Ramsey debt viewpoint explained

[shannerdrake]

in twin cities we are getting “hospitality fees” in the 7-10% range and sometimes inflation surcharges

It’s all just optics - the final price is the final price - I don’t want to see a clean up fee and a gas/electric fee etc etc. it is really irritating.

Just got back from Twin Cities. All my clothes smell like weed smoke from simply being so bold as to walk through hotel and restaurant entry doors.

In addition to the dry cleaning fees I’ll face for my suits, I was also hit with automatically imposed 18-20% tips and a 10% hospitality fee on every meal. No wonder the government sets the Minneapolis locality pay almost on par with DC.

 

[Pucky Freak]

Ok, I’ll play.

I’ve been following Ramsey’s financial advice for 9 years now, the last 7 together with my wife. Not blind, 100% adherence, but in total I’d guess I have about 85-90% fidelity to his teachings. Here are the most beneficial elements, in my experience:

1. Faith in God as the foundation of money management. Tithing is the cornerstone of solid personal finances. Jesus spoke extensively about money. The Bible is full of instructive content on stewardship, generosity, financial priorities, attitudes towards money, investment, debt, wealth management, and other money-related topics. I have personally found the Bible’s teachings on finances to be superior to other sources.

Obviously the 21st century has some new and different financial considerations that did not exist in antiquity. I choose to seek out a variety of financial knowledge from many wise teachers. I interview financially successful persons, and I consume a large quantity of media on money-related subjects in an effort to become proficient in many categories of personal finance such as taxes, investment, budgeting, etc.

2. Generosity. Ramsey asks what kind of person do you want to be - generous, or stingy? If you want to be generous, you become that way by giving freely and cheerfully. It doesn’t feel too great at first, but after pouring out generously over years the internal reward of blessing others, organizations and causes is worth everything given and more.

3. Collaboration with my partner. Using Ramsey’s Every Dollar budgeting software provides the structure for my wife and I to work together towards common financial goals, and have clear communication. It strengthens our relationship and builds trust. We both know where 100% of our money goes. A monthly budget meeting and a zero-based budget are key components.

4. Purpose. We happen to life; life does not happen to us. We are in the financial driver’s seat and choose our financial goals, then achieve them. My wife is a full-time homeschool teacher and stay-at-home mother of 4, we own our home outright, we have no debt, and we’re on a great track in saving for retirement and fully funding our children’s higher education. I have a higher-than-average income, but not by a lot - we are solidly middle class. We did not start here, but we knew where we wanted to go, made a plan to get there, and followed it. This was not without bumps and sidetracks either. My own severe mental health problems have challenged us greatly, and pushed us to the edge of what our relationship could handle many times. We adopted 3 kids along the way, two of whom have severe developmental disabilities. Having a sufficient emergency fund enables us to overcome hurdles without getting derailed or going back into debt.

5. Boundaries. Having clear expectations and what is ours, and what is mine. Also, healthy financial boundaries with friends and extended family.

6. Legacy. Being able to pass along a solid financial foundation to our children as they transition into adulthood. This is primarily about values, and financial literacy. We’re not handing out silver spoons to deprive them the opportunity to learn to stand in their own two feet.

Summary: A lot of people get hung up on Ramsey’s teachings on debt, investment, and home-buying. It’s good to be critical. Those topics are also easy targets and make it easy to overlook some of the more foundational elements of the Ramsey way, described above. I’m not ignorant of the math problems with his treatment of the subjects in this paragraph, as described elsewhere in this thread, and on past threads. I’ll do my best to refrain criticism from others who take a more nuanced approach to these subjects, because as @VikingsGuy points out, responsible debt-leveraging is a key component to modern life, as well as business, government, etc.

 

[BigHornRam]

Piece of mind from zero debt and positive net worth is priceless IMO. Most people would be surprised to see how fast their savings account grows, once the mortgage is paid off. I've heard an occasional Ramsey show on the radio while driving through the middle of nowhere and it's the only station that tunes in. From the little I've heard, his philosophies seem simple and reasonable. If you don't like what he is preaching, turn the channel.

 

[TN2shot07]

Piece of mind from zero debt and positive net worth is priceless IMO.

I couldn’t agree more, that’s the part of the equation that isn’t being measured in math calculating what spread you can make in interest. I can’t wait for the house to be paid off in about 5 years

 

[Steiny77]

Piece of mind from zero debt and positive net worth is priceless IMO. Most people would be surprised to see how fast their savings account grows, once the mortgage is paid off. I've heard an occasional Ramsey show on the radio while driving through the middle of nowhere and it's the only station that tunes in. From the little I've heard, his philosophies seem simple and reasonable. If you don't like what he is preaching, turn the channel.

I agree also. Haven't had any personal debt (mortgage) for over 25 years. We ran a 65 employee $30 mil annual revenue business for many years before selling out without ever borrowing money. Use leverage if you want, bankers need and appreciate you ..... but you can do just fine without taking the risk.

 

[williaada]

I think more recently he tells them to use a free app that they budget with. The envelope system was a thing before itemizing apps were created.

The app is free, but to get the most out of it there is a monthly fee. Usually the people hosting the calls will give the apps and program out for free, usually a year.

 

[Deleted member 28227]

I’ve wondered if Ramsey could do it again. If he didn’t have his net worth and wasn’t peddling his current business model. Do you think he could become rich again following his practices. I remember reading somewhere that if you redistribute all the wealth in this country evenly the rich people would be rich again in under a decade. It’s how they are wired they will find a way to make it back

I disagree. They would make money sure, but bezos and gates are as rich as they are because they had one in a generation opportunities and went all in.

I bet if they lived another 100 lifetimes they would never be billionaires again.

It would be interesting to see what buffets single best bet, best week for BH and then see where his net worth and price of BH sits. My assumption is that while he has made a bunch of good plays, his billions can be attributed to one or two deals that had meteoric returns.

 

[VikingsGuy]

positive net worth is priceless

Proper use of debt increases your net worth as you are using it for assets and not toys or daily expenses.

In the end, fear of debt isn’t much different than “scary black guns” or “demon rum”. Some people shouldn’t have any of the three, but for most it is not worth having a “religion” over.

 

[cgasner1]

I disagree. They would make money sure, but bezos and gates are as rich as they are because they had one in a generation opportunities and went all in.

I bet if they lived another 100 lifetimes they would never be billionaires again.

It would be interesting to see what buffets single best bet, best week for BH and then see where his net worth and price of BH sits. My assumption is that while he has made a bunch of good plays, his billions can be attributed to one or two deals that had meteoric returns.

I heard some thing that buffet bought into coke with a pile of cash and the next day raised the price of coke by a penny. He made his money seeing value in things. You’re right about the generation and going all in for bezos. Buffet is an entire different kind of wealth. I have no doubt a guy like him would make it back.

 

[BigHornRam]

Proper use of debt increases your net worth as you are using it for assets and not toys or daily expenses.

In the end, fear of debt isn’t much different than “scary black guns” or “demon rum”. Some people shouldn’t have any of the three, but for most it is not worth having a “religion” over.

I've had debt and used it wisely. Now I don't, and don't need to get in debt anymore. It's a good feeling.

 

[VikingsGuy]

I’ve wondered if Ramsey could do it again. If he didn’t have his net worth and wasn’t peddling his current business model. Do you think he could become rich again following his practices. I remember reading somewhere that if you redistribute all the wealth in this country evenly the rich people would be rich again in under a decade. It’s how they are wired they will find a way to make it back

My job has given me the opportunity to work directly with a lot of folks trying to be rich entrepreneurs. For every one that makes it 100 don’t and there is not a clear difference in IQ, work ethic or business acumen between the winners and losers. It is simply post hoc survivorship bias that has us celebrate the few.

 

[Treeshark]

My job has given me the opportunity to work directly with a lot of folks trying to be rich entrepreneurs

Mine has too, and my perspective mirrors yours.

Great ideas and work ethic are key ingredients of course, but at some point there is almost always that “big swing” moment where there is a very real chance of epic failure. The true big dogs had their number called at just the right moment in time, and a lot of times it’s not much more than being prepared to seize upon a lucky break.

 

[SAJ-99]

I’ve wondered if Ramsey could do it again. If he didn’t have his net worth and wasn’t peddling his current business model. Do you think he could become rich again following his practices. I remember reading somewhere that if you redistribute all the wealth in this country evenly the rich people would be rich again in under a decade. It’s how they are wired they will find a way to make it back

Interesting thought exercise. As @VikingsGuy points out, a lot of business, and life in general, is luck - good and bad. Charlatan succeed because they key in on people fears and aspirations. Not saying Ramsey is a complete fraud or anything like that, just that he is a self-proclaimed expert (uncertified and unlicensed) who people believe because he learns enough about something to create an informed opinion and shares it with others. This has become easier with the amount of data on the internet. That said, people don't change. They have the same fears and dreams and they would rather someone else do the hard stuff for them. The vast majority are followers. It's in our DNA. These facts support the idea of him replicating the success. My one question, would he choose to go thru bankruptcy again and gain that "experience" that be based his belief system on?

 

[SAJ-99]

I couldn’t agree more, that’s the part of the equation that isn’t being measured in math calculating what spread you can make in interest. I can’t wait for the house to be paid off in about 5 years

The peace of mind is different for everyone. Paying off your debt doesn't change your net worth. You are simply transferring an asset (cash) to reduce a liability (mortgage). The change in net worth came from working and earning the cash.
If I have a $200,000 mortgage at 3% and have $200,000 in cash (or assets easily convertible to cash) that is earning 5%, throwing away that 2% would drive me crazy. My wife is very much of the other anti-debt view. I point out to her that a house is an illiquid asset. If liquid assets are earning more than the illiquid asset is costing, we win by making money on the positive net and by maintaining flexibility in the liquidity.

 

[Nick87]

Regardless winning is winning, like @TOGIE said the rest is dick measuring. There is no one size fits all.

 

[ignorethefringes]

The peace of mind is different for everyone. Paying off your debt doesn't change your net worth. You are simply transferring an asset (cash) to reduce a liability (mortgage). The change in net worth came from working and earning the cash.
If I have a $200,000 mortgage at 3% and have $200,000 in cash (or assets easily convertible to cash) that is earning 5%, throwing away that 2% would drive me crazy. My wife is very much of the other anti-debt view. I point out to her that a house is an illiquid asset. If liquid assets are earning more than the illiquid asset is costing, we win by making money on the positive net and by maintaining flexibility in the liquidity.

Which makes things different for people getting a 7% mortgage today. For them it might make most sense to get that mortgage paid off ASAP.

 

[VikingsGuy]

Regardless winning is winning, like @TOGIE said the rest is dick measuring. There is no one size fits all.

And like has also been said, some will lose instead of "winning" and that is the difference between having a d*ck to measure and being d*ckless. And no one size fits all is exactly the point of those of us who question youtube influecers tendency to sell the "only way".

 

[williaada]

The peace of mind is different for everyone. Paying off your debt doesn't change your net worth. You are simply transferring an asset (cash) to reduce a liability (mortgage). The change in net worth came from working and earning the cash.
If I have a $200,000 mortgage at 3% and have $200,000 in cash (or assets easily convertible to cash) that is earning 5%, throwing away that 2% would drive me crazy. My wife is very much of the other anti-debt view. I point out to her that a house is an illiquid asset. If liquid assets are earning more than the illiquid asset is costing, we win by making money on the positive net and by maintaining flexibility in the liquidity.

Math says you are right on the additional funds earning more, but as someone who has done both the 4k over the course of a year does not really factor into most people’s lives at the end of the day. Having the cash flow from not paying on a mortgage is even better.

 

[Nick87]

And like has also been said, some will lose instead of "winning"

I dont believe in "only way" for anything in life. It's still dick measuring since everyone's piece of mind has a different price tag. Try flipping the ruler the other way to the mm side for greater satisfaction.

 

[Nick87]

youtube influecers

Scary part about that is regardless, what someone is peddling on youtube or whatever no matter how wrong they may be someone is going to take there advice whether it's ten or 10,000 people.