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Yes it does work for the average person if you can discipline yourself. And it also helps you learn how to manage your money after you are debt free, it's habit forming. Once you've paid off debt you can progress to the next step. You even learn how to use good debt to make money, example in real estate investing.
Key, you have to be determined, you have to control yourself, you have to want it bad enough.
Petch, don't forget to buy his books, attend financial peace university, tithe 10% to your pages God, and attend his counselor training camp to have the. Heart of a teacher. But first, sell your car and buy a $1000 dollar beater for your trip. Of course, that's after you've invested in his overpriced front loaded mutual funds from his ELP's, and bought some inflated cost term insurance from them too!
Well I think you're going really overboard on living beyond your means definition. For example I usually pay off my cc when I get the bill. There are times when I may pay 1/2 the balance and wait till next month to pay the other half. I'm not living beyond my means.
Electrician,I, myself, don't think it's living beyond a person's means. I said some people could think that -- and it didn't take long to prove my point because the very next post agreed with what I said that some people would think. That -- and that it's stupid to pay interest when you could pay it off before that. Again I'm not saying that others think that.
I also have charged things and paid it off over two or three months -- when I had the money to pay for it. I just didn't want to give up the cash. Others would say it's stupid to pay even 5.00 in interest if you don't have to. Personally I don't care about the interest. I care about what allows me to sleep at night -- not others opinions about what I do. If I charge $600 and pay it off in two 300-dollar payments (the first of which IS before interest is charged.) Yes, stupid me, doesn't see the big deal about paying interest on 3-400.00 for 1-2 months. So yes that 600.00 but the time I added finance charges was what -- 610??? I just can't get that worked up about that. If I'd paid cash for the item at 610.00 would that have been better?
As a real life example… I did charge my entire kitchen remodel on my CCs at 5%. And paid it off over 5 years. It would have taken me 5 years or more to save for the remodel. In the mean time I wouldn't have had my fantastic new kitchen to enjoy……AND…the cost of contracting labor and materials would have gone up also…so a 25K remodel…by the time I saved the cash for it would have cost more anyway -- I'd have had to save even MORE cash. Sooooo I put the kitchen on the CC at 2003 prices and enjoy my kitchen as I pay it off, or save the cash, hate my kitchen -- and have to save enough for 2008 prices. The anti-credit card people might say "you're just rationalizing using credit"……And personally I'm OK with living under the side-eye or their judgement.
Dave Ramsey would say I'm irresponsible. And I think his advice about only having a 1K EF while getting out of debt is off. So we're even. I'd rather have it take me longer to get out of debt, and keep building the EF to more money. But I personally like high amounts of cash cushion. He told a person to take their 20K EF DOWN to 1K….even though the young man told him that wouldn't have paid off all the debt -- and he was nervous about losing his job. Ramsey said "Why are you nervous" is that a real possibility?" Even if you did you could find another job. WHO in this economy tells someone to deplete their EF…..and by doing that, it wouldn't have even paid off all the guy's debt. So you deplete your EF, and you STILL have debt. Less debt, to be sure. But take your EF down to just 1K that's….well, let's just say that's not what I would have advised. I was screaming at the radio for the young man to NOT deplete his EF.
I, myself, don't think it's living beyond a person's means. I said some people could think that -- and it didn't take long to prove my point because the very next post agreed with what I said that some people would think. That -- and that it's stupid to pay interest when you could pay it off before that. Again I'm not saying that others think that.
I also have charged things and paid it off over two or three months -- when I had the money to pay for it. I just didn't want to give up the cash. Others would say it's stupid to pay even 5.00 in interest if you don't have to. Personally I don't care about the interest. I care about what allows me to sleep at night -- not others opinions about what I do. If I charge $600 and pay it off in two 300-dollar payments (the first of which IS before interest is charged.) Yes, stupid me, doesn't see the big deal about paying interest on 3-400.00 for 1-2 months. So yes that 600.00 but the time I added finance charges was what -- 610??? I just can't get that worked up about that. If I'd paid cash for the item at 610.00 would that have been better?
As a real life example… I did charge my entire kitchen remodel on my CCs at 5%. And paid it off over 5 years. It would have taken me 5 years or more to save for the remodel. In the mean time I wouldn't have had my fantastic new kitchen to enjoy……AND…the cost of contracting labor and materials would have gone up also…so a 25K remodel…by the time I saved the cash for it would have cost more anyway -- I'd have had to save even MORE cash. Sooooo I put the kitchen on the CC at 2003 prices and enjoy my kitchen as I pay it off, or save the cash, hate my kitchen -- and have to save enough for 2008 prices. The anti-credit card people might say "you're just rationalizing using credit"……And personally I'm OK with living under the side-eye or their judgement.
Sorry, but inflation has not averaged 5% annualized between 2003 and 2008, so your real interest rate was still positive and you are rationalizing.
Petch, don't forget to buy his books, attend financial peace university, tithe 10% to your pages God, and attend his counselor training camp to have the. Heart of a teacher. But first, sell your car and buy a $1000 dollar beater for your trip. Of course, that's after you've invested in his overpriced front loaded mutual funds from his ELP's, and bought some inflated cost term insurance from them too!
Exactly. But you have to give credit where it is due; he is a marketing genius. He found a way to become wealthy by selling advice which was not new. All he did was slightly re-arrange and simplify advice which had been promoted for years by Crown Financial Ministries.
Sorry, but inflation has not averaged 5% annualized between 2003 and 2008, so your real interest rate was still positive and you are rationalizing.
And as I said, I can live with that. I smiled every day I came home and enjoyed my kitchen. (versus walking in the door and hating the site of it.) I was more than happy to send those payments in every month…payments for something I was enjoy as I paid it off.
ETA: one couple. Ramsey fans, said they declined going on a family cruise (what I would call a once in a lifetime trip) to celebrate their in-laws 50th wedding anniversary and a sibling's birthday that fell at about the same time. They were soooo glad they stuck to their plan. So Dave asked them about it. And talking about how there'll be other cruise opportunities, yada, yada, yada. Turns out the cost of the cruise would only have delayed them being debt-free by two months. So they pass up on a 50th wedding anniversary cruise -- to get out of debt two months sooner than if they'd taken the trip? I'd like to know what other chances they'll have for a parent's 50th wedding anniversary?
Here I go rationalizing again. I'm not passing up that kind of family trip just because it delays my 'debt snowball' by two months. The couple said, yes, they were disappointed, but they'll take other trips. If they're OK with it that's all that matters. But it wouldn't be me. I'd have had a great cruise!
Petch, don't forget to buy his books, attend financial peace university, tithe 10% to your pages God, and attend his counselor training camp to have the. Heart of a teacher. But first, sell your car and buy a $1000 dollar beater for your trip. Of course, that's after you've invested in his overpriced front loaded mutual funds from his ELP's, and bought some inflated cost term insurance from them too!
I didn't do any of that and won't. I actually did the snowball before I even knew who Dave Ramsey was.
I get your sarcasm and I'm didn't say be "led by the nose" like you are insinuating, AS I SAID.... FIRST STEP. And I said ... progress to the next step. Maybe I should have been a little more specific. While I was paying down debt I was reading books from different authors (in other words, educating myself in financial matters). My favorites was Cash Flow Quadrant and Rich Dad Poor Dad and I read other good financial books from other authors but the reading / educating didn't stop there. I started and now run successful business, best of all, I employ people too and I also invest. Imagine that, here you are being sarcastic discouraging people from taking the first step but strangely I agree with your point but people have to start somewhere. If I had not buckled down and got out of bad debt I'd still be punching a time clock and struggling to make ends meet. The snowball was the first step in turning my life around.
I think a big reason people struggle with and give up on paying down debt is because they have a hard time breaking bad habits. I redirected my attention to educating myself on finance planning my next step and when I got rid of bad debt, I was ready to begin the next phase. A lot of people just fall into their old habits and get into trouble again.
Everyone thinks that once they graduate the education ends, there is nothing further from the truth.
If I recall, Ramsey's approach is to work really hard, stay out of debt, and build your various savings vehicles so that debt won't sink you and so you'll have a nice retirement. The $1K emergency fund is just for starters, that's not the whole of it. Another step after that is to build 6+ months of full expenses in a larger emergency fund. You don't stop at $1K, but $1K is something small enough that it allows someone who doesn't know how to save or struggles with temptation to experience a 'win.'
The whole point of it, whether you follow Ramsey or not or like his advice or not, is that you need to accumulate $$$ and have more than you spend. That's the only math that works in the end. It does take sacrifice, it means that $2K shopping spree at upscale mall might need to be a $400 spree instead. It means for some people working more than 1 job, or having a sideline business. There isn't just one way to get there, but unless you have a trust fund, a lottery win, or married someone wealthy, chances are you're going to slog away over at least a couple decades if not more. It doesn't mean you live in a tin shack and eat out of garbage bins. You just always put some $$ away out of every paycheck and watch your spending and pay off debts as fast as possible (except for a mortgage which will take years if you don't have the cash).
I ignore all of Ramsey's religious stuff as that's not of interest to me. The foundational principles are good ones. Everyone can benefit by having an emergency fund. Everyone can benefit by utilizing 401Ks and IRAs. No one will ever complain that they "saved too much money." You can still plan for big purchases like nice vacations or a big toy. You just save for it so you don't get into debt to have it. That's taking control of your money.
Bingo
I don't follow Ramsey's advice to the letter, either. For instance, I do have a credit card that I pay off every month. But I also save more than 15% for retirement (more than he recommends). I do have 3-6 month emergency fund as he recommends.
And I think his advice about stock market returns from "good growth stock mutual funds" being 12%, while possible, is overly optimistic to say the least. Top performing growth mutual funds have not returned that over the last 20 years, and with the stock market fully valued, I don't think they'll return anywhere near that over the next 20, either. His advice that you can take out 8% from your retirement savings once you retire is wildly optimistic as well. It should be 5% at most, and that is a stretch.
Electrician,I, myself, don't think it's living beyond a person's means. I said some people could think that -- and it didn't take long to prove my point because the very next post agreed with what I said that some people would think. That -- and that it's stupid to pay interest when you could pay it off before that. Again I'm not saying that others think that.
I also have charged things and paid it off over two or three months -- when I had the money to pay for it. I just didn't want to give up the cash. Others would say it's stupid to pay even 5.00 in interest if you don't have to. Personally I don't care about the interest. I care about what allows me to sleep at night -- not others opinions about what I do. If I charge $600 and pay it off in two 300-dollar payments (the first of which IS before interest is charged.) Yes, stupid me, doesn't see the big deal about paying interest on 3-400.00 for 1-2 months. So yes that 600.00 but the time I added finance charges was what -- 610??? I just can't get that worked up about that. If I'd paid cash for the item at 610.00 would that have been better?
As a real life example… I did charge my entire kitchen remodel on my CCs at 5%. And paid it off over 5 years. It would have taken me 5 years or more to save for the remodel. In the mean time I wouldn't have had my fantastic new kitchen to enjoy……AND…the cost of contracting labor and materials would have gone up also…so a 25K remodel…by the time I saved the cash for it would have cost more anyway -- I'd have had to save even MORE cash. Sooooo I put the kitchen on the CC at 2003 prices and enjoy my kitchen as I pay it off, or save the cash, hate my kitchen -- and have to save enough for 2008 prices. The anti-credit card people might say "you're just rationalizing using credit"……And personally I'm OK with living under the side-eye or their judgement.
Dave Ramsey would say I'm irresponsible. And I think his advice about only having a 1K EF while getting out of debt is off. So we're even. I'd rather have it take me longer to get out of debt, and keep building the EF to more money. But I personally like high amounts of cash cushion. He told a person to take their 20K EF DOWN to 1K….even though the young man told him that wouldn't have paid off all the debt -- and he was nervous about losing his job. Ramsey said "Why are you nervous" is that a real possibility?" Even if you did you could find another job. WHO in this economy tells someone to deplete their EF…..and by doing that, it wouldn't have even paid off all the guy's debt. So you deplete your EF, and you STILL have debt. Less debt, to be sure. But take your EF down to just 1K that's….well, let's just say that's not what I would have advised. I was screaming at the radio for the young man to NOT deplete his EF.
I think the bottom line is Dave Ramsey is for dumb, lazy, clueless people who need a rigid plan. Otherwise, they will start rationalizing their behavior and never get anywhere. But not everyone is like that. Not everyone needs to be told what to do. There are people who can go into debt and treat it seriously without it becoming a downward spiral. Maybe that's a minority of people, but I suspect it's a sizable minority.
I think the bottom line is Dave Ramsey is for dumb, lazy, clueless people who need a rigid plan. Otherwise, they will start rationalizing their behavior and never get anywhere. But not everyone is like that. Not everyone needs to be told what to do. There are people who can go into debt and treat it seriously without it becoming a downward spiral. Maybe that's a minority of people, but I suspect it's a sizable minority.
problem with high earners is that most of their debt, they can "work" to compensate for it. they don't mind spending $10-20k+ on a vacation/fun car because it's a few extra work days a month for a few months and they make it back.
Debt changes meaning once you can just earn your way out of the hole, so why worry about the hole if it isn't a "large" leak?
For most people, they don't see Starbucks as a large leak, so they buy their coffee. A smartphone plan with "extras" like unlimited X, small leak, they pay for an unlimited plan. People buy food but let it spoil, again small leak but they don't mind their money "spoiling" away.
Bring this back to high earners, a small leak can be thousands of dollars.
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