Total Money Makeover

[C.Ann]

Started reading this book last night and I'm almost finished today.. Great reading - and pretty much confirms what my Dad always said, "Pay as you go - unless you're going for good.." He was a firm believer in paying cash for everything - including his homes - and he never had a 6-figure income (or anything even close to it).. He was able to leave my Mom extremely well off when he passed away and as kids, we never felt "deprived" or "less than" in any way, shape or form..

I especially liked his analysis of car payments and the monetary advantage of purchasing a car that is 2 years old.. It confirmed my own beliefs to the letter..

If you're interested in living a debt-free life, this is definitely a book that is worth reading.. Even if you're not convinced that it can be done - or that it's in your best interest - take a peek anyhow.. You may be pleasantly surprised!

 

[mrsgus06]

I am a huge fan of Dave Ramsey. We pay cash for everything. Our only credit card is the Disney Visa, which I am getting ready to close because the reward is not that great. Our cars are paid for. We just bought an 02 suburban and paid cash, what a great feeling. Our only debt is our mortgage and it is scheduled to be paid in full in 12 more months. We are going to build a new house next year so the money we get from selling this place will pay for our next house, plus the new house will be more than 4500 square feet and with 6 kids, that still may not be enough! Dave Ramsey is wonderful!

 

[C.Ann]

I am a huge fan of Dave Ramsey. We pay cash for everything. Our only credit card is the Disney Visa, which I am getting ready to close because the reward is not that great. Our cars are paid for. We just bought an 02 suburban and paid cash, what a great feeling. Our only debt is our mortgage and it is scheduled to be paid in full in 12 more months. We are going to build a new house next year so the money we get from selling this place will pay for our next house, plus the new house will be more than 4500 square feet and with 6 kids, that still may not be enough! Dave Ramsey is wonderful!

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It's very interesting to see all the financial "myths" that most people live with debunked in simple to understand every day language.. Although I've pretty much lived by my Dad's motto my entire life, there were still a few areas where I made the "common" mistakes and paid dearly for it.. Knowing now that there are much better ways of handling certain issues is extremely helpful.. I originally purchased this book for someone else, but I can't have a book in my possession without reading it first myself so this will be a win-win situation..

Congrats on your accomplishments!! You should be SOOO proud of yourself..

 

[dvcgirl]

Yes, this is a good book....I like Dave Ramsey. And we agree with paying cash for everything. Well, actually we use credit cards for everything for the free miles and pay them off each month.

The other interesting factor with buying new cars is that a new car loses 60% of it's value in the first four years of its life. Isn't that incredible? It's the largest purchase Americans make besides their home and it starts to lose money the second you pull out of the dealership lot. He also advocates cutting out the middle man when buying a used car...the dreaded used car dealer....and buy from an individual who isn't likely to stick you with a huge mark-up.

And speaking of debt, I heard a statistic on the radio (Clark Howard show) the other day about car loans. The average length of a car loan in this country right now is 63 months. That means that there are more and more people are taking out 72 month and 84 month loans. Like Howard says, "people, if you need to pay 72 or 84 months for a car....you can't afford it!!" Also, 1/3 of people who are trading in cars for a new one are "upside down" in their loans, meaning that they owe more on the car than the car is worth. And, also, he said that leasing is back up to 20% in this country.

Some Federal Reserve study numbers I read recently. For the fiscal year 2004, the average family in the United States carried $8,000 in credit card debt and a total of $18,564 in overall debt (not including mortgage). Also, 43% of Americans spend more than they make. $1.22 for every $1.00 earned....that's the average. And the scary thing is that Fed predicted a flat spending year in 05' due to the credit situation, and yet it went *up*...why? The real estate boom and the "my house is an ATM machine" factor.

The moral of the story, being debt-free is not only a good thing, it's becoming more and more of a rare thing.

 

[C.Ann]

The other interesting factor with buying new cars is that a new car loses 60% of it's value in the first four years of its life. Isn't that incredible? It's the largest purchase Americans make besides their home and it starts to lose money the second you pull out of the dealership lot. He also advocates cutting out the middle man when buying a used car...the dreaded used car dealer....and buy from an individual who isn't likely to stick you with a huge mark-up.

And speaking of debt, I heard a statistic on the radio (Clark Howard show) the other day about car loans. The average length of a car loan in this country right now is 63 months. That means that there are more and more people are taking out 72 month and 84 month loans. Like Howard says, "people, if you need to pay 72 or 84 months for a car....you can't afford it!!" Also, 1/3 of people who are trading in cars for a new one are "upside down" in their loans, meaning that they owe more on the car than the car is worth. And, also, he said that leasing is back up to 20% in this country.

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I have never purchased a brand new vehicle and probably never will.. I have always purchased from a very reliable dealer that I've done business with for many, many years and have always paid cash.. When you figure in what I have paid for any given vehicle, repairs and the length of time I've run these vehicles, I have ALWAYS come out WAAAAAY ahead of anyone who has purchased a brand new vehicle..

I found this statement interesting:

"Most people carry a car note for their entire lives, paying about $378 a month. That same amount invested from age 25 to retirement would, on average, amount to more than 4 million dollars by age 65." Kind of sheds a whole new light on "car payments" - doesn't it? And most of the people I know are paying MORE than $378 a month!

 

[Nik's Mom]

I'd love to be totally debt free! When I look at our mortgage, it seems like an impossible task to pay that off. How do you all do it? We are working on paying off our credit card and car payment this year, student loans next year. Then we'll tackle that mortgage. Maybe I'll have to check out the book. I have a cousin who has 2 houses paid off, and just bought a mobile home with cash! She's a stay-at-home Mom, and her dh makes a decent wage, but they are not rich. So there must be a way.
About car loans, it's so true. We bought our first new car when we were 32 years old. DH gets employee discount, so we got a good deal. I was just looking at the car adds today (just looking), and was shocked at all of the 84 month loan offers!

 

[Free4Life11]

I'd like to check out that book. I have to be honest and say that I'm skeptical! If it weren't for loans, I couldn't even afford to pay my monthly rent while in school! I just don't make enough from both of my jobs to cover that, plus food, personal expenses, and credit card payments. Even if I were able to put 100% of every paycheck towards my rent it wouldn't be enough....so I do have to say I am VERY skeptical as to how this all works out. I suppose I could move to a cheaper apartment, but since I don't have a car, living on campus is the best option.

 

[C.Ann]

I'd love to be totally debt free! When I look at our mortgage, it seems like an impossible task to pay that off. How do you all do it? We are working on paying off our credit card and car payment this year, student loans next year. Then we'll tackle that mortgage. Maybe I'll have to check out the book. I have a cousin who has 2 houses paid off, and just bought a mobile home with cash! She's a stay-at-home Mom, and her dh makes a decent wage, but they are not rich. So there must be a way.
About car loans, it's so true. We bought our first new car when we were 32 years old. DH gets employee discount, so we got a good deal. I was just looking at the car adds today (just looking), and was shocked at all of the 84 month loan offers!

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Perhaps you can borrow the book from your library? It's definitely worth the read and will point you in the direction of getting those debts paid off MUCH faster, have plenty of $$ aside in a STRICTLY emergency fund, how to save for college and retirement - AND how to pay CASH for everything from now on..

You can also check out the web site daveramsey.com for additional info, forums, etc..

Just remember - banks (and any other business that will loan you money - or extend credit to you) are NOT doing it to "help you out" or make your life easier.. They are doing it to make a profit - off of YOU and YOUR MONEY!

Won't hurt a thing to give it a look-see, right?

 

[C.Ann]

I'd like to check out that book. I have to be honest and say that I'm skeptical! If it weren't for loans, I couldn't even afford to pay my monthly rent while in school! I just don't make enough from both of my jobs to cover that, plus food, personal expenses, and credit card payments. Even if I were able to put 100% of every paycheck towards my rent it wouldn't be enough....so I do have to say I am VERY skeptical as to how this all works out. I suppose I could move to a cheaper apartment, but since I don't have a car, living on campus is the best option.

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I'm a bit of a skeptic too.. Even though I have always lived my life on a strictly cash basis, the remainder of my money was never used to it's full advantage and I'm paying DEARLY for that now..

This is NOT a "get rich quick" scheme and it is NOT "easy".. It takes determination and sacrifice, but like anything else in life, if you truly want to live your life debt free and have a cushion for emergencies, $$ for retirement, etc. - this plan can work for anyone..

I can't wait to share this book with the original people I purchased it for.. They have always insisted that you can NOT live in this day and age without credit cards, two incomes and debt and it simply isn't true.. I already knew that - from watching my Dad - but I just couldn't figure out how to put it into words.. Dave does it extremely well - in very easy to read language..

Take a look if you can.. Hopefully you can make it work for you..

 

[my3kids]

I'd like to check out that book. I have to be honest and say that I'm skeptical! If it weren't for loans, I couldn't even afford to pay my monthly rent while in school! I just don't make enough from both of my jobs to cover that, plus food, personal expenses, and credit card payments. Even if I were able to put 100% of every paycheck towards my rent it wouldn't be enough....so I do have to say I am VERY skeptical as to how this all works out. I suppose I could move to a cheaper apartment, but since I don't have a car, living on campus is the best option.

Dave Ramsey's philosophy is not to pay more for school than you can pay cash for....live at home, work and pay for community college, never consider a private college. I don't agree with that so much, but he seems to say it on most every show, I think.

But, he would go on to say if you are making credit card payments, that money would be freed up for other things once you didn't have the debt. He advocates not living outside your cash means...so yes, he would say cheaper apartment, delivering pizzas(he always is telling someone to do that.) and working a zillion jobs and not use credit for anything.

 

[mrsgus06]

Dave Ramsey's philosophy is not to pay more for school than you can pay cash for....live at home, work and pay for community college, never consider a private college. I don't agree with that so much, but he seems to say it on most every show, I think.

I have a 19 year old son that goes to the community college in town. He lives at home with us. He works full time to earn his spending money and car insurance/gas money. We pay for his classes on a cash basis. Because he is attending a school in his state, he is eligible for lottery money. We would rather him do this than to go to a private college and be in student debt forever. I could not say that we could have paid for his education if he considered Clemson for all 4 years. However, he is getting the basics now and transferring them to the College of Charleston later. He knows there are 5 others behind him that need their degree also. I am happy to report that we have 3 of the youngest childrens college (of their choice) completely paid for. I wish I had figured out the Dave Ramsey way about 19 years ago and all 6 would have had their education paid for long before they went. It is all a matter of how bad a person wants it. I like having my emergency fund set to the side. I like being able to pay bills at the first of the month and not living paycheck to paycheck. College is important to me and I want the best for my kids, as all parents do, but Dave came into my life a little too late to help the oldest one.

I have a friend that has refinanced her house 3 times in the last seven years. The house was a gift to her and her hubby, free and clear. Now they have a mortgage of over $200,000 owed on it and not one thing to show for refinancing. I have tried to get them on the Dave Ramsey plan, but he is not even going to consider it. They don't pay the bills together so neither one knows what the other is doing. They want to get out of debt, but are not willing to part with their material things. Like I said, it really is how bad a person wants to be debt free.

 

[Muushka]

I agree with 99.9999% of everything mentioned. The one itty-bitty teeny-tiny exception is about the cars. We have bought brand new cars- one in 2003 and one just about 3 months ago. The one we bought in 2003 had a higher book value than what I paid for it about 16 months later. And the brand new one (2005) cost about the same price to buy one that was 1 year old. I think the reasoning is sound-to buy a car 2 or years old, but there are exceptions. You really have to do your homework. And you really have to deal at the dealers! Carry on.....

PS we did not get car loans for either of the cars .

 

[C.Ann]

I agree with 99.9999% of everything mentioned. The one itty-bitty teeny-tiny exception is about the cars. We have bought brand new cars- one in 2003 and one just about 3 months ago. The one we bought in 2003 had a higher book value than what I paid for it about 16 months later. And the brand new one (2005) cost about the same price to buy one that was 1 year old. I think the reasoning is sound-to buy a car 2 or years old, but there are exceptions. You really have to do your homework. And you really have to deal at the dealers! Carry on.....

PS we did not get car loans for either of the cars .

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That's great that you didn't take on any car payments.. However, the depreciation will still occur over the course of time - beginning the second you drive it off the lot.. "Book value" is rarely what you can sell it for - or expect to get if you traded it in at a later date.. Even your car insurance company won't pay you "book value" if it's totalled - unless you fight like heck and get lucky.. I think it's awesome that you paid cash though!!

 

[Muushka]

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That's great that you didn't take on any car payments.. However, the depreciation will still occur over the course of time - beginning the second you drive it off the lot.. "Book value" is rarely what you can sell it for - or expect to get if you traded it in at a later date.. Even your car insurance company won't pay you "book value" if it's totalled - unless you fight like heck and get lucky.. I think it's awesome that you paid cash though!!

I agree that the depreciation begins the second you drive it off the lot. Book value is what I can expect to pay for a car. If I can buy a brand new car at the same price as one that is a year or two old, why would I buy the used one?

 

[C.Ann]

But, he would go on to say if you are making credit card payments, that money would be freed up for other things once you didn't have the debt. He advocates not living outside your cash means...so yes, he would say cheaper apartment, delivering pizzas(he always is telling someone to do that.) and working a zillion jobs and not use credit for anything.

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Well my Dad never "delivered pizzas", never worked a 2nd job (actually at one point he was out of work for 8 years when he broke his back), but still managed to build and/or own 5 homes, a summer place, numerous cars and trucks, several campers/travel trailers, give two of his children down payments for their homes as a "gift", travel whenever they wanted to travel, pay for two weddings, adopt another child after the rest of us were grown, put that child through a private military school and college, and still managed to leave my mother extremely well off when he passed away.. He did it all with CASH and never purchased ANYTHING with credit.. Obviously he did something "right" and must have had Dave Ramsey's insight long before Dave ever had it.. LOL

 

[C.Ann]

I agree that the depreciation begins the second you drive it off the lot. Book value is what I can expect to pay for a car. If I can buy a brand new car at the same price as one that is a year or two old, why would I buy the used one?

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I don't think I've ever heard of anyone being able to purchase a brand new car for the same price as a two-year old car, but I'd love to hear about it if you would like to share.. Also, what is the difference in your insurance rates? With my own car purchases I have always noticed that the newer the car, the higher the rates.. Has that been the case for you?

 

[wdwpluto]

The one thing I disagree with (and this is a personal choice of course, not bashing anyone else's choices) is buying a used car.

I have a 2000 car that I bought brand new in 2000. My co-worker has a 2000 car that she bought in 2003. She has spent WAY more than I have in maintenance because apparently the car she bought was poorly maintained. Her car is always in the shop for some problem while I only take my car for routine stuff (like oil changes and my 60k mile service).

Maybe it's a fluke, but I don't like the idea of buying someone else's headache. I know that I will have my car much, much longer than my co-worker will, simply because she's fed up with spending a fortune in maintenance.

Just my 2 cents.

 

[my3kids]

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Obviously he did something "right" and must have had Dave Ramsey's insight long before Dave ever had it.. LOL

Dave always does say advice your grandmother would give you! Probably most in that generation felt the same way.

 

[my3kids]

mrsgus: Sounds like a good plan to me. My problem with Dave's philosophy isn't with paying for school; it is his stance that no one should ever consider a private college. I know for a fact that many, and probably most, private colleges do a much better job at meeting student's financial aid needs. He carte blanche tells people to not even look at private colleges. For a lot of folks, the private schools could end up being a lot more affordable than public ones. That is what I disagree with.

 

[mrsgus06]

My3kids, there was no offense taken with your post. I was just whinning because I did not prepare earlier for my oldest . I would love to have been able to pay for Clemson, but did not learn lifes' lesson soon enough. I do have the others under control and will be able to offer them different choices but if gas prices keep increasing, they will have to stay in the dorm of a private college because it will be much cheaper.