What are your thoughts on Dave Ramsey's Total Money Makeover

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AtlantaFamily-2013
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What are your thoughts on Dave Ramsey's Total Money Makeover

Post by AtlantaFamily-2013 » Mon Apr 22, 2013 10:11 am

My wife and I are really working on cleaning up and taking control of our finances. We have been listening to Dave Ramsey and thinking about trying his program. Just wanted to hear what you all thought about it or if any have tried it? Any help would be appreciated. Thanks!

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by dhodson » Mon Apr 22, 2013 10:21 am

in my view, R is good for helping to motivate people out of debt especially the psychology of it. for instance he seems to recommend paying off the smallest credit card 1st even if that isnt the one with the higher interest rate. Math wise that doesnt make sense but psychology wise it can help motivate you to keep paying off more debt. If you need motivational help then i think you will find his plan useful.

i wouldnt recommend him for actually investing advice. He seems to quote higher returns than are realistic and pushes towards actively managed mutual funds. He also seems to push towards companies (especially in regards to term insurance) that he has an association with and that may not be best for you.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by JupiterJones » Mon Apr 22, 2013 10:40 am

I'm with dhodson. If you struggle with debt, building savings, and just generally getting yourself on solid financial ground, then I think Dave's TMM is a fantastic plan. It would be my recommendation to just about anybody for that purpose.

His basic get-out-of-debt plan is not without its controversies, but I tend to side with him on them. I think it's perfectly ok to temporarily give up contributing to a 401k plan in the name of "gazelle intensity", for example. And I do think his "snowball" method of paying off debts in small-to-large balance order is a good way to go. These are things that might not be mathematically efficient, but they make a lot of sense from a behavioral standpoint. The trade-off is typically worth it.

But yeah, come back here when you get to Baby Step Four. Ramsey's advice at that point is a lot tougher to agree with.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by M1garand30064 » Mon Apr 22, 2013 10:44 am

dhodson wrote:in my view, R is good for helping to motivate people out of debt especially the psychology of it. for instance he seems to recommend paying off the smallest credit card 1st even if that isnt the one with the higher interest rate. Math wise that doesnt make sense but psychology wise it can help motivate you to keep paying off more debt. If you need motivational help then i think you will find his plan useful.

i wouldnt recommend him for actually investing advice. He seems to quote higher returns than are realistic and pushes towards actively managed mutual funds. He also seems to push towards companies (especially in regards to term insurance) that he has an association with and that may not be best for you.


This is my thought as well. Read the "Total Money Makeover" to get out of debt, then read "Boglehead's Guide to Investing" after you've accomplished that.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by ThePrune » Mon Apr 22, 2013 12:43 pm

+1 to all previous comments.

I have regularly facilitated Dave Ramsey's Financial Peace University class at my church. I use his approach to help people get out of debt. But his retirement investing advice (at least in the pre-2012 videos) was not very good.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by SkolVikes7 » Mon Apr 22, 2013 12:47 pm

His plan changed our lives.. The Boglehead philosophy took over once we were out of debt and had a solid footing.. His investing advice is lacking.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by mptfan » Mon Apr 22, 2013 1:00 pm

I agree with what has already been said... Dave Ramsey is excellent at getting you out of debt and controlling your spending, and for that purpose, his course is well worth it. However, for investing advice, he falls short, and you should get the Bogleheads Guide to Investing, and the Guide to Retirement Planning.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by carolinaman » Mon Apr 22, 2013 1:34 pm

Dave Ramsay has a great program that has helped many people get out of debt and handle their finances and household budget very well. I listen to his program often and am amazed at the many success stories there are of people hopelessly in debt who have followed his plan and got out of debt. I highly recommend it for anyone who has issues or the need for a money makeover. I agree with the criticism of his investment advice but this is really secondary at this point. First things first. Focus on getting your finances under control and wipe out your debt. Best wishes.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by Tortoise » Mon Apr 22, 2013 1:56 pm

I was listening to his show just last week and he started talking about retirement. He said that an 8% withdrawal rate would work in perpetuity because "the market" had returned over 11% per annum since 1926. :shock:

As others have said, his ideas for reducing debt are sound. His investment ideas are not.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by bungalow10 » Mon Apr 22, 2013 2:15 pm

SkolVikes7 wrote:His plan changed our lives.. The Boglehead philosophy took over once we were out of debt and had a solid footing.. His investing advice is lacking.


+1

We found ourselves rather suddenly with a lot of housing-bubble related debt, a toddler and a new baby, and my DH out of a job. We managed to pay off $110k+ in about two years. We got a lot of motivation from Dave's podcast. I had always been a saver and wasn't able to bring myself to cut my 401k contributions all the way down (kept the match), but went gazelle in all other areas.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by stemikger » Mon Apr 22, 2013 4:43 pm

AtlantaFamily-2013 wrote:My wife and I are really working on cleaning up and taking control of our finances. We have been listening to Dave Ramsey and thinking about trying his program. Just wanted to hear what you all thought about it or if any have tried it? Any help would be appreciated. Thanks!


I love Dave Ramsey for motivation and getting out of debt but the plan that worked better for me was The Automatic Millionaire by David Bach. It is a very similar plan but much more user friendly. And although very similar there are some critical differences between the two plans. One is The Automatic Millionaire does not have you stop retirement. In fact that is the most important part of the plan. The second biggest differences are The Automatic Millionaire plan does not believe in budgeting. It compares a strict budget with a strict diet. Not many can maintain that discipline for very long.

By following the Automatic Millionaire I completed all of The Baby Steps without budgeting and never stopping retirement.

After this great book David Bach seemed to pump out books just for the money and there is no need to buy any of his other books, but IMHO The Automatic Millionaire is one of the best personal finance books on the market.

P.S. The Automatic Millionaire gives the same advice when it comes to investing as a Boglehead would.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by starsfan18 » Mon Apr 22, 2013 5:03 pm

SkolVikes7 wrote:His plan changed our lives.. The Boglehead philosophy took over once we were out of debt and had a solid footing.. His investing advice is lacking.


+1

We loosely followed the TMMO to get out of debt, all the way to Baby Step 7 - home is owned free-and-clear, invest, build wealth, and give to charity. We do not have any children so saving for kids' college is not something we had to worry about.

We even worked with one of Dave's Investing ELPs for a brief time. I was uncomfortable with the load funds that they were pushing us towards. It was during this time that I read an article on Motley Fool about the power of index investing. I used some of the points in the article to protest the ELP's plan for us, and we parted ways shortly thereafter. In the interest of full disclosure, we did get some good advice from the ELP in the area of estate planning, insurance, and yes, even investing (a little). The ELP wanted us to hold stocks and bonds, which is in contradiction to Dave's investing advice. This, ironically, was one of the things I was unhappy with the ELP about at the time - I expected us to follow Dave's 100% stocks in four asset categories plan. Of course, as a Boglehead, I know now the importance of bonds in a portfolio.

Sometime after our initial fee-based engagement with the ELP ended, I was reading a thread on www.early-retirement.org about whether financial planners were worthwhile. A poster suggested that the OP of that thread come to www.bogleheads.org and figure out how to invest for themselves. That's how I discovered the Bogleheads and the rest is (recent) history. I'm really, really glad I happened to read that thread, because this philosophy makes so much more sense to me than any of the others I've encountered. Nobody's trying to outsmart the market. It's just so elegant in its simplicity.

In short, yes, I do think Dave's get-out-of-debt advice is great, and I think his general attitudes and advice about relationships, business, budgeting/spending, debt and even some of the investing advice have a lot of merit to them. I can't say I agree with the quoted expected returns ("12% from a good growth-stock mutual fund") or asset allocations (100% stocks), however.

I agree with the advice to get past Baby Step 4 and come back to Bogleheads (the message board or the reading list) to figure out how to build wealth.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by Random Musings » Mon Apr 22, 2013 7:54 pm

Take control of your finances and get out of debt. Although, to be frank, one should pay off the highest interest debt first. Or take advantage of refi opportunities to lower payment streams. I'm not arguing that Dave's approach is to KISS to motivate via eliminating some debt, but if you understand that it isn't the most cost effective way and you are focused, his way isn't the best way to do it financially.

However, don't let Dave Ramsey or his advisor network take control of your money.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by mike143 » Mon Apr 22, 2013 8:09 pm

Random Musings wrote:Take control of your finances and get out of debt. Although, to be frank, one should pay off the highest interest debt first. Or take advantage of refi opportunities to lower payment streams. I'm not arguing that Dave's approach is to KISS to motivate via eliminating some debt, but if you understand that it isn't the most cost effective way and you are focused, his way isn't the best way to do it financially.

My logic would not allow me to follow his debt payoff strategy. I refinanced everything I could, paid extra principle on the highest interest loans, paid down debt with bonuses. Today I am debt free besides mortgage and will max my 401k this year and also did a Roth IRA for 2012 and will do the same for 2013. Little by little it becomes addicting. Now I am working on making all the money back from the credit card companies through cash back rewards. Never again will I pay credit card Interest.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by Toons » Mon Apr 22, 2013 8:37 pm

M1garand30064 wrote:
dhodson wrote:in my view, R is good for helping to motivate people out of debt especially the psychology of it. for instance he seems to recommend paying off the smallest credit card 1st even if that isnt the one with the higher interest rate. Math wise that doesnt make sense but psychology wise it can help motivate you to keep paying off more debt. If you need motivational help then i think you will find his plan useful.

i wouldnt recommend him for actually investing advice. He seems to quote higher returns than are realistic and pushes towards actively managed mutual funds. He also seems to push towards companies (especially in regards to term insurance) that he has an association with and that may not be best for you.


This is my thought as well. Read the "Total Money Makeover" to get out of debt, then read "Boglehead's Guide to Investing" after you've accomplished that.


+5 :happy
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by JupiterJones » Tue Apr 23, 2013 1:15 pm

starsfan18 wrote:and even some of the investing advice have a lot of merit to them.


That does tend to get lost in all the (justified) harping about Dave's more questionable advice. There are several areas where his investing advice would get nods of agreement from most Bogleheads.

For example, Dave does not recommend gold and other similar commodities. He is pro-mutual-fund and is against holding single stocks except perhaps within a "play money" section of your portfolio. He sees investing in the stock market as a long-term, buy-and-hold game, and is strongly against market timing. He frequently advised people to essentially turn out the noise and "stay the course" during the recent recession.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by bottlecap » Tue Apr 23, 2013 2:02 pm

Dave Ramsey's no holds barred get out of debt advice = fantastic.

Dave Ramsey's investing advice = simplistic (even for a Boglehead), unrealistic and risky.

People might have some minor quibbles with some of his get out of debt advice, but this about sums up the way most people on this board view him.

Good luck getting out of debt!

JT

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by ivesjl » Tue Apr 23, 2013 3:12 pm

mike143 wrote:My logic would not allow me to follow his debt payoff strategy. I refinanced everything I could, paid extra principle on the highest interest loans, paid down debt with bonuses.


This works mathematically, but as Dave frequently points out, most people aren't in debt because of a math problem. Most people get into debt because of behavioral problems (e.g., spending more than they make, not having an emergency fund, etc.). The real power behind Dave Ramsey's advice is on the behavioral side of the equation.

TMMO and FPU teach you how to handle money as a family, and it provides a common language to have the discussion; my wife and I found it life-changing. As others have suggested, I'd recommend Dave Ramsey for getting out of debt; once you hit Baby Step 4 (invest 15% pre-tax income for retirement), pick up The Boglehead Guide to Investing.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by enderland » Tue Apr 23, 2013 5:53 pm

ivesjl wrote:
mike143 wrote:My logic would not allow me to follow his debt payoff strategy. I refinanced everything I could, paid extra principle on the highest interest loans, paid down debt with bonuses.


This works mathematically, but as Dave frequently points out, most people aren't in debt because of a math problem. Most people get into debt because of behavioral problems (e.g., spending more than they make, not having an emergency fund, etc.). The real power behind Dave Ramsey's advice is on the behavioral side of the equation


QFT. I said this previously

enderland wrote:Not everyone in the world can simply build a spreadsheet and make their decisions based on what rationally follows. In fact, I'd argue the majority of people do not (or cannot) approach finances like this, and having a strategy which is desirable for them to actually do stuff is what matters.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by SurfCityBill » Tue Apr 23, 2013 6:48 pm

As said by many, Ramsey is very good at providing advice to eliminate debt. This is his specialty, as is managing a small business and purchasing income real estate. However, be very cautious about his investment advice. He completely frowns on bonds and doesn't have any whether in a mutual fund or directly. Having the vast portion of his liquid holdings in growth stock mutual funds is a recipe for disaster. My opinion of course.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by SteveB3005 » Tue Apr 23, 2013 7:14 pm

OP, if this seems like an echo chamber, there's good reason. This doesn't happen often.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by mike143 » Tue Apr 23, 2013 9:03 pm

ivesjl wrote:
mike143 wrote:My logic would not allow me to follow his debt payoff strategy. I refinanced everything I could, paid extra principle on the highest interest loans, paid down debt with bonuses.

This works mathematically, but as Dave frequently points out, most people aren't in debt because of a math problem. Most people get into debt because of behavioral problems (e.g., spending more than they make, not having an emergency fund, etc.). The real power behind Dave Ramsey's advice is on the behavioral side of the equation.

My problem was that instead of taking out student loans I charged my expenses when they exceeded my income. I could have tightened my expenses more than I did but not enough to avoid some type of lending. Hind sight is 20/20 and if I could do it again I would have sought out lower cost lending, most likely in the form of student loans.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by MP173 » Wed Apr 24, 2013 6:43 am

Echo chamber here.

My take on DR is slightly different. He was available to me on radio back around 2004 and I listened to him for a short period of time, as did a young college grad who I was mentoring (lots of drive time in the car). Even tho I only listened for a short period of time, he influenced me to be debt free. The young co-worker has since moved on but we stay in touch. He now is married with two young children and has a very, very high paying sales job in medical devices. He has stated that he lives well below his income level and DR was an influence.

Investing advice from DR? No. Someone should get to him and explain this stuff to him. He is too valuable at debt reduction to be giving faulty advise.

Ed

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by Dulocracy » Wed Apr 24, 2013 12:08 pm

mike143 wrote: Hind sight is 20/20 and if I could do it again I would have sought out lower cost lending, most likely in the form of student loans.


I hope if you could do it over again, you would also seek to find a way to save money/ reduce costs so as not to need the loans. :wink:
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by ingenue » Thu Apr 25, 2013 7:49 am

I got out of debt with an Excel file to project and track my progress, but I always prioritized payment to the highest interest rate, and used balance transfers (back when you could do them for a $0 or low flat fee) to reduce interest rates overall. There was also a period of about 3 years when I cut up (but didn't cancel) all my credit cards, and wrote down every penny I spent. That impulse gumball isn't as tempting when you know you're going to have to record the $0.25 expense..

Then after I was done getting out of debt, I read Total Money Makeover, just to be a snot. It's good debt reduction advice, but if you have discipline, prioritizing payment to "highest APR" is a less expensive snowball than "smallest balance."

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by guitarguy » Thu Apr 25, 2013 8:29 am

I agree with pretty much everything said here.

I'll add one thing: I didn't agree with his philosophy of liquidating all bank accounts / emergency funds down to $1k to pay off debt.

Personally we're comfortable with 10x that amount saved for an emergency (just our number...others may vary of course). However, we only have student loans and a mortgage for debt. No consumer debt or anything with high interest. If we had that, like many people who jump on DR's philosophies do, maybe his advice to liquidate savings would've made more sense. So...it depends on what your financial picture looks like.

We also didn't stop IRA contributions to eliminate debt. Rather, we chose to split it up. Maxing one Roth IRA and putting about the same amount extra per month on debt makes us sleep well at night. Again though, if we had higher interest rates on our debt, maybe we'd choose differently.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by Dulocracy » Thu Apr 25, 2013 3:17 pm

ingenue wrote:I always prioritized payment to the highest interest rate, and used balance transfers (back when you could do them for a $0 or low flat fee) to reduce interest rates overall.


This is the smart way to do it.

Dave Ramsey's debt reduction plan is not the smartest way to reduce debt. It is, however, one of the most effective. Why? It attacks the weakness many people have: lack of discipline.

Even though paying down the highest interest rate first is the best way to reduce overall debt, many people need the emotional satisfaction of seeing results. Paying the smallest debt gives a sense of accomplishment, provides drive to keep going, and increases the amount that will go to the next debt. This speeds the next satisfaction phase. While the overall debt will take a little longer to pay and more interest will be paid, this method uses psychology to keep people committed to the process. For that reason, it is a great benefit to many who follow it.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by guitarguy » Thu Apr 25, 2013 3:32 pm

Dulocracy wrote:
ingenue wrote:I always prioritized payment to the highest interest rate, and used balance transfers (back when you could do them for a $0 or low flat fee) to reduce interest rates overall.


This is the smart way to do it.

Dave Ramsey's debt reduction plan is not the smartest way to reduce debt. It is, however, one of the most effective. Why? It attacks the weakness many people have: lack of discipline.


Overall I agree with this. Forming the habit and getting disciplined are the hardest factors (for some people).

But, the "debt snowball" also serves the benefit of freeing up cash flow faster, which can be important. We attacked our smallest student loans first even though they had slightly lower interest rates than some others. Granted the rates were all pretty close (2-5%), but we were (and still are) expecting a decrease in income soon due to starting a family and DW going to part time or no time working. Sure, we paid a few extra bucks in interest through the process, but had we had a baby come into the picture at that time, we would've benefited from the extra cash flow. So...keep in mind that there can be other factors in play that may warrant the "smallest loan first" approach.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by entyrii » Thu Apr 25, 2013 3:45 pm

I dunno, call me crotchety, but Dave Ramsey comes off as vaguely sleazy to me, especially when compared to my preferred consumer advocate/personal finance radio personality guru, Clark Howard. Dave makes no bones about making money from his endorsements, classes, books, shows, and all that. That isn't necessarily a bad thing, to make money from something you're good at, but it brings up questions about how he might be compensated in some cases, or whether there might be conflicts of interest in some of his recommendations and ideas. If he motivates you to get out of debt and become financially literate, then good for you. If you agree with the book, by all means buy it and use his ideas to help pay down debt. But he is by no means a Boglehead and really doesn't know what he's talking about when it comes to investing. Personally, I would also be skeptical of paying more than a couple bucks for one of his books. I don't know how much his other classes and seminars cost, but I would not pay for those (especially since his radio show and the resources of many other perfectly respectable financial health gurus is perfectly free). Additionally, when he makes particular product or investment recommendations, I would question how his compensation fits into the picture.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by JupiterJones » Thu Apr 25, 2013 5:04 pm

guitarguy wrote:But, the "debt snowball" also serves the benefit of freeing up cash flow faster, which can be important.


Bingo!

In aviation terms, the debt snowball is like performing a takeoff a the best-rate-of-climb speed.

It might not be fuel-efficient. It might not give you the best groundspeed. But it gives you altitude as quickly as possible, and altitude is vital. It's a "risk buffer" that gives you more options if things go wrong.

Same with cash flow. It can often be worth giving up a bit more in interest payments if it more quickly turns "have to spend it on X" money into "choose to spend it on X". That is, if it creates more "financial altitude" and subsequently more options when things go wrong.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by Clearly_Irrational » Thu Apr 25, 2013 5:42 pm

Random Musings wrote:Although, to be frank, one should pay off the highest interest debt first. Or take advantage of refi opportunities to lower payment streams. I'm not arguing that Dave's approach is to KISS to motivate via eliminating some debt, but if you understand that it isn't the most cost effective way and you are focused, his way isn't the best way to do it financially.


For people who are really in debt I actually suggest you pay off debt in the order that will maximize free cash flow. Not having any surplus and being unable to deal with surprise expenses is more damaging than the mathematical bonus of paying things off in interest rate order.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by White Coat Investor » Fri Apr 26, 2013 9:17 am

JupiterJones wrote:
guitarguy wrote:But, the "debt snowball" also serves the benefit of freeing up cash flow faster, which can be important.


Bingo!

In aviation terms, the debt snowball is like performing a takeoff a the best-rate-of-climb speed.

It might not be fuel-efficient. It might not give you the best groundspeed. But it gives you altitude as quickly as possible, and altitude is vital. It's a "risk buffer" that gives you more options if things go wrong.

Same with cash flow. It can often be worth giving up a bit more in interest payments if it more quickly turns "have to spend it on X" money into "choose to spend it on X". That is, if it creates more "financial altitude" and subsequently more options when things go wrong.


I like that analogy. Thanks for sharing.
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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by allsop » Fri Apr 26, 2013 11:26 am

guitarguy wrote:I'll add one thing: I didn't agree with his philosophy of liquidating all bank accounts / emergency funds down to $1k to pay off debt.


For people with loads of credit cards debts this makes perfect economic sense as credit card interest rates are typically very high and there is always a new credit card to get if one runs out of the $1K. The $1K is to avoid getting new debts.
Last edited by allsop on Fri Apr 26, 2013 8:28 pm, edited 2 times in total.

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Re: What are your thoughts on Dave Ramsey's Total Money Make

Post by starsfan18 » Fri Apr 26, 2013 1:02 pm

JupiterJones wrote:
guitarguy wrote:But, the "debt snowball" also serves the benefit of freeing up cash flow faster, which can be important.


Bingo!

In aviation terms, the debt snowball is like performing a takeoff a the best-rate-of-climb speed.

It might not be fuel-efficient. It might not give you the best groundspeed. But it gives you altitude as quickly as possible, and altitude is vital. It's a "risk buffer" that gives you more options if things go wrong.

Same with cash flow. It can often be worth giving up a bit more in interest payments if it more quickly turns "have to spend it on X" money into "choose to spend it on X". That is, if it creates more "financial altitude" and subsequently more options when things go wrong.


Paying off debt at Vy. I like it.

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