Dave Says What Goes Up Must Come Down

Townhall.com ^ | June 20, 2012 | Dave Ramsey

[Kaslin]

Dear Dave,

I’m about to graduate from college, and I’m following your plan and trying to focus on my future financial situation. Is the current down economy a cyclical thing and just part of life?

DJ

Dear DJ,

It is. There are always cycles in the economy. I know you hear all this talk about this is the worst recession since the Great Depression, but that’s a bunch of bull. It was worse in 1982, when the Jimmy Carter era came to a close. We had double-digit inflation, double-digit unemployment and home interest rates were at 17 percent.

The current situation has been kind of long and boring. Things haven’t really rebounded quickly. Instead, they’ve just kind of wallowed around and crawled along. There are a lot of theories as to why it’s happened this way, but the truth is it’s a part of life. Just like you have good and bad times in your personal life, there will always be good and bad times in your financial life. That’s why you need a solid, common-sense financial philosophy that works when things are up and when things are down. The principles I teach about not having debt and investing conservatively over the long haul work every time.

Right now, I’m tempted to invest like a wild man and put every dollar I can find into investments, because everything is on sale. It’s a great time to buy real estate and put money into mutual funds. The best time was about a year and a half ago, but the deals are still there.

Just keep investing and working your plan. The idea that you’re graduating at bad time and never going to have a good life is just plain wrong. There’s always some good and some bad out there, and the cycles will always come and go.

—Dave

Dear Dave,

My husband and I are debt-free, and we have $100,000 saved. We like to give, rather than loan, money to family members if they’re having financial problems. Can you give us some advice on how to establish giving guidelines?

Susan

Dear Susan,

First, you can’t give to a level that it starts to make you worry about your future. Your first obligation is to your own household. Once that’s done, you can help family members and your immediate community as best you can without weakening yourself.

The big thing in this scenario, I think, is to make sure you’re helping someone get back on their feet. You’re not helping when you give a drunk a drink, so you have to ask yourself if your generosity is really helping them or if you’re simply enabling irresponsible behavior.

I’m not saying this because I’m a control freak. I’m saying it because I don’t believe in investing God’s money unless I see a positive return on investment. In human terms, that means helping someone get out of a mess they’re in, while at the time seeing that they are working to make sure they never end up back there again. If they’re buying cigarettes or lottery tickets with the money, then you’re not helping them.

Taking this stance isn’t mean, and it doesn’t indicate that you don’t love your family. It means you’re loving them well and want what’s best for them.

—Dave

[Crazieman]

Dave is ONLY good for budgetary financial advice for the home. He is too naive and not understanding of macroeconomics and how it ties to the communists that run the country to provide ANY helpful advice in long-term planning.

[DuncanWaring]

I’m also amused by his claims that there are safe investments out there that pay 10% annually.

[DB]

You can’t compare today’s numbers with the past. They counted both unemployment and inflation much different back then. Government always does all it can to hide the truth but today they get away with it because the MSM is its bedded cheerleader.

[Fee]

BLS changed the way unemployment is calculated since Carter and the Fed Reserve changed the way we calculate inflation. If we use the old way, unemployment is about 17 and inflation is about 4 to 5 percent. Under Carter our budget shortfall was under 50 billion, today it is 1.5 trillion. Dave Ramsey should be advising people to prepare for high inflation and deflation. One Black Swan event involving derivatives and people will wake up and find the banks closed and their stock portfolio worth nothing.

[familyop]

"My husband and I are debt-free, and we have $100,000 saved. We like to give, rather than loan, money to family members if they’re having financial problems. Can you give us some advice on how to establish giving guidelines?"

Instead, buy a cheap place for family members to live. Do that only for younger family members who are willing to put all their efforts toward getting ready for the coming collapse. If you have no family members fitting that description, help some other willing, technically inclined young folks (motorhead rednecks will do).

Oh, and don't listen to Dave, unless your income comes from government. ;-)

[EVO X]

I’m also amused by his claims that there are safe investments out there that pay 10% annually.

Never really listen to Dave, but people with big debt which isn't treated favorably by the tax code can realize big gains by just paying off the debt and putting the money in a tax deferred money market fund earning zero percent..

[DuncanWaring]

Yeah, if you’ve got a credit card with an interest rate of 28%, and you pay it off, you’re effectively making 28%, tax-free, on that money.

Ramsey, on the other hand, claims that if you come into some money one way or another, you can invest it and make 10%.

There are investments that pay 10%, but they have an associated 9% risk of losing your entire investment.

[Altariel]

Dave Ramsey ping.

[CSM]

Personally, I have issues with how Dave addresses our current economic mess. That said, I think he is trying to remain focused on our own individual responsibility for our own economic situations. I’ll listen to Mark Levin for the politics and Dave for personal finance....

Dave Ramsey Fan Ping List.

If you would like to be added to the “Live like no one else, so that you can LIVE like no one else” list, feel free to Freepmail me.

[tbw2]

However, his advice to pay off all your debt including the house is invaluable in a long term recession/ depression, whether due to deflation or hyperinflation.

[Silentgypsy]

After having read “Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon,” it seems that he underestimated the complicity of the fed, big banking and investment firms, ratings agencies, dereliction of duty by our regulatory agencies, etc.

It’s weird. When somebody has a degree in finance, econ, accounting, whatever, you’d think they’d be aware of certain principles (old stuff like investing for the long haul instead of buying high and then going into a panic and selling low.) The distillation of the whole situation is that you take information you can use that’s within your comfort zone and toss the rest out.

Isn’t it astonishing that people have to ask what to do with $100K ?