Dave Ramsey's ideas - comments? discussion?

[PaKettle]

I just took the Dave Ramsey Debtor Education course that is required for a Ch. 7 bankrutpcy (his is one of many you can choose from to meet the government requirement). I reviewed it in the Ch. 7 forum if anyone is interested. In brief, I thought it was okay but not great. There were technical problems to deal with and it was way too long.

However I had a couple of comments that did not seem appropriate to put in my review so I am putting them here, to open a discussion on some of these topics.

One thing he says is that one should not use credit AT ALL. While I agree that ideally one should live without debt, it just does not seem practical for many people, and perhaps impossible for some.

For example, as part of Ramsey's lifestyle changes, he suggests you have 3-6months expenses in an emergency fund, so that if you lose your job or have a major medical problem or whatever, you can likely weather the storm without total devastation. I agree that this is ideal and I am going to try to do it.

However, how many of us can actually do this? How long would it take the average person who has just filed bankruptcy to save $7,500-15,000 for an emergency fund? Even if you are lucky enough to be able to save $1000/month, that would take 7 and 1/2 to 15 months to save that much money. Meanwhile, what happens if your car dies or you need medical care or any other major emergency? Without credit you would be screwed.

Another thing he says which I kind of agree with him on but I think he oversimplifies his case, is the idea of buying a used car instead of a new one.

He talks about how by buying a $6000 used car and keeping it for 7 years, you would pay about $200 less than buying a new car, and if you take that $200 and put it into savings (I'm assuming mutual funds or cd's or something that yields a decent return), you would save over $20k in 7 years so that when you trade the car in you would buy a new used car with cash and still have money left over to continue saving... so that overall you would never again have a car payment.

Sounds good on paper.

But what if the $6000 car you buy is a lemon? What if it is a money pit that instead of saving you money, costs you money to repair it. I had a used car once that I had thoroughly checked by a good mechanic before buying it. Over the next year I had to replace the transmission, the carburetor, the clutch, this that and the other thing until I had put enough into it that I could have bought a new car. In fact, after that experience (and several similar problem used cars before it) I decided to quit buying used cars.

In other words, Ramsey's car buying plan seems to have a lot of insecurity and uncertainty to it. It will work IF the car lasts 7 years and IF the car does not require a lot of repairs. On the other hand, it's a gamble, because IF the car costs you a lot of money to repair or IF it breaks down completely after 2-3 years, you could find yourself spending more money to buy another used car, as in my scenario re the lemon I bought, above.

Here's the other problem with Ramsey's idea:
In another lesson of his Debtor Education course, he recommends buying a 1-2 year old car. Well, that's a different story. Buying a 1-2 year old car is going to cost you $10-15k.

Since a used car will only be financed for 4-5 years and since they are often financed at a higher rate, and since a good one year old car is usually only about $1-2k less than a new one, is there really that much savings in buying a used one over buying a new one?

I looked into this, and it was my conclusion that with a good Japanese economy car, one could get a new one for about $17k or one could get a used one for about $15k. With the new one, one could get 7% interest, one could get a bumper to bumper warranty, and one's payment for the new car would only be a little more than for the used car but with full warranty and reliability on the new car. For $2k more is it worth it to buy a used car that might have been someone's problem?

These are just 2 of the things I questioned about Ramsey's lessons on living debt free.

Your comments are welcome.

[ameliabedilia]

I just took the course too, and added to your review in your other post.
Here are my thoughts about Dave's emergency fund. All financial advisors/books/banks will tell you that you should have that in your bank account. The hard part is how bad do you want it? Have you really lowered your standard of living enough temporarily? Most of us don't do that. People can squish into tiny apartments for a year, sell a car, take the bus etc.. These are things most people are not willing to do even though the peace of mind we will have later on would probably outweigh the sacrifice. I am including myself in this scenario of people unwilling to make these sacrifices, by the way.

I am a social worker and I work with very poor people. They do not get bombarded with credit card offers like we do. I will occasionally come across a client with the terrible rent to own furniture, but most of them live very meagerly. If they don't have money for something they deal with it, they don't put it on credit. If they don't have gas, they try to find a ride or they stay home. Now the BIG difference is that most (95% probably) do not have educations so they most likely will be this way for a long time, not temporarily. But, they don't have credit and they deal with it.

As for the car buying, I see both sides of it, but still think it's better to buy used for the most part. I have purchased a used lemon and it stunk! But, I have also had a new car that turned into a lemon right about when the warranty was up. Most warranties only last 3-5 years. You do take your chances there. For the most part if you buy a newer used Japanese with a good track record, it will probably be a good purchase. I would probably buy a new car or a 3 or 4 year old car. I would probably NOT buy a 1-2 year old car. I was going to do that a few years ago, and it turned out to be cheaper to buy the new one because there were specials on the options and financing.

I do think that Dave Ramsey makes it sound easier than it is to save this kind of money, I know I wouldn't want to work two jobs. I also don't think that thrift and consignment stores offer better deals than buying new. I am a fabulous shopper and I always find amazing deals on new things, especially for my kids.

Right now I am trying to be a sponge and pay attention to all the financial gurus out there. I love Suze Orman and her ideas can be quite different than Dave Ramsey's- she actually is kind of obsessed with the fico score for one example. I figure that if you surround yourself with thoughts about using money wisely, it can only make you think before you purchase, and that helps right there.

[HHM]

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.

[robivi3]

It seems kind of like Carlton Sheets. Several co-workers have used his system in varying degrees and they have had positive outcomes, some accomplished a goal and some used it lightly, none did as a get rich fast deal but all say that it works. Most of it seems to be common sense. I have a co-worker who has employed some of the items you mentioned just out of his own common sense, used cars, money toward this and that, $1 menus and such and he is doing beautifully in the fiscal sense. He started with ZIP and at 42 his home in Davie Florida (pricey area) has a 50 odd thousand dollar Mortgage, he NEVER has had any CC debt at all, he uses them but pays them monthly.

[keepmine]

While my post bk journey involves budgeting and saving and, maxxing out my 401K, there is no substitue for raising your income.

[FreshLikeADaisy]

You know, life happens.

I actually DID have no income and got along fine for 6 months, but extended unemployment and disability did me in. So yes, 6 months savings is great to have, but it's not the be-all end-all. Life happens. Quite frankly, I almost wish I had had no buffer at all at the time, because then I would have been forced to bk a lot sooner, instead of thinking that if I just waited long enough or tried hard enough the Good Ship Lollipop would finally show up. It never did, obviously. And here I am.

Sorry to be a wet blanket, I know there are people who truly believe that if you just do everything right and work hard enough and try hard enough it will all work out, but that is illusion. The fact is that you can only do the best you can with what you have *right now* (which includes not only $$$ but wisdom and knowledge) and try to anticipate life's changes. So if *right now* you don't have 6 months savings (hell, right now I don't have 6 minutes savings) sweating it would be counterproductive. That quiet decrease in reliance upon credit along with a slow but steady addition to savings is what will make a difference. And to be honest, I didn't concern myself with savings nearly as much as I did with avoiding debt. Maybe I shoulda taken the other road...

BTW, HHM, I did read that book several years ago shortly after it came out and it REALLY changed my views on a lot of things. I credit that book in part with not having had any real debt until last year (I had my one CC, paid off monthly, and my mortgage, that's it) and with completely changing my views on having nice stuff. Since reading that book, luxury items that everyone else seems gaga over just seem excessive and pretentious to me. Like Cadillac Escalades were the bomb a couple years ago, now it's Hummers, but it's been a long time since I looked at either as anything but *debt on wheels*...

[chpxiii]

Okay, my comments.

One thing he says is that one should not use credit AT ALL. While I agree that ideally one should live without debt, it just does not seem practical for many people, and perhaps impossible for some.

Personally, I don't believe that living with out credit is impossible for anyone. If you have to rely on credit, then you are not living within your means.

While, like FLAD says, "life happens," and I certainly don't blame anyone for that as I had the same thing happen an extended period of being unable to find a job within my field.

However, I did get a low paying job. As a result, I was unable to pay bills and ultimately I found myself filing bankruptcy. (I've told my story elsewhere on the forum, I won't repeat it here.) One thing I have learned from that, however, is to make sure that I keep my lifestyle as simple as possible.

I make a lot of money now. Alot. However, even though I make a lot of money, I have kept my lifestyle at a level that if I need to go back to making $12/hr I can. This is why I don't think Chapter 13 is all that bad. It can really force some people to learn to budget, accept a different level of their standard of living (and no, you don't have to live in the ghetto to have an inexpensive place), etc.

I'm with ameliabedilia on this in that there are many people who are unwilling to lower their standard of living so that their current income can support them. Myself, having lived in gang territory, while I did not go back to that, moving back to a cheaper and not so fancy apartments was not difficult for me at all. Others are squeamish.

For example, as part of Ramsey's lifestyle changes, he suggests you have 3-6months expenses in an emergency fund, so that if you lose your job or have a major medical problem or whatever, you can likely weather the storm without total devastation. I agree that this is ideal and I am going to try to do it.

However, how many of us can actually do this?

I think there are more people who can do this, but are unwilling to make the sacrifices that are required to be able to do so.

How long would it take the average person who has just filed bankruptcy to save $7,500-15,000 for an emergency fund? Even if you are lucky enough to be able to save $1000/month, that would take 7 and 1/2 to 15 months to save that much money. Meanwhile, what happens if your car dies or you need medical care or any other major emergency? Without credit you would be screwed.

I don't agree with Ramsey in that we should never use credit. Credit is great for emergencies and huge purchases, like houses or cars. If Ramsey would have his way, there'd be many more renters than house owners. I don't agree with this at all. That being said ...

I really wish I could remember where the link is, but there was a study done as to what it is that makes a successful bankruptcy. The main key ingredient is being able to raise your income. If that means working two jobs, then so be it.

Yes, you are right that there are some people who are lucky enough to save $1000/month. I'm one of those people. But I don't consider it luck as I have worked hard for this. And in the 4 years that I have been in bankruptcy I have taken measures in order to be able to accomplish this. I have moved to cheaper apartments. And being a single woman, safety IS a concern. And I grew up, literally, in gangland areas. So I know what it's like.

And it is because of that that I have taken measures to acquire an education (for others, it can be a technical skill) in order to keep myself employable. And again, if anything, I am not too proud to work in a grocery store checking groceries again if I have to. I truly do wonder just how many people are willing to do this? I know people who would rather take welfare than to actually work.

Having said that, I realize that my experience can not be applied accross the board to everyone. Again, "Life Happens." We all have our own paths we will have to take. Some have health issues that makes living life difficult at best. I understand that - those are not the people I am talking about.

Another thing he says which I kind of agree with him on but I think he oversimplifies his case, is the idea of buying a used car instead of a new one.

I have learned that lesson with my current car. I like HHM's idea about used cars.

But what if the $6000 car you buy is a lemon?

[deletia]

In other words, Ramsey's car buying plan seems to have a lot of insecurity and uncertainty to it.

Ramsey's car buying plan is based on security. Remember, his plan is based on the idea that you buy a decent used car. Your six months savings would go to help repair the car.

One of the reasons why I've decided I don't care too much for Ramsey is he doesn't take these extremes into consideration. However, in a way he does. His POV would be to use your savings, that's what you have it for, and once you make the repair, go back to saving to rebuild your saving.

Here's the other problem with Ramsey's idea:
In another lesson of his Debtor Education course, he recommends buying a 1-2 year old car. Well, that's a different story. Buying a 1-2 year old car is going to cost you $10-15k.

Since a used car will only be financed for 4-5 years and since they are often financed at a higher rate, and since a good one year old car is usually only about $1-2k ...

The problem with your last example, comparing the purchase of a used car against buying a new car, is that you're using the idea of financing.

Remember, Ramsey advocates the use of cash for ALL purchases - even used cars. So your example of buying a new car over a used car based on financing may have some validity, but in the context of Dave Ramsey and his philosophy of buying everything in cash, it doesn't work.

It occurs to me that you're still in the mindset of having and using credit and financing purchases. When talking about Dave Ramsey and his ideas on buying a used car, homes even, or general financial living, remember to keep it in the context that everything he talks about is in the context of living in a cash world. So your comparison is like apples and oranges. HHM's comparison of buying a used car over a new car - under the context of paying cash - is a better comparison.

I like Suze Orman too. I think she had, at one point, changed her stance regarding credit. I think, if I recall correctly, many many many years ago she advocated a debt free lifestyle. But considering how insurance companies and even employers are now using FICO scores to judge and evaluate people, and considering that in this day and age in order to purchase big ticket items like houses and cars, and other large asset properties, she has since come around to responsible credit use.

Dave Ramsey is one of those hard liners that doesn't take Life Happening into consideration. But, in a way he does take it into consideration by his advocation of a savings buffer.

Bear in mind, even while financial advisors, Ramsey, even Suze, ALL say you "should" have a 6 to 10 month living buffer, that suggestion is really a suggested minimum of what you "should" have in savings.

Look, when I filed chapter 13, I was making less than $12/hr. I had the trustee payment, regular living expenses, insurance, etc. that I had to pay too. And even that money was sporadic as I lost jobs and had to go out looking for another one. But in all that I still managed to pay the trustee, KEEP THE UPKEEP on my car (that goes a loooooooooooong way to keeping a car going for years), buy a new washer and dryer, move around, and even go out to eat dinner and see a movie. But in the mean time I took measures to increase my income.

I really like when I read Keepmine's posts. They're very practical and are based off of common sense. Like I've mentioned earlier, increasing one's income during and post BK is crucial for that fresh start we are all seeking. If that doesn't occur, then that BK was for naught and will simply be a small reprieve from Life Happening. I would like to point out that I do realize that some people simply CAN NOT increase their income. I feel for them. I really do. And I feel blessed and fortunate that I have been able to do so.

[chpxiii]

BTW, HHM, I did read that book several years ago shortly after it came out and it REALLY changed my views on a lot of things. I credit that book in part with not having had any real debt until last year (I had my one CC, paid off monthly, and my mortgage, that's it) and with completely changing my views on having nice stuff. Since reading that book, luxury items that everyone else seems gaga over just seem excessive and pretentious to me. Like Cadillac Escalades were the bomb a couple years ago, now it's Hummers, but it's been a long time since I looked at either as anything but *debt on wheels*...

I learned that while in Chapter 13 bankruptcy. And through spiritual self discovery as well. I'm still interested in that book HHM suggested, though. I know several millionares "next door."

Everything I have, I can leave behind.

[ameliabedilia]

This is a nice discussion. Knowledge is definitely power, as is self control, which I think many of us here had issues with. The bottom line is that we all need to make more money while not raising our standard of living.

[chpxiii]

This is a nice discussion. Knowledge is definitely power, as is self control, which I think many of us here had issues with. The bottom line is that we all need to make more money while not raising our standard of living.

Yes. Exactly.

And usually, raising our income is nearly an impossibility, which is what got most of us here to begin with.

Many times it is a catch-22.

[One Half Full]

I find a lot of assumptions in Ramsey's thesis. The main being that there is income to "cut" in the first place. Savings (call it profit) can only come if your incoming income is more than your overhead. I suppose he assumes that most people make the "median" income or better.

His idea about the car is okay too, but there is the assumption that you actually could afford the new car and thus can "put away" the money that you "saved." Generally, in my experience, people buy a used car because they cannot afford a new car. What he is saying is that if you can afford new car by a used car and save the money. Buying a 1-2 year old car only makes sense because of the depreciation. Truly poor people can't afford a 200.00 per month car payment as well as insurance, gas, and maintenance anyway.

I think that if a person could afford a 300,000 dollar house, they would definitely save money if they bought a 100,000 dollar house. In many places, you cant find a house like that, maybe a fixer-upper that requires money you dont have or will have to borrow to raise the standard. You might go out to the sticks and hunt down such a house, but pay much more money in transportation and gas and car repairs because you need to commute for an hour each day. Or you might end up living in a part of town where people shoot from cars, and the house is valueless because you can't sell it.

I really think the time of making money from buying and selling houses has run its course. What about you?

Its like these people who buy side of beef and freeze it all year long. They look at the cost of the beef, but don't look at the long term cost of storage and maintenance of that meat. You might save a few pennies on the pound, but are you actually saving that money?

Here's a good example of false economy: Before things got so bad I was purchasing class A stock though my company, a newspaper. In order to qualify to buy the shares, I had to buy the newspaper at nearly $200 per year. Each year twice a year the company paid dividends of about 200 (I am simplifying) making 1/2 of that vanish because I had to buy the newspaper (profit of 200$ per year for 100$ per month allotment). When I had to cash the stock in due to financial pressures, I was taxed at about 35%, losing a good portion of any value added due to the stock price going up each year. Shorthand-- I lost more than it was worth, and basically only made the money I put in-- why not just have a savings account? I would not have lost so much money.

A friend of mine seems to have it all together when it comes to savings. He will spend huge amounts on furniture (like $3000.00) for a classical modern armchair. But he knows that when he needs to turn it around it will not depreciate, and in many cases, it will appreciate, and also, if he must sell it, he knows that buyers will snap it up in an instant.
He needed some money and sold only about 4 pieces of furniture and made $7,000.00. So he put his money into things that retain their value.


I also agree that a person shouldn't need credit. I also do not believe that you should need 2 wage earners to pay the expenses of one house. This is 2008, not 1950, and a one income family with affordable payments for affordable houses and cars is long in the past.

This is to counter the argument that you should always rent or have a mortgage that one of the pair (usually married) can afford "in case something happens to the other one" like a divorce. Oh, please! If there are 2 people paying on a 1,500 mtg, they are paying along the lines of $750 each if it is split down the middle. for that money you might get an apartment in a big building downtown, but not much in the "nice house" variety. And the odds are on getting a divorce anyway down the line, so it is almost inevitable that someone should be stuck with the house.

Just rambling, sorry...

[emoney]

Some of you miss his point that credit is OK for home buying with 20% and a 15 year term.

What he is really saying is that when we pull out the plactic the pain is not there for most us. When we spen cash we really feel it, so we spend less.
regards,
emoney

[PaKettle]

Thanks for the responses. I hope others will get in on this discussion. You've all brought up points worth considering for those of us in, soon to be in, or post-bankruptcy.

HHM, I do think you are probably right about buying a used 4 year old car with low mileage, in good shape etc.. Next time I will probably buy used. I hate spending $300/month on the car I bought back in January. However, I have been burned by a bad used car several times in my life and am "thrice bitten, twice shy" about buying used again. Thus, I saddled myself with a $300 new car payment and I already KNEW I'd lose money as soon as I drove it off the lot. Next time I'll give the used car thing another shot. But you do have to buy one that is 3-4 years old because I looked into buying a 1-2 year old one and the price difference between that and a new one was too small, so it wasn't really practical.

As to creating a large emergency fund, I do think it is a matter of "not being willing" to make major sacrifices in order to get that savings of 3-9 months' expenses. Especially if you're older and have come up from having lived poor before, you really don't want to go back to that, even for a year or so. At least I know my wife and I do not. It's one thing to give up luxuries like cable and luxury vacations, but to move into a tiny cheap apt. in a bad neighborhood.... I don't think so! That's not in our plans. (Especially since our apt. is already relatively cheap and too small for us!)

But also, as someone else said, the main thing one needs to do is increase one's income, and that is what we are going to try to do. And if you have any kind of skills and education you should be able to raise your income, work extra hours somewhere or something.

As for Ramsey's idea of not using plastic, I do think it makes sense to get used to using cash, and definitely not buying stuff with credit cards and building up debt. I agree with him that using cash and budgeting your money to include savings is important. Hopefully we will never ever build up a pile of debt again; at least, that's our strong intention. However, I think if you can use credit responsibly, and never buy anything on credit that you can't pay off in a few months, and never allow it to go more than $1000, then that can both help you both live a more comfortable life AND help you build up your credit so that you do have a credit card for emergency use.

For example, in a scenariio where I had not saved up a lot of money yet, and I needed to repair my car, or any other legitimate emergency, I'd rather borrow the money on credit than not fix the car. Borrowing $1000 to repair the transmission on my car, or to fix an infected tooth and/or install a crown would make more sense than NOT doing those things, imho. Of course, if you can save enough in an emergency fund to do that, then that is the best option. But if you have not been able to, or if you've already tapped out your emergency fund, I think having the "cushion" of a credit card with $1-2k credit available is a good thing, not something to be avoided. Maybe I'm wrong, but that's how I see it, even though we got ourselves into trouble with credit. But we didn't get ourselves in trouble by using $1000 for an emergency, we got ourselves in trouble by using credit indiscriminately and THEN spending over $10,000 in necessary dental and medical bills on top of that. Had we not spent so much money on vacations, and "stuff" for so many years, we'd not have had to file bankruptcy. (Also our income went down about 25-30%.)

So it's a matter of using common sense and making a major effort to save money and not charge up a lot of credit, imho.

I think Ramsey's ideas are much easier to implement and may be a good idea if you are making a good income and can do it without too much pain. If you're relatively low-income, I think his ideas are probably more difficult to achieve than they are worth enduring. Ramsey strikes me as a guy who's always had a good income, and has no idea how it really is to be poor. He talks about losing "everything" but I don't think a guy who had $25 million worth of real estate and files bankruptcy really ends up with "nothing". His version of having nothing does not include living in the ghetto and taking the bus to work, I guarantee you.

If you're low income, you need to find a way - somehow - to raise your income. That makes more sense than moving into the ghetto or taking the bus, to me. That of course depends on the person, for example if you live in a city that has great bus service and you are rugged enough to stand out in the weather, then that could be a very good option, and save the money towards a car, or never buy a car if that suits you. Personally I would not choose to live in a bad neighborhood and use the buses in THIS city, to save money. But I am willing to cut off my cable tv, not eat out at restaurants, and not buy a lot of "stuff"...

That's another thing someone said that I totally agree with. Even before bankruptcy I learned a long time ago that buying the latest "stuff" or status symbol car, fancy furniture, etc. is not worth it. I don't need a $30k car or truck, I don't need new furniture, I don't need expensive clothes... In fact I prefer old clothes, they're more comfortable. Detaching oneself from "consumer" mentality is something that I think is very worthwhile to do. I even cut my own hair now to save $20/month on that (plus the gas and time it took to get there). Luckily my hair is easy to cut and because I'm not caught up in looking "stylish" I can do this. Everyone has their own level of comfort boaut what they are willing to do to save money. For some, cutting one's own hair would be out of the question. So I guess you have to just decide what you can do to increase your income and lower your expenses so as to save money and have an emergency fund.

Like someone here said, "It's just common sense".

[chpxiii]

Some of you miss his point that credit is OK for home buying with 20% and a 15 year term.

What he is really saying is that when we pull out the plactic the pain is not there for most us. When we spen cash we really feel it, so we spend less.
regards,
emoney

Interesting, because I've never heard him say that. I've heard several shows where people are wanting to buy property (either personal - home, or business - office building) and he always said to pay for it in cash and that if the person didn't have it, they needed to rent until they had the money to pay cash for it.

[PaKettle]

chpxiii wrote:

"Interesting, because I've never heard him say that. I've heard several shows where people are wanting to buy property (either personal - home, or business - office building) and he always said to pay for it in cash and that if the person didn't have it, they needed to rent until they had the money to pay cash for it."

No, on the bankruptcy debtor education class, he does say that it's okay if you buy a home on credit but make sure you don't get more than a 15 year mortgage and 20% down. At least I'm pretty sure he said 20% down. I know he said a 15 year mortgage was okay.

How many people in California could buy a home with cash?? The average 2 br home in a non-ghetto neighborhood in the Los Angeles area is around $450k! It's probably even higher in San Francisco. I just saw a lot - a LOT, mind you, probably 1/8 of an acre, no house - with a price of $1.5 million, about 2 blocks from the beach. And that's NOT the exception for that location, unfortunately.

I'm sorry, but while I think some of Ramsey's basic ideas are sound, I also think he's living in an "ivory tower" in some ways. He needs to consider that not everyone started out with $20+ million in real estate before they "lost everything". I'd be curious to know how he originally got the money to buy all that real estate, before he filed bankruptcy. Anyone know?