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Discussion Starter #1
I'm constantly reminded of my upbringing, to be as cheap as possible and not to go into debt. Mortgages and cars are the only exception.

I'm looking at these fancy ways of paying down my mortgage faster, at the same time, growing a business.

For some reason I got locked on to Dave Ramsey's YouTube channel and was bingeing those for a while. Made me feel dirty about possibly going into debt to speed things up a bit.

I'm not really afraid of debt but going into it is scaring me a tad. I don't think I'll be over my head but the negative Nancies are dancing in my head.
 

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Go into debt for car? Not a chance in hell, its one of the worst debts possible. I might consider it, if it was heavily written off debt in a business, but as a personal vehicle, nope, never.

Best debts in my life have been for business and education. 2nd have been for the mortgage, and everything else is bad and to be avoided. Give up on the idea of being as cheap as possible, it won't serve you well. Look for value in anything, cheap will leave you stranded on the side of the road.
 

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Dave Ramsey is a pretty clear system
I don't know all of it, but it's pretty simple.
The thing I really like about it is that it's logical how you get ahead, and it has simple rules.
Simple rules are easier to follow.

The problem with car debt is a lot of people will spend too much on a car, it's easy to add $1k here $2k there, instead of a $30k family vehicle you end up with the $45k version with all the options, because it's only $20/wk more.

Almost everyone gets into too much debt.
Why do you think there is so much outrage about credit card interest rates, people actually pay them.

Now as for a car, I need a reliable car, and I found at a certain time they break... a lot. I don't want to spend 1-2 days/months with a broken car, paying $500/month in repairs.
I really hate that, and a new car payment, to me, is how I minimize that.

That being said I know people who have had great luck with cheap used vehicles, and cutting out those car payments really helps them.
 

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You can have your cake and eat it too. Buy a slightly used car.

I once bought a Camry that was 3 years old. It was half the price of new (15k vs 30k), but I got way more than half of the car's useful life. You save the freight, PDI, admin fee and initial depreciation which is the worst.

The car lasted me 10 years, then I sold it when it 13 years old. I had virtually no issues at all. No breakdowns.
Sold it for 2500, so that's 15000 - 2500 = 12500 for 10 years of rides.
 

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I was also raised to avoid debt. I started implementing the Smith Maneuvre in 2019 and have been fairly happy until the market crash this past March 2020. It was very unfortunate timing since I ended up buying mostly near the top and haven't really seen big gains. I have been kept up a few times at night because not only was my portfolio down, the debt is still there.

Consumer debt is almost certainly bad. Investment debt, not so much. The tax credit on interest paid (line 221) is a pretty sweet discovery. It felt really good getting it for the first time this year.

Debt is a powerful tool and like any tool, it can be dangerous if not used carefully and properly.

Before you dive in, make sure you have your finances in perfect order. Carefully consider your overall debt ratio and how the debt might weigh on your conscious.
 

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I have believe debt is okay in cases where it is being used either on an appreciating item or things that will bring you more money future,

houses - personal or rentals, or commercial, business, investments (if you know what you are doing) and education.
cars - unless they are exotics that. An be resold for more, nope.
 

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Bad debt = going into debt for things that lose value, like clothes, cars, vacations.
Good debt = going into debt for things that gain value, like real estate.
With that as a principle you can work out whether something is good debt or bad debt. Some things are a judgement call, like things that may allow you to make money like a college education, a business, or equipment for a business. You have to make a case that they will bring in more than they cost.
This is purely a mathematical exercise. You may choose to go into debt for other reasons, like you need a car to get to work and have a decent life so you balance that against the minimal debt to get it.
You won't go far wrong listening to David Ramsey. I have watched some of his videos and agree with what he is saying, about 90% of the time. Where we disagree is more a matter of nuance, not that he out and out wrong.
I will add, that if you follow his advice and get free of debt, pay off your car, pay off your house you will feel as if a burden is lifted off you.
 

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Ramsey is great for people who suck with money, not so good for people who are good with money.
I watched a few videos of his over the last few months and he gives some awful advice. I don't watch any of these any more.

That being said, I've avoided debt as well. I was just raised that way.
 

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When I was younger, I was living the dream as was told. I was debt free...then I got injured and couldn’t work for several years...the dream turned into a nightmare. I turned to investing at this point, needed to live off credit for a while as I allowed my investments to grow. Today, I’m millions in debt, but worth several times more than my debt. I add to my debt all the time as I buy several rentals a year. I’m way more financially secure today than I ever was back when I was debt free as all my debt makes me money every month.

there is a big difference between good debt and bad debt, debt is not to be feared, it’s only a tool. Used properly, you can build wonderful things, used improperly and you can get badly hurt, even killed.

trust me, being debt free can be equally as dangerous.
 

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A mortgage is fine, but debt for a vehicle is borderline depending on how well you manage your cashflow.
 

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I watched a few videos of his over the last few months and he gives some awful advice. I don't watch any of these any more.

That being said, I've avoided debt as well. I was just raised that way.
What "awful advice"?

He's a very insistent on "live within your means", even a bit extreme by some standards, but I can't recall him giving bad advice.
 

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What "awful advice"?

He's a very insistent on "live within your means", even a bit extreme by some standards, but I can't recall him giving bad advice.
He had some very inaccurate information on fixed income investment.

Like anything else, it's a mix of good info & bad info. But what I saw myself was not particularly accurate, and didn't impress me. Maybe he's still better than the average personality -- no idea.

Example of something I don't like about Ramsey: he's recommending growth mutual funds with trailing performance of 12% CAGR and giving very optimistic projections. He's leading others to believe they can get returns like 10% to 12% nominal, or 10% real return going forward. There are very few experts who think that such high returns are likely going forward. Even Jack Bogle and Buffett have given far lower projections of returns going forward.

Ramsey should be encouraging diversification with bonds, but he doesn't.

Ramsey is giving overly optimistic stock return scenarios. At the same time he discourages people from investing in fixed income. So he's talking people into some very risky portfolios (high volatility) that they probably are not going to be able to stick with. His audience are novice investors, and it's pretty crazy to encourage them to go into high equity allocations WHILE also setting overoptimistic expectations.

That's a recipe for disaster. Novice investors typically have trouble sticking to high equity allocations.

I think Ramsey is pitching a bad recipe and bad approach for novice investors. He is not setting up people for success. Rather, he's overconfident about high equity returns and is trying to convince novices into equity allocations which are far too high / aggressive.
 

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He had some very inaccurate information on fixed income investment.

Like anything else, it's a mix of good info & bad info. But what I saw myself was not particularly accurate, and didn't impress me. Maybe he's still better than the average personality -- no idea.

Example of something I don't like about Ramsey: he's recommending growth mutual funds with trailing performance of 12% CAGR and giving very optimistic projections. He's leading others to believe they can get returns like 10% to 12% nominal, or 10% real return going forward. There are very few experts who think that such high returns are likely going forward. Even Jack Bogle and Buffett have given far lower projections of returns going forward.

Ramsey should be encouraging diversification with bonds, but he doesn't.

Ramsey is giving overly optimistic stock return scenarios. At the same time he discourages people from investing in fixed income. So he's talking people into some very risky portfolios (high volatility) that they probably are not going to be able to stick with. His audience are novice investors, and it's pretty crazy to encourage them to go into high equity allocations WHILE also setting overoptimistic expectations.

That's a recipe for disaster. Novice investors typically have trouble sticking to high equity allocations.

I think Ramsey is pitching a bad recipe and bad approach for novice investors. He is not setting up people for success. Rather, he's overconfident about high equity returns and is trying to convince novices into equity allocations which are far too high / aggressive.
Yup, good get out of debt advice, bad investment advice. The fact that he cant tell the difference between the mathematical mean and CAGR is troubling to say the least. And "Just pick the mutual fund with the best track record" is terrible advice of course.
 

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Discussion Starter #15
I think Ramsey is pitching a bad recipe and bad approach for novice investors. He is not setting up people for success. Rather, he's overconfident about high equity returns and is trying to convince novices into equity allocations which are far too high / aggressive.
True I just watched some caller tell him her financial planner said this plan was too risky and he seemed insulted by it. He also says to invest in Mutual Funds, that beat the S&P 500 with a track record of 15 years and don't mind the fees.

In all the research and reading I've been doing in the past 6 years about investing, this goes against everything I've learned. He's also a multi-millionaire ( allegedly ) and probably has a full time wealth management agent working for him.

I would like to thank everyone with their input on debt. Sounds like Velocity Banking is the way to go for me. Just need to finish up my business purchases first.
 

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So, in other words, James disagrees with him so he’s wrong. Why anyone would recommend bonds in this economy is beyond me, but then again, I like making money not losing it. If anything Ramsey is out of date with his expected returns just like james is out of date with the idea bonds are good.
 

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Bonds return less than inflation before taxes, yes they are excellent at losing your money.
 

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If you make less money then you aren’t preserving anything. Losing money is not protecting capital. You’ll have less at the end of the day, basic math.
 
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