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She is shopping based on payment because she doesn't have enough cash to buy anything outright now. My whole idea was for her to "make a payment to herself" for ten months. Her old car payment was $400, and she was current on that. If she makes a $400/month payment into savings, she can have enough for a much more reliable $4k-$5k car in a year. We found some nice, reliable cars in that range when looking a few weeks ago.
The Pontiac ought to be fixed to get it safe and as reliable as can be. If she buys this five year old Hyundai we looked at this week, she will be making a $250/month payment on a car that will be ten years old. Horrible.
I just threw the washer/dryer example in as what she could afford in a couple of months by steering clear of the car payments.
She should keep her car. If she saves say $5000 and she has a car repair for $600 she still has $4400 in her pocket. She can make up the $600 in 1.5 months. She should take her money and start looking to make it grow.
When she has all kinds of other money she can go buy a car. If she saved up $5000 and bought a car with it she would be back to square 1 with no money again.
I think that Dave Ramsey's advice is good for people who are totally incompetent at managing finances and have dug themselves into a deep hole of bad credit and poor decisions.
If you are at all financially capable, then his advice is terrible. For instance, when you say "the average payment is $450-650 a month for 6-7yrs at average 8-10% interest" I can't believe anyone would be that incredibly stupid.
Dave Ramsey's problem is his advice has to be targeted to total morons and financial nitwits, and he has to make sweeping blanket statements, which aren't fully and totally applicable.
Dave Ramsey is, in fact, correct - at least in part. The average car payment in America is about $480, although the average interest is just under 5%.
Unfortunately, the average American is a financial nitwit.
Anecdotally, most of the people I have talked to about money are idiots, from one lady making $28k per year who filed bankruptcy but reaffirmed the mortgage on her $36k car to a youngish (but old enough to know better) friend of mine who is paying $75 a week for a washer, dryer, and PS4 from RentaCenter but can't figure out why he's always broke. Of course, when I trey to gently give them advice, I have no idea what I'm talking about - even though I've managed to save enough outside of my retirement fund that I'd be perfectly fine for 2+ years if I lost my job tomorrow and they consistently ask how I managed it.
There are plenty of bright people, with good jobs/professions/businesses, that make a lot of money, that don't understand these things. There are lots of personal finance issues that aren't intuitive, and what many believe to be "common sense" behaviors are just wrong.
It isn't so much that common sense behaviors are wrong, it's how society has been spoon fed the line that "buy it now" and "debt is good" for so many years it's ingrained deep into people's minds.
They don't teach basic finance in school anymore, they don't teach even the most basic things like how to run a check book or balance a statement or that debt is a tool that one doesn't want to overuse. Bankruptcy became the accepted norm instead of something to be ashamed of and to avoid at all costs so what's the down side? Buy all this stuff, go B.K and after a few years you're right back on the buying train again.
Growing up I had people I knew that had every toy they ever wanted, but were in debt up to their eyeballs.
Their idea was "well, I've got payments up the rear but I've got everything I've ever wanted". I guess that's fine until it's not what you want anymore (usually a year or two later) and you're still stuck paying huge payments on it all.
All I know is an occasional listen to D.R. poked me enough to start paying off all are revolving debt so all we'll have is 2 cars and a house to pay on, very manageable and very,very low interest. When both cars are fully paid they'll get a whopping $1600 in total interest off both of them put together. For using their money for 5 years that's no biggie in my book.
She should keep her car. If she saves say $5000 and she has a car repair for $600 she still has $4400 in her pocket. She can make up the $600 in 1.5 months. She should take her money and start looking to make it grow.
When she has all kinds of other money she can go buy a car. If she saved up $5000 and bought a car with it she would be back to square 1 with no money again.
The car has various issues but none that are catastrophic to my knowledge. It needs a set of spark plugs, a battery, and the interior is all to hell, but it doesn't seem like there is an imminent engine/transmission disaster, etc. Her nephew is pretty mechanically handy and gave her a list of things that were wrong, she took that list to a dealer who interpreted some diagnostic codes. I need to get the full story from her. It was a smoker's car and smells like holy hell but that could probably be remedied to an extent. I'm going to try to prevent her from doing anything stupid and vet the car more thoroughly when I get back here after Christmas.
Her dad is 73 and sees his daughter driving a junker and wants her to buy something new. However, daddy isn't on the hook - my girlfriend is. She borrows his car when she needs to go farther. She has made some dumb financial decisions that lead to the bankruptcy, combined with a bad divorce, but the bottom line is she doesn't have a lot of income (makes about $35k in a beat down Rust Belt town in central IN, so probably not that bad relatively speaking) and needs to not waste that income on transportation when doesn't really go all that far.
You must be one of his sheep! And yes he has said to sell a $4-$5k car and buy a $1k car, I heard it, listen between the lines! The losers that listen to him can't afford the crap he sells nor should they be donating to the church, they can't afford that either. I'll agree with you they need to reduce there (and eliminate it)debt, throwing it away on his products won't help. He pushes the Jesus to get a free place to peddle his crap when he comes to town. They invite him in hoping they (the sheep) will give more money (to pay priest lawsuits). The church and Dave both win. The sheep lose! What mutuals funds are the good ones? Probably the high front and rear load ones his ELP's push. And you don't need his ELP's for term insurance either, anybody with a good heart and good intent will tell you that. Get a good AAA+++ company and your set.
You heard nothing of the sort. You are lying. You seem to have it in for Dave. Whatever your silly problem is, I advise other readers to ignore your posts and be a sheep and DO EXACTLY WHAT DAVE ADVISES. Get out of debt completely, make good sound decisions, use discipline and don't buy every little thing that comes into your head, buy the things you do need with cash, and save money like crazy to avoid problems with income interruption. Also, if you can help someone else, go ahead and do it, then turn them on to Dave and pay it forward with the good advice. And by all means, take Liledgy's bitter posts and throw then in the dumpster, the trash, the GOBBIDGE, where they squarely belong.
Last edited by Marc Paolella; 12-20-2015 at 10:10 PM..
It isn't so much that common sense behaviors are wrong, it's how society has been spoon fed the line that "buy it now" and "debt is good" for so many years it's ingrained deep into people's minds.
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I'll be 40 next month. Never in my life have I heard anywhere (on tv, among conversing adults, in any book) that "debt is good."
[I have read how you can use it strategically, but not for common consumables.]
Unfortunately, the average American is a financial nitwit.
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This just follows the line of the average American being a nitwit, period.
It was shocking to me...as I became an adult and realized that most people are really, really dumb and rarely employ any common sense. Which is all financial planning amounts to.
I've driven beaters and I've driven new cars. But I'm not very extravagant. My only truly new car was a stripped-down Toyota Tacoma - it was VERY cheap compared to most other cars because the only "add-ons" it had were an automatic transmission and air conditioning. It was one of the best purchases I ever made. The payments were low (a few hundred a month), and I barely put any money into that vehicle for 120,000 miles. Then it got totaled in an accident, and I ended up with a used Ford Ranger with almost as many miles on it.
Eventually, I bought a gently used Subaru from a dealership for about $22K. I got a very low interest rate, and an extended warranty. This car is perfect for me, and more importantly, I have confidence in its handling and its level of safety.
The idea of driving a beater is great, if you've got a close friend who's a mechanic, but otherwise, not so much. Since I work from home, I COULD get away with a beater, probably, but I value reliability. And then also, what is a car worth if it leaves you sitting somewhere or you have to make other arrangements for transportation because it's in the shop?
I find his advice in this regard to be very impractical.
Used cars works for me. I never buy used from dealers. I'm my own mechanic.
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