Posted on 12/28/2024 1:11:54 PM PST by Responsibility2nd
In a podcast, personal finance guru Dave Ramsey boldly declared that even if offered $1 billion at 0% interest for 10 years, he wouldn't take it. That's right, not even a billion dollars with no interest could tempt Ramsey to break his cardinal rule of never borrowing money.
……
"Mathematically, it might make sense," he admitted. "But I built a career and financial success on avoiding debt and I'm not about to change that now. Borrowing money is an unnecessary risk and I'm not interested in playing that game."
(Excerpt) Read more at finance.yahoo.com ...
His was useful advice when the US had a gold-standard, and we did not have a completely printed, fiat monetary system, with government debt as the main asset underpinning our financial system.
Now we live in an era of printed money and baked-in, guaranteed inflation. If you can buy an asset that produces dividends or returns greater than the politically manipulated interest rate, then it makes sense.
That's why most physics and computer science PhD's wind up in finance. Its become an arms race, and Wall Street and Washington DC is absolutely guaranteed to do better than the average American citizen.
Yes, obviously, but non-recourse debt does not leave your personal assets on the hook to satisfy the debt
Yes it does. If the bank forecloses on a car or mortgage and sells the asset at a loss you remain personally liable for the remaining debt.
Hey, the net present value of a billion dollars ten years from now is maybe two hundred dollars. :-)
Yeah, I’m not a financial advisor.
A word of advice from my time volunteering with kids in the projects. Go ahead and accept that you won't be able to motivate all of them. Live on the ones who change their lives and you'll be motivated to keep on keeping on.
Ramsey has a lot of good ideas and a lot of bad ones—personal finance is complicated stuff and everybody’s situation is different.
We have relatives that should have listened to one pieces of his financial advice:
—Our always broke small farm owner relative... Ramsey loves to say “Farming is a hobby for rich people. You are poor.”
At the other extreme I always tell the story of the wealthiest people I ever met—other relatives.
They made a fortune because they purchased modern art from unknown artists back in the 1960s and 1970s. They had the magic touch and got ridiculously wealthy from that art.
This is a very bad plan for the vast majority of people.
:-)
Good advice, thanks.
I’m going to be the older white guy talking to minority inner city kids.
I’ll spend the first session telling them why I want to help them, and let them know I’m not benefiting in anyway monetarily by helping them.
I see too much hopelessness out there, and want to show there is a good future out there if they want it.
And a good future outside of government dependency.
ramsey’s a fool if indeed he would turn down a billion dollar loan for ten years interest free ...
he could invest in short term Fed paper at 4.5% annually, compounded monthly, ending up with $1,566,992,776.28
pay back the ten billion, with profit of $566,992,776.28 ...
[that’s assuming no profit taking during the interim]
Have you ever borrowed money at 0%? The agreement is that you never miss a payment and if you do, the rate goes to 25%. Do you know who decides if you miss a payment? They do.
That's correct. Most people have zero ability to evaluate risk - thanks to government education - so giving them advice on hoe to use debt to build wealth would just lead them to disaster. Most Americans today think small and live small, just trying to keep the little bit they have managed to accumulate. Ramsey is the right advisor for them.
What age did you purcgase your house, for how much money?
What is your current income?
Mortgage free at 28? Did you inherit a house or are you among top earners for the group and follow Dave Ramey’s advice if paying off your mortgage?
Or are you homeless with no home to pay for?
Yup—if you listen to the callers to Ramsey’s shows it can get depressing in a hurry.
The most common issues:
—Huge college debt for worthless or near worthless degrees
—Buying fancy new cars/trucks when they cannot afford the monthly payments
—Buying houses in bad/dangerous neighborhoods (without doing their homework beforehand)
—Divorce horror stories
—Family issues—for example when one spouse spends a lot more than the family can afford
—Credit card debt out of control
A car loan is not made on a non-recourse basis.
“ A non-recourse loan is a type of secured loan where the lender can only seize the collateral provided (e.g., property) if the borrower defaults, without pursuing the borrower’s other assets or personal liability, even if the collateral’s value is insufficient to cover the debt.
“These loans are common in real estate and project financing and carry higher interest rates due to the increased risk for lenders. Borrowers typically need strong credit and financial profiles to qualify, as lenders rely solely on the collateral for repayment.
All debt is based on everything staying the same. That $900 car payment is fine until you lose your job.
When I bought my last car, we decided to finance. Our credit union gave us a 6% rate. One bank turned us down because of our income. I have over a million in that bank. It’s because the bank does not talk to their wealth advisors. Our investments are at 9%. If I yank that money out, it gets taxed at 25% because our income is up while I am working.
I’m not getting into the whole discussion overall but I have to laugh at the idea of credit cards at 12 to 18%. I got to believe that ain’t happening anywhere nearby
That said, even at the fantasy level of 12% credit cards are a horrible way to actually borrow money.
On the other hand, used properly they’re a great way to manage money.
I’d take it, too. :-)
Interesting. I live in Texas No non recourse loans with one exception. Per AI
Texas is partially a non-recourse loan state, with specific rules depending on the type of loan:
Home equity loans in Texas are non-recourse loans. This means that if you default on a home equity loan, the lender can only seize and sell the property to recover their losses, without pursuing your other assets or income.
First and second mortgages in Texas are generally recourse loans. In these cases, lenders could potentially pursue a deficiency action if the foreclosure sale doesn’t cover the full loan amount.
For home equity loans, Texas law specifically states that they must be “without recourse for personal liability against each owner and the spouse of each owner, unless the owner or spouse obtained the extension of credit by actual fraud”.
It’s important to note that while Texas offers non-recourse protection for home equity loans, it doesn’t extend this protection to all types of mortgages. The state’s approach aims to balance consumer protection with lender rights, particularly in the case of home equity borrowing.
However the maximum loan rate on a Texas HEL is 80%. There’s little chance of a lender losing money on a HEL.
If I were to take any financial advice from someone over the internet, would it be Dave Ramsey, who is worth in excess of $200 million or some yahoo posing as a financial guru here on Free Republic?
Hmmmmm, tough choice.
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