Dave Ramsey Advice?

[TNKBELL]

I have just read Dave Ramsey's book "Total Money Makeover", thanks to all the Disers who recommended and quoted him!! My question is... Does Dave ever advise people to move to save money? I am asking because, Dh & I love our home and really don't want to move, but after looking at his graphs and crunching some numbers, we would be better off in a smaller house. We also wish to have a big family and our current house would be perfect.Currently we have 14 years left on our mortgage. We are on baby step #2 and inching toward #3. We have looked for a less costly home and most of the homes we have seen are much smaller and would required quite a bit of repairs. I want to do right by my family and ensure our children will have some $$ for college and a healthy sum at retirement. I'm just unsure of what to do?? Any suggestions?

 

[JoyG]

Why don't you call Dave on his radio show and ask? I don't get his show around here, but I listen to it online at his website, Daveramsey.com I think you could get the number and call in during the time he's on air. I think I have heard him advise people on paring down in the housing dept. but your situation might be different if you plan on starting a family.

 

[disnutt]

You can also check out his site at www.mytotalmoneymakeover.com

We did sell our house to get rid of some debt but we didn't love it and we're going to need one more bedroom because we had a bonus baby that we didn't plan on when we bought it. Now that we're debt free (and renting a lovely condo) we're socking away lots of cash for a downpayment on a 'just right' sized house we plan to buy or build in about 1 yr.


Good luck,
Kiena

 

[shelly3girls]

I don't know anything about Dave but have quite a bit of experience with buying a house that "needed work." We downsized our house to live in our dream neighborhood/town. We bought a much less expensive house originally but by the time we are finished replacing the roof, HVAC, etc. we will owe just as much and still need to remodel a bathroom and the kitchen. We do not regret it but surely did not save the money we thought we would. We are in a much better situation in that our taxes are half of what they were in the other house and we are happier in our neighborhood. If your current house does not need work and you think you will need the size for future kids then I would stay where you are. You may find yourself in a worse situation than now if you downsize then find out you need a bigger house later. Additions are very expensive and if you have to upsize again most likely your smaller house will not increase in value as much as the house you currently own.

There are so many things to consider that there is not a right answer, only what is right for you. I would just make sure you include all costs including moving costs, smaller tax deduction (interest and property taxes), remodeling costs, etc. I would also get estimates for everything. We did and still ended up more than 20% over budget due to structural problems when adding a planned addition. On the other hand my cousin just downsized to get out of debt and she is thrilled. The house is smaller but all their debt but their mortgage is paid off (she was out of work after a car accident). They still have quite a bit of work to do on the house that will cost money but they purchased a house 45% less than what they sold their original house for and they know their family is complete.

 

[TNKBELL]

Why don't you call Dave on his radio show and ask? I don't get his show around here, but I listen to it online at his website, Daveramsey.com I think you could get the number and call in during the time he's on air. I think I have heard him advise people on paring down in the housing dept. but your situation might be different if you plan on starting a family.

I haven't thought of trying to call in to the show, I just figured I wouldn't be able to get through. We already have 4 Dks and in a few years we hope to expand our family a little more. I've just really been struggling to make a decision, We built our house just the way we wanted, we love our neighbors, It's a great area for long term investing, the right size for our family, the only negative is that the payment% of our income way exceeds what Dave recommends spending on housing. If I would have been more in tune to debt free living 4 years ago, we probably wouldn't have built this house. Dh & I are so attached to it, being the only home the Dks really remember, but it is only a material item. Our only other debt we have is a credit card that we are chipping away at and should have it paid off in 18-24 months. My dream would be for Dh to retire early with a healthy bank account and no mortgage!

 

[bengalbelle]

I'm not a Dave Ramsey expert by any means, but I'm struck by some of the things you've said: you love your home, it fits your family nicely, you don't want to move, you have relatively little debt, and your home will be paid for in 14 years. I've also read other posts of yours (particularly your famous WDW Budget thread ) and I feel like I can safely say you are very creative, resourceful and smart with your money. JMHO, but if I were you, I would stay put.
I don't know how much extra money you have per month, or how much more you need to save to have a comfortable retirement, but could you do other things besides downsizing to make this happen for you? What if you take the payments you've been making toward your credit card and mortgage and divert them to your retirement fund(s) once they are paid off? Can you find any other money in your budget to add to your retirement funds.

I'm not totally comfortable with this concept, but some financial advisors actually suggest you make saving for college a low priority. The reasoning behind that is that these days there are so many financial options for kids to attend college. State/other tuition assistance plans, grants, scholarships, loans, child working through college, etc. are more available and accessible than they were years ago.

Back to downsizing, we did it but it really made sense for us. I was working at the time we bought our last home. It was in the nicest (read most expensive) subdivision in our town and came with a huge mortgage. I decided to stay home with DS, so we quickly sold that house for a nice profit and bought a much less expensive home about 2 miles away. BUT, we were only a family of 3, so we could easily go down to a 3 bedroom home. We are planning on only having one more child, so we are still OK in a 3 bedroom home. It also didn't make sense to spend that much money on a home we didn't love. If we had loved it and it would have had a reasonable mortgage, we probably would have stayed and made it work. We're happy here and we know that in a few years we'll be able to build our forever home.

Whatever you decide to do, good luck!

 

[my3kids]

Some of his ideas are great, but if you are comfortable and can afford your home which you certainly must be able to since you have been managing the mortgage just fine, why move? It probably always makes better sense to stay put....think of closing expenses, moving expenses, redecorating expenses, a potentially higher interest rate. I wouldn't consider leaving a home I loved just to get out of a mortgage I was well able to afford.

 

[Kramer]

the only negative is that the payment% of our income way exceeds what Dave recommends spending on housing.

Just curious... what is the % of your income that Dave Ramsey recommends to spend on a mortgage/housing?

Other sites/books I've read use a range of 28% - 35%.

 

[my3kids]

Kramer: I think it is 25%.

 

[Kramer]

Kramer: I think it is 25%.

Thanks!

 

[CarolA]

Dave has some very good ideas, but he is not an expert.

Dave is self taught from losing his shirt and always remember to him it's a BUSINESS!!! He is making a fortune!!!

Reading your post I see no reason why I would move. Sounds like you have an accelerated mortgage. Plus you already have four kids and want more... if you get small house where are you going to put them? Would you and DH always compare the downsize house to the "dream" house you have now and feel cheated? Sounds to me like you would.

I have read several articles lately indicating that saving for retirement is actually more important then saving for college. Haven't really thought about it since I have no kids.

You say it's your dream for DH to retire early? Is it DHs? I have a friend who would love for her DH to retire early.... he wants to work until he is 80 like his dad.

 

[TNKBELL]

Just curious... what is the % of your income that Dave Ramsey recommends to spend on a mortgage/housing?

Other sites/books I've read use a range of 28% - 35%.

Our mortgage far exceeds the 25% of take home pay that Dave advises, it's more like 47%(including taxes and insurance). We have pretty high taxes with specials because our home is newer. As Dh's wages go up this percentage will decrease but not very fast.


QUOTE"You say it's your dream for DH to retire early? Is it DHs? I have a friend who would love for her DH to retire early.... he wants to work until he is 80 like his dad."
Today 12:13 PM

Yes, if Dh could, he would retire today!! Another dream we have and have tried but obviously not succeeded is to work from home. I sell a few things on ebay, but certainly not enough to add very much to our income, I homeschool my Dks, so my time isn't as plentiful for ebay. I appreciate all your tips and advise, sometimes it helps to have more than one person thinking on things!!

 

[tinaluis]

TNKBELL
I agree with what most others have said -- stay put!
DH and I are in the same boat with a large percentage of our income (probably near 43%) devoted to housing because DH is a stay at home dad. He will eventually go back to work when our girls are a little older but, for now, we can pay all of our bills and manage to keep our heads above water (with a very large Emergency Fund just in case thanks to a lot of saving before DH left his job). Our home will be paid off in about 9 years and then we'll be rolling in $$ (yeah, right).
Good luck to you whatever you decide but my vote is to stay put.

 

[hsmamato2]

hmmmm, good question, I too am a Dave Ramsey fan, but not everything is set in stone. We bought our home before I knew about the "not to excced 25% of income, 15 year mortgage" thing... Ours is about 25%, but it's on a 30 year plan. Perhaps we can change that length of time in the future(extra payments?), but by following the other ideas for staying debt free and building other financial safety nets, we've been just fine where we are. It sounds like your home means a lot to you, as does ours right now- it was hard for my ds to move the last time, and I don't want to again =unless necessary...
If you're fine everywhere else, paying off cards, buliding emergency fund and living wisely etc., you probably will be fine- Don't forget, the costs of moving and getting something new, then settling in and trying to fix it up need to be weighed against the costs of staying put, and as long as you aren't having trouble working toward your goals, I personally would stay put.

 

[jfap]

What is the interest rate on your loan? If you got that loan several years ago maybe you could reduce the monthly payments by refinancing to one of todays low interest rates. Alot of companies will refinance with very little closing costs.

Just a thought.

 

[bengalbelle]

How are you all figuring out what percentage of your income goes toward your mortgage? Are you looking at monthly/yearly take home pay and calculating to see if your mortgage payment is within the 25-35% of that, or are you looking at how much you actually paid/financed for your home?

If I figure DH's monthly take home pay (not taking into account the 2 extra paychecks per year) our mortgage payment is 25% of his monthly take home pay (I'm a SAHM). Are we within the guidelines?

 

[TNKBELL]

What is the interest rate on your loan? If you got that loan several years ago maybe you could reduce the monthly payments by refinancing to one of todays low interest rates. Alot of companies will refinance with very little closing costs.

Just a thought.

We refinanced a year ago and got 5%. I am happy with that rate as it is fixed and only 14 years to go. My hope is to pay it off in 10 years, but we'll just have to see about that. As far as college savings, I do plan to have my Dks research any possible grants and scholarships,take courses for college credit while in highschool, volunteer in the field they wish to pursue to establish experience(granted they know what they want to do)take Cleps and Advanced Placement tests, possibly attend a cheaper 2 year Juco, for the basics and then attend a state school for the other credits, live at home if necessary and work their way through. So I hope this helps because I probably won't be able to save enough to outright pay for college.

 

[TNKBELL]

How are you all figuring out what percentage of your income goes toward your mortgage? Are you looking at monthly/yearly take home pay and calculating to see if your mortgage payment is within the 25-35% of that, or are you looking at how much you actually paid/financed for your home?

If I figure DH's monthly take home pay (not taking into account the 2 extra paychecks per year) our mortgage payment is 25% of his monthly take home pay (I'm a SAHM). Are we within the guidelines?

Yes you are exactly right!! You are sittin' pretty!!

 

[bengalbelle]

Yes you are exactly right!! You are sittin' pretty!!

Heh, heh, not really. We have other debt we're trying to pay off. It's good to know we're not way over on our mortgage, though.

Thanks for the info

 

[Twinkies]

Assuming you use an agent, there are commissions to consider... also, if your purchase another house soon, the costs of originating the loan should be considered.

And there is also the possibility that interest rates won't be this low for much longer, therefore, in a couple of years, you'll end up with a higher rate.

Not an expert, and I might be missing something but I've never seen these costs discussed or even mentioned before....