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It is a controversial piece that shows a side of Dave Ramsey that I have, quite honestly, never seen. I'm still trying to sift through how I feel about some of his comments and where his words may have been coming from. My initial reaction was he seems arrogant and cocky. I guess having 7 million plus listening to your advice will do that to your head! At some point, have you ever sat back and wondered why so many people listen to his advice? Have you ever wondered, does this really work? What is the "healthy" way to balance this advice?
My challenge to you is to read the article above and allow your mind to go to those types of questions. So many people in today's society don't put enough thought into what they are doing with their money. They have a thirty minute discussion with either themselves or their significant other once a month and that's about it. Most people focus on how much they save AFTER they pay all of the bills and their lifestyle $ amount. Be real with yourself, if you wait to save your money until you finish spending what you want to spend for life style you will always be left with little to nothing at the end of the day.
I don't want to become a part of the Dave Ramsey argument but I do want to raise some questions and observations.
Dave will recommend his listeners to:
-Save $1,000
-Pay off all debt but the mortgage
-Then invest
Types of debt we can accumulate throughout life in order are: car loan, student loan, mortgage, business loan, personal loan, home equity line of credit... Somewhere mixed in their you could acquire another student loan for your child/children to pay off or to hand off to them to pay off.
What the above strategy fails to realize, in my opinion, is that we will be paying off debt our entire lives.
If we wait to invest until the debt are paid off we will be left with a savings of $1,000 plus the .01% return on our money in the savings account/money market account and nothing to live off of in retirement. Throw out your dreams of a beach house, lake house, or out house for that matter because you never had the opportunity to save up enough while you were paying down debts at such an accelerated rate.
Like everything in life, there is a balance that is needed. You have to eat a balanced diet and have boundaries on how much of certain foods that you eat..... You have to exercise your body in a balanced method and have boundaries on that or you can injure yourself or look top heavy like many guys at the beach.... You have to have a balanced Work- Life balance and have boundaries on that or you will have either no friends or no work, depending on which way you swing.
It is the same with your finances. You can't focus on just paying off debt without saving and you can't focus on just saving and accumulating debt. There has to be a balance to the debt-savings ratio to have the result of you coming out "healthy" in the end. On top of JUST saving, you have to have your money somewhere that is outpacing inflation! You will not outpace inflation with your money sitting in your savings account. The inability to outpace inflation is going to leave your pot of money with deflated purchasing power if you don't invest it in something that gets a modest 3% return or more, depending on where you have it invested you have to account for taxes on your gains.
The graph on page 5 of the article shows the lack of certainty in the market and the concept of counting on a 12% return that Dave Ramsey tells his listeners is realistic. There are other things for you as an investor to invest in other than Mutual Funds and equities that give a more linear and constant return in the positive. Until you have "play money" I would suggest those types of investments to build your balance sheet's foundation with- something guaranteed.
Financial Planner's advice can be a very valuable asset to you and your future, as well as, some of Dave Ramsey's advice. Explore all of the options and don't be ignorant to possible solutions. Everyone is different so your solution is going to be different than your parent's solution, your neighbors solution, and Dave Ramsey's solution.
Find someone you can trust and put in the effort to taking care of your future investigating all of the avenues for success! Every decision you make has a ripple effect on your balance sheet. There is always an opportunity cost.
If you want to hear how we work at Peachtree Planning give me a call @ 404-260-1629 or e mail me @ David.Wallach@PeachtreePlanning.com
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