Dave Ramsey's ideas - comments? discussion?

[One Half Full]

There is the problem in many higher end office jobs that you are "expected" to look great all the time, have plenty of the latest clothing, have professionally done hair and so on. Those jobs often pay well, but frankly, anyone can live beyond his/her means.

Education does not immediately lead to great income. Many poor people have college degrees. Education without jobs that accept that eduction is meaningless. There is a logical fallacy involved with believing that "more education" or becoming "better educated" will suddenly raise your income.

A lot of where you get in the job world depends on "location" and "who you know." Often it is also good looks and mannerisms that get you into the good part of the plane. Most of the richest people are not necessarily the smartest, but they are the best connected.

[chpxiii]

How many people in California could buy a home with cash??

Those were my thoughts. I didn't take his bankruptcy class, but I've heard his show after I filed. And so I was under the impression he was all for all cash all the time. I remember thinking, "That's no practical. No one would be buying houses."

So either he's changed his mind, or I never heard this part of his message.

And as to how he got his money, I don't know.

[PaKettle]

There is the problem in many higher end office jobs that you are "expected" to look great all the time, have plenty of the latest clothing, have professionally done hair and so on. Those jobs often pay well, but frankly, anyone can live beyond his/her means.

Education does not immediately lead to great income. Many poor people have college degrees. Education without jobs that accept that eduction is meaningless. There is a logical fallacy involved with believing that "more education" or becoming "better educated" will suddenly raise your income.

A lot of where you get in the job world depends on "location" and "who you know." Often it is also good looks and mannerisms that get you into the good part of the plane. Most of the richest people are not necessarily the smartest, but they are the best connected.

I totally agree. My sister just got a new job, completely different from her old job; she had no real "qualifications" for this new and better job, but happened to have a friend there who recommended her for it. She also has to suddenly dress in high heels and nice business attire, whereas before she just wore jeans and tennis shoes.

I also work in an industry where who you know is much more important than what you know or how well you do your job. In fact, I am 100% certain I do my job better than many of those who have surpassed me, AND I have more experience. But I'm not favored by the bosses because I don't hang out with them socially as the ones they favor, do. I refuse to play that game. I do what I want in my off hours, and what I want isn't to hang out with my bosses, I have my OWN life, thank you very much...

Education also doesn't matter that much. What matters more is who you know and experience. If I had it to do all over again, I would have gone for getting experience in my field rather than a college degree. I have advised my niece that while college is perhaps a good thing for her to do, what is more important is networking with people and getting experience in the field she chooses.

[WantToBeDebtFre]

When I was searching for an answer to my debt problem and before I came to the realization that I needed to file bankruptcy I visited the Dave Ramsey website and ordered his book "The Total Money Make Over". I actually really liked the book and I intend to follow it as best as I can. What I like most about it, is it gives you step by step instructions on how to save your money, pay off debts, save for retirement/college, etc and it prioritizes it for you.

The huge flaw in his book is he says you should almost NEVER file bankruptcy. He says its gut wrenching, humiliating, and the most horrible thing you'll ever go through. The problem with that was I would never be able to follow his plan because I wasn't even close to having enough money to even break even at the end of the month. I tried to cut expenses, I cut phone, cable, eating out, cutting coupons, etc. The only way we could have saved more money was to move out of our house (which we couldn't have sold and would have had to be repo'd). Our mortgage payment is $1250 per month. You can't get much cheaper than that for a family of 5.

My only solution was bankruptcy. If I wanted to get on with my life this was what I had to do. I joined the message boards on the Dave Ramsey website and they wanted me to post my budget. When I did, they criticized me and wanted me to cut EVERYTHING. They wanted me to sell my van (which I owe more on than it's worth), stop my daughters dance classes, and give me another job (I'm already a working mother of at least 40 hours a week). I was so happy to find this forum where people actually understood my situation and seemed to live on earth.

Anyway, now that my bankruptcy is discharged (yesterday) I'm ready to check out his plan again and any others. I really want to learn as much as I can about financing and budgeting. Money is so easy to waste. I think it's important to have a good time with your money but it's even more important to be in control of your finances and have a plan for your and financial future.

[One Half Full]

There are many many things more embarrassing and humiliating than going Bankrupt. I don't get into GURUs, by the way. Anyone who sys they have "the answer" is either lying or fooling him/herself. There are Waaaaay too many factors for everything to say there is one "answer." I dont follow him persay, but many of the things he says seem to be good old common sense. You can be selective about the things you believe or if you follow a plan. To say never use credit is nutty in this day and age, but to say use it wisely, makes sense. Most of us were "trapped" into this. I know I was. I would not be here unless I was dragged kicking and screaming. This is the last place i want to be, but sense I am here, I plan to use every advantage I can, and to know as much as I can in advance so I will not be taken to the bank by unscrupulous lawyers.

[PaKettle]

When I was searching for an answer to my debt problem and before I came to the realization that I needed to file bankruptcy I visited the Dave Ramsey website and ordered his book "The Total Money Make Over". I actually really liked the book and I intend to follow it as best as I can. What I like most about it, is it gives you step by step instructions on how to save your money, pay off debts, save for retirement/college, etc and it prioritizes it for you.

The huge flaw in his book is he says you should almost NEVER file bankruptcy. He says its gut wrenching, humiliating, and the most horrible thing you'll ever go through. The problem with that was I would never be able to follow his plan because I wasn't even close to having enough money to even break even at the end of the month. I tried to cut expenses, I cut phone, cable, eating out, cutting coupons, etc. The only way we could have saved more money was to move out of our house (which we couldn't have sold and would have had to be repo'd). Our mortgage payment is $1250 per month. You can't get much cheaper than that for a family of 5.

My only solution was bankruptcy. If I wanted to get on with my life this was what I had to do. I joined the message boards on the Dave Ramsey website and they wanted me to post my budget. When I did, they criticized me and wanted me to cut EVERYTHING. They wanted me to sell my van (which I owe more on than it's worth), stop my daughters dance classes, and give me another job (I'm already a working mother of at least 40 hours a week). I was so happy to find this forum where people actually understood my situation and seemed to live on earth.

Anyway, now that my bankruptcy is discharged (yesterday) I'm ready to check out his plan again and any others. I really want to learn as much as I can about financing and budgeting. Money is so easy to waste. I think it's important to have a good time with your money but it's even more important to be in control of your finances and have a plan for your and financial future.

Just my 2 cents, take it or leave it: If I were you I would check out some other financial advisors, maybe some mentioned at the top of this thread. While Ramsey has some good ideas, the more I think about it and the more I hear, I think Ramsey folks are almost cult-like, they're too much into following "the party line" and not thinking for themselves. I think the idea of not filing bankruptcy when necessary is not only wrong, it's absolutely bad advice. And if Dave is so anti-bankruptcy why does he sell the Debtor Education course for banktupcy filers?

I've already decided that Ramsey's ideas are not for me, at least not "to the letter". I won't do an envelope budget, I won't avoid getting more credit... What I WILL do is make a budget, stick to it as best we can but also be somewhat flexible, and I will establish and use credit again, but I will never owe more than $1k and I will pay that off within a few months or else I won't borrow it.

That is to say, I think his plan is just too strict, and from what you said about his fanatic followers, I think they're kind of dumb.

[PaKettle]

There are many many things more embarrassing and humiliating than going Bankrupt. I don't get into GURUs, by the way. Anyone who sys they have "the answer" is either lying or fooling him/herself. There are Waaaaay too many factors for everything to say there is one "answer." I dont follow him persay, but many of the things he says seem to be good old common sense. You can be selective about the things you believe or if you follow a plan. To say never use credit is nutty in this day and age, but to say use it wisely, makes sense. Most of us were "trapped" into this. I know I was. I would not be here unless I was dragged kicking and screaming. This is the last place i want to be, but sense I am here, I plan to use every advantage I can, and to know as much as I can in advance so I will not be taken to the bank by unscrupulous lawyers.

Well said.

[FLBK7]

Just my 2 cents, take it or leave it: If I were you I would check out some other financial advisors, maybe some mentioned at the top of this thread. While Ramsey has some good ideas, the more I think about it and the more I hear, I think Ramsey folks are almost cult-like, they're too much into following "the party line" and not thinking for themselves. I think the idea of not filing bankruptcy when necessary is not only wrong, it's absolutely bad advice. And if Dave is so anti-bankruptcy why does he sell the Debtor Education course for banktupcy filers?

I've already decided that Ramsey's ideas are not for me, at least not "to the letter". I won't do an envelope budget, I won't avoid getting more credit... What I WILL do is make a budget, stick to it as best we can but also be somewhat flexible, and I will establish and use credit again, but I will never owe more than $1k and I will pay that off within a few months or else I won't borrow it.

That is to say, I think his plan is just too strict, and from what you said about his fanatic followers, I think they're kind of dumb.

I'm with you 100%. I filed CH7 in 2004, developed a budget that includes payroll deductions for both my retirement plan and regular savings, and set out to rebuild my credit. Two and a half years after discharge my scores were in the low 700's and I was able to buy a home with a 6.2% fixed rate mortgage. I have several credit cards (all of them no-fee) and they all have zero balance except that I "rotate" the cards and use them for purchases that I pay off each month. One huge charge ($2200) for emergency home appliance purchases and car a/c repairs, was paid off in 3 months. I lived so frugally those 3 months that it kinda reminded me of my pre-bk days, but I didn't want the weight of the debt weighing on me.

You don't need a Dave Ramsey to recover from a bankruptcy. What you do need is a budget, common sense, and determination. Another trick I learned to save money regularly is, you should consider yourself a creditor and pay yourself a set amount each payperiod or at least each month, just like you pay your phone, electricity, etc. I set this up through payroll deductions so I don't even notice the money is gone to another account.

Just my two cents.

[jane taylor]

Great discussion! I agree totally--a budget, common sense and determination are the keys!

Although BK has been a rough process for me, it is far from the worst thing I've ever experienced! Gutwrenching, yes, impossible, no!

I've posted my story somewhere on here, but the reasons we filed were three job losses, enormous medical bills (I had two complicated pregnancies and I have a chronic illness), and yes, living beyond our means.

The worst thing that happened to me in this process was that my brother and sister-in-law were SO judgemental! He has been blessed to work for the same company for nearly 20 years in a business that will always be around. I lost a huge contract several years ago that was just "the icing on the cake" for us. They looked down their noses and said that we were "undisciplined."

As for Dave Ramsey, Suze Orman, etc., I just take what is applicable to me and leave the rest. I have learned to live with less and appreciate what I have even more.

My own personal opinion is that young couples really should take a course in money management. It would have saved my husband and me TONS of money and many fights! Neither of us are financial gurus, but are very proud of how we've stuck together through this and learned from it.


jane

[PaKettle]

Glad to read positive reports from a couple of long-time post-bankruptcy people!

And FLBK7, your budgeting ideas apparently prove that my ideas are sound.

It's not a bad idea to use credit, as long as you use it wisely. Of course, you do have to be very careful to NOT fall into a situation where you need to borrow more than you can afford to pay back within a few months.

That is the one thing I see as being valid about Ramsey's "don't use credit AT ALL' phiilosophy: If you don't use it at all, then you cannot get in trouble with it, you cannot get head over heels in debt "by mistake". I know, we did very well for a long time with our credit - had a real high rating, never got one "late payment" on our credit in 10 or so years... but we did start charging them up too high, "living beyond our means", and then we had some medical and dental problems that had to be charged. If we'd lived by the rule of not charging more than we could pay off in a few months, and had a big "emergency fund", then we would not have had to file bankruptcy!

We thought we'd make more money as time went on, and had reason to believe that, but instead we both began making less money...

All of this could have been handled had we used credit more wisely and not allowed ourselves to charge things we couldn't pay off within a few months, and if we'd put money into an emergency fund equal to 3-9 months' expenses. So that emergency fund is something we did learn from Ramsey (and others) and something that we WILL do now, in our new post-bankrutpcy life.

[arkienurse]

I really like a lot of Dave's ideas, others I am not so hot on. I do plan on paying off the remainder of my student loan ASAP. They only want $50/month, but for the next 7 years!! I hope to have it paid off by mid summer if Murphy doesn't visit one of our vehicles first. I do plan to build up my savings/emergency fund.
And I am working on his current ideas---
1. Have written goals for yourself, it gives you direction and purpose. My goals for this year are to get the med bills paid off by the end of Feb, Student Loan by mid summer, and have a good downpayment for a newer vehicle, plus some savings accumulated.
2. Have a "Love Drawer" for your family in case the worst happens. DH or the kids would be lost if anything happens to me. I have been paying the bills, I know when they are due, I know where all the birth certificates, ss cards, etc are. No one else has a clue.

I agree with Jane, take what you want from everyone, leave the rest, and create what works best for you.

[ssdsco]

I haven't really read or watched his stuff...but for the most part, I think what he says is common sense.

If you really want to see money at work, read The Millionaire Next Door, its a very eye opening book.

I think the savings issue is there to simply motivate you to save. You cannot think of savings in terms of a couple months, but in terms for many years. So, yeah, you may not be able to save up that fund in 2 years, but think how much you would save if you started saving money 10, 20, years ago.

As for the car, I posted elsewhere a more detailed approach to buying a car, so I will summarize here. The idea of buying a used car is sound, and frankly most cars built after 2000 hold up fine. I generally recommend a person buy a car around 4 years old (or older). The reason being, the bulk of the depreciation has occurred and therefore your amortized acquisition cost for the car is actually quite low. Also, you should look for cars that retain resale value (namely main brand Japanese cars, but there are certain models within all brands that are acceptable).
The formula is
(Current Purchase Price - Future Sale Price) / # months you own the car

Best case scenario, you pay cash for the car, but I know that is probably unrealistic for many people.
Current Purchase Price = The price you paid for the car
Future Sale Price = Estimated price you would sell the car for in the future.

For example, lets say you bought a 2000 Honda Accord in Feb 2004 with 40,000 miles on it. for $11,000. In Dec 2007, you would have sold that car for about $7,000. Thus, you owned the car for 33 months, your amortized acquisition cost is $121 per month (or $4,000). And you walk away with $7,000 in your pocket to buy another car if you want.

Instead, lets say you bought a new 2004 accord in 2004. That car probably would have cost you around $21,000. Today, that car would sell for $13,000. Your amoratized acquisition cost is $242 per month (and that's assuming you paid cash). If you financed the purchase of a new car...your acquisition is significantly higher and odds are, you would walk away with only a few thousand dollars after paying off the loan, if anything.

Leasing is even worse.

I found the Millionaire Next Door for $6 plus shipping. May you all become one some day.

http://search.barnesandnoble.com/booksearch/isbnInquiry.asp?z=y&EAN=9781567315684&itm=1

[FreshLikeADaisy]

The huge flaw in his book is he says you should almost NEVER file bankruptcy. He says its gut wrenching, humiliating, and the most horrible thing you'll ever go through.

Kari, that made me laugh! Bk is a *bed of roses* for me; it's what all went before it that was "gut wrenching, humiliating, and the most horrible thing [I'll] ever go through." Compared to that, bk is a hot bath, a massage, and some nice fella peelin' me a grape.

[WantToBeDebtFre]

I agree with all of you. If I would have followed Dave Ramsey my life would be horrible right now. Instead I have a bankruptcy that's just been discharged and enough money left over at the end of the money to pay for all those little things that pop up (dental work, car repairs, etc). So far I don't regret filing bankruptcy.

What really gets me is that Dave Ramsey was rich, then he lost everything and HE FILED BANKRUPTCY. Now he's rich again. I wonder how much money he'd have right now if he hadn't filed bankruptcy and instead waited years to pay back every penny he owed. Also, he talks about wanting to help people but it costs $10 or $20 per month (I don't remember which) to have an account on his website. I think that's a complete rip off for someone who's trying to save every dime to follow his plan. Kind of contradicting, ya think?

Once site I found that is good is http://www.crown.org/ (it's a religous site on money)

[PaKettle]

I agree with all of you. If I would have followed Dave Ramsey my life would be horrible right now. Instead I have a bankruptcy that's just been discharged and enough money left over at the end of the money to pay for all those little things that pop up (dental work, car repairs, etc). So far I don't regret filing bankruptcy.

What really gets me is that Dave Ramsey was rich, then he lost everything and HE FILED BANKRUPTCY. Now he's rich again. I wonder how much money he'd have right now if he hadn't filed bankruptcy and instead waited years to pay back every penny he owed. Also, he talks about wanting to help people but it costs $10 or $20 per month (I don't remember which) to have an account on his website. I think that's a complete rip off for someone who's trying to save every dime to follow his plan. Kind of contradicting, ya think?

Once site I found that is good is http://www.crown.org/ (it's a religous site on money)

Yeah, WantToBeDebtFre, I too found Ramsey's anti-bankruptcy philosophy "ironic" to use a polite word; actually I think it's more like hypocritical. HE filed bankruptcy but he wants others not to?
And though he says he "lost everything" in his bankruptcy, I doubt that is true. If he was a millionaire as he claims, before bankruptcy, I imagine he managed to come through it with quite a bit left in his coffers, in one form or another. Did he file Ch. 7 or Ch. 11 or Ch. 13? I'm guessing he filed Ch. 11 and was left with a lot in his personal life. And how did he accumulate that wealth to begin with? Even he admits he used credit to do it!

I don't know, but I smell some hypocrisy!

And his Debtor Education class for Ch. 7 is one of the most - if not THE most - expensive classes to take, even though he just edited it together from the video he was already selling to people as a financial course.

I personally think it's foolish not to have at least one credit card with $1000 or so on it, for emergency use. The key is just not to run it up and leave it up, and not to accumulate thousands and thousands of dollars worth of credit or credit cards. You don't need that. But having a thousand or two in credit just in case you have a series of events that tap out your "emergency fund" just seems like being prudent, to me.