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Pay off all debt using the debt snowball
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Pay off home early (prepay mortgage)
Build wealth and give!

Author Topic: Dave Ramsey Plan  (Read 106103 times)

Offline Mordyk

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Re: Dave Ramsey Plan
« Reply #400 on: November 15, 2020, 01:00:23 AM »
I love listening to Dave Ramsey, but i feel like he's better suited for people with lower income. Personally I carry two mortgages and they both generate income b"h.
Why should i hurry to pay off these mortgages instead of searching for more opportunities for income generating properties?
Paid up property owners were able to weather covid.  People with mortgages had a harder time.  If you build a real estate portfolio on cash, then you can weather every downturn.  Just think of people that lost it all in '08. Etc.   Its a slower growth, but a steady growth. And as your portfolio gets bigger thats when the fun starts because its like a Boulder going downhill as you pick up more rental income without sharing with the bank
#TYH

Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #401 on: November 15, 2020, 01:01:45 AM »
I love listening to Dave Ramsey, but i feel like he's better suited for people with lower income. Personally I carry two mortgages and they both generate income b"h.
Why should i hurry to pay off these mortgages instead of searching for more opportunities for income generating properties?

I don't think he's talking about paying off mortgages on investment properties. He's talking about personal residence (I don't think that should necessarily be paid off given today's low interest rates, but some people have a psychological need for it).

I can tell you from the days I was helping people with mortgage modifications, there were a few instances where my best advice for people would be to go 90 days delinquent and then get a modification. Some were afraid at first, but were reassured when I explained the process and the ramifications (and it worked well for them) while one comes to mind that wouldn't do it (but was paying late fees and overdraft fees every month, and had a mortgage with an interest rate over 8%!). 
« Last Edit: November 15, 2020, 01:07:54 AM by ExGingi »
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Offline aygart

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Re: Dave Ramsey Plan
« Reply #402 on: November 15, 2020, 01:04:49 AM »
I love listening to Dave Ramsey, but i feel like he's better suited for people with lower income. Personally I carry two mortgages and they both generate income b"h.
Why should i hurry to pay off these mortgages instead of searching for more opportunities for income generating properties?
No plan is for everyone. If you are able to manage debt to be a useful tool then that is great.
Feelings don't care about your facts

Offline drosenberg88429

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Re: Dave Ramsey Plan
« Reply #403 on: November 15, 2020, 01:15:41 AM »
Paid up property owners were able to weather covid.  People with mortgages had a harder time.  If you build a real estate portfolio on cash, then you can weather every downturn.  Just think of people that lost it all in '08. Etc.   Its a slower growth, but a steady growth. And as your portfolio gets bigger thats when the fun starts because its like a Boulder going downhill as you pick up more rental income without sharing with the bank

Leverage gets you more cash on cash returns. What difference does what the bank is making make to you? You're making more money than you would without the leverage.

The ability to float the payments in case of vacancies and a downturn is a different story. Having a contingency plan and not being stretched too tight as to be wiped out by a couple of bad months is key. Paradoxically, you're likely better off taking a bigger mortgage and putting the extra cash in an emergency fund than you are putting in all in initially and keeping mortgage balance as low as possible.

Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #404 on: November 15, 2020, 01:33:25 AM »
Leverage gets you more cash on cash returns. What difference does what the bank is making make to you? You're making more money than you would without the leverage.

The ability to float the payments in case of vacancies and a downturn is a different story. Having a contingency plan and not being stretched too tight as to be wiped out by a couple of bad months is key. Paradoxically, you're likely better off taking a bigger mortgage and putting the extra cash in an emergency fund than you are putting in all in initially and keeping mortgage balance as low as possible.

There's a right balance for everything.

Paying down a mortgage is essentially converting one asset (cash) into another (equity in real estate) while saving the interest cost.

High leverage runs the risk of a wipeout in case the asset value falls. But having the (balance sheet)  equity tied into real estate rather than fully liquid and safe, won't always be advantageous.

Take two hypothetical homeowners. A used his cash to prepay his mortgage, while the B built up cash reserves (possibly in a life insurance policy) and just made his mortgage payments as they came due. In 2008 property values went down by 50%. A had a small 125,000 balance left on his mortgage, but no cash war chest, while B still owed 500,000 on his mortgage but also had a liquid war chest of 200,000. B was able to deploy his war chest opportunisticly and buy a neighboring property out of foreclosure, and was also able to modify his own mortgage, slashing his monthly payments by 40%, while A just felt bad for all the people who could lose their homes to a foreclosure (though he knew of none in his community).
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline Mordyk

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Re: Dave Ramsey Plan
« Reply #405 on: November 15, 2020, 01:42:10 AM »
I don't think he's talking about paying off mortgages on investment properties. He's talking about personal residence (I don't think that should necessarily be paid off given today's low interest rates, but some people have a psychological need for it).

I can tell you from the days I was helping people with mortgage modifications, there were a few instances where my best advice for people would be to go 90 days delinquent and then get a modification. Some were afraid at first, but were reassured when I explained the process and the ramifications (and it worked well for them) while one comes to mind that wouldn't do it (but was paying late fees and overdraft fees every month, and had a mortgage with an interest rate over 8%!).
Dave Ramsey says that paying off personal home mortgage is the last step after investments etc. So thats why I assumed he was talking about mortgages in investment properties .
#TYH

Offline farmbochur

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Re: Dave Ramsey Plan
« Reply #406 on: November 15, 2020, 02:21:33 AM »
Dave's opinion on how to invest in real estate

https://www.daveramsey.com/blog/how-to-invest-in-real-estate
Risk is opportunity

Offline farmbochur

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Re: Dave Ramsey Plan
« Reply #407 on: November 15, 2020, 02:30:10 AM »
And while we're at it, here's Dave's opinion on cash value insurance.

https://www.daveramsey.com/blog/cash-value-life-insurance
Risk is opportunity

Offline CountValentine

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Re: Dave Ramsey Plan
« Reply #408 on: November 15, 2020, 08:01:28 AM »
You can argue for the psychological benefit of DR plan. After that you are whistling Dixie!!!
Only on DDF does 24/6 mean 24/5/half/half

Offline zh cohen

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Re: Dave Ramsey Plan
« Reply #409 on: November 15, 2020, 08:21:57 AM »
There's a right balance for everything.

Paying down a mortgage is essentially converting one asset (cash) into another (equity in real estate) while saving the interest cost.

High leverage runs the risk of a wipeout in case the asset value falls. But having the (balance sheet)  equity tied into real estate rather than fully liquid and safe, won't always be advantageous.

Take two hypothetical homeowners. A used his cash to prepay his mortgage, while the B built up cash reserves (possibly in a life insurance policy) and just made his mortgage payments as they came due. In 2008 property values went down by 50%. A had a small 125,000 balance left on his mortgage, but no cash war chest, while B still owed 500,000 on his mortgage but also had a liquid war chest of 200,000. B was able to deploy his war chest opportunisticly and buy a neighboring property out of foreclosure, and was also able to modify his own mortgage, slashing his monthly payments by 40%, while A just felt bad for all the people who could lose their homes to a foreclosure (though he knew of none in his community).

Where did B's other $175,000 go?

Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #410 on: November 15, 2020, 12:19:44 PM »
Where did B's other $175,000 go?

Could have gone many places, and possibly even spent on lifestyle. But most likely went to pay tuition at Yeshivos and Girls Schools.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline ExGingi

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Re: Dave Ramsey Plan
« Reply #411 on: November 15, 2020, 12:26:16 PM »
Dave's opinion on how to invest in real estate

https://www.daveramsey.com/blog/how-to-invest-in-real-estate

He should definitely stick to motivating people to get out of, and stay out of personal debt, and creating a rainy day fund and saving 15% of their income.

I think most successful real-estate investors would agree that buying a property without a mortgage makes sense when there's a significant discount and a bargain to be found due to the availability of an all-cash purchase. Otherwise most real-estate investors tend to leverage their properties, as it is a cheap source of liquidity and can enhance returns.
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 #412 on: November 15, 2020, 12:27:49 PM »
And while we're at it, here's Dave's opinion on cash value insurance.

https://www.daveramsey.com/blog/cash-value-life-insurance

It's pointless to argue about this. He (and Suze Orman) have built themselves a brand with Buy Term and Invest the Difference. No matter what proof one will show otherwise (or in specific cases), they will not concede or it will tarnish their brand.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline drosenberg88429

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Re: Dave Ramsey Plan
« Reply #413 on: November 15, 2020, 12:33:08 PM »
Ramsey works with debt addicts. Debt addicts have to avoid leveraged acquisitions the way recovering alcoholics have to avoid a glass of wine with their dinner. For all non addicts, though, there's nothing inherently evil about debt. As long as there's an arbitrage between the amount the debt costs you and the amount of revenue you can generate with that capital, go for it. Just make sure you have contingency plans for debt servicing in case the forecasted revenue stream that is being counted upon to repay the debt dries up.

Offline avromie7

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Re: Dave Ramsey Plan
« Reply #414 on: November 15, 2020, 12:46:43 PM »
Ramsey works with debt addicts. Debt addicts have to avoid leveraged acquisitions the way recovering alcoholics have to avoid a glass of wine with their dinner. For all non addicts, though, there's nothing inherently evil about debt. As long as there's an arbitrage between the amount the debt costs you and the amount of revenue you can generate with that capital, go for it. Just make sure you have contingency plans for debt servicing in case the forecasted revenue stream that is being counted upon to repay the debt dries up.
Most of the anti Dave Ramsey responses here are akin to "but a glass of wine with dinner is healthy"
I wonder what people who type "u" instead of "you" do with all their free time.

Offline Mordyk

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Re: Dave Ramsey Plan
« Reply #415 on: November 15, 2020, 02:18:06 PM »
Ramsey works with debt addicts. Debt addicts have to avoid leveraged acquisitions the way recovering alcoholics have to avoid a glass of wine with their dinner. For all non addicts, though, there's nothing inherently evil about debt. As long as there's an arbitrage between the amount the debt costs you and the amount of revenue you can generate with that capital, go for it. Just make sure you have contingency plans for debt servicing in case the forecasted revenue stream that is being counted upon to repay the debt dries up.
go learn his program and then come back to discuss.

i know people that were never in debt following his advice and method.


and regarding the second part about a contingency plan, I was in that place. Some weird stuff had to happen to my contingency plans to go sour and they did. never got into debt for no reason.
« Last Edit: November 15, 2020, 02:21:55 PM by Mordyk »
#TYH

Offline yesitsme

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Re: Dave Ramsey Plan
« Reply #416 on: November 15, 2020, 02:20:03 PM »
go learn his program and then come back to discuss.

i know people that were never in debt following his advice and method.
Motivated by?  Are they better off?
["-"]

Offline Mordyk

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Re: Dave Ramsey Plan
« Reply #417 on: November 15, 2020, 02:23:46 PM »
Motivated by?  Are they better off?
motivated by seeing family members struggle financially(not with debt) and they want to feel set.

way better off. small salary yet big savings account somehow.  its by being intentional with money.  (now please don't start telling me that people that don't budget properly are intentional with every dollar.)

Offline yesitsme

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Re: Dave Ramsey Plan
« Reply #418 on: November 15, 2020, 02:30:01 PM »
Ok fair enough, link please, ok I'll Google it
["-"]

Offline CountValentine

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Re: Dave Ramsey Plan
« Reply #419 on: November 15, 2020, 02:34:40 PM »
go learn his program and then come back to discuss.

i know people that were never in debt following his advice and method.
His program has been discussed in depth. If you don't have a problem controlling your finances I would not recommended his flawed program.
Only on DDF does 24/6 mean 24/5/half/half