Gen Z ignoring hack Dave Ramsey

[Matt]

https://finance.yahoo.com/news/d-rather ... 00987.html

I'm sure this absolute might help some people with finances, but the idea that he's any kind of authority has always been laughable.

[bmw]

I haven't listened to his program enough to have an opinion one way or the other, but one piece of advice I remember him giving that I absolutely agree with is that unless you're a millionaire, don't buy a brand-new vehicle.

I do get a good chuckle out of this though (from your linked article) :

In a recent TikTok, Kate Hindman, a 31-year-old administrative assistant in Pasadena, California...[says]...

“I’m not willing to do anything to get out of debt,” she says. “I’m not willing to eat rice and beans everyday, I’m not willing to have three jobs and not spend time with my children. I’m not willing to forgo my favorite salad on a Friday.”

Hindman explains that her bills are so massive that a little extra cash saved here and there isn’t making a major dent in her debt. “The cost-of-living and low wages is to blame for the financial woes of most Americans,” she says. “Being told that we can incrementally make these big differences if we just give up our quality of life for five, 10 years is absurd.”

I will agree with her to an extent that little savings here and there don't necessarily add up to all that much. But how typical is her "it's somebody else's fault that I'm broke" attitude among her generation? Sounds to me like she wants the American dream but doesn't want to actually pay for it. Her entire video:

https://www.tiktok.com/@leftistmommy/vi ... jkXjZyE55q

So she racked up $30,000 in credit card debt and can't afford the $1500/month payment. Maybe she should have thought about that before having kids and racking up that debt in the first place.

Entitled little brat.

[Graham Wellington]

https://finance.yahoo.com/news/d-rather ... 00987.html

I'm sure this absolute might help some people with finances, but the idea that he's any kind of authority has always been laughable.

I'm mixed on Ramsey, but the entitled, spoiled Gen Z brats interviewed in this article instantly drove me to Ramsey's side for this. Not willing to make any sacrifice to improve their financial situation. Sometimes, when push comes to shove, you might need to give up that $6 coffee for a bit. These people are still very much children.

[MWmetalhead]

For folks who are irresponsible with money due to a lack of self control or lack of financial literacy, his advice can be useful, but for many folks, much of his advice is not very practical.

Using debit cards or cash for retail purchases - especially the former - is stupid for those of us capable and willing to pay our credit card bills in full monthly. Credit cards offer liability protection, extra warranty coverage in some cases, and reward dollars or points. Paying with debit if a data breach occurs could put your checking acct balance at risk.

Taking out a 15 year mortgage at times when the yield curve is flat or nearly flat is stupid when 30 year money can be had for an extra 0.3% or 0.4% APR. Prepaying a mortgage in many instances is also foolish. I have a 30 year fixed rate below 3 percent. Why would I want to use extra cash to prepay super low rate debt on an appreciating asset? My home value of my current home has risen at a CAGR of about 6 percent. That extra money should be invested in securities or in high yield savings instead.

His advice to pay cash only for cars is similarly foolish in many circumstances. If I can average an 8 to 12 percent average yield per annum investing in ETFs or mutual funds(an S&P 500 index fund, for example, is a great idea for a long-term investment), why would I be unwilling to borrow at a 3.9% or 4.9% APR to finance a car? Cripes, even some zero risk investments are paying a 5.0 percent or greater yield at the moment. Moreover, because dealers make money from finance charges, the out-the-door price for the vehicle will often be raised if a buyer insists on paying only in cash.

I will say his advice to choose used cars over new can be wise, but used car buyers certainly need to do their homework. Not all sellers are created equal, and some used car warranty companies are not reputable.

Another area where I *will* agree with him to an extent is on his retirement savings advice, although I would modify his advice to say the company match for 401k or 403b should be counted for purposes of the 15 percent of pretax gross income investing benchmark.

[Matt]

I haven't listened to his program enough to have an opinion one way or the other, but one piece of advice I remember him giving that I absolutely agree with is that unless you're a millionaire, don't buy a brand-new vehicle.

I do get a good chuckle out of this though (from your linked article) :

In a recent TikTok, Kate Hindman, a 31-year-old administrative assistant in Pasadena, California...[says]...

“I’m not willing to do anything to get out of debt,” she says. “I’m not willing to eat rice and beans everyday, I’m not willing to have three jobs and not spend time with my children. I’m not willing to forgo my favorite salad on a Friday.”

Hindman explains that her bills are so massive that a little extra cash saved here and there isn’t making a major dent in her debt. “The cost-of-living and low wages is to blame for the financial woes of most Americans,” she says. “Being told that we can incrementally make these big differences if we just give up our quality of life for five, 10 years is absurd.”

I will agree with her to an extent that little savings here and there don't necessarily add up to all that much. But how typical is her "it's somebody else's fault that I'm broke" attitude among her generation? Sounds to me like she wants the American dream but doesn't want to actually pay for it. Her entire video:

https://www.tiktok.com/@leftistmommy/vi ... jkXjZyE55q

So she racked up $30,000 in credit card debt and can't afford the $1500/month payment. Maybe she should have thought about that before having kids and racking up that debt in the first place.

Entitled little brat.

Yeah, not exactly a shining example.

[Rate This]

For folks who are irresponsible with money due to a lack of self control, his advice can be useful, but for many folks, much of his advice is not very practical.

Using debit cards or cash for retail purchases - especially the former - is stupid for those of us capable and willing to pay our credit card bills in full monthly. Credit cards offer liability protection, extra warranty coverage in some cases, and reward dollars or points. Paying with debit if a data breach occurs could put your checking acct balance at risk.

Taking out a 15 year mortgage at times when the yield curve is flat or nearly flat is stupid when 30 year money can be had for an extra 0.3% or 0.4% APR. Prepaying a mortgage in many instances is also foolish. I have a 30 year fixed rate below 3 percent. Why would I want to use extra cash to prepay super low rate debt on an appreciating asset? My home value of my current home has risen at a CAGR of about 6 percent. That extra money should be invested in securities or in high yield savings instead.

His advice to pay cash only for cars is similarly foolish in many circumstances. If I can average an 8 to 12 percent average yield per annum investing in ETFs or mutual funds(an S&P 500 index fund, for example, is a great idea for a long-term investment), why would I be unwilling to borrow at a 3.9% or 4.9% APR to finance a car? Cripes, even some zero risk investments are paying a 5.0 percent or greater yield at the moment. Moreover, because dealers make money from finance charges, the out-the-door price for the vehicle will often be raised if a buyer insists on paying only in cash.

I will say his advice to choose used cars over new can be wise, but used car buyers certainly need to do their homework. Not all sellers are created equal, and some used car warranty companies are not reputable.

Another area where I *will* agree with him to an extent is on his retirement savings advice, although I would modify his advice to say the company match for 401k or 403b should be counted for purposes of the 15 percent of pretax gross income investing benchmark.

As to cars, why would you buy new and lose 20% by leaving the lot?

Credit cards… if you’re in a position to pay in full monthly and you’re looking at 500-1,000 on a credit card you probably aren’t in need of his advice. Most of the people looking for his advice are not in that position so the idea of paying in cash and being done with it is probably good for those people. Personally I’ve had to use credit cards as a lifeline several times… credit cards are a lousy deal all the way around. If you can afford to pay the balance I wouldn’t even bother having one of those POS cards.

There is no circumstance where a level of debt you have to pay interest on for several years is superior to owning the thing and being done with it. Zero. Zilch. Nada. Unless of course you enjoy paying somebody else the interest for some weird reason.

[TC Talks]

I think advice from a baby boomer "Prosperity Faith" white guy gets lost on 20 something women who are making 83% of their male counterparts.

It used to be that starter homes could be purchased by 20 something's. Today those homes are owned by fortune 500 corporations and Ramsey disciples who invest in starter homes for the rental income.

How does a 20 year old respond to those who are putting home ownership out of reach?

I bought my first house at 24 with 5% down and ridiculously low interest rates. I could have gotten an interest only loan too. I doubled my investment in 18 months.

Gen Z has lost hope to achieve some of the things I had access to. Maybe when they reach their 30's.

Year-over-year rental price growth will rise from 5.8%, as of June 2022, to 8.4% as of May 2023, according to a Federal Reserve Bank of Dallas forecast that uses data from the federal government’s consumer price index.

Similarly, an upcoming Moody’s Analytics forecast predicts a rent growth rate of 5% to 7% during that same time, says Thomas LaSalvia, a director of economic research at the financial analytics firm. Before the Covid pandemic, annualized rent price gains were about 4% to 5%, he says.

[Rate This]

I think advice from a baby boomer "Prosperity Faith" white guy gets lost on 20 something women who are making 83% of their male counterparts.

It used to be that starter homes could be purchased by 20 something's. Today those homes are owned by fortune 500 corporations and Ramsey disciples who invest in starter homes for the rental income.

How does a 20 year old respond to those who are putting home ownership out of reach?

I bought my first house at 24 with 5% down and ridiculously low interest rates. I could have gotten an interest only loan too. I doubled my investment in 18 months.

Gen Z has lost hope to achieve some of the things I had access to. Maybe when they reach their 30's.

Year-over-year rental price growth will rise from 5.8%, as of June 2022, to 8.4% as of May 2023, according to a Federal Reserve Bank of Dallas forecast that uses data from the federal government’s consumer price index.

Similarly, an upcoming Moody’s Analytics forecast predicts a rent growth rate of 5% to 7% during that same time, says Thomas LaSalvia, a director of economic research at the financial analytics firm. Before the Covid pandemic, annualized rent price gains were about 4% to 5%, he says.

They should start by picking up a trade in their early 20’s with little to no debt from the jump. I wish I went that route to begin with. You can easily make 6 figures and not be crippled and get way ahead of your peers that way.

[MWmetalhead]

Personally I’ve had to use credit cards as a lifeline several times… credit cards are a lousy deal all the way around. If you can afford to pay the balance I wouldn’t even bother having one of those POS cards.

I would much rather use a credit card than a debit card for online purchases for the reasons I stated earlier. I also get 6 percent cash back on groceries and streaming services using my AMEX Blue Cash Preferred card.

There is no circumstance where a level of debt you have to pay interest on for several years is superior to owning the thing and being done with it. Zero. Zilch. Nada. Unless of course you enjoy paying somebody else the interest for some weird reason.

Watch this to see why prepaying a mortgage aggressively may be very foolish:

https://youtu.be/-UohbS7UaSk?si=GFf6pgjUCNxZrjJ0

If your home mortgage interest rate is high, then prepaying makes sense. If your home mortgage interest rate is lower than an APY that can be earned on a risk free or low risk investment, then prepaying is stupid.

From 2011 to 2016, I prepaid my mortgage (at that time) like crazy. I was actually debt free on my old house when I sold it. At the time, the strategy made sense. Money market and CD interest rates were lousy, even at the online banks. The home values in Warren still were well below 2005 levels; I was underwater from an LTV standpoint on a house I wanted to sell within five years. I also was already maxing out my employer's 401K match, and that was the point where I began making too much annual income to be eligible to contribute to my Roth IRA.

Today, I have at least $250,000 in home equity and my home mortgage interest rate is much cheaper than the annual yield on even a long-term CD. I would be destroying wealth by prepaying on my current mortgage. I would, in effect, be earning a negative return on my money.

[Rate This]

Personally I’ve had to use credit cards as a lifeline several times… credit cards are a lousy deal all the way around. If you can afford to pay the balance I wouldn’t even bother having one of those POS cards.

I would much rather use a credit card than a debit card for online purchases for the reasons I stated earlier. I also get 6 percent cash back on groceries and streaming services using my AMEX Blue Cash Preferred card.

There is no circumstance where a level of debt you have to pay interest on for several years is superior to owning the thing and being done with it. Zero. Zilch. Nada. Unless of course you enjoy paying somebody else the interest for some weird reason.

Watch this to see why prepaying a mortgage aggressively may be very foolish:

https://youtu.be/-UohbS7UaSk?si=GFf6pgjUCNxZrjJ0

If your home mortgage interest rate is high, then prepaying makes sense. If your home mortgage interest rate is lower than an APY that can be earned on a risk free or low risk investment, then prepaying is stupid.

Most people are not paying off their card’s every month… there’s a reason credit card debt is through the roof. People drown in it and pay the interest forever. If you can make the full bill every month good for you but you’re more an exception than a rule.

You could always pay for the house in cash and invest indefinitely the money you would have paid on your mortgage. Now you own the house and you’re investing all the money you would have been feeding to the house.

Personally I want full control of my money… seeing $300 in interest taken a month on my car (the interest rate is about 9 but I had little choice at the time) makes me sick inside. Seeing the credit card statements that say if you make the minimum payment you’ll be done in 11 years is disgusting. Being debt free is the only objective now. And in 10 months I’ve paid off about a 10 grand loan. I am intentionally living paycheck to paycheck and putting every last extra dime towards paying off my debts. Not gonna take it anymore.

[bmw]

Most people are not paying off their card’s every month…

I have one lone credit card with a $750 credit limit that I use for gas and groceries. I've paid the balance in full every month for a good 10 years now.

[TC Talks]

They should start by picking up a trade in their early 20’s with little to no debt from the jump. I wish I went that route to begin with. You can easily make 6 figures and not be crippled and get way ahead of your peers that way.

Not all young women are drawn to traditional male occupations. I can't see a Swifty become a journeyman.

[MWmetalhead]

You could always pay for the house in cash and invest indefinitely the money you would have paid on your mortgage. Now you own the house and you’re investing all the money you would have been feeding to the house.

Today, with 30 year mtg rates near 7 percent, I agree that new homebuyers should consider maximizing their down payment to avoid having to borrow at expensive rates.

The problem with Ramsey is he ignores interest rate cycles, which is foolish. My 30 year fixed rate is 2.875 percent. I'd be a moron to prepay on that loan right now. Deposit yields can still be had for 5 percent.

[TC Talks]

You could always pay for the house in cash and invest indefinitely the money you would have paid on your mortgage. Now you own the house and you’re investing all the money you would have been feeding to the house.

You are overlooking the fact that borrowing on the front end would allow you to keep $200k, $300k, $400k or whatever in your pocket that could be invested in liquid assets as opposed to being applied toward the purchase price of the house.

Granted, there are some people who would be tempted to piss away all that money, in which case Ramsey's advice is relevant and prudent.

There are also folks who are uncomfortable investing in anything other than very safe instruments (CDs or money market accts) for whatever reason, in which case minimizing mortgage borrowing in the current market certainly makes sense, as 30 year mortgage rates are near 7 percent.

How does a 25 year old pull that off?

[bmw]

If I can average an 8 to 12 percent average yield per annum investing in ETFs or mutual funds(an S&P 500 index fund, for example, is a great idea for a long-term investment).

I did alright last year, on my investment in TQQQ (triple NASDAQ average). Added to what I made already this year, my $3615 to start the year last year now has a value of about $13,000 (most of which I sold 2 weeks ago and have as cash sitting in my account). Not sure what my actual APY was last year but it was well over 100 percent.

Currently waiting for a pullback to get back in.