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Dave Ramsey - The Total Money Makeover:

 
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This fellow has written a book The Total Money Makeover: Classic Edition will give you the tools and the encouragement you need to:

- Design a sure-fire plan for paying off all debt--from your cars to your home and everything in between
- Break bad habits and make lasting changes when it comes to your relationship with money
- Recognize the 10 most dangerous money myths
- Secure a healthy nest egg for emergencies and set yourself up for retirement
- Become financially healthy for life

The seven baby steps are:
- Save a $1,000 beginner emergency fund.
- Get out of debt using the debt snowball.
 This means to list all debts arranging them by smallest to largest amount. Make only the minimum payments on all except the smallest debt.
 Use any available money to pay as much as possible to the smallest debt. When the smallest debt is paid off add that money to the payments of your next smallest debt.
 Repeat until all debts except the house mortgage are paid off.
- Save a proper emergency fund that is 3-6 months of expenses.
- Invest 15% of household income for retirement.
- Save for children's college.
- Pay off the home early.
- Build wealth and be generous.

I have not read this book, but it was mentioned in a Topic I started about GOOD DEBT / BAD DEBT
The suggestion at the time seemed to be that all debt is bad, I dont agree.

I will read the book, but running through the points made about it, I doubt he labels 'all debt as bad.'
He mentions the old proven method of reducing multiple small debts, I am guessing credit and store cards but keeping the house mortage.
Then he talks about better money management for the rest of you life and aim to pay off the house early.
He does not suggest you pay the house off whilst living like a church mouse.

He speaks of financial fitness, not abstinence or gluttony

My topic is similar, but the inference that any debt is bad is something some need to think about.
Good luck with it.
 
pollinator
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I've listened to far too much of Dave Ramsey's show than I care to admit, but I'll address some of your points.

John C Daley wrote:I will read the book, but running through the points made about it, I doubt he labels any debt as bad.


He might not exactly use the words "bad debt" but when he say's "a car payment is a good way to stay broke" I'd say that qualifies as him labeling it as bad debt.
https://www.youtube.com/watch?v=NvZJb_ydvUk

John C Daley wrote:He mentions the old proven method of reducing multiple small debts, I am guessing credit and store cards but keeping the house mortgage.


He usually suggests a 15 year mortgage and paying it off as fast as possible.

John C Daley wrote:He does not suggest you pay the house off whilst living like a church mouse.


One of his general guidelines is that you shouldn't buy a new car until you have a million dollars net worth. I'm a cheap SOB, and even I didn't follow that one.

While Dave Ramsey has some great advice for paying off debt, his investment advice tends to be crap.
 
John C Daley
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John Wolfram, I agree;
-  a new car payment can be a BAD DEBT
- 15 year mortgage is a GOOD DEBT, but a longer period may not be a bad debt if the figures are good.
- I need to alter a comment about labelling any debt as bad, to 'all debt is not bad'
 
pollinator
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I’ve read his books.

My understanding from them is that he labels

- all debt, aside from a mortgage, bad.

- all credit cards, bad

- term life insurance (the only kind one should buy)

I learned a lot from his books and a class he offers usually via churches called Financial Peace University. They helped me a lot and shifted my mindset significantly.

His books line up well with the details found in the book, The Millionaire Next Door.

That said, after 5 years of not having credit cards, I do have credit cards (I pay in full each month.) I have a great credit score (which if I worked his plan, he says I wouldn’t need.) I recently got some debt to pay for a biological dental procedure that I was confident I would be able to pay off prior to the 6mos when I’d be charged interest (definitely not what Dave would suggest.) I can’t speak on the investment side of things because I haven’t made any, in a traditional financial sense… mine have been in myself and others. I also don’t think it’s a waste for a woman to have degrees and decide to stay home and raise her children. However, I do understand and agree with his point that young adults ought not to get $100K student loan debts and then decide to stay home and their spouse be paying that off for as long as a traditional mortgage.


I’ve heard it said that it’s beneficial to read books like eating a watermelon… eat the fruit and spit out the seeds…

That metaphor doesn’t work as well in a permie crowd… some would eat the seeds or plant the seeds and pickle the rinds, give them to the chickens, or compost them.

However, I would say for a majority of Americans Dave’s books and resources (especially the EveryDollar App) are incredibly beneficial… for the permies crowd seeking Gerthood… I don’t know if they’d be as beneficial.

I look forward to hearing your thought/opinions about what you read.
 
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I have been a fan of Dave Ramsey for as long as I can remember.

I have not read his book though I recommend his website.

The baby steps are easy to follow.

I would highly recommend getting started using the Envelope System as that is how I started off and became Debt Free:

The envelope system is a way to track exactly how much money you have in each budget category for the month by keeping your cash tucked away in envelopes. At the end of the month, you can see how much cash is left by taking a quick peek in your envelope. How easy is that?



https://www.ramseysolutions.com/budgeting/envelope-system-explained
 
John Wolfram
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John C Daley wrote:John Wolfram, I agree;
- 15 year mortgage is a GOOD DEBT, but a longer period may not be a bad debt if the figures are good.


Dave Ramsey really isn't into optimizing for the most mathematically favorable situation (e.g., 30 year loan at 3.5% when inflation is 8%). Instead, he pushes for the situation that  produces a fairly good economic and psychological outcome. For example, paying off debts ranked on interest rates would be mathematically favorable, but paying them off smallest to largest has a big psychological benefit.

Taken to the extreme, Dave Ramsey even advocates for quickly paying off student loans when public service loan forgiveness is a real possibility.
 
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That was me, I said that in your post. I stand by it. You stated that you thought buying business stuffs was "good debt" and I strongly disagree.

Being debt free = freedom.


This is a perfectly timed post from you because my boss just told me that because of his declining health he is going to be retiring July 1. I am the only employee at my firm and I have no other bosses so his retirement means my joblessness. My husband stays at home with our kids. So this will mean 0 members of my household will have a job. I'm not scared at all. My husband even suggested I take the summer off to hang out with the kids. If we had debt we'd be freaking out and having totally different conversations. Debt= slavery and I'm no one's slave. HURRAY!
 
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Ramsey’s advice is great for those who are just starting out and/or those whose finances are a wreck and need some order.  He is not about optimizing one’s finances to the nth degree.  I love to optimize, so I favor Mr. Money Mustache’s advice.

If you view debt as a tool to make money vs a way to get the things you want before earning them, you might look further than Ramsey.

Maybe Ramsey has changed, but I think he used to advocate investing with your typical brokerages with management fees of 1-2%, which are often baked in so you really never know what you are paying. I’d recommend using Vanguard’s target retirement funds over these brokerages, which cost a fraction in fees.  The difference can add up to HUNDREDS of THOUSANDS of dollars over a lifetime.  

This is, of course, if you can ride out swings in the market without panicking and selling out at the bottom.  If you can't, an investment advisor, that can also offer products such as risk limiting annuities, is well worth what the charge.
 
John Wolfram
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Gray Henon wrote:Ramsey’s advice is great for those who are just starting out and/or those whose finances are a wreck and need some order.  He is not about
Maybe Ramsey has changed, but I think he used to advocate investing with your typical brokerages with management fees of 1-2%, which are often baked in so you really never know what you are paying. I’d recommend using Vanguard’s target retirement funds over these brokerages, which cost a fraction in fees.  The difference can add up to HUNDREDS of THOUSANDS of dollars over a lifetime.


He's a big fan of the American Funds which not only have a 0.6%-1.0% expense ratio, they also have an eye-popping 6% front end load fee. Short of something really exotic, most funds haven't had loads since the late 90s.
 
Alana Rose
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As I read this article this evening: https://www.ramseysolutions.com/retirement/how-to-retire-early

I thought of this post and the early retirement posts.

I liked that this article covered the ‘Baby Steps.’

Debt Freedom and being at the beginning of Baby Step 4 allowed me to take almost a 2 year ‘Gap year’ and pursue philanthropic interests. Though I’m bummed to go back to Step 2 (because of some dental work I want done a specific way) and Step 3… it was a wonderful feeling to not be a slave to my job like many of my co-workers who stayed in a toxic work environment for years longer than I did because they had debt and didn’t keep a budget. It was also exhilarating to go serve at-risk youth and abused mothers and children without having to ask for money (depend on it) from others to fund my livelihood while I did acts of service.

My most conflicting idea in the Dave Ramsey books and other money saving books is their food budget/health philosophy and the types of foods they recommend. As a permie, voting with my dollar for local, organic, non-GMO produce is important to me… as well as pastured eggs, grass fed (& finished beef) so on and so forth. Because our food contributes to our health, and as permies the food we consume often relates our core values… it is part of the budget that I couldn’t skimp on. That being said, eating at home, packing lunches & snacks & water bottles, eating more organic rice & beans, using glass reusable storage containers… composting, gardening, and meal planning all helped.

The good debt, bad debt is a challenging topic and I’d say that many successful people I’ve met looked to me like they followed a blend of Dave Ramsey’s  and Robert Kiyosaki’s philosophy (author of Rich Dad, Poor Dad.) …I’ve never been a big risk taker with money but that has prevented me from seeing larger gains. However, I sure wish I started investing in aggressive mutual funds right out of high school. It is one of my regrets.

Retirement: I also think our world is changing drastically and it seems difficult to predict if retirement strategies that previously and currently work, will work in the future. After teaching in various capacities for the last 20 years and then in public schools… I’d much rather live a Gert lifestyle than work to obtain what I’d need to to retire ‘well’ but working as a teacher, in a traditional sense for the next 25-30 years. Do I trust the state of CA to manage what I’d be mandatorily paying into to be there in 25 years until I die? (I don’t.) Teaching has also morphed into something I find very difficult to participate in after being exposed to John Taylor Gatto books.

Permies has really inspired me to live more of a ‘conserver’ lifestyle and the diverse DIY skills of the permies on this website never cease to amaze me! The book, How to Survive without a Salary, reminds me a lot of Gert while implementing some of the shared philosophies of Dave Ramsey.

Happy budgeting!
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Alana Rose
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John C Daley wrote:

I have not read this book, but it was mentioned in a Topic I started about GOOD DEBT / BAD DEBT
The suggestion at the time seemed to be that all debt is bad, I dont agree.



I like what Marco shared here: https://permies.com/t/93089/Living-debt-free#762584

That agrees with your sentiments that not all debt is bad.
 
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The Ramsey approach certainly provides a reasonable system.  If applied it will work.  I do have a problem (s) with it.  The most obvious one is that, as stated here, it does not consider interest rates.  If interest rates are generally equal, then the approach works well.   If they are not equal, the approach will still work, just not as well.

To explain, if I owe $14,000.0 @ 28% and $12,000.00 at 4%,   I would choose to pay down the higher loan first.

But to stress a couple of points, I realize that was was presented here was in short- form, and the approach may account for interest rates. And, as I already stated, the approach will still work as stated.  It just won’t be optimal.
 
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