wannabee

The thing you have to understand about Dave Ramsey is that his target audience is people who have a really hard time managing money and have either:
A) Spent too much on college and now have too much debt, or
B) Spent too much on junk and now have too much debt.

It’s a one size fits all approach to getting and staying out of debt, and it actually works really well. We used it to pay off all our student loans in just a couple of years. The debt snowball method is not necessarily the most logical sequence of paying down loans, since you start with the smallest loan rather than the one with the highest interest rate. It’s meant to give you a psychological edge and keep you motivated to stick with it. It’s also designed to get rid of your bad debt first and your “good” debt last.

But yeah, his investing advice isn’t great. Find yourself a good financial planner for that.

captive apple

Have cash, no debt, invest?
That is common sense.

SonicFlyer

https://yourlogicalfallacyis.com/ad-hominem



Then he has expanded his investing advice since I last heard him. But yes, still, there is more to it than just what he describes. How much churn, which sectors, rebalancing, actively managed or not, etc are all factors hat are equally as important.

rickair7777

Some commentary on aggressive debt reduction and aggressive retirement savings....

I'm all for that, conservative by nature, and practiced what I preach from a young age (with a few strategic exceptions, career change and dream home).

However...

If something very bad happens in the future, either to you personally or the economy/society generally, your hard earned sacrifices and savings may end up worth far less than you imagined, or even nothing at all.

If push comes to shove you can't eat or wear money in a digital bank account, and investment instruments are only as valuable as other people think they are at the time when you need to cash them in. You can still live in your paid-off house, but you darn well better still have a job so the government can keep getting their property taxes.

Point being don't forget to enjoy life a little along the way. Because there are many folks who are enjoying life TODAY on the fruits of your labor. They are promising to pay you back someday, but that's only going to happen if all of the stars line up right

The wealthiest members of our society, the ones living very high on the hog, are all mortgaged to the hilt. There's a reason for that... they like other people supporting their lifestyle. If it all comes crashing down, they don't want to be the ones left holding the bag.

That's just some philosphy, not "financial advice".



With that said, pilots (more so than white collar) can be subject to catastrophic long-term (permanent) loss of livelihood. So you need to have a Plan B for that contingency. Whatever Plan B is acceptable to you, but you should have one.

That might involve having everything paid off and living modestly so you can keep your lifestyle on LTD, or it could involve a planned downshift of lifestyle. But you want to plan so you're not having to liquidate all of your assets in a fire sale while also dealing with medical issues.

sailingfun

So Dave’s advice is to payoff debt and save money. How much do people pay Dave for those bits of financial wisdom?

TiredSoul

Zero, nothing....it’s free.
Syndicated radio show and free apps and YouTube podcasts.
Been listening to him for 3 years now and he’s awesome.
We have no car payments, no cc payments and on accelerated mortgage payments that will have our house paid off in another 6 years for a total of 17 years out of a 30-year mortgage.
We’re doing 90% DR as we’re building an emergency fund which is equal to 6 months total income not 6 months of expenses.
So push come to shove and we button down the hatches we should be able to go a year if we’re both laid off.
Basically every year I get a pay raise the extra money is made to disappear and we just maintain our budget and lifestyle.
Same come upgrade time.
All the extra money will go to mortgage then savings and investments.

Amphibian

We follow Ramsey methods and practices at our house as well. They work.
As an older and more experienced aviation mentor recently told me "we should currently enjoy our blessings because things can change very rapidly in our profession".

Name User

If you are serious about cleaning up your finances you first need to see where you are spending your money. Check out a financial aggregator like Personal Capital (my favorite) as it will boil down where your spending goes each month/year.

What is interesting about this approach is it allows you to focus on where your money is going. If you want to become financially free you must do two things a) reduce overhead expenses and b) buy things that make you money, not cost you money.

The argument that a car is bad debt is superfluous. I would argue it can be good debt (if reasonable and reliable) AND bad debt (if you bought a luxury car). Same goes for a house. You have to live somewhere, but at some point a house really becomes a liability as it costs money to maintain, heat/cool, and pay taxes on. So clearly something larger and more expensive than needed (not wanted; two very different things) becomes a liability.

I have no idea what your background/working history/age is. But at the money we are making now as professional pilots, there is ZERO REASON to be struggling. And a 15% savings rate is absolutely horrendous.

In 2019 our net worth increased $600k (we are in our 30's). If I had decided to pay off mortgage debt instead of investing the money instead, it would've been a LOT less.

As an example, $250k would've returned $75k in the market last year. At 3% interest you would've "saved" under $10k in interest paying that down. You would've lost over $65k paying off your mortgage...in a single year...

Low interest debt is not a big deal as long as you are accumulating assets. It's leveraging up and buying the big house, $40k-$50k car, etc while having nothing to your name that gets people in trouble.

Things will turn for this profession. If it's not the economy it will be single pilot or autonomous vehicles. The getting is good right now. Stuff cash hand over fist into investments (SP500 fund 100% is my recommendation, nothing else needed beyond rentals if you want to expand your base after hitting a mil or so) and keep expenses low. Make hay while the sun is shining.

SonicFlyer

Ehhhh debt on things that depreciate is never a good thing. I understand sometimes it is necessary but should be avoided if possible.

Very good point, but you forget to factor in risk. If for whatever reason you go bankrupt, in many states they can't take your primary residence. Having a house that is paid off increases your financial security.

JayBee

I think you hit the nail on the head with what I was thinking. I want to get while the getting is good but I also don't really want to tap into that 6 months of emergency fund savings. So its aggressively pay off car loan and then mortgage or put some more money into investments.

I'm 45 - first career mechanic, second career short stint with Air Force, rolled into the Reserves and concurrently got my helicopter license, started at the airlines 2017 and still doing MIL stuff in Reserves. So looking at civilian 401k at Regional airline, 401k at Military and future pension from Military. All my previous retirement savings I cashed in to get my Helicopter license. Freshly divorced concurrently with the Regional Airline in 2017 so started all over from scratch. Bought a modest house and modest car in 2018. So I'm easily in the black even with car and house payment.