@cpafred,Good luck with that(:
Aubrey 1Almost every billionaire on the planet has become wealthy by
using other people's money. I would elaborate here but there is not space.
Some very wealthy people (e.g., Donald Trump) have become wealthy, lost
everything, then become wealthy again. Dave Ramsey's advice regarding
suspending investing is just plain bad advice. No risk, no reward.
A tax deduction= A 30% savings on a purchase you shouldn't have made or a
loan that you are paying interest on. You don't get a tax deduction of $30
unless you spend $100. So it doesn't take a genius to understand that a
house paid off is better than a tax deduction. Once you have no debt all your
investments are much less risky.
None of you are debt free that's obvious from your comments. The real
killer is interest (buying money) you should never invest unless you are debt
free. If you were wise you'd see that the best financial situations have no
interest payments. Even if you are making 6% on some investment while you are
fighting a 3% (or more)mortgage payment, it's not worth the hassle. I think
you all are looking for something that is not possible, true financial freedom
with out hard core debt pay off. If you really want to be free it's simple.
Don't buy money at one interest rate just to turn around and invest it in
hopes of offsetting the money you borrowed.
A few thousand dollars? The 401 contributions I make plus 3% match from my
company over the course of the last 4 years is now worth over $16,000. Running
some quick math, over the next 35 years with interest that $16,000 grand will
supposedly be worth around $150,000, and that's if I stopped contributing
to it right now. I would say it's worth taking a few extra years to pay off
that debt for that kind of ROI. Sorry Dave, you are wrong on this one.Of course we all know that Dave Ramsey is more of a religion around here than
a financial adviser.
I few years ago I followed DR's advice. I stopped investing and paid off
debt. Yes, on paper it appears that I lost a few thousand dollars over my
lifetime, but the piece of mind that come with knowing that all of my debt are
in the past is worth every penny!A few months ago I was laid off.
With no debts, my wife's part time income and my little income from a side
business is keeping us even until I find full time employment again. Until you have rid yourself of all debt, all you are doing is justifying why
you have not completely paid off your obligations. Only people that are in debt
say that debt is good. I have never talked to anyone that got
completely out of debt, then decided that being in debt was much better, so they
took out every loan they could because debt makes them happy. If this is you,
please comment - I would love to hear your story!Is your piece of
mind worth a few thousand dollars over your lifetime?
Bypassing your company's 401K match is just plain stupid. Furthermore, if my mortgage rate is 3% fixed (tax deductible) and I can earn
7% (on average after-tax) investing in an S&P 500 index fund, I will be
doing myself permanent financial damage to pay off the tax-deductible mortgage.
Ramsey already said that most people lose focus. So to keep things simple, he
recommends focusing on one thing only--get out of debt. Don't worry about
the 401K, the simple IRAs, the stocks, etc. Instead, just get out of debt as
quickly as possible, and don't go back into debt. Remember, he is not
talking about the mortgage at this point (baby step 2).After the
debt is paid he recommends investing 15% into retirement efforts.Sounds like a great plan to me.
I disagree with one point of advice. I am a CPA and consider myself personally
disciplined and rather informed on the subject of personal finance. I would
never suggest somebody pay off all debts (except maybe excessive credit card
debt) before investing in a company 401k with a match. Why give up free money
(often a 100% guaranteed return) in order to put a little more toward a debt
that has a reasonable interest rate? Particularly if you're already making
extra payments. I still have substantial student loan debt that we're
working on, but I always fully take advantage of our company match first. The
80% return I get (on top of market returns after investing) is far better than
saving 6.5% interest on the student loans. Otherwise I agree with him. Pay the
debt off. It's more important than a new car, boat, other toys. Get free!
This is horrible advice! Everybody's situation is different; to make a
blanket statement the debt should be paid off first is financial quackery. There
is room for debt in many portfolios depending on an investor's financial
situation and appetite for risk.