Author Topic: Dave Ramsey Total Money Makeover (Read 616 times)

Cougar68 · « **Reply #15 on:** January 25, 2004, 11:25:22 AM »

I don't agree Curval. Why hold on to a $300,000 piece of property and borrow $50,000 to finish the apartment? What is so special about being able to hold on to the property? I think where your friends went wrong was letting the remaining $250,000 from the sale just sit around. With that kind of cash they could've set out a 6 month emergency fund and then invested the rest.

To me it just doesn't make sense to go into debt when it just takes a little financial maneuvering to pay cash for something.

Cougar

Curval · « **Reply #16 on:** January 25, 2004, 11:47:27 AM »

Just where are you suggesting the money be invested? Interest rates are incredibly low at present. Don't forget that 5-7% returns on mutual funds can easily turn into 10-20% losses with a down-turn in the markets. The banks are paying less than 1% on balances up to five million dollars here.

6 month emergency fund? Sorry, I am not understanding the purpose of this...where is this fund investing its cash?

Why hold the property? It will increase in value, probably returning (effectively) at least 15% over each of the five years we are talking about.

What manouvering are you talking about? They sold a solid, valuable asset that could be developed by using more of the banks money and using the rental income from the apartments to service the debt.

When all is said and done they would still have the original asset, their loans are all covered and they would then have rental income from the developed piece of land AND the two apartments once the debts are paid.

Also, you need to look at the opportunity cost of their actions. Almost two years have passed while these guys have worked and struggled to do the renovations on the apartments themselves at night and on weekends. Every single month that passes they lose the potential rental income on those units.

strk · « **Reply #17 on:** January 25, 2004, 02:46:32 PM »

I gotta agree with Curval because of the nature of the asset - you can always get a 210-240k loan on a 300k piece of real estate. Finishing the apartment opens up a new income stream and becomes an asset.

The truly smart way would be to pay of the loan early and avoid the interest, if possible. Thay way you have leveraged your investment to the max.

That all being said, the originial point is also correct - we carry far to much personal debt. Tax benefits for mortgage interest notwithstanding, the person who has his house paid off and no consumer debt is in the drivers seat as far as creating wealth is concerned.

This guy reminds me of the wise words of Ben Franklin, who also made the comment that debt is a form of slavery or servitude. Read his words of wisdom here - The Way to Wealth - just as true today as it ever was

http://itech.fgcu.edu/faculty/wohlpart/alra/franklin.htm

Cougar68 · « **Reply #18 on:** January 25, 2004, 03:38:59 PM »

I'm not denying that there are ways to get the most out of borrowing money. My point is that I would rather pay cash and earn interest on my money than paying interest to someone else for using theirs.

It's two different schools of thought that just aren't compatable. My way of thinking has changed over the last several years to where I believe that going into debt is something that should be avoided at absolutely all costs. Even if it means delivering pizzas to make some extra cash. Your school of thought has you leveraging to pay as little interest as possible when you do borrow money. If that works for you, cool. But for me, I'd just rather not have the note hanging over my head.

Cougar

Gunslinger · « **Reply #19 on:** January 25, 2004, 04:54:22 PM »

cougar that's pretty much the whole point of the book. Ifs funny how everyone in here seems to be knocking the ideas w/o reading the book but the simple fact is most americans are in debt. If your not great...disreguard the post. When you are in debt you are a slave to the creditor!

Here's another example from the book....A woman who has to deal with the death of her mother decides at 35 she's gonna buy a prepaid funeral for $3500. That's all that money buys is a funeral BUT if she invested it and earmarked it in her will and she survived a long fruitfull life the people who burry her are going to have ALOT more money to work with.

Hope your enjoying the book I havnt finished it yet and I'm doin pretty well at educating my wife and reducing our debt at the same time.

I'm not sure what's wrong with the rest of the poeple on this board but there is still plenty of good long term investments that work. My stocks and funds took a beating in 2001/2 and I ended up selling for a loss cause I lost my job (HELLO EMERGANCY FUND!) Wish I had one then cause I'd be up about 18% right now.

In addition I love his veiws on new cars. I've been saying to my friends for years that a new car is the worst thing to spend your money on PERIOD. They loose at least 10% of value the second you drive them off the lot. If you financed it now you are officially upside down on your loan if you didnt put much money down. Now when the car is actually paid off your vehicle that you paid all that intrest on is usually only worth maybe a 1/3rd of its orriginal value.....now that's a loss if i've ever seen one and people keep doing this there whole lives

anyway this book has changed my life and I am going to be completly debt free in 18 months with at least 2 paychecks in the back for emerganies. If you have debt I'd check it out!

2Slow · « **Reply #20 on:** March 22, 2004, 01:36:24 PM »

My only debt is the mortgage. Since '95 the property value has almost doubled.

I agree, new car is a poor purchase, but they are fun! If I have the need for a new car, then I would use a Home equity line of credit to pay "cash" for it. The one gets to deduct the interest.

When you deal for the car, let the salesman think you intend to finance. He can then offer you a lower price based on what he gets for commision on the sale and finance. Then, we you get the price quote you want, drop the bomb and write him a check.

Not too fair, but what the heck.

Frogm4n · « **Reply #21 on:** March 22, 2004, 02:32:15 PM »

Cars are big toys not an investment. Why else would people pay 400 bucks a month for something they can barely afford to fill up with gas.

Gunslinger · « **Reply #22 on:** March 22, 2004, 02:38:12 PM »

Quote

Originally posted by Frogm4n
Cars are big toys not an investment. Why else would people pay 400 bucks a month for something they can barely afford to fill up with gas.

not to mention over the next 4 years that new car smell is gonna wear off and it's going to depreciate in value by as much if not more than 50%.

Frogm4n · « **Reply #23 on:** March 22, 2004, 02:40:10 PM »

wait till gas prices hit 3dollars+ a gallon. And see how good the resell value on SUV or low gas milage car is.

Badger · « **Reply #24 on:** March 23, 2004, 06:06:54 AM »

Quote

Originally posted by Gunslinger
....... Basically throughout the book he tells you that America has been brainwashed into thinking debt is a tool that you can use to create wealth.....

He's correct insomuch as it applies to individuals with average incomes. On a personal level, live as debt free as you can, however, the odd splurge to make life a little interesting won't hurt anybody as long as it doesn’t become a normal way of living. The bonus to not living under the burden of a personal high debt load is a healthier, more stress free life.

He's incorrect for equity funds or other such firms, who use debt to accomplish leveraged buyouts. We consistently return 25-30% IRR's year over year buying companies with bank leverage (sometimes up to 3-1), then operating the company for 5-7 years paying down the debt (de-levering it), ultimately selling it though an exit strategy that benefits all of the shareholders.

Regards,
Badger

Eagler · « **Reply #25 on:** March 23, 2004, 08:02:11 AM »

somebody shoot that guy?

what does he think is driving the economy if it isn't credit cards?

I'd like to see what balances the average joe here on this board is running monthly on his cards. what if anything they pay over the minimum each month towards ending that debt

I truely do not believe I will ever buy a new car again, they are the biggest rip off. drop $40k on a car, drive it off the lot and you lose $5k in 5 seconds - retarded

cars cost as much or more than my parents paid for their house. run that out, our kids will be paying over $120,000 for a new (average) car in their lifetime - like I said, retarded

back to the credit card bubble - when it pops - it'll make the dot com bubble look like nothing

2Slow · « **Reply #26 on:** March 23, 2004, 09:55:37 AM »

I use Discover for all my purchases. What the heck, I pay (OK the wife pays) the balance every month. Then the cashback from them is free money. Average ballance per month, 1500 to 2200. We never carry a balance. Always pay off in full.