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

Eldritch said:
What if you just pay in cash to outright buy a car you love and keep it for years and years and years and have no particularly big interest in an upgrade?

:dunno
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See my earlier example. A large chunk of cash in a high yield stable investment will earn you much more than taking that out of the market and paying yourself back. But if you're taking mattress cash out then just do you?
 
East Bay Mike said:
Hopefully someone can assist me in my decision making process.

I’m not gonna say what I earn, but I’m thinking of getting a 65-70K car (BMW X3 M40i) and I earn....union construction wages. With no OT I’m making enough to go through with a new car, but with OT (Saturday double time, 10 hour days). Basically I can work OT and easily buy stuff, but OT is never guaranteed, thought it is available very often.

$1,200 rent in my gf’s condo
$380 motorcycle payment for 3 years
No kids
Take relatively frequent trips/vacations
Don’t want to live very old or necessarily retire early
No current car note

Minimal other expenses.

The big question is, if I don’t buy relatively expensive toys/cars for my income, what else would I spend it on? I value performance and want an SUV daily driver. There’s not many good quick SUVs out there.

Since I’m in doubt I will just keep saving my money for a while and see if the excitement wears off.
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Buy politicians instead. :thumbup
 
kingmoochr said:
See my earlier example. A large chunk of cash in a high yield stable investment will earn you much more than taking that out of the market and paying yourself back. But if you're taking mattress cash out then just do you?
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Clearly all those companies selling car loans are run by idiots, and could put the money into "high yield stable investments" instead.

:laughing
 
kingmoochr said:
Maybe not sensible, but not unreasonable. We make less than 200k, max our 401k, have a 4k mo mortgage, and are paying @1k/mo on a 4 year 50k loan on our Audi comfortably. That take home at 200k is in the region of 8k/mo net after retirement deductions...
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People do what they have to do but those sort of payments would keep me up at night. I kinda live as though I could be out of a job tomorrow.
 
rodr said:
Clearly all those companies selling car loans are run by idiots, and could put the money into "high yield stable investments" instead.

:laughing
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No, they're run by people taking your money and investing it for a profit. It's very easy to make 10% returns on an investment over the life of a car loan. Is it a CD? No. There's a risk involved, sure. But we're talking about people buying $50k cars and not using already invested funds to do so. I don't know exactly what point you're making right now.
 
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kingmoochr said:
See my earlier example. A large chunk of cash in a high yield stable investment will earn you much more than taking that out of the market and paying yourself back. But if you're taking mattress cash out then just do you?
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No, it doesn't come from liquidated investments, it comes from a liquid Operating Reserve that I keep funded before allowing any cash flow into Retirement Funding.

I have been burned to death in 2 great recessions. I will not be caught with my pants down again.
 
Blankpage said:
People do what they have to do but those sort of payments would keep me up at night. I kinda live as though I could be out of a job tomorrow.
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Smart move.
Un like.. East Bay Mike...
 
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Eldritch said:
No, it doesn't come from liquidated investments, it comes from a liquid Operating Reserve that I keep funded before allowing any cash flow into Retirement Funding.

I have been burned to death in 2 great recessions. I will not be caught with my pants down again.
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That goes to the root of this thread. Financial advice is highly individualized. I'm 20+ years from retirement. Different moves to be made if you're much closer.

My "operating fund" sits in stable coin (crypto) earning 10.5% at a crypto bank. There's no risk in the value, only in the medium as a whole. My emergency fund sits in an actual bank.
 
East Bay Mike said:
Why is my move not smart? What would you spend your money on?

I might copy you.
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You wanna go 60-70 large on a sport luxury XUV? Probably should make a new thread. Vehicle choices like that make Dave Ramsey’s head hurt.

Of course we’re all going to tell you turbo Busa, but let’s go through the motions anyways shall we?
 
kingmoochr said:
A large chunk of cash in a high yield stable investment will earn you much more than taking that out of the market and paying yourself back.
Click to expand...
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.
 
East Bay Mike said:
Why is my move not smart? What would you spend your money on?

I might copy you.
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Just for one thing.
You said you spend 1200 a month rent now. That situation could change very fast
And to stay in the bay area can you afford 4000 more a month if it does?
And keep your car?
 
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ScarySpikes said:
Borrowing to buy a house is almost always going to be more beneficial than paying the same amount towards rent, and often the amounts for one vs. the other are really not that different. That's not saying people should over spend on the house, but they are better off with the debt than pissing away money on rent, that remains true if the mortgage payment is more than 20% of their net income.

Similarly, for people that depend on having a reliable car, taking on a car loan for a reasonable, reliable vehicle, where everything is under warranty and they don't have the risk of a huge payment for an engine blowing up or something major like that, makes sense. Doesn't mean they should buy a 60k mercedes, but calling people out for buying a Camry or similar is silly.

The most egregious one, however, is probably student loans. To be clear, the student loan system is really bad and predatory, I wish it were better. However even with it's flaws, a higher education is the most reliable way for people to get better income and increase their quality of life long term. Telling people to not go to college if they can't pay for education out of pocket is actively doing harm to them.
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Buying a home usually builds wealth and interest rates are low for that. It's a automatic saving tool that people are usually not disciplined enough to do by themselves.

Buying a car typically does not build wealth and it's more expensive when you lease or borrow.
 
Wife and I took a slight gamble. We chose to rent my townhouse out and then rent a larger home down the street.

We put in several offers with the assumption I'd sell my townhouse I bought 11 years ago, use equity and still help from my father and put 40% down to stay in Danville/San Ramon.

We decided the prices are no longer worth it and keeping my townhouse is better financial decision. THEN this 4 bed, 3 car garage, huge 1/3 acre lot popped up to rent. It's $4,200 in rent which is a lot BUT I'm renting my townhouse out and positive about $1,000 a month. Prices supposed to go up another 8-10% which means another $80k in equity at least. It also forced us to make a decision instead of struggling in a 2/2 townhouse with 2 dogs, 3 cats, and 1000sqft.

I like to move but also also only plan to be here 3 years and the assess the area. Power and gas is more as the house is bigger and older.

Worst case, it will be a wash for a couple years but at least we aren't on each others nuts and the baby has room to grow and actually floors to crawl around on.

Wont be surprised in 3 years we decide to leave the area. Not sure. Wife getting a significant promotion and raise which might change things. I'd like to pull $$ out of my townhouse and buy 1-2 other rentals somewhere.

I have a 2 year window to sell and not get taxed on equity under $500k. My towhnhouse worth $866k and it's hard not to sell and cash out.
 
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ScarySpikes said:
Borrowing to buy a house is almost always going to be more beneficial than paying the same amount towards rent, and often the amounts for one vs. the other are really not that different. That's not saying people should over spend on the house, but they are better off with the debt than pissing away money on rent, that remains true if the mortgage payment is more than 20% of their net income.

Similarly, for people that depend on having a reliable car, taking on a car loan for a reasonable, reliable vehicle, where everything is under warranty and they don't have the risk of a huge payment for an engine blowing up or something major like that, makes sense. Doesn't mean they should buy a 60k mercedes, but calling people out for buying a Camry or similar is silly.

The most egregious one, however, is probably student loans. To be clear, the student loan system is really bad and predatory, I wish it were better. However even with it's flaws, a higher education is the most reliable way for people to get better income and increase their quality of life long term. Telling people to not go to college if they can't pay for education out of pocket is actively doing harm to them.
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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.

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.

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).

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."
 
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.

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.

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).

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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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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