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So, Dave Ramsey....on car buying....

quicksparks said:
You have paraphrased Dave's advise mostly incorrectly.

His baby steps are triage, and they focus on fixing the biggest problem first: the person's behavior. Completing the first few baby steps -- becoming debt-free except for your mortgage -- should take you 6 months to 2 years, depending on your income and how much debt you have. That amount of time is insignificant in the grand scheme of things, so it's not the end of the world to drive whatever car you can afford to pay cash for and to miss out on investing for that amount of time, given the huge upside at the end of it, which is to use your whole disposable income for building wealth. Not to mention that in the process of learning to budget and stop borrowing, people improve themselves in other ways as well and often end up with better paying jobs by the time they're done becoming debt free.
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A lot of presumptions here are just not based in reality. Paying off all loans in 6 months to 2 years? If you have enough income, not a problem. How exactly is, say, a teacher, with the student loans from getting a masters degree, and a starting salary at like 40-50k, supposed to do that. The only people this advice would help with are people with relatively small amounts of debt, and enough income that they are not basically living month to month.

Dave doesn't advocate renting forever. He wants people to get into a mortgage and effectively "lock in their rent" since rents always go up. He just doesn't want the mortgage to become an anchor around your neck. It should be something you can comfortably afford so you don't end up foreclosing if you lose your job for a few months. It should be something you can realistically pay off well within your lifetime so you don't have to sell your house to retire. Plus, what if it doesn't appreciate like you think it should? That's called putting all your eggs in one basket.
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His advice was that a mortgage should be only 20% of net income, and also to go for shorter loan periods. It's fine advice for people that can afford it, but in many areas homes that would allow for that kind of a loan don't even exist. The cost has gone up. People are still better off going with a loan that is 33% of their net income, and/or a 30 year term. His advice is just completely unrealistic for most people.

This also could cause a lot of problems with the housing market. the supply of inexpensive homes is already very thin in many housing markets. Just as an example, up here in the greater Seattle area, last year I put a bid for a house that was marketed at $340k, and worth about that. My bid had an extension to $380k, 40k over asking. I was outbid by an additional 40k, meaning the house went for 80k, just under 24% over asking. A coworker of mine just saw a similarly lower cost house he bid on, which needed to be completely refloored and repainted (15k worth of work) go for 100k above asking.

Ramsey is basically saying everyone except the exceptionally rich ought to be going for what amounts to maybe 10% of available homes at the bottom of the market, and you end up with a situation where the prices get gauged up, and the people who can afford to escalate excessively pay about as much as they would have if they went up market a bit anyway.

Before you say that supply and demand for these less expensive homes will eventually even out, that doesn't happen, developers will not build new lower cost homes if they aren't forced to, the profit motives overwhelmingly favor selling more expensive 'luxury' homes. When people like Ramsey just blame individuals for not living within their means, it gives cover for developers to continue to ignore the shortage they are knowingly creating.

Dave has no problem with $70k luxury cars -- for people who can afford them. If reliable transportation is all you need, he tells people daily to buy a $12k used Camry with cash. And, you should be saving the money ahead of time for when it comes time to replacing that Camry, so you can buy another car wihtout borrowing. This all comes after the 6-24 months of driving a clunker that could break down at any time, and after you've saved enough cash that you can fix the car if it does (which is "baby step" number 1 BTW).
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Paying $12k in cash for a car is still outside of the realm of possibility for many people, just as the mortgage at only 20% of net take home, and paying off all debts in only 6 months to 2 years is. Again, this goal only really fits with a small slice of people who already have good incomes, and are just really dumb with their money.

The main thing you got right in your assessment is that he tells people not to go into debt for college. Dave is not telling people, "College isn't worth it, don't do it unless you can pay cash for it." He is telling them, "Get a degree in something marketable, don't spend out the wazoo for the name on the front gate, and pay for it as you go by doing your breadth requirements at JC and transferring to a state school."
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Again, even following that advice, it is no longer possible for people to pay for college with the part time, at or near minimum wage jobs they will probably be able to find as college students. Also, there is value to the country for having people educated in something other than the pretty narrow selection of options that are 'marketable'. That will lead to a lot of people getting educated in things they might not really feel any passion for, and a populace that is severely undereducated on a lot of topics that are not deemed 'marketable'. I think that the country is made better by having philosophers, historians, sociologists, and the like. Probably more so than we are made better by getting another MBA douche or lawyer.
 
Don’t you think the cheap money (easy loans) has been a factor in inflating prices of cars, homes, and college degrees?
 
There would be far less demand for expensive cars and homes if they weren’t so easy to pay for with debt. Mfrs would respond by making more of the affordable variety.

Same goes for college degrees.
 
easter bunny said:
You want to throw out an example or two of these stable high yield investments? Because I'll happily take something 'stable' that outperforms the total market. The last decade has had two major crashes, so simply looking at a 1 year or 10 year avg doesn't tell the whole story.

Looking at the annualized average returns of these benchmark indexes for the 20 years ending June 30, 2019 shows:
S&P 500: 5.90%
Dow Jones Industrial Average: 7.03%
Russell 2000: 7.70%
MSCI EAFE: 4.00%

https://www.wealthsimple.com/en-us/learn/average-stock-market-return#stock_market_return_historically

But I agree that using cash would be dumb because car loans for people who hav ethe cash are dirt cheap and you still come out ahead leaving it invested.
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My overflow cash (after retirement and expenses with a fully/over funded emergency account) is going to a crypto bank that pays 10.5% for holding stable coin. It's not invested in a project, it's basically a high yield savings account that pays way more than a traditional bank.

/boomer financial advice flame suit on


Happy to talk to anyone interested, PM me about it.
 
ScarySpikes said:
Paying $12k in cash for a car is still outside of the realm of possibility for many people, just as the mortgage at only 20% of net take home, and paying off all debts in only 6 months to 2 years is. Again, this goal only really fits with a small slice of people who already have good incomes, and are just really dumb with their money.
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Sad, but true. The average savings account is $3,500.
https://www.fool.com/the-ascent/research/average-savings-account-balance/

And from the Wall Street Journal today: Since there is a paywall, I'll give you a taste.https://www.wsj.com/articles/risky-...car-payments-11617615001?mod=itp_wsj&ru=yahoo

"A greater share of people with low credit scores has been falling behind on their car payments in recent months, a sign of stress among consumers whose finances have been hit hard by the pandemic.

Some 10.9% of subprime borrowers with outstanding auto loans or leases were more than 60 days past due in February, up from 10.7% in January and 8.7% a year prior, according to credit-reporting firm TransUnion. It marked the sixth consecutive month-over-month increase and the highest level in monthly data going back to January 2019.

More than 9% of subprime auto borrowers were more than 60 days past due in the fourth quarter, the highest quarterly figure in data going back to 2005.

The missed payments are increasing in what has otherwise been a period of relatively low consumer delinquencies, with stimulus payments, unemployment benefits and other measures keeping many borrowers afloat. The rising subprime delinquencies point to an uneven economic recovery and a deep divergence between those who can navigate the coronavirus downturn and those who can’t.

“We are seeing the separation between the consumers who are back on their feet and those who aren’t,” said Satyan Merchant, head of the auto-finance business at TransUnion.

Car loans are a key indicator of how riskier borrowers are faring. The loans represent the biggest monthly debt payment for many subprime borrowers, who often don’t have mortgages or college debt. Many work in restaurants, hotels and bars that have been hurt badly by Covid-19."

Basically, Dave is advocating that most of us drive clunkers, if we have any debt at all.

Realize, however, that Dave broadcasts from Tennessee, I think, and the realities here in California's coastal areas simply do not apply to much of his advice. He's out of touch with the realities on the ground here. He does not appreciate how expensive it is to live here.:wow
 
quicksparks said:
Don’t you think the cheap money (easy loans) has been a factor in inflating prices of cars, homes, and college degrees?
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There is no question that this is happening. If there is a saving grace, it is that home lenders are no longer doing "liar" loans as in the last real estate bust.

But there is a bubble, and I fully expect it to burst.: |
 
mrmarklin said:
There is no question that this is happening. If there is a saving grace, it is that home lenders are no longer doing "liar" loans as in the last real estate bust.

But there is a bubble, and I fully expect it to burst.: |
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I think, and hope, there will be more a student loan bubble burst. Read awhile back many of these loans are getting deferred and will eventually crumble.

I dont see housing bubbly burst because lending and qualifying is much more strict.
 
Dubbington said:
I think, and hope, there will be more a student loan bubble burst. Read awhile back many of these loans are getting deferred and will eventually crumble.

I dont see housing bubbly burst because lending and qualifying is much more strict.
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There was a law change under Bush (I think), and Student debt can no longer be discharged in bankruptcy. It will follow you your whole life.:thumbdown
 
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Any feature on a vehicle that does not enhance its ability to do its job is a waste of money.

Most people don't care what you drive, how it looks, how fast it could go, et cetera.

Madison Avenue has kinda deranged people into believing their lies. It's a pity.

.
 
quicksparks said:
Don’t you think the cheap money (easy loans) has been a factor in inflating prices of cars, homes, and college degrees?
Click to expand...

quicksparks said:
There would be far less demand for expensive cars and homes if they weren’t so easy to pay for with debt. Mfrs would respond by making more of the affordable variety.

Same goes for college degrees.
Click to expand...

I think that you are getting the order of things wrong. Wages, normalized for inflation, have remained just about stagnant for a long time, benefits packages have actually been getting worse. Most major expenses, in contrast, have grown well above the rate of inflation for a while now. Homes and education are some of the worst offenders. Average car prices have also beaten out inflation, though if you look at the cheapest cars on the market, they are a lot closer to normalizing with inflation.

So, where previously someone could depend on a job covering a whole bunch of things, full medical insurance coverage including optical and dental, sometimes even company cars and pensions, now a good benefit package probably has 80% medical insurance coverage, and a 401k matching program. Where previously someone would have a lot of decent choices for housing that they could afford on a 10 or 15 year loan, now they have to fight for any reasonably priced home that they can afford with a 30 year loans. Where previously someone could actually save up for a year or 2 to pay cash for a reasonably priced, new car, now they may spend that long saving up for a down payment, for a car that they can only budget it with a 5 or 6 year loan. Where previously a student could easily afford to pay their full college tuition at a good, in state public university, along with costs for food, housing, etc. (some colleges were actually completely free for in state students) now either you have parents who had enough foresight to save like 100k+ for tuition, or you go into debt that could take decades to pay off.

Costs are out of control, wages are stagnant, and cheap debt is a bandaid that is allowing things to seem almost functional. Dave Ramsey shifts the blame onto individuals for all of these systemic problems, and overcharges for advice that will only help a narrow subsection of people and could actually harm many more.
 
I think this is a case of victim mentality vs taking ownership. You act like Dave’s advice is accessible only to those who pay him. You want to portray him as a charlatan. Attending his seminars or buying his books is totally optional. You read everything on his website for free. One can listen to his radio show for free.

As for “systemic __________,” phrase of the year and I’m sick of hearing it. We did not arrive at the situation we’re in out of the blue. Decades of consumer habits played just as big a role in shaping the current conditions as “the man.”
 
Eldritch said:
FU, my $120k Art History degree with a specialization in Indigenous Trash Pile Observations has clearly made me the best Barrista Starbucks has ever known. College Debt Relief is a human right!!! :x
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:laughing

I came **this** close to spewing water out of my nose.

MysterYvil said:
Any feature on a vehicle that does not enhance its ability to do its job is a waste of money.

Most people don't care what you drive, how it looks, how fast it could go, et cetera.

Madison Avenue has kinda deranged people into believing their lies. It's a pity.

.
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You can take my heated seats from my cold dead hands! :x
 
quicksparks said:
I think this is a case of victim mentality vs taking ownership. You act like Dave’s advice is accessible only to those who pay him. You want to portray him as a charlatan. Attending his seminars or buying his books is totally optional. You read everything on his website for free. One can listen to his radio show for free.

As for “systemic __________,” phrase of the year and I’m sick of hearing it. We did not arrive at the situation we’re in out of the blue. Decades of consumer habits played just as big a role in shaping the current conditions as “the man.”
Click to expand...

You are right about one thing, The situation we are in is due to decades of bad decisions. Right now the same people who made those bad decisions are desperately trying to cling to wealth and power, standing in the way of their kids and grandkids that want to fix things.
 
MysterYvil said:
Any feature on a vehicle that does not enhance its ability to do its job is a waste of money.

Most people don't care what you drive, how it looks, how fast it could go, et cetera.

Madison Avenue has kinda deranged people into believing their lies. It's a pity.

.
Click to expand...

I’d love to see what car this guy drives.
 
ScarySpikes said:
I think that you are getting the order of things wrong. Wages, normalized for inflation, have remained just about stagnant for a long time, benefits packages have actually been getting worse. Most major expenses, in contrast, have grown well above the rate of inflation for a while now. Homes and education are some of the worst offenders. Average car prices have also beaten out inflation, though if you look at the cheapest cars on the market, they are a lot closer to normalizing with inflation.

So, where previously someone could depend on a job covering a whole bunch of things, full medical insurance coverage including optical and dental, sometimes even company cars and pensions, now a good benefit package probably has 80% medical insurance coverage, and a 401k matching program. Where previously someone would have a lot of decent choices for housing that they could afford on a 10 or 15 year loan, now they have to fight for any reasonably priced home that they can afford with a 30 year loans. Where previously someone could actually save up for a year or 2 to pay cash for a reasonably priced, new car, now they may spend that long saving up for a down payment, for a car that they can only budget it with a 5 or 6 year loan. Where previously a student could easily afford to pay their full college tuition at a good, in state public university, along with costs for food, housing, etc. (some colleges were actually completely free for in state students) now either you have parents who had enough foresight to save like 100k+ for tuition, or you go into debt that could take decades to pay off.

Costs are out of control, wages are stagnant, and cheap debt is a bandaid that is allowing things to seem almost functional. Dave Ramsey shifts the blame onto individuals for all of these systemic problems, and overcharges for advice that will only help a narrow subsection of people and could actually harm many more.
Click to expand...

Typical leftist crap that Dave actually gives advice on how to avoid. If you don't fucking listen to him then just shut the hell up because you sound financially illiterate. I'll comment on the college scenario because it fits perfectly with Dave's advice. You CAN go to an in state school without any debt. All it takes is planning.
SJSU tuition is still only 8k a year, with fees. You can afford that working a minimum wage job in CA. Add a few grand for books, and pick a major that actually has value in the real world and you're golden. Now if you want that fancy dorm and expensive food options, that's all on you. But you can graduate from a CSU for 40k. The only reason the costs are out of control are people just sign that FAFSA form that last semester of high school where nobody has ever taught them anything about personal finance. Government involvement is what caused the rapid rise in student loans in the first place. Make it easy to get but nobody ever tells you what happens when you pick underwater basket weaving for a major.
 
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ScarySpikes said:
You are right about one thing, The situation we are in is due to decades of bad decisions. Right now the same people who made those bad decisions are desperately trying to cling to wealth and power, standing in the way of their kids and grandkids that want to fix things.
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And your taking on more debt is fixing it how?
 
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