USMCmech
Well-Known Member
Pot, meet Kettle
Savings&Mortgage or No Savings&No Mortgage
- Thread starter Jafari RastaMan
- Start date
Pot, meet Kettle
I won't bother arguing what my "sole" purpose seems to be to you. The zero people who are interested can look me up and decide for themselves.
And no, I won't answer your question. Amorris was able to talk his way into a correct answer eventually and I have faith you can do the same.
Oh, totally agree. And tell you what - ATN_Pilot - you've even begun to change my mind on something in this thread.
OMG! Somebody better call Dave before he exits the cult!
Ha! Seriously though - I've said before the Dave thing doesn't really apply to me. But it works wonders for those it does apply to.
We were joking about the coaching thing before and I guess the word "coach" ruffles some feathers. I'm no financial genius. I'm not rich. But I can give common sense advice to the truly financial illiterate. And that's all "coaching" means in this context.
For a deeper understanding, the guy I helped is a really good friend who just buys too much stuff, saves nothing, and had oodles of consumer debt. Not a bad guy or a dumb guy - just money dumb. I told him before he should be smarter with money. I referred him to D.R. But he didn't do anything about it. He was in financial denial, much like someone who is overweight might blame their condition on anything but lack of diet and exercise, he blamed it on "circumstances."
It took me sitting down with him with a pencil, paper, and a calculator to show him an achievable plan. It took me motivating him. It took me checking in with him now and then. That's all the word coaching means. Think of it like being a mentor or just a friend. "Should" someone be able to read some books and just execute a good financial strategy? Sure. But people are human and sometimes they need a push, or a guide, or someone to cheer them on along the way. I can't really see the harm in that.
SeatClutcher
Pasta.
I'm willing to bet if they didn't stay married to their first wife and they're now in the "work til I die" retirement plan it's because they're a) crappy judges of character who chose women who would take them for everything in a divorce, or b) they did something they really, really shouldn't have that made her want to take them for all they're worth. It's cheaper to have a better picker/be a better man.
(Very off topic, I know. But, so was yours, so there.)
SlumTodd_Millionaire
Most Hated Member
Agreed. I don't expect them to do so. But they aren't being helped by being provided with counter-productive information from the get-go.
Which can easily be achieved by telling someone to pay off their highest interest debt first, rather than adhering to the crazy "debt snowball" mantra.
I don't advocate leveraging "every bit of credit" at all. Credit cards specifically should never be used for this purpose, because even if you have a great introductory rate, investing is long-term, and no low-interest rate on a credit card lasts long-term. But some debt can be effectively leveraged, and it's wrong to teach people that it can't be.
SlumTodd_Millionaire
Most Hated Member
In that case, welcome to the ignore list. You're the only one there. Congrats!
Well, as I linked to earlier this is some research that suggests that the snowball method works better. Again, if this was simply about math very few of these people would have this problem to begin with.
Well I think it's also equally wrong to simply line up debt at whatever low interest rate debt you'd like to bring up and theoretical investment gains next to them without mentioning taxes, inflation, and risk. Whereas the debt will accrue the interest every single time, you're not guaranteed the gain.
SlumTodd_Millionaire
Most Hated Member
Thanks, I had missed your link earlier. I went back and read it. While it's an interesting study, it has a key flaw: it's focusing on the behavior of people whom the authors never even had contact with, let alone were able to collect additional date on. They simply collected bulk data from a debt reduction service and analyzed it. For all we know, no one even mentioned to any of these people the math that is involved. For a study to really determine which works better, you would need to properly educate a large group of people on the math, then have half of them follow the Ramsey approach, half of them follow the mathematically correct approach, and see the results. To the best of my knowledge, no such study has been done.
Sure they would. Since we don't teach basic money management to kids in school, they grow up never even thinking about the math. They just build up debt, and no one ever teaches them how to get out. That is, until they're listening to a guy on the radio who talks a good game but doesn't teach the math.
Which is why a margin of safety is so important.
Ok, that makes no sense. Your criticism of this study seems to rest on the idea that 6,000 people who successfully paid off their debt went into that endeavor with no concept of the math whatsoever, or even that any was involved. They just decided with no prompting and no research to pay off all their debt one day. If that were the case I doubt any of those people that study looked at would've embarked on that goal in the first place.
I would wager that once someone comes to the own personal realization that their personal and consumer debt is something they want to get rid of, for whatever reason, they're going to do what most people do these days and head to the internet. There is plenty of advice suggesting both approaches and it's not hard to imagine an individual making a choice, based either on the first thing they see, or a choice based on information gleaned from both approaches.
Bottom line, the math really isn't all that important. If being "mathematically correct" were really the truth path to success as you say then we should have seen that in the study regardless of the participants education in the first place. Again, it's not really about the math.
And has a much better track record that anyone else I know of getting people out of debt and getting their minds wrapped around their finances. You keep forgetting that part.
SlumTodd_Millionaire
Most Hated Member
I disagree with your premise. The very fact that they're using a debt reduction service is a good indication that they're not very well educated, since such services are rarely in the person's best interests.
And has a much better track record that anyone else I know of getting people out of debt and getting their minds wrapped around their finances. You keep forgetting that part.
Source?
drunkenbeagle
Gang Member
The vast majority of information about personal finance that is published/broadcast/disseminated by people that are selling something. Guess what? Almost none of it is relevant to most people, because most financial products are not that great for the consumer. But selling books, selling lecture tickets, selling advertising, selling mutual funds, selling debt relief - someone is making someone money, but it isn't the customer.
Kind of like diet books - they sell millions of copies, but people are still fat. Why? Well, everyone wants an easy answer - that sells. Yet everyone also knows the truth - eat less and exercise more, yet few people do it.
The answer to becoming wealthy isn't in any books, but it is pretty simple:
- Minimize taxes (the biggest expense wealthy people have).
- Spend substantially less than you make.
- Don't borrow money
That part I agree with. But the simple fact remains that even given that dubious advice, the people who paid off smallest balances first were still more likely to get out of debt.
One part of that plan that you've overlooked is that the Ramsey version of the snowball assumes that someone is going to seriously cut down their lifestyle, perhaps take a second job, and apply every last cent towards paying down debt. If someone really does that over a short, focused amount of time the additional interest is pretty miniscule.
Admittedly I don't have one. I've been a longtime Dave listener and have heard countless people call in to his show to celebrate the fact that they've eliminated their debt. So in that I will admit my bias.
You've pretty much summed up the Ramsey method in a nutshell, although your steps would be preceded by getting out of debt in the first place. No doubt the guy has made a ton of money, and good for him I say. He's got a product that most people in this country need quite frankly. He'd also be the first one to tell you he's not selling an easy fix either.
darrenf
resident denizen
What drama is this? Just got home, too tired to read through it tonight, will have to look tomorrow.
Edit to add-- This is my first time looking in this thread as the idea of pilots talking about money? Ha.
SlumTodd_Millionaire
Most Hated Member
Which still does nothing to prove your overall point. It only proves that woefully uneducated people do better under a Ramsey style system. I think we can do better than submitting to the idea that people can't be educated on basic math.
Not really. For a lot of these people, they have very low incomes and they've acquired incredible amounts of debt. Especially during the '90s and early '00s, banks would give just about anybody with a job a ridiculous credit line. And if you went around to 10 different banks, they'd all give you the same ridiculous credit line. People had credit that exceeded their yearly incomes by multiples. It was insane. For those people, even a second job and extreme expense cutting isn't going to help you get out of debt quickly. It takes a hell of a long time. Especially if you're being a moron and not paying down the 27% interest in favor of paying down the 5% interest.