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That's different. Personal finances and business finances need to be kept 100% separate. YOU don't borrow money to get a business of the ground, the business does.
That doesn't make sense.
Of course "I" borrowed money to get the business off the ground. I borrowed against my home to start up a business. If the business fails, I fail, and my home that I borrowed against fails.
They would have to rent and renting is dumping money into someone else's pocket.
On numerous occasions Dave Ramsey totes that one should never take out a loan on a new car, the car purchase should be paid in cash.
Does anyone else find his advice unrealistic at times?
The problem I think is that people have a certain vision of how life should be lived. It includes:
-A home they want, in an area they want (usually trendy or "up and coming", which means higher prices)
-Family cell phone plan which includes lots of voice minutes, unlimited text, and unlimited data...of course everyone needs a $200+(?) smart phone.
-High speed internet at home, because the above phones with the internet just isn't enough or "the same."
-A certain kind of motor vehicle
-Eating out at certain places, without any regard for the price of the meal
The list goes on and on. If one makes $30K/year, they can easily be a home owner if they want. It depends on where one lives (housing values) and making do with less in life. Part of the problem is this idea of renting being a total waste of money. I used to think like that myself. Here is the problem with that thinking:
I purchased a $130K home in a decent suburban school district, 1,300 sq. ft. I've put in $10K in updates/repairs (about 1/2 needed repairs, the other half didn't need to be done, but will help sell the home). Still have to redo a bathroom that will help with selling the home (nothing fancy, doing the demolition stuff myself). So throw in another $4,000.
So right now I have $144K in this home. This doesn't include the thousands of dollars in home insurance, property taxes, and interest I have paid. Just doing a quick figure since I've lived here: $6,000 in home owners ins., $6,000 in property taxes, and say maybe $10K in interest (maybe even more...I've paid the home down a lot). So that $144K now becomes $166K to own my home over an almost seven year period. With the home almost being paid off, just say $170K for my home over that time frame. Once home is paid off, I would be able to save an additional $600/month. My home would likely sell for $110K in this market.
If we had rented for 78 months: I could have rented a comparable apartment for $700/month. Say another $50/month for a two car garage. So over that same time frame, I would have paid $58,500 that I wouldn't get back. Given what I paid on principle, I would have about the same amount in cash had I saved that. Plus I wouldn't be out the $10K in interest, and $14Kish in repairs/updates. So I would have spent $58K in money I wouldn't get anything from, but I would have roughly $82K saved in cash. So while renting may be dumping money in another person's pocket, it can also mean dumping money in your pocket. And remember, I'm an odd ball. I've got an almost paid off home over a seven year period. Lots of folks pay over decades, and they pay tens of thousands of dollars in interest over those years.
im a big believer in renting is not automatically throwing money away. it all depends on the deal ,rents and if rents are cheaper than buying .
the big question is if rents are cheaper and you have the money for a down payment or lump sum but chose not to buy what did you do with that extra money.
there are many variables but each case is an individual basis as to which is best.
it also depends on what home appreciation is, what markets on other asset classes do.
historically the markets have beaten home appreciation by 3x or more. that pays a load of rent increases while principal still grows at a faster rate than a home.
my own calculations show in my case taking the same money i put in a home and instead invested it in the same portfolio i have been following for 25 years would have left me with enough today to go out and buy 2 homes even after subtracting out decades of rent.
each case will work out different but anyone who doesnt consider renting and investing elsewhere because they think automaticlly renting is throwing out money has alot to learn.
they both can produce great results depending on circumstances and markets.
Last edited by mathjak107; 12-18-2011 at 06:42 AM..
JMHO, Dave Ramsey is a simplistic idiot who doesn't live in the real world of the middle class. He either gives advice based on a $200K salary, or lectures people on things that they should already know and won't/can't learn now - and uses it all for pure self-promotion.
I have lived my whole financial life based on simple rules:
Never believe anything lasts forever - not an investment in blue chip stock, not a car, not a house, not a job, not a relationship - and plan accordingly
Be versatile; be prepared to recover if you leap, and be alert and prepared to leap - condition yellow at all times
Trust no one but yourself - and take full responsibility for your own decisions
Read everything; things that "don't matter" or affect your account today might tomorrow, from the weather in Chile to the riots in Greece
Plan. Then make plans based on both the potential successes and failures of those plans. Then make plans based on those plans. "What if" to the nth degree.
Teach yourself to make rapid, whole-information decisions, knowing the consequences and rewards of those decisions.
Learn patience
You don't need/can't use Dave Ramsey's fatuous, self-congratulatory advice if you have your own brain function.
(Which probably means that at least 60% of the population DOES need him - the world is full of idiots. Which, like any faith healer, media hound, or con artist, is what he depends on - and lives for.)
Anybody assuming dear old Dave's callers are random callers is probably in for a shock. I'm sure most of it is a scripted show... just like all of the others. It's about getting Dave's message out... not helping callers.
Really doubt this. He has plenty of radio station listeners to "pull" callers from. Are the callers screened? No doubt. Are they paid actors or employees? No, I seriously doubt it.
People in this thread seem to be forgetting that common sense isn't common. That is who Dave's advise is most useful to...the people who haven't used common sense in their finances.
Someone had mentioned that he advocates a 15 year mortgage. This is a bad idea. ONe can make extra payments on their mortgage and turn their 30 year mortgage into a 20, 15, etc, , but if some crisis comes up (loss of job, illness,etc), you're stuck with a 15 year mortgage.
Someone had mentioned that he advocates a 15 year mortgage. This is a bad idea. ONe can make extra payments on their mortgage and turn their 30 year mortgage into a 20, 15, etc, , but if some crisis comes up (loss of job, illness,etc), you're stuck with a 15 year mortgage.
I agree.
That's one of the things he advocates that I don't follow.
Along with the use of a credit card for points/rebates. I usually get about 3-4 free plane tickets per year plus more than a few hotel rooms through points - without the restrictions of frequent flier miles.
Again, you (not YOU specifically) have to understand his target audience and why he is the way he is. Personally, I think he's a little over the top sometimes, but not too often..
I, and more than a few others that have responded here, are not his target audience. We listen for various other reasons.
Right now I'm paying down my 30 year mortgage (only debt I have) at a rate that will get it done in about 15 total. Hope to pay more soon if the promotion I'm up for goes through. Otherwise I'll keep at it the way I am.
Someone had mentioned that he advocates a 15 year mortgage. This is a bad idea. ONe can make extra payments on their mortgage and turn their 30 year mortgage into a 20, 15, etc, , but if some crisis comes up (loss of job, illness,etc), you're stuck with a 15 year mortgage.
The reason for that is the intererest rate is lower on a 15 year mortgage, so while yes you can make extra payments on a 30 year note, you are still overpaying on the interest.
If you cant afford the 15 year payment, then a better option is to get a smaller home you can afford, and then buy a larger one down the road.
I did this exact thing, but I took it to the extreme..
I bought a $12K dump, paid that off in a couple of years, sold it and bought a $46K home, paid it off in a couple of years, and now I'm into a $132K home (appraised for $250K), and that'll be paid off in a couple of years.
From start to finish, about 10 years total to pay off a $250K home and the best part is, my mortgage payments are 1/4th what they would be if I had just bought the $250K home. In fact the $250K home is actually cheaper than the $46K home was.
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