Wednesday, April 12, 2006

Who Cares What the Broke People Think?



There's a story that Dave Ramsey tells in his book
Total Money Makeover
which has always really appealed to me. By "appealed to me," I mean that it usually gives me chills. The good kind.

I suspect that a fair amount of its appeal for me derives from the way Dave narrates it in the audiobook version. There are a few things I hold against Dave, but his abilities to storytell and motivate aren't among them. The man is a performer and motivator, no question about it. But who cares — I'm still going to post the little story here, because ... well, because I feel like it:

First, let me tell you that mortgage debt is the only kind of debt I don't yell about. I want you to pay off your home as part of your Total Money Makeover, and, for all the reasons stated in the previous pages, you have to be very careful. When asked about mortgages I tell everyone never to take more than a fifteen-year fixed-rate loan, and never have a payment of over 25 percent of your take-home pay. That is the most you should ever borrow.

I don't borrow money — ever. Luke called me from Cleveland to tell me that some of our listeners and readers are doing what Sharon and I have done: "The 100 Percent Down Plan." Pay cash. Most people don't think it can be done. Luke did it.

Luke made really good money. His income at twenty-three years old was $50,000, and he married a young lady making $30,000. His grandfather had preached to him never to borrow money. So Luke and his new bride lived in a very small apartment over a rich lady's garage. They paid only $250 a month for it. They lived on nothing, did nothing that cost money, and they saved. Man, did they save! Making $80,000 in the household, they saved $50,000 a year for three years ... and paid cash for a $150,000 home. They closed on the home on Luke's wife's twenty-sixth birthday. If you make $80,000 per year and don't have any payments, you can become very wealthy, very quickly.

Keep in mind, though, that Luke's friends and relatives thought he should be committed. They made fun of his cars, his lifestyle, and his dream. Only his bride ... and his grandfather ... believed in his dream.

Who cares what the broke people think?


And cue the chills. I hear that story, and oh how it makes me wish I could go back in time and erase the multitude of stupid things I did with my money in my early 20s. Gads. Mid-twenties couple, making $80k per year, and no house payments. Wow.

Ask any eighty-year-old if five years of sacrifice is worth it to change your financial destiny for the rest of your life! Ask any eighty-year-old if five years of sacrifice is worth it to have the satisfaction of knowing you changed your family tree. Paying cash for a home is possible, very possible. What's hard to find is people willing to pay the price in sacrificed lifestyle.


I'll be entirely honest: For me, at twenty-three years old, even if Dave's book had been in my lap, I doubt if I'd have been willing. Heck, look at my last car purchase — I'm 34, and I'm not willing now. Sad, but true. I've come a long way ... but not that long, apparently.

Anyhow, I think that's a great story, particularly if you're in the midst of making some tough sacrifices now in anticipation of some lofty goal(s) down the road. The payoffs can be downright astounding.

Oh well ... then there's me, and my underachieving self. Me, and my fifteen-year, fixed-rate mortgage, with a payment that's well beneath 25 percent of my take-home pay.

At least in that regard, I'm within Dave's house-payment guidelines, right?

Plus I can sleep at night.

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— Posted by Michael @ 9:52 PM








15 Comments:
 

I'm not a Ramsey fan, but that's a great story. Thanks for sharing.

 

Nice story.But average people with a fixed income group go for it.And atleast more than 50% of the salaried class end up being broke.The attraction of consumer items coming in and credit card payment and ever rising interest cost will make general public care about what people think.Normally one is not a broke in the beginning.His spending in given cirsumstances make him so,and more than 75 % people do not properly plan.Simply they can not.Count the percentage.

 

I cringe when I think about my money decisions just a few years ago. I could have SO MUCH right now if I wasn't ignorant then! But, the point is that we know better now. I don't plan to borrow any money anymore either. "Neither a borrower nor lender be." It's that simple.

 

Good story, but even better punch line!

Who DOES care what the broke people think, anyway?

 

If Dave's book had been in HIS lap at a younger age, he wouldn't have done it either. He went hugely over his head speculating in real estate and went bankrupt. (which is why I disagree a bit with his take on bankruptcy.) And I wish he talked about being prepared in other ways, like adding food storage. The real test is whether or not you learn from your mistakes

 

Good stuff! The importance of a frugal lifestyle really can't be underated! Thanks for making that plain.

 

I disagree with the author in some repects. Debt has become an unavaoidable aspect of our soceity. Complete fear of it can also be a form of financial ignorance. In my opinion debt is acceptable under 2 curcumstances.
1. To earn income
2. To increase equity.

 

I am a 24 year old making about $50,000 a yearxx. I have never carried any debt until a car that I just bought. I now regret that purchase but you have affirmed my belief in not carrying any debt and only paying cash. Thanks for this blog as I will get back to saving my money like I should!

 

You can do it, bub. The sooner you deep-six your debt, the happier you'll be. Try it and good luck, baby! www.debtective.com

 

Making $50k and $30k in such a low cost of living area at young ages is unusual. Trying living on $80k in a more reasonable place where you don't save 50% of your salary. $80 is already in the 25% bracket of taxes.

 

I care about what broke people think. I know first hand that when you are in your 20's and have no car payment or house payments, that doesn't make your life richer or better off. I provided my 2 girls a fresh start with no house note or car note and they both messed up. I write about it in my articles. I'm known as the moneytutor.

Jo Ann Brown
http://wheretofindjoannbrown.blogspot.com

 

First, There is no way someone in their early 20's can earn $50,000 a year after taxes.

You would have to earn $100K before taxes to bring home $50k.

So WHO in their early 20's earns $100K a year???

Didn't he go to college??? Then what about Student Loan Debt??? Who paid for college??

 

Settle down, Beavis.

Just because *you* couldn't do it doesn't mean someone else couldn't do it, either. Ever hear of any successful young entrepreneurs? Since when does starting your own biz require a degree? Or student loans?

(And no, it wouldn't surprise me to learn that Dave fabricated this story just to make a point. Doesn't matter. I still like it.)

 

Dave Ramsey reminds me of Rich Dad Poor Dad...

He uses "old fashioned" money management techniques to sound like he knows what he's talking about but in reality he is just plagiarizing the wisdom of those who have lived before him.

Rich people make money because we KNOW how to GIVE PEOPLE what THEY WANT.

It's that simple. The RICH PROFITEER by given people what THEY ask for. If you want it, WE (the rich) can find and fun, and profitable, way to provide it for you.

The truth is, in America that you either come from money (and your family taught you how to manage it properly) or you live in the vast "college educated "middle" now lower class) and you have idea how to handle what little wealth filters though your fingers.

True, the poor could become rich but it would require AMBITION not CONSERVATIVE behavior. You have to be Ambitious and be willing to not only work hard but INVEST your $$$ into things that GAIN value. THAT is the key. Spending what you have on things that GO UP in value. It could be Jet Skis but they are Jet Skis that for whatever reason are in DEMAND to a particular group that WANTS VERY BADLY to buy them. Go figure... but THAT is the key that every fortune has been build on.

Think about that.

 

Somehow my last post contained grammatical errors so I am posting a corrected version... Yes I'm crazy like that...


Dave Ramsey reminds me of Rich Dad Poor Dad...

He uses "old fashioned" money management techniques to sound like he knows what he's talking about but in reality he is just plagiarizing the wisdom of those who have lived before him.

Rich people make money because we KNOW how to GIVE PEOPLE what THEY WANT.

It's that simple. The RICH PROFITEER by giving people what THEY ask for. If you want it, WE (the rich) will see that you want it and we will set out to find a FUN, and VERY PROFITABLE, way to provide IT for you. Whatever "it" may be.

The truth is, in America that you either come from money (and your family taught you how to manage it properly) or you live in the vast "college educated "middle" now lower class) and you have idea how to handle what little wealth filters though your fingers. You live the "American dream" where you have 6 kids (with reality TV on TLC you have 20+ kids...) And you have massive Mortgage Debt. The Rich pay CASH for their residence without exception as well as our cars, furniture, etc.

True, the poor could become rich but it would require AMBITION not CONSERVATIVE behavior. You have to be Ambitious and be willing to not only work hard but INVEST your $$$ into things that GAIN value. THAT is the key. Spending what you have on things that GO UP in value. It could be Jet Skis but they are Jet Skis that for whatever reason are in DEMAND to a particular group that WANTS VERY BADLY to buy them. Go figure... but THAT is the key that every fortune has been build on.

Think about that.

** Comments Closed on this Post **

Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


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