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Never cared or agreed with what he says, and never will. But will say for a guy who went bankrupt he sure found a way to make a ton of money.
I think a lot of the principles he harps on today are overcorrections from missteps he THINKS he took in the years leading up to the bankruptcy. He thought he was doing a lot more wrong than he actually was.
If what he says is true - he had to declare bankruptcy because the bank called his loans - that would put a lot of landlords and even flippers out of business. Not all work on loans, I understand, but a good number do and wouldn't (yet) be able to without them. Ramsey now preaches not to finance rentals.
On his radio show (FM radio, I didn't find the corresponding YouTube video to share) he states that buying a car specifically FOR the gas mileage / savings is a bad idea "unless you're driving from here to the moon". I don't see it as QUITE so far-fetched an idea as he does:
Let's say I was weighing continuing to drive my old gas guzzler vs. buying an EV. I've already done the math ahead of time, and with my local energy rates, and local fuel prices, there would be a $0.13/mile difference.
300 miles or "one tank" or "one charge" (in a true electric-only vehicle) would be a difference of 300 x $0.13 of $39/week. Not enough to justify a NEW car. You'd have to add this into how many repairs (count any tow bills, and trips to Auto Zone, too) your old clunker has cost you. Maybe you'll get to a break even point. It's still a long way to get to a Tesla.
But if you don't need 7 passenger capacity, maybe swapping the 13 MPG Suburban for a 40 MPG used Civic Hybrid (if you can find one for $5000) makes more sense. You've got to do "your own math" with your own numbers.
So is spending your savings on a cash purchase of a depreciating asset. I'd rather use other people's money to buy a depreciating asset at low interest rates and pay it off early and leave my cash liquid for other purposes.
Exactly. Use your credit union's money to finance your new car or new to you car and keep your savings set aside and growing with interest. Or your Inherited IRA Annuity, 401K, etc., etc. I completely agree.
So is spending your savings on a cash purchase of a depreciating asset. I'd rather use other people's money to buy a depreciating asset at low interest rates and pay it off early and leave my cash liquid for other purposes.
Everyone is a finance expert until they find themselves unemployed in a recession. It's happened to me a few times. With no debt, a paid-for house, and an emergency fund, it was no big deal. Lots of people were "using other people's money" in 2008 when the bottom dropped out last time and lost everything.
So is spending your savings on a cash purchase of a depreciating asset. I'd rather use other people's money to buy a depreciating asset at low interest rates and pay it off early and leave my cash liquid for other purposes.
Exactly. Use your credit union's money to finance your new car or new to you car and keep your savings set aside and growing with interest. Or your Inherited IRA Annuity, 401K, etc., etc. I completely agree.
Unlike retail banks, most credit unions have very minimal qualifications for their best (the advertised) interest rate on financial products. For example, only a 680 score is required to receive the 3.00% interest rate on a new auto loan. While this may not fly with a 680 due to late payments, a 680 due to young credit or higher utilization may very well qualify for their best rate. This would NOT happen with similar dealer or manufacturer incentives advertising similar low or "0% financing for 60 months".
While someone with a much higher credit score may be able to get the 0% rate on a new auto, used auto loans is where credit unions really shine. You will not find retail banks willing to match 3-4%.
Everyone is a finance expert until they find themselves unemployed in a recession. It's happened to me a few times. With no debt, a paid-for house, and an emergency fund, it was no big deal. Lots of people were "using other people's money" in 2008 when the bottom dropped out last time and lost everything.
And if you use up your savings buying that car outright and then get unemployed, you're still screwed by not having any cash left.
Sorry, you can what-if that scenario to death and come out screwed no matter what. I'm going to go with my methods which have worked for 50+ years so far.
I think a lot of the principles he harps on today are overcorrections from missteps he THINKS he took in the years leading up to the bankruptcy. He thought he was doing a lot more wrong than he actually was.
If what he says is true - he had to declare bankruptcy because the bank called his loans - that would put a lot of landlords and even flippers out of business. Not all work on loans, I understand, but a good number do and wouldn't (yet) be able to without them. Ramsey now preaches not to finance rentals.
I would agree...early on he had a wicked lesson on how bad it can go when it went bad in a way he might not have been prepared for. He has a finance degree, a family and personal background in Real Estate. He learned the hard way about the risk side of leverage and how it can blow up...
He had $4 Million in rental property, owed $3 Million, then a bigger bank bought a bank he was a customer of and they called $1.2 Million then shortly afterwards another one called in another $800K. He ended up paying all but $380K back from what I understand...It was also partially motivated (from what I understand) by the tax reform act of 1986 which made interest no longer tax deductible on investor owned properties.
I would agree...early on he had a wicked lesson on how bad it can go when it went bad in a way he might not have been prepared for. He has a finance degree, a family and personal background in Real Estate. He learned the hard way about the risk side of leverage and how it can blow up...
He had $4 Million in rental property, owed $3 Million, then a bigger bank bought a bank he was a customer of and they called $1.2 Million then shortly afterwards another one called in another $800K. He ended up paying all but $380K back from what I understand...It was also partially motivated (from what I understand) by the tax reform act of 1986 which made interest no longer tax deductible on investor owned properties.
That would be the same story I heard, as told by him on his show, "no one wants a 26 year old ... with millions in outstanding loans" never mind the fact if he was paying them on time. delinquency did not seem to be even part of the decision, as it appeared to be a factor only AFTER the bank DECIDED to demand a balloon payment vs. his normal amount due.
Not saying anyone at the new bank knew him personally, but SOMEONE at the bank believed that his RELATIONSHIP fit him into the category of borrower whom the bank would never see the end of his loans. Someone legitimately thought that the bank would see more of their money if they just took everything and sold it themselves, ASAP, vs. collecting interest over the life of the loan. That's a real shame.
It's not that outlandish to consider today, rental property loans commonly ask for 30% equity / down, so that could be $2.8M outstanding on a $4M property... new loans are being cut, very close to the numbers at which his old bank decided to call the cows home. Curious if I'm missing something that points to him being irresponsible. I don't think I am.
And if you use up your savings buying that car outright and then get unemployed, you're still screwed by not having any cash left.
Sorry, you can what-if that scenario to death and come out screwed no matter what. I'm going to go with my methods which have worked for 50+ years so far.
When did I ever say to zero out your emergency fund buying expensive cars? I buy cars out of cash flow. It keeps me from buying too much car. I haven't had a car loan in 25+ years. My emergency fund hasn't been below 6 figures in 20+ years.
Totally agree. Ramsey's advice is great if you need to get your financial house in order. He's less useful when it comes to investments for capital building - his affiliated vendors (Endorsed Local Providers) often carry big fees when one can do better.
Yeah I went to see one of their network advisors on a friends recommendation. I was less than pleased with their investment tactic. Lots of.....fees and charges. My investment guy smokes them. I used one of his real estate providers on my last home purchase. Guy was....ok. He was professional but....Truthfully no better or worse than if I opened up the yellow pages under Realtors and blindly pointed. I wasn’t impressed. Trying to bounce anything off the guy was like bouncing a tennis ball in sand. This was also on a friends recommendation who thinks DR is just one rung under God on the ladder. My buddys whole investing strategy....mutual funds and no debt. He’s been trying to buy a house cash for the last 7 years or so. Still renting. If he would of bought in 2009/2013 he would of been well ahead.
Quote:
Originally Posted by GeoffD
Everyone is a finance expert until they find themselves unemployed in a recession. It's happened to me a few times. With no debt, a paid-for house, and an emergency fund, it was no big deal. Lots of people were "using other people's money" in 2008 when the bottom dropped out last time and lost everything.
Yes that can be true. And it happened. But it didn’t happen to everyone. Only to people who were financially stupid. I had a mortgage during that bad time. But it was manageable debt. I have 4 years worth of payment set aside for every expense I might have. And that’s just the emergency fund. We do t spend money stupidly.And I can do a lot of side work to get paid to make money. Everyone needs a car repaired or work on their house even in a recession.
As far as vehicles there can be a total return on buying a cheaper car. I was driving my truck to work at the time of 900 a month. Not counting I was putting 3,000 miles a month on the truck. $120 in oil changes every three months. It adds up fast.
I bought a cheap little Kia. The first 3 months that car paid for itself. After that it was oil changes a few maintenance items and repairs. All cheap.
I sold the car for 3,000 bucks. It cost me 80 bucks a month to drive that car to work. I was literally keeping 900 a month in my pocket
Last edited by Electrician4you; 12-10-2019 at 03:05 PM..
I don't agree that driving an old pos is a good idea because it can be unsafe and too expensive to have it repaired by a professional mechanic. However, I do think that buying a moderately used car makes good sense. What do you think?
I wish the conservatives of this forum ( and also the republican politicians) watch his videos. He is a model conservative.
Some of his advice summarized.
1) Get out of debt.
2) Focus on your income & budget, invest and save. Long term gains have short term pains.
3) F those Sallie Mae and 25k car payments.
4) The borrower is a slave to the lender - From Bible.
5) Pray to God.
6) Give.
Pretty basic common sense principles. It will really help people who are struggling. They cannot build wealth, but atleast stop their money getting squandered in credit card interest.
It personally helped me. I got 22% APR on a new car back in June . Dave Ramsey rants helped me abandon that deal and now I got a one at 3%.
Last edited by shanv3; 12-10-2019 at 07:34 PM..
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