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 106128 times)

Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #320 on: July 28, 2020, 02:21:06 PM »
The answer is simple, getting it done is the hard part. Drastically scale back government spending

ROTFLMAO....

There's only one way out of this kind of a debt hole. It's been tried and tested for thousands of years. Hint (Though R&R don't seem to say thousands, only hundreds).
I've been waiting over 5 years with bated breath for someone to say that!
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Offline whYME

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Re: Dave Ramsey Plan
« Reply #321 on: July 28, 2020, 02:40:00 PM »

Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #322 on: July 28, 2020, 02:47:13 PM »
tl;dr?

In today's day and age, there's no need to actually read the book to know what it's about. There's been enough publicity of this dissertation to the extent that just mentioning R&R brings it to mind.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline whYME

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Re: Dave Ramsey Plan
« Reply #323 on: July 28, 2020, 03:01:55 PM »
There's been enough publicity of this dissertation to the extent that just mentioning R&R brings it to mind.
I'll take your word for it

Offline David61

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Re: Dave Ramsey Plan
« Reply #324 on: July 28, 2020, 11:42:03 PM »
Not one penny more than the saved interest. THe appreciation was yours before paying off the mortgage as well.

The saved interest PLUS the portion of the money you would have squandered frivolously, PLUS the habit setting practice of prioritizing long-term financial health over instant gratification.

Offline AussieMan

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Re: Dave Ramsey Plan
« Reply #325 on: July 29, 2020, 10:14:34 AM »
Paying off a mortgage, other than the interest saved, is exchanging one type of asset (guaranteed, liquid cash) for another type (illiquid, non-guaranteed equity in real estate).
Does this apply if every dollar of principal gets added to HELOC?

Offline AussieMan

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Re: Dave Ramsey Plan
« Reply #326 on: July 29, 2020, 10:25:18 AM »
Do behavioral aspect of financial planning ever outweigh the actual financial benefits? Do they have some value?
 
Case in point when deciding which retirement account to use, in Canada there is TFSA and RRSP - simialr to Roth IRA and 401K
Main difference between TFSA and roth IRA is that TFSA you can withdraw at any point tax free not only in retirement.

1)If TFSA makes more financial sense (based on current and future tax bracket estimates), but isn't actually forced savings, would one recommend RRSP for the forced savings, or at least give that some value.
2) If RRSP makes more financial sense but since it's locked up is highly illiquid, (is that even a word @ExGingi) would you recommend TFSA for liquidity.

 

Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #327 on: July 29, 2020, 12:11:45 PM »
The saved interest PLUS the portion of the money you would have squandered frivolously, PLUS the habit setting practice of prioritizing long-term financial health over instant gratification.

None of those have anything whatsoever to do with math.

If you would take the same amount and put it somewhere where it would grow by more than the interest saves, and would go towards building wealth and possibly provide other benefits, why would it make sense to prepay one's mortgage?
I've been waiting over 5 years with bated breath for someone to say that!
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Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #328 on: July 29, 2020, 12:16:39 PM »
Do behavioral aspect of financial planning ever outweigh the actual financial benefits? Do they have some value?
 
Case in point when deciding which retirement account to use, in Canada there is TFSA and RRSP - simialr to Roth IRA and 401K
Main difference between TFSA and roth IRA is that TFSA you can withdraw at any point tax free not only in retirement.

1)If TFSA makes more financial sense (based on current and future tax bracket estimates), but isn't actually forced savings, would one recommend RRSP for the forced savings, or at least give that some value.
2) If RRSP makes more financial sense but since it's locked up is highly illiquid, (is that even a word @ExGingi) would you recommend TFSA for liquidity.

I claim total ignorance of Canadian plans, laws, and taxes.

AFAIK illiquid is a word, but I believe the ultimate arbiter for the English language 'round here is @Yehuda57.

Mathematically, if everything else remains constant (if you think that is a fact, I have a bridge to sell you) there is no difference between a ROTH IRA and a Traditional IRA. However there are even some built-in differences that make sure that things won't be constant. For example, a traditional IRA has RMDs which a ROTH IRA doesn't. Those RMDs can have a significant impact at retirement. Other types of planning which require asset transfers are easier (and won't affect taxes at that point) with ROTH IRA (after age 59.5) than with traditional IRAs.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline AussieMan

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Re: Dave Ramsey Plan
« Reply #329 on: July 29, 2020, 01:18:17 PM »
I claim total ignorance of Canadian plans, laws, and taxes.


So theoretically, all other things equal - is money that is locked up until retirement
1) Good - forces less consumption
2) Bad - why make it illiquid if not needed
3) Somewhere in the middle

Offline yungermanchik

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Re: Dave Ramsey Plan
« Reply #330 on: July 29, 2020, 01:21:56 PM »
So theoretically, all other things equal - is money that is locked up until retirement
1) Good - forces less consumption For people with NO self discipline
2) Bad - why make it illiquid if not needed For people with self discipline, who know how to would invest in better short term investments
3) Somewhere in the middle For people with self discipline, who don't know how to wouldn't invest in better short term investments
@ExGingi am I right?
« Last Edit: July 29, 2020, 01:40:57 PM by yungermanchik »
Small people talk about other people.
Average people talk about things
BIG PEOPLE TALK ABOUT IDEAS.

Offline AussieMan

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Re: Dave Ramsey Plan
« Reply #331 on: July 29, 2020, 01:35:45 PM »
@ExGingi am I right?
The money in the retirement account is obviously also invested, the question is, is making it untouchable good or bad.
The only way it's bad is if at some point you would need the money and have to withdraw it early, and then suffer consequences.

The thing is, people may write the "right" answer, even though they know that it's not practical. Risk tolerance is an emotional financial concern, and I'm suggesting that making funds untouchable could be be as well.
« Last Edit: July 29, 2020, 01:39:55 PM by AussieMan »

Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #332 on: July 29, 2020, 01:43:09 PM »
@ExGingi am I right?

Is there a right or wrong?  Only about facts. Here you're talking about emotions and psychology.

As to the facts. Again, I don't know anything about Canadian laws or programs, but in the US a traditional IRA isn't illiquid. There are consequences such as taxes and penalties which are applicable, but in general if a request goes through before market close, the funds could be available by the next business day (or two). I don't call that illiquid, there are just some fences around it.

With a 401k there's usually easier access in the form of loans.

CARES act created huge access opportunities to almost all retirement accounts.
I've been waiting over 5 years with bated breath for someone to say that!
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Online Yehuda57

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Re: Dave Ramsey Plan
« Reply #333 on: July 29, 2020, 02:51:16 PM »
A little ironic that I got tagged in a thread that started after I quit DDF about a topic I got into since I quit  :)

I read some of the thread, but not all, so forgive me if I'm repeating things.

1) DR is catering to people who are stuck in debt. These are people who made mistakes and didn't know how to handle money. If they had good financial planning knowledge, they wouldn't be in the mess in the first place. Saying something like "Why would you pay off lower interest first?" and following that up with "I've always had financial freedome [and never been in debt]" shows you aren't the DR target.

Take me for example, and I'm saying this even though I'm not anonymous. I found DD and started opening up credit cards and earning miles. It was awesome. Did a whole bunch of things I could never have afforded. Paid my bills on time, had a amazing credit score without a penny to my name. Life happened. Expenses ended up being more than I was earning. One job cut my salary by 40% rather than fire me outright. I was never an extravagant spender, don't have a car, live in a small apartment, but the CC bills became unpayable. I did 0% balance transfers and was treading water for a while. Then I missed a payment on one card. Then another on a different card. Before I knew it I was 80k in the whole, with no shovel to dig out of it.

I hate to say it, but I worry that more DD(F)ers fell into this than we like to imagine. No CC farms, no swiping scams, just spending more than we can afford to on high interest CCs.

2) As such, the DR advice is not necessarily the most mathermatically sound advice. He says so himself. It's behavioral. It's about planning, budgeting, and being in control. It is absolutely beneficial for the kinds of people in point 1 above to pay off a smaller debts earlier, even if it is lower intrest. The whole point is to change behaviour, not be the most optimal mathematical plan.

3) I have learned his plan without reading his book (though I could, for free, at the library) or paying him a penny. I've listened to him on youtube and I got the picture. The fact that he has built a multi million dollar self help and media empire doesn't mean he preys on anyone. And even if it would have cost me $100 to learn his plan, it would have been the best $100 I'd have ever spent.

4) Some people have mentioned $1000 not being enough of an emergency fund. True, that's why it's called a *beginners* emergency fund. Step 3 grows that to 3-6 months of expenses.

5) All the talk of WL vs Mutual funds, etc. - once you get into step 4,5 & 6 you should be speaking to an advisor who can go through the options with you.

Thank G-d, I should be debt free within a month, and complete step 3 soon after that. Then I can come back to DDF to hear the outcome of the arguements for step 4, 5 and 6. :)

Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #334 on: July 29, 2020, 02:58:38 PM »
A little ironic that I got tagged in a thread that started after I quit DDF about a topic I got into since I quit  :)

I read some of the thread, but not all, so forgive me if I'm repeating things.

1) DR is catering to people who are stuck in debt. These are people who made mistakes and didn't know how to handle money. If they had good financial planning knowledge, they wouldn't be in the mess in the first place. Saying something like "Why would you pay off lower interest first?" and following that up with "I've always had financial freedome [and never been in debt]" shows you aren't the DR target.

Take me for example, and I'm saying this even though I'm not anonymous. I found DD and started opening up credit cards and earning miles. It was awesome. Did a whole bunch of things I could never have afforded. Paid my bills on time, had a amazing credit score without a penny to my name. Life happened. Expenses ended up being more than I was earning. One job cut my salary by 40% rather than fire me outright. I was never an extravagant spender, don't have a car, live in a small apartment, but the CC bills became unpayable. I did 0% balance transfers and was treading water for a while. Then I missed a payment on one card. Then another on a different card. Before I knew it I was 80k in the whole, with no shovel to dig out of it.

I hate to say it, but I worry that more DD(F)ers fell into this than we like to imagine. No CC farms, no swiping scams, just spending more than we can afford to on high interest CCs.

2) As such, the DR advice is not necessarily the most mathermatically sound advice. He says so himself. It's behavioral. It's about planning, budgeting, and being in control. It is absolutely beneficial for the kinds of people in point 1 above to pay off a smaller debts earlier, even if it is lower intrest. The whole point is to change behaviour, not be the most optimal mathematical plan.

3) I have learned his plan without reading his book (though I could, for free, at the library) or paying him a penny. I've listened to him on youtube and I got the picture. The fact that he has built a multi million dollar self help and media empire doesn't mean he preys on anyone. And even if it would have cost me $100 to learn his plan, it would have been the best $100 I'd have ever spent.

4) Some people have mentioned $1000 not being enough of an emergency fund. True, that's why it's called a *beginners* emergency fund. Step 3 grows that to 3-6 months of expenses.

5) All the talk of WL vs Mutual funds, etc. - once you get into step 4,5 & 6 you should be speaking to an advisor who can go through the options with you.

Thank G-d, I should be debt free within a month, and complete step 3 soon after that. Then I can come back to DDF to hear the outcome of the arguements for step 4, 5 and 6. :)

Great post, and very emotional. Kudos. You were tagged for your mastery of the English language, and ended up writing a great post which I can only agree with about the practical application of DR vs the mathematical correctness, while making some typos along the way, and ignoring the question for which you were tagged.  ;)
I've been waiting over 5 years with bated breath for someone to say that!
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Online yeshivabucher

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Re: Dave Ramsey Plan
« Reply #335 on: July 29, 2020, 04:58:57 PM »
A little ironic that I got tagged in a thread that started after I quit DDF about a topic I got into since I quit  :)

I read some of the thread, but not all, so forgive me if I'm repeating things.

1) DR is catering to people who are stuck in debt. These are people who made mistakes and didn't know how to handle money. If they had good financial planning knowledge, they wouldn't be in the mess in the first place. Saying something like "Why would you pay off lower interest first?" and following that up with "I've always had financial freedome [and never been in debt]" shows you aren't the DR target.

Take me for example, and I'm saying this even though I'm not anonymous. I found DD and started opening up credit cards and earning miles. It was awesome. Did a whole bunch of things I could never have afforded. Paid my bills on time, had a amazing credit score without a penny to my name. Life happened. Expenses ended up being more than I was earning. One job cut my salary by 40% rather than fire me outright. I was never an extravagant spender, don't have a car, live in a small apartment, but the CC bills became unpayable. I did 0% balance transfers and was treading water for a while. Then I missed a payment on one card. Then another on a different card. Before I knew it I was 80k in the whole, with no shovel to dig out of it.

I hate to say it, but I worry that more DD(F)ers fell into this than we like to imagine. No CC farms, no swiping scams, just spending more than we can afford to on high interest CCs.

2) As such, the DR advice is not necessarily the most mathermatically sound advice. He says so himself. It's behavioral. It's about planning, budgeting, and being in control. It is absolutely beneficial for the kinds of people in point 1 above to pay off a smaller debts earlier, even if it is lower intrest. The whole point is to change behaviour, not be the most optimal mathematical plan.

3) I have learned his plan without reading his book (though I could, for free, at the library) or paying him a penny. I've listened to him on youtube and I got the picture. The fact that he has built a multi million dollar self help and media empire doesn't mean he preys on anyone. And even if it would have cost me $100 to learn his plan, it would have been the best $100 I'd have ever spent.

4) Some people have mentioned $1000 not being enough of an emergency fund. True, that's why it's called a *beginners* emergency fund. Step 3 grows that to 3-6 months of expenses.

5) All the talk of WL vs Mutual funds, etc. - once you get into step 4,5 & 6 you should be speaking to an advisor who can go through the options with you.

Thank G-d, I should be debt free within a month, and complete step 3 soon after that. Then I can come back to DDF to hear the outcome of the arguements for step 4, 5 and 6. :)
Thanks for sharing; definitely opened my eyes a lot more just by reading this

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Re: Dave Ramsey Plan
« Reply #336 on: July 29, 2020, 11:20:33 PM »
I hate to say it, but I worry that more DD(F)ers fell into this than we like to imagine.

If you are making a list you can add me. Similar situation, and just finished step 3. Trying to figure out 4,5 and 6 now

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Re: Dave Ramsey Plan
« Reply #337 on: July 29, 2020, 11:25:56 PM »

Thank G-d, I should be debt free within a month, and complete step 3 soon after that.

Let us know when to be listening for your Debt Free Scream...

Online Yehuda57

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Re: Dave Ramsey Plan
« Reply #338 on: July 30, 2020, 12:46:31 PM »
If you are making a list you can add me. Similar situation, and just finished step 3. Trying to figure out 4,5 and 6 now

I think it's fair to say @zh cohen is an intelligent person. These issues are not born of a lack of IQ.

@Dan often writes disclaimers about using credit cards as one would use cash. I read them, understood them, and agreed with them. I've since wondered if reading real life stories of people who, like me, started with that intention but ended up in an uncontrollable downward spiral would have helped, or if I'd have nodded in agreement and proceeded without a plan or control.

What definitely has not helped is the mocking and scolding the few who have posted questions about their debt on this forum have received.

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Re: Dave Ramsey Plan
« Reply #339 on: July 30, 2020, 01:10:06 PM »
I think it's fair to say @zh cohen is an intelligent person. These issues are not born of a lack of IQ.
IQ was never a question when it came to this issue.
What definitely has not helped is the mocking and scolding the few who have posted questions about their debt on this forum have received.
If anything I said has come off as mocking or scolding I apologize in advance.
My beef is with the person (DR) and some of the financial part of his course, not any member taking his course.
@Dan often writes disclaimers about using credit cards as one would use cash. I read them, understood them, and agreed with them. I've since wondered if reading real life stories of people who, like me, started with that intention but ended up in an uncontrollable downward spiral would have helped, or if I'd have nodded in agreement and proceeded without a plan or control.
Your story and others will/would help.
I think the problem is we never know beforehand how it (CC game) effects an individual.

Great to see you posting again even if it is short lived.
Only on DDF does 24/6 mean 24/5/half/half