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177 Comments
- cosmicray9000, on 08/24/2009, -3/+93Now they need to do a video on how to make 12 percent a year in a dead economy. Solar power looks like a good bet.
- Nidy1, on 08/24/2009, -3/+67So which virtually no risk mutual fund is giving me 12%? Really Dave Ramsey, I'd love to know.
- dalittle, on 08/24/2009, -2/+6012% is kind of a pipe dream, but no car payment is a great advice. Even though people will say otherwise, I think mortgages are the same kind of bad deal and I am going to pay mine off 20 years ahead of schedule. Any time anyone says that if you want to give them $5k plus a year for holding paper it is a bad deal for you. You are paying taxes on the house so add that in and no matter what kind of market you are in you are probably breaking even on your house's appreciation.
- massminority, on 08/24/2009, -2/+51I think that was the first logical, serious flash animation that I have ever seen...ever
- eelozano, on 08/24/2009, -1/+49Other than the 12% this was pretty good. Even at a much lower rate of 6% you'll still come out pretty good in the end.
Especially if you decide to adjust a few more of things you waste money on. - zaren, on 08/24/2009, -3/+48"new car every six years"?
I've been driving for over 20 years, and the closest I've ever come to a new car was a ten-year old Cavalier - ran that thing into the ground, I did. My current car is eighteen years old... and doesn't qualify for the gov't tradein program by two MPG.
"average car payment of $475 a month"?
Good Lord, every car I've had to make payments on hasn't totalled up to $475 a month!
"stock market average of 12%"
Seriously? I'm supposed to get all this magical car money from the stock market? What market is he using that's still getting 12% returns a year? - palos99, on 08/24/2009, -1/+33If your car is getting totaled every 2 yrs, maybe you're the bad driver...? :P
- elenaadamscom, on 08/24/2009, -0/+31Great video, but it's hard to understand why the majority of consumers just don't get that and go on buying new cars.
My husband and I basically do this (I don't think their math was quite right, though). We will never buy a new car; private sales of used cars only. That means no debt, and if we do our homework right, we end up spending less on maintenance than cars just outside their warranty. That leaves us more money to invest/save.
What's the appeal of a new car? If someone can explain it, I'd actually like to know, because I see no upside. - sipsyrup, on 08/24/2009, -2/+29New car smell; new warranty
- Shawn4168, on 08/24/2009, -3/+29Dave Ramsey is one of the best financial advisors out there. He became a millionaire but did it through borrowing more than he could afford, went bankrupt, and then made all of his money back again many times over by avoiding debt entirely. He really knows what it takes to become wealthy in this country. I highly recommend reading one of his books or listening to his daily radio show/podcast. (www.daveramsey.com)
- Hillsfar, on 08/24/2009, -0/+20It's not just the 12% pipe dream.
1. There' also a couple of trade-offs. Lower auto insurance and lower vehicle taxes - but higher repair costs. An old car that costs $1,500 or even $6,500 is definitely going to have issues and be at risk for some some major repairs.
2. Also, most people don't pay $475 car payments. It's closer to $250 to $350 per month because the car they buy is more like $13,000 to $18,000 whether new or used.
That said, it's a great presentation. The numbers may be unrealistic, but it's still the smart way to go. I'm still on my 9 year old truck that I originally bought new, but I don't plan on buying a new car again. - Entroper, on 08/24/2009, -0/+19Knowing that all of the miles on the car are the ones you put on it can be a big comfort. I've only bought used cars so far in my life, and I've always wondered what the previous owner didn't tell me. The warranty is nice, too (sort of -- can be not so nice if you have to use it and deal with a dealer that doesn't want to help you).
If you do the math, buying used is always the way to go. But buying new can offer a certain peace of mind, and even if I didn't choose it, I don't think that's worthless. - motivatedguy, on 08/24/2009, -0/+17Dugg for the couple living paycheck to paycheck but with two new cars in the driveway. I know a lot of people like that. I bought a used Honda Civic Si 2 years ago and I'm gonna keep it for a long time.
- ChuckDees, on 08/24/2009, -0/+16Haven't had a car payment in 8 years.
I'll never finance a car again. - pk386, on 08/24/2009, -0/+16Dave Ramsey on the front page of DIGG?!?!
how did that happen. It must be Bizarro day and I don't know it. - gankige, on 08/24/2009, -5/+20"Wrap" vehicle advertising pays anywhere between $100 and $3,200 a month.
Drivers are selected based on their location, age, sex and car type. They don't offer free vehicles but over 55,000 people have volunteered to have their personal cars wrapped.
More than 400 of these cars are on the road right now....not a great ratio, but it made a difference for those 400... - biogears, on 08/24/2009, -1/+15I was with ya until the "you Americans..." part.
- nomoreink, on 08/24/2009, -1/+11http://www.google.com/finance?chdnp=1&chdd=1&a ...
There's your 12%. Dave Ramsey looks at long term investing when he talks about the stock market. Sure we're down in the short term (short term being 2 years, compared to the 40 years you may want to save for retirement), but the stock market has a pretty good history of going up 12% a year, once again, on average. - sh0x, on 08/24/2009, -1/+10I bought an 11 year old convertible for $6700 cash. I've put maybe $1000 in maintenance into it for the last 3 years. When I pulled into the parking lot at work, the CEO said, "You mean that's not a brand new car?"
Somebody hit the car yesterday in a parking lot. I only have liability on it because, well, would you pay collision on a car worth so little? But the accident was his fault, so it'll be paid for. If it was a new car, I'd probably be freaking out. Instead? I think, "Cool. I get a new paint job."
For some reason, some people think buying a used car will make you look like a pauper. Shop carefully and you can get stuff that's better than new sometimes. Would I have rather paid $14,000 for a brand new Saturn Ion or something? Hell no.
Meanwhile living within my means has allowed me to refinance into a 15-year loan on my house, which should be paid off in 8 years, because that's where that money I would have paid for that car loan is going.
In a few years, when I have neither a house payment or a car payment, I figure the possibilities are damn near endless. - pshuman, on 08/24/2009, -1/+10Great video, in theory. My thoughts & responses to other comments:
- Auto loans are silly. They typify the American exuberance that got us in the financial mess we are in. People "buying" things they don't need with money they don't have.
- 12% is a difficult number to sell as a reasonable mutual fund return right now. They would get less push back if they used a more sane return these days. That said, why didn't I pump ever dime I had into the Market in Nov 08?
- If you really want a new car, keep it at least 10 years and pay cash. --Clark Howard
- The only allowable debt should be on appreciating assets (e.g. house (as long as you didn't buy in 2006)) --Crown Financial
- As someone who only buys used cars, it pains me to see Clunkers4Cash sending working used cars to an early grave, driving up the used car prices. - mrtroy32, on 08/24/2009, -1/+10Once you have enough built in the savings account, you can STOP paying into it and just buy new cars off the interest every 6 years. Watch the vid till the end, it talks about that.
- brbubba, on 08/24/2009, -0/+912% is optimistic. I researched this for another project and the S&P 500 was on average 9% over the last 50 years. Still not too shabby.
- roebeet, on 08/24/2009, -1/+9This American knows it, so please don't generalize.
- brettmjohnson, on 08/24/2009, -1/+9Yeah, I'm up more than 25% YTD this year too. Still doesn't make up for the down 40% 18 months ago.
- PsychoPNut, on 08/24/2009, -1/+8i plan on winning the lotto, so im good. good video though.
- inactive, on 08/24/2009, -5/+12I only buy old cars and run them till they fall apart! And with all the bad drivers out there I usually get hit and the car totaled about once every two years. Example I got a 2000 Winstar mini van for $1000 put 4 tires on it $400 fixed the brakes $120 etc. drove it for three years it got hit and totaled out. I get $3000 from insurance company, if I had a new car $400 a month for 3 years = 14,400. I made $1480 because oil changes normal maintenance would be the same.
- tgc1, on 08/24/2009, -0/+7I think you guys are all looking too far into this. And nit picking the idea to death.
The point is you don't have to be an idiot and go buy a brand new car and stick yourself with tens of thousands of dollars in debt so you can be a big shot only to have the car lose most of its value in the time you own it. Cars are NOT assets. They are depreciating liabilities. And that is what this presentation says, basically.
I agree with it because it just so happens to be the way things used to go. My grandparents and even my dad are savers. Whereas my generation is the debt generation. We buy ***** we can't afford and rack up debt like it's going out of style. Paying yourself is just a wise thing to do. But don't take my word for it. The banks spend millions every year finding new ways to ***** us all out of our money. And these new car sales men/women will tell you the sweetest story ever told just so long as you sign that damned contract.
// Car is 15 years old this year. I still absolutely love it. - lalder, on 08/24/2009, -0/+7Hey it works, when you own nothing, you pay check adds up super fast! For 20 years I struggled with debit and after finally getting control of everything, I am at a point I am not sweating much of nothing. Still have a mortgage and a student load, but that's it. Blood pressure had dropped, I'm actually have some fun and there is no worries. I have 26,000 in a the bank for a another 'car' when I want to go up (the last two were paid for by interest).
- wstrucke, on 08/24/2009, -0/+6I think the author mentioned buying a used POS first and not the $27,000 $475/mo vehicle, hence no initial payment. Granted he's using best case numbers and fudging things a little (like you're thinking, where does the initial money come from?) but the point is solid.
- LarkStew, on 08/24/2009, -1/+6How to get rich? Write a book explaining to people how to get rich.
- jdames1980, on 08/24/2009, -0/+5Once cars reach middle age their depreciation slows rapidly. In theory you could have gotten a good deal on the car, and then sold it for the same price to someone else a year later. They just wouldn't have got such a good deal as you, but it still wouldn't really be unreasonable.
- linagee, on 08/24/2009, -0/+4Is there a website that lists all the places that will wrap your car for you and pay?
- Ascus, on 08/24/2009, -1/+5100% agree with the premise. Buy a car cash, if you can't afford to buy the car cash don't buy it. 12% on investments is quite dated, best I can get is about 6% right now. Although for businesses, leasing sometimes is worth while because of tax issues, for a person long leasing is always a bad deal, if they don't get you at front end, they will get you for "damage", "abuse" and mileage overages.
- HeavyWave, on 08/24/2009, -1/+5But if everyone buys used cars where will they come from??
- gizram84, on 08/24/2009, -4/+8Dead? You're investor sucks then. YTD, I've earned over 20% interest in the stock market.
Edit:
Just logged into my online account. Make that 27.3% YTD - jpschlosser, on 08/24/2009, -1/+5The 12% mentioned in the video is for LONG TERM INVESTING... 1 to 2 years of a bad economy isn't long term.
- danesparza, on 08/25/2009, -0/+4What a smug comment from somebody who's likely broke.
;-)
My portfolio is up 22.28% in the last 4 months alone.
Don't believe the ***** media. You'll just get a ***** life. - BenRoth, on 08/25/2009, -0/+4@SmpleJohn: You do know that it's "rear view" and not "review" right? Just lookin' out, we all have things that we say incorrectly without knowing it, like my friend who called notebooks "labtops" for a very very long time.
- filolif, on 08/24/2009, -0/+4The saddest thing is that this approach might be considered novel for some people. If you can't afford it, don't buy a new car!
- shadedecho, on 08/24/2009, -0/+4That's better than 99% blowhards in washington. At least he has some common sense.
- fkhairallah, on 08/24/2009, -1/+5Cute presentation, good advice, but 12% return on a mutual fund? Consistantly for 30 years? Common!
Even factoring risk out of the picture, typicl market returns are 8% over the long term. Factor in inflaction (4%?), and of course uncle sam wants his share (2%?), and you are looking at about 4% real return. If you are lucky (as in you can now bring risk back into the picture).
People should try to minimize the loans they carry and buy used cars unless they can afford new one. But this outlining a best-case scenario that is not realistic. - lumpking69, on 08/24/2009, -0/+4How do I download this video?
- inactive, on 08/25/2009, -0/+3great advice-- to anyone who went to a real university is already well aware... i hope.
- enzomedici, on 08/25/2009, -0/+3Except that you can't make 10% interest in a mutual fund. And some people's mutual funds got wiped out in the recent downturn.
- zoomaKabu, on 08/24/2009, -2/+5The Dow Jones Industrial average is flat for the last five years. So putting savings under your mattress or in the Dow for the last five years you'd have the same amount. Except, you'd probably have paid management fees in a mutual fund so you would actually have lost 3-5% on the mutual fund.
- Stieffers, on 08/24/2009, -0/+3Why don't you invest when the market is down? I had a stock triple. Went from $10 to $30. Unfortunately I only had ten shares.
- shadedecho, on 08/24/2009, -0/+3Shocking that we might actually have to exercise self control and patience to get ahead in this me-me-me-now-now-now society. Sacrifice is the name of the game. "Live now like no one else, so later you can really live like no one else." Short term gratification leads to long term headache, but short term headache leads to long term gratification. Take your pick.
- metaldwarf, on 08/24/2009, -1/+4But I want the sports car NAOW!!!
- nomoreink, on 08/24/2009, -2/+5Dave Ramsey doesn't recommend driving the old car for long. He is all for driving a reliable car that doesn't require those repairs. You just stay in the old car long enough to save up for the newer, more reliable car.
Really though, common repairs on $6,500 cars are usually not that expensive and don't pose a risk to the budget. - MrSmith34, on 08/24/2009, -0/+3off topic: I thought someone said used hybrids are a bad deal because replacing the car batteries removes any savings from the gas money saved.
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