, electric oven. Supposedly a net positive carbon footprint.
Quote from: SunCottage Welcome Packet
Cannabis & Hemp
 It is now legal in Vermont for citizens to grow marijuana for personal use. It can’t
 be sold, but it can be shared, if you would like to sample some of our home-grown
 let us know. While we don’t partake ourselves, we love growing things! In 2019
 we received our hemp license to grow for the CBD market. You may see them
 growing in the garden
:D

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15618
  • Total likes: 7711
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
Re: Dave Ramsey Plan
« Reply #27 on: June 10, 2020, 07:58:12 AM »
He's very clear that paying off one's mortgage is a behavioral decision and not a logical decision. The question he asks to anyone asking why not rather invest the money is " Would borrow money on your home to invest? If the answer is no, then this is the same thing"
Some might borrow money on their home to invest
This, and its about the freedom one has when the pressure of paying monthly bills is removed. (not in the sense of freedom to stop working but the freedom to be able to search for the right opportunities without the pressure on your head of making ends meet)

obviously there are some expenses that will never disappear.
So now that we agree on that. What's there to argue about? Based on that argument, the Dave Ramsey Plan should be instructing people to purchase heavily overfunded Whole Life insurance in a way that it's either fully paid off or self sustaining in 10 years or less. No more life insurance bills to worry about. And peace of mind of having coverage that will never expire.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline moko

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Jul 2011
  • Posts: 4567
  • Total likes: 1484
  • DansDeals.com Hat Tips 2
    • View Profile
  • Location: BOS
Re: Dave Ramsey Plan
« Reply #28 on: June 10, 2020, 08:15:57 AM »
This, and its about the freedom one has when the pressure of paying monthly bills is removed. (not in the sense of freedom to stop working but the freedom to be able to search for the right opportunities without the pressure on your head of making ends meet)

obviously there are some expenses that will never disappear.

So now that we agree on that. What's there to argue about? Based on that argument, the Dave Ramsey Plan should be instructing people to purchase heavily overfunded Whole Life insurance in a way that it's either fully paid off or self sustaining in 10 years or less. No more life insurance bills to worry about. And peace of mind of having coverage that will never expire.
ah, his argument to that is to keep investments and insurance separate.
He views WL as a long term investment but you can do much better with other, relatively safe investment tools.
In regards to strict insurance, term is way cheaper dollar for dollar than WL.
I'm in my mid 30s and obese. I pay $1400 annually for 1mil,  30 yr term.
What would I have to pay in whole life to receive a 1mil pay out?

Offline Mordyk

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: May 2013
  • Posts: 4102
  • Total likes: 1015
  • DansDeals.com Hat Tips 3
  • Gender: Male
    • View Profile
  • Programs: Some of this and some of that.
Re: Dave Ramsey Plan
« Reply #29 on: June 10, 2020, 08:16:20 AM »
This, and its about the freedom one has when the pressure of paying monthly bills is removed. (not in the sense of freedom to stop working but the freedom to be able to search for the right opportunities without the pressure on your head of making ends meet)

obviously there are some expenses that will never disappear.

So now that we agree on that. What's there to argue about? Based on that argument, the Dave Ramsey Plan should be instructing people to purchase heavily overfunded Whole Life insurance in a way that it's either fully paid off or self sustaining in 10 years or less. No more life insurance bills to worry about. And peace of mind of having coverage that will never expire.
He says not to buy whole life.  He says the only reason to have life insurance is so your family can continue living.  Thats why you only need term until you built wealth.  Go on youtube and find out what he thinks of whole llife.  Its the devil ;D
#TYH

Offline Kobe Bryant

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Jan 2017
  • Posts: 3763
  • Total likes: 2280
  • DansDeals.com Hat Tips 17
    • View Profile
Re: Dave Ramsey Plan
« Reply #30 on: July 23, 2020, 01:48:00 PM »








Offline avromie7

  • Dansdeals Lifetime Presidential Platinum Elite
  • *********
  • Join Date: Feb 2014
  • Posts: 8188
  • Total likes: 2713
  • DansDeals.com Hat Tips 6
    • View Profile
  • Location: Lakewood
Re: Dave Ramsey Plan
« Reply #31 on: July 23, 2020, 02:08:06 PM »
This, and its about the freedom one has when the pressure of paying monthly bills is removed. (not in the sense of freedom to stop working but the freedom to be able to search for the right opportunities without the pressure on your head of making ends meet)

obviously there are some expenses that will never disappear.

So now that we agree on that. What's there to argue about? Based on that argument, the Dave Ramsey Plan should be instructing people to purchase heavily overfunded Whole Life insurance in a way that it's either fully paid off or self sustaining in 10 years or less. No more life insurance bills to worry about. And peace of mind of having coverage that will never expire.
The main principal behind his plan is, without payments you can use your income to build wealth. Your idea is not only keep a big payment (mortgage), but also add another one.
I wonder what people who type "u" instead of "you" do with all their free time.

Offline Pad18

  • Dansdeals Platinum Elite + Lifetime Gold Elite
  • ******
  • Join Date: Apr 2014
  • Posts: 926
  • Total likes: 104
  • DansDeals.com Hat Tips 9
    • View Profile
  • Location: United States
Re: Dave Ramsey Plan
« Reply #32 on: July 23, 2020, 02:50:43 PM »
Funny but I just finished the book this past week, and will start the "baby steps 3"

I am not an expert in investing at all, and unfortunately no money on the side for emergency or investing.

Things start to change !

Online yos9694

  • Dansdeals Lifetime Platinum Elite
  • *******
  • Join Date: Aug 2012
  • Posts: 1903
  • Total likes: 899
  • DansDeals.com Hat Tips 6
  • Gender: Male
    • View Profile
Re: Dave Ramsey Plan
« Reply #33 on: July 23, 2020, 02:54:13 PM »
Just want to add a couple of things to this:

WL can be a great vehicle in your fixed income investment basket. If you're only investing in equity then you might not see WL as a logical investment, but 100% equity exposure is not for most people.

A good WL policy is highly similar to a mortgage. Fixed payments with guaranteed equity build up. I can see why someone would choose to put extra money into WL rather than into paying down a mortgage.

The best reasons to not pay off a mortgage early are (wadr to DR)
  • Liquid assets are better than illiquid (and yes, WL is liquid)
  • Net cost of borrowing is government subsidized if you itemize (obviously not everyone, especially after TCJA)
  • The big one that most people don't factor in - Risk sharing. If you own your house outright all the risk of loss is on you (/HO insurance). Having a mortgage means that part of your home's value is the bank's risk. If you had to walk away from the house for any reason, they can never touch any of your other assets

Offline Kobe Bryant

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Jan 2017
  • Posts: 3763
  • Total likes: 2280
  • DansDeals.com Hat Tips 17
    • View Profile
Re: Dave Ramsey Plan
« Reply #34 on: July 23, 2020, 05:36:04 PM »

Offline Kobe Bryant

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Jan 2017
  • Posts: 3763
  • Total likes: 2280
  • DansDeals.com Hat Tips 17
    • View Profile
Re: Dave Ramsey Plan
« Reply #35 on: July 23, 2020, 05:37:45 PM »
"Whole life insurance is the payday loans of the middle class" DR

Offline Kobe Bryant

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Jan 2017
  • Posts: 3763
  • Total likes: 2280
  • DansDeals.com Hat Tips 17
    • View Profile
Re: Dave Ramsey Plan
« Reply #36 on: July 23, 2020, 05:38:20 PM »

Offline Kobe Bryant

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Jan 2017
  • Posts: 3763
  • Total likes: 2280
  • DansDeals.com Hat Tips 17
    • View Profile
Re: Dave Ramsey Plan
« Reply #37 on: July 23, 2020, 05:38:42 PM »

Offline Kobe Bryant

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Jan 2017
  • Posts: 3763
  • Total likes: 2280
  • DansDeals.com Hat Tips 17
    • View Profile
Re: Dave Ramsey Plan
« Reply #38 on: July 23, 2020, 05:39:19 PM »

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15618
  • Total likes: 7711
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
Re: Dave Ramsey Plan
« Reply #39 on: July 23, 2020, 05:43:51 PM »
"Whole life insurance is the payday loans of the middle class" DR

Can you just give us the transcript or arguments?
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan