Dave Ramsey

[eldirector]

Yeah. A lot of time I see folks conflate debt, with expenses, and a budget.

Ramsey is mostly about getting out of debt. Once out, how not to get back into it. He dabbles in actual financial advice and money management. Always through the lens of "debt is bad". That is actually really good advice for folks that are otherwise bad about managing their money. It is greatly over-simplified.

I am still annoyed that one never really OWNS anything. Houses, cars, boats, etc... The .gov has to have their cut. But, that is an EXPENSE, not a debt.

 

[CHCRandy]

You two should get together... in an economics class.

It is what it is. One man's debt is another man's expense. Reminds me of my buddy who bought a new truck & skid steer and told me he paid cash for it....by refinancing his home. I guess he can feel better in knowing he has no debt, other than his house which just financed his truck for 15-30 years. Dang it...I forgot, that's not a debt though.

 

[rhino]

It is what it is. One man's debt is another man's expense. Reminds me of my buddy who bought a new truck & skid steer and told me he paid cash for it....by refinancing his home. I guess he can feel better in knowing he has no debt, other than his house which just financed his truck for 15-30 years. Dang it...I forgot, that's not a debt though.

I need to learn how to buy stuff for cash by refinancing other people's homes.

 

[JettaKnight]

It is what it is. One man's debt is another man's expense. Reminds me of my buddy who bought a new truck & skid steer and told me he paid cash for it....by refinancing his home. I guess he can feel better in knowing he has no debt, other than his house which just financed his truck for 15-30 years. Dang it...I forgot, that's not a debt though.

Huh? Why do you keep attempting to conflate two (or more) very clear terms?

If you refinance your mortgage to buy car, you're still taking on more debt - only difference is the collateral, the interest rate, and tax consequences.


Taxes, Insurance, debts, utility bills, grocery expenses ... all circles in a Venn diagram without any intersections.



Utilities - I can flip off the main breaker and voila! no more electric bill.
Groceries - The days of keeping a tab at the general store are long gone.
Taxes - If I don't make money, I don't owe income tax, and when I do, I pay it once. I only pay sales tax when I buy. Property tax? I always have to routinely pay that... a debt can be paid off, property tax can't.
Debts - I owe it, and it's not based on any consumption. It's always hanging over my head until I pay it off, which I can do and then be done with it.

 

[BehindBlueI's]

One man's debt is another man's expense.

Only if one of the men doesn't understand the terms.

 

[CHCRandy]

Huh? Why do you keep attempting to conflate two (or more) very clear terms?

If you refinance your mortgage to buy car, you're still taking on more debt - only difference is the collateral, the interest rate, and tax consequences.


Taxes, Insurance, debts, utility bills, grocery expenses ... all circles in a Venn diagram without any intersections.



Utilities - I can flip off the main breaker and voila! no more electric bill.
Groceries - The days of keeping a tab at the general store are long gone.
Taxes - If I don't make money, I don't owe income tax, and when I do, I pay it once. I only pay sales tax when I buy. Property tax? I always have to routinely pay that... a debt can be paid off, property tax can't.
Debts - I owe it, and it's not based on any consumption. It's always hanging over my head until I pay it off, which I can do and then be done with it.

I understand what you are saying and I do understand debt, expenses, liquidity and net worth. Just you and I have 2 different views of debt free, that's all. I respect your view and understand what you mean, but it still don't change my view on being "debt free". Something as simple as a cell phone can be an expense to you or I (no contract, shut it off), but it could be a debt to the next guy(a contract he is obligated to fulfill). I guess it is just all how you look at it.

Regardless of how hard we work and how well we manage our funds, it can all be gone in a blink of an eye and then it won't matter if it's an expense or debt. Guess we all should just consider ourselves blessed to have what we have, it could always be worse.

 

[Trigger Time]

Yep blessed regardless.
Each person has to choose their own path. Weve all heard it before but .... Opinions are like butt holes, everybody has one. Everyone can choose which rich and successful guys book advice they wanna follow or none at all. Either way in MY (normal never gonna be rich or famous) opinion whether you choose the debt free route or the mortgage or loan route whatever you call it, as long as you pay for your ****, you're doing it right.
It's when people get behind that brings more costs and more compounding problems.

 

[JettaKnight]

I understand what you are saying and I do understand debt, expenses, liquidity and net worth. Just you and I have 2 different views of debt free, that's all. I respect your view and understand what you mean, but it still don't change my view on being "debt free". Something as simple as a cell phone can be an expense to you or I (no contract, shut it off), but it could be a debt to the next guy(a contract he is obligated to fulfill). I guess it is just all how you look at it.

Regardless of how hard we work and how well we manage our funds, it can all be gone in a blink of an eye and then it won't matter if it's an expense or debt. Guess we all should just consider ourselves blessed to have what we have, it could always be worse.

Fair enough.

I'm (a bit of) a vocabulary literalist (see all my rants against four rules), so I get stuck looking at one tree instead of the forest.

But...

Bankers are literalist too, so they look at things the way I do.

You can turn off Netfilx, and it will be boring, but you can do it... you can't stop paying your car payment.

 

[FearAndLoathing]

It is what it is. One man's debt is another man's expense. Reminds me of my buddy who bought a new truck & skid steer and told me he paid cash for it....by refinancing his home. I guess he can feel better in knowing he has no debt, other than his house which just financed his truck for 15-30 years. Dang it...I forgot, that's not a debt though.

That is insanity!!

 

[JettaKnight]

That is insanity!!

How so?



EDIT: Just realized you might be saying that sarcastically. FYI: INGO uses purple text for that to avoid confusion.

 

[Kirk Freeman]

What I know about Ramsey is that he is about living without unsecured debt. Ok, but never talks about what next.

Do not know if he discusses investments and time value of money.

The poor buy expenses.

The middle class buy liabilities.

The rich buy assets.

 

[CampingJosh]

What I know about Ramsey is that he is about living without unsecured debt. Ok, but never talks about what next.

Do not know if he discusses investments and time value of money.

The poor buy expenses.

The middle class buy liabilities.

The rich buy assets.

Yep. The reason to eliminate debt is to free up income so that you can start buying assets. Stock mutual funds and paid-for real estate are his recommendations.

 

[Kirk Freeman]

Yep. The reason to eliminate debt is to free up income so that you can start buying assets. Stock mutual funds and paid-for real estate are his recommendations.

Cool, I feel a lot better about him then. I have only heard him beat the anti-debt drum, nothing about investment.

If I did not have SEPs I would have tax debt.

Buy those assets first, then you can buy the 3-D 401Ks.

 

[OldHoosier]

Haven't read Dave's work. I simply don't buy things if the $$ isn't sitting in the bank. The only exceptions are the house and if we need to replace a vehicle though all the current ones are paid for. We have a half dozen cards all with five figure limits on them but we use one rewards card because it is easier to use than cash or checks and the amazon card (5% off amazon purchases). Cards always get paid off each month. Never have we looked at a purchase and thought "I don't have to pay for that now, I'll pay for it later." IMO that is the key thought process. Also making sure there is some $$ saved away for a new home air conditioner or a transmission rebuild.

Pretty much what I do. I also don't buy anything on impulse that costs over a fairly small amount (well under a hundred) or so unless (1) its needed for a repair or (2) its part of an ongoing project. Everything else I think about for a month or two. if I still want it, I buy it. I buy a lot less than I use to. And I don't start on-going fun projects that are going to cost significant money without pondering them for a while.

 

[OldHoosier]

I just buy everything on my amazon prime card, and get 1% back on everything, 2% or 3% back on other things. I would get 5% back on Amazon purchases, except most of what I buy on Amazon is covered by my 1% back. We've had years where most of Christmas was paid for by the cash back.

But I agree that obsessing over them is an efficient use of one's time.

 

[OldHoosier]

I have learned that when you are a party of one, it's a lot simpler and easier to stick to sound financial principles, avoid debt, spend money you don't have, save a substantial amount, etc.

Once you figure one or more additional person in the mix, unless they have a clone of your brain, it changes everything. I can't imagine how you guys who have kids balance everything. I can't imagine adding even one child to my life, much less several, and be able to provide a decent life for them.

Well, unless I win a big lottery.

I won the big lottery of marrying an extremely thrifty wife, and having thrifty parents that taught me things I didn't put into action until getting married. We don't eat out much, don't carry debt that cost anywhere close to what our retirement accounts are generating, and are in general cheap. Fortunately much of this has worn off on the kids, and the cheapness has allowed my wife to stay at home, which she wanted to do.

I will say that the poorest I ever felt was after my first kid was born. Before that, I figured worse case I could live in a pretty mediocre part of town and deal with it. After the first one was born, I got much cheaper because I wanted to have a big enough buffer that losing my job wouldn't put the kids in a bad place for at least a year.

 

[Pyro]

Single income and 4 kids, 1 in college 2 close and we were completely debt free including the house until January when we moved. Making good headway on the new small mortgage as I must admit I still prefered NO mortgage. I'm still dealing with impulsing too much and honestly although we pat the CCard off every month I think it lends a LOT to the impulse issue .. if I had waited a month in the new CZ Scorpion I'd have been able to pickup one used a lot cheaper than I paid but ... CCard and she's home.

 

[Pyro]

To be fair like OldHoosier I married an extremely thrifty wife who had been through enough bad financial decisions growing up to avoid them at all cost. I'm the one who spends to much. ;-)

 

[trimman83]

I have listened to DR and preached over and over again, to my adult kids, the great value in living within your means and staying debt free. Debt (un-known to me at the time) originally cost me/us our marriage. The marriage had to end to separate finances so I could keep track of all income and expenses and she could no longer take credit debt in my name. As a young family, the debt took $150,000 from our family. I was left with very little after the divorce, but have since paid off all debt, including the house. I have 2 IRA 's, and substantial savings. Had we/I not ended the union, (10 years ago)no telling how far in the hole we would have gone. This all may be just a little off topic, except for me preaching the benefits of staying always within your means and staying debt-free........as DR would say.

 

[Hohn]

What I know about Ramsey is that he is about living without unsecured debt. Ok, but never talks about what next.

Do not know if he discusses investments and time value of money.

The poor buy expenses.

The middle class buy liabilities.

The rich buy assets.

He does, actually. He's not just about avoiding debt, but also about making a sticking to a budget to that you can actually do with your money what you want to do.

For investment and savings, DR pushes real estate and mutual funds pretty much exclusively. I'm not a fan of most mutual funds. I part companies with DR a bit on investing philosophy.


And you are absolutely right about the differences between assets, expenses, and liabilities. The problem is that many people don't know the differences.

A house is an asset. The mortgage is a liability. The taxes are an expense.

Debts are liabilities, not expenses. But they CREATE expenses in the form of payment obligations and interest costs.


I'd say more, but then I'd have to start billing my normal MBA rate, lol.