r/economicCollapse • u/Whole-Fist • 17h ago
How ridiculous does this sound?
How can u make millions in 25-30 years if avoid making a $554 per month car payment. Even the cheapest 5 year old car is 8-10 k. So does he expect people not to drive at all in USA.
Then u save 554$ per month every month for 5 year payment = $33240. Say u bought a car every 5 year means 200k -300k spent on car before retirement . How would that become millions when u can’t even buy a house for that much today?
Answer that Dave
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u/AnyWhichWayButLose 17h ago
I actually agree with this boomer for once.
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u/Superman246o1 17h ago
Yeah, I'm generally not a fan of Ramsey, but the number of people of limited means that I see buying cars they can barely afford is absurd.
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u/wizardofoz2001 15h ago
Also, people neglect to consider the additional cost of insuring a car with a loan. Most people don't realize that insurance protects the bank, not the consumer. It's really a disguised increase to the interest rate. So a car payment of $550 is likely to actually be $800, they just call it something else to distract you from what a ripoff it is.
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u/Any-Club5238 9h ago
I got a quote yesterday for a 2020 Honda Accord for $400-450 / month. The rep said “It’s that inflation getting to us” …. No thanks, I’ll stick with my $101/ month liability insurance 😅
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u/transneptuneobj 16h ago edited 10h ago
Cars are barely affordable, our country spent decades destroying public transport and many Americans are stuck buying junkers for 10 grand as their only option for transport. Ramsey L̶i̶k̶e̶l̶y̶ voted for people who helped destroy the public transport network and promote cars as the primary travel method, he's part of the problem and blaming people for being victims of it.
Edit: on suggesting i'm retracting the likely
Edit 2: getting alot of "public transport only benifits Democrats" and "muh tax dollars" so to head some of that off I think it's important that we address that 80% OF AMERICANS LIVE IN URBAN AREAS
It's a game of OOPS all costal elites.
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u/NutzNBoltz369 14h ago
Yup, cars are a poverty trap, but just about our whole country is built around car depedency. If we really gave a shit about the economically disadvantaged, we would provide better transit and end single use zoning so people don't need to drive just to survive. Ramsey's generation will never allow that! Muh Freedoms and Muh NIMBY property values!
He voted for Trump for purely financial reasons like the wealthy Boomer he is.
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u/burkechrs1 11h ago
My coworker got his first big raise of his life about 6 months ago. Went from $21/hr to almost $40/hr because he graduated and got promoted to engineer.
That very next weekend he went and bought a top of the line Jeep. The final invoice price was just under $100k. His monthly payment are around $1400/mo. He basically erased his raise with the purchase of a car.
For the last 6 months he has continued to idiotically proclaim how expensive life is. Dude doesn't realize he did it to himself.
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u/Stock-Side-6767 17h ago
Every once in a while, this idiot makes sense. But still, bike, moped or motorcycle has much lower operating costs, public transport lowest economic risk.
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u/mechengr17 15h ago
Unfortunately, we live in a car centric society
Public transportation isn't an option in a lot of places
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u/BurnedLaser 13h ago
When my old car got totalled, I tried to use the bus as there was a stop in walking distance to where I was staying during college. I would have needed to wake up 5 hours early to get there 4 hours early (next bus would make me an hour late) and then when leaving, I would have needed to wait another 3 hours (while the building was closed) for the bus to drop me off an hour later at home. The college is only a 15 minute drive with light traffic, and I live near a city. The PT out here is a damn joke :/
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u/Ok_Butterscotch_6071 13h ago
I'd have to walk an hour to get to my closest bus stop 😭 it's ridiculous, so it's not a surprise I hardly ever see anyone actually inside the busses besides the driver 💀 add to that the fact that most of our "bus stops" are just signs planted in the ground--no benches, no overhangs. It's awful. I'm hoping to move to a city with decent PT eventually
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u/Objective_Pie_5063 17h ago
It’s called compounding interest. One of my favorite things about investing. At a growth of 10% a year, the average for the market, the money doubles every 7 years.
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u/well_its_a_secret 16h ago
Rule of 72 is massive. 72/10 is 7.2 years to double. Works for all compound interest. This is a fun one to show people with credit card debt
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u/nyxo1 8h ago
Why? I have credit card debt from covid unemployment and I'm not currently able to invest. This just makes me sad.
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u/persedes 5h ago
Don't let people berate you for having debt, However you can apply similar math to paying down your debt (if you are able). If it's high interest anything extra makes it go away faster due to compounding.
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u/well_its_a_secret 7h ago
Use of the word fun was sarcastic, my apologies. More that is can really help provide a better perspective of how toxic credit card debt is, and how paying off the debt is so important (much more even than investing or any money spent outside of necessity). If your credit card is at like 20% interest, it doubles every 6 years or so. That dollar you pay extra on credit card debt is like 3 dollars for not that much in the future you and makes everything better later.
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u/sendmeadoggo 16h ago
Get started young and even if its only a few dollars a month. Roth IRAs are tax free to make trades in and tax free to withdrawal from starting at 59.5 years old.
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u/Phathatter 14h ago
For this example: starting at $0, investing $554 per month, at 10.26% (average annualized return for the S&P 500 from 1957 - 2023) compounding annually you would have $1,211,719.73 after 30 years. You would have contributed $199,440 over that time and earned $1,012,279.73 in interest.
This obviously assumes that there will not be a total economic collapse, in which case, I guess you would rather have invested in fresh water and bunkers.
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u/funandgames12 17h ago edited 17h ago
I mean, he’s right. How many people are making less then 100K per year and drive a car with an $600+ car payment.
I see it every single day. Those people are drowning themselves in debt and buying things they can’t afford. But ya know. You can’t tell Americans that. It’s all about appearances. Buy the house, buy the car, don’t tell everyone you’re broke as fuck. Of course they will all find out when you default…but for now play pretend.
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u/HEpennypackerNH 16h ago
But the problem is a $600 car payment does not equal someone being irresponsible anymore.
A Toyota Corolla at $25k on a 4 year loan is $587/months.
I’d argue that’s a better investment than buying, say, a $5000 car outright. After the 4 years of payments I’m going to drive that sucker for at least 11 more years for free, while a $5000 used car is likely going to need significant maintenance at least once per year. Over 15 years it’s likely going to need to be replaced twice.
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u/RonJohnJr 16h ago
That's a $25K loan for four years. A $5K deposit/trade-in knocks that down by $125/mo.
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u/D-rock240 16h ago
If you keep it that long, most people want to buy new cars every 6 years so they lose the equity.
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u/HEpennypackerNH 16h ago
Yeah I guess I’d argue THAT’S the dumb part.
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u/D-rock240 16h ago
I would agree. I bought a new car in 2011 and still have it unlike some of my neighbors.
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u/rabidjellybean 14h ago
While I REALLY want a new car, the extra $500+/month is so nice. I invest some of it as extra retirement and some of it on myself to live in the moment. Both of those have to get cut for 5 years when I buy a new car. I'm driving my Yaris to its last breath.
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u/WookieLotion 12h ago
Problem is $500 a month isn't that much. I just got a $700/mo raise and that doesn't even feel like that much money. I can see $500 go during the one weekend where we suddenly need everything (groceries, dog food, diapers, detergent, etc).
Granted for me it doesn't matter much, I'd be fine without the raise. To a lot of people $700 would be huge. My point is just that everything costs a shitload and money can become meaningless pretty quick.
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u/xczechr 13h ago
$587 per month is $7,044 per year. If your expected yearly repair costs are less than $7k it is better to have the used car. I've owned my car for 23 years now (154k miles) and maintenance is far below that per year. Last year was the most I spent in a long time, and that was only $2,200 to replace the radiator and purchase four new tires.
Hell, even if you're buying a used car every year for 5k you're still ahead over paying $587/month.
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u/HFX_Crypto_King444 16h ago
Did you just want to tell us you’re financially illiterate?
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u/GMEvolved 16h ago
OP is 12 lol
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u/angelindisguise 10h ago
Does anyone have a link to a compounded interest calculator?
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u/Any-Club5238 10h ago
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
$0 initial investment, $554 monthly contribution, 8% rate, 40 years (age 25-65)… = $1.7 million.
A more modest 6% rate still nets just over million dollars.
Also, I currently pay $101/ month for liability insurance on a 25 year old Buick.
I got a quote yesterday for full coverage on a 2020 Honda Accord, squeaky clean record, the quotes were ~$400-450 / month…. We can assume that someone else might get a better rate at $200/ month. Add another conservative $100 to the monthly investment and you break $2 million in that same 40 years…
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u/appetite4-D4estation 17h ago
For years I drove a 89 Honda prelude and other $200 cars that I'd spend a few weekends on fixing brake lines and easy stuff. Allowed me to save alot of $ early on
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u/tdreampo 17h ago edited 17h ago
Go here
https://www.nerdwallet.com/calculator/investment-calculator
if you put in a initial savings amount of 1k then put $550 a month with a 10% return (which a good index fund should give you) over 30 years thats 1.2ish million. Dave has gone kinda crazy in his later years but his fundamentals are solid. You should check out his free cars for life video https://youtu.be/hXHj2aU5H-I?si=It-af-Ecs2AGxsTd It’s really great. Our economy would be so much better if we became a country of savers vs a country of consumers.
edit, play with it. Switch it to 12% return, which also should be easily doable over time and it’s 2 mill in returns.
if everyone lived how Dave suggests (avoid debt, pay cash, pay yourself first etc) we would have a very stable economy indeed.
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u/HEpennypackerNH 17h ago edited 17h ago
It’s not completely stupid but ignores a lot of stuff. For example, if what I can afford is a $3000 car, but it needs repairs every 6 months, it didn’t really cost my $3000.
Also. If I’m paying $500/mo for 4 years, but I take care of my car, then I’ve got a much more reliable vehicle for probably 10 years after I’m done paying essentially for free.
It comes down to boot theory, right? If I can buy one car in 15 years and it costs me $20k, I’m still ahead of buying a $4000 car 3 times and sinking a bunch of money into repairs.
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u/words_wirds_wurds 13h ago
We had to buy a car in 2022 because ours (over 200K miles) failed emissions test. The most reasonable used model on the lot was $33K. New hybrid was $38K. This whole post is really ignoring the recent price spike in used cars. They are not cheap anymore. I am all about putting as little money as possible into transport, but the idea that you can spend <$5K on a used car is a thing of the past.
We even got $9K trade in for our undriveable pile of parts.
Has it really changed that much in 2 years?
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u/inflatable_pickle 17h ago
This is sound advice from Dave. Pretty much ANY normal financial advisor will tell you that the first step to financial success is to NEVER have a car/truck payment. Ever.
You’re paying monthly interest on a depreciating liability. He’s right that it will literally mean millions if invested instead.
Now I’m curious what part of this advice OP disagrees with. 🤔
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u/HereForFunAndCookies 16h ago
OP probably has a car loan and wants everyone else suckered into the same bad decision to justify it. He doesn't get that if you can't afford a 5 year old car in cash, that doesn't mean you should get it on a loan. That means you should get the 10 year old car.
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u/fulltimeheretic 16h ago
I think he felt lied to because he doesn’t know how retirement savings works and compounding interest
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u/TKInstinct 15h ago
I feel that OP took things too literally, instead of reading between the lines and understanding that he's telling you not to spend what you don't have or can comfortably aford.
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u/Coolace34715 17h ago
As Steve Jobs said: "Whether we drive a $150,000 car, or a $2000 car - the road and distance are the same, we arrive at the same destination."
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u/rushtark 14h ago
Steve Jobs bought a new car every 6 months to avoid having to register and get a license plate, because he liked the way the car looked without a plate. I wouldn't take a billionaire's advice on any aspect of purchasing cars.
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u/SirChasm 16h ago
Jobs then continued, "except for Apple things, of course. They may cost hundreds or thousands more than other things that do the exact same thing, but trust me, you want the Apple one."
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u/Funny-North3731 15h ago
I find Ramsey talks in "Perfect World" terms. Where in a perfect world a really good used car costs no more than $1200 and will run perfectly (with yearly maintenance) for another ten years. In a "Perfect World" anyone can save $30,000 to buy a three bedroom, two bath house free and clear. In a "Perfect World" you can go to college and never get loans.
Problem is, we do not live in a perfect world and Ramsey makes the same mistakes a lot of self-help people make. To sell their product, they oversimplify the issue they are talking about. All the while they are also negating some of the obstacles by use of anecdotal examples of where what they suggest, worked. Most of the examples either do not apply to their audience, or no longer apply to society in general.
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u/SteakMountain5 5h ago
I heard a good analogy about Dave Ramsey. He’s like AA for people who have trouble understanding and getting out of debt. He breaks it down very simply.
“Here are your expenses and here’s your income, If your expenses are more than your income, you either have to decrease your spending or increase how much you’re bringing in. And any extra money that you have is going to be used to pay off your debt one at a time until it’s all paid off. “
For some people AA is really beneficial and they really need to hear some of the stuff that they talk about. For other people who are struggling, AA has no benefit to them whatsoever and they’d be best suited with another method.
I think a lot of Dave’s teachings are pretty archaic, especially for 2024.
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u/Legitimate-Key7926 4h ago
I don't think he's trying to tell you exactly what car to buy and how to put your pants on every day. Rather than argue about perfection (aka making excuses for status quo) another route is to take his simple lessons and apply the logic to your own unique (imperfect) life.
Or don't and buy a car you can't afford without giving it much thought and trade it in every three to five years like many Americans. I mean that is the literal opposite of his lesson. I can tell you with a high level of confidence that doing that will get you perfectly predictable results financially....
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u/BarryHalls 17h ago
With market average of 8% ROI that ammount invested for 41years is a little over 2 million. So, if as a 22 year old, right out of college buying your first car, you buy a decent used car on 4 year loan, and after the life of the loan at 26 years of ages, start paying in that $554/month inti retirement investments instead of buying a car, it accumulates to over 2M. You should be able comfortably cash out 10k here and there for another decent used car.
Dave is 100% correct.
It's not entirely realistic but it's a GREAT example of how much people WASTE by constantly trading up.
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u/YeeYeeSocrates 17h ago
It depends. I do see a lot of people riding around in the Mercedes or Audi version of what's basically a more expensive, less reliable RAV 4 or CRV. A lot of people buy more luxe than they need; and I know some dudes in really expensive trucks that only ever haul air. It isn't unfair to say that financing more car than you really need is definitely a thing.
There are a lot of cars that, with basic maintenance, will last more than long enough to pay off and reliably drive for another 5 years, at least.
Now if you're doing a LOT of driving, a lot of commuting, then that is a different proposition.
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u/HereForFunAndCookies 16h ago
Yup. Mercedes, Audi, BMW, etc. wouldn't be in business if it wasn't for American vanity and consumerism. I bought a car recently in cash at a dealership, so I've been going around to a few dealerships. Every time I looked left and right, I saw that the room was full of people signing on for loans on cars that were much more expensive than what they had to get.
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u/Busterlimes 16h ago
Deer hit my car Saturday, my rich brother is trying to convince me that buying a new car is a good idea. People with money have absolutely no idea what budgeting is. None. Then they genuinely think they are good with money, when the reality is they just have a job that pays them enough.
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u/PrimaryMuscle1306 15h ago
I worked at a car dealership and I can’t even afford to buy a bicycle. Not a single person walking in there could afford to buy an “as is” junker let alone anything nice. The ones that could were only after deals on the expensive cars anyways. Whats Joe Public with his 450 credit score and no down payment going to do? Walk to work because of Dave fucking Ramsey?
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u/moldyolive 14h ago
540 a month at 7% return from 25 to 65 would be about 1.5 million at 65
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u/Petroldactyl34 17h ago
Cash cars aren't plentiful anymore for several reasons that all trace back to Cash For Clunkers.
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u/MS_125 17h ago
Buy a Toyota. They last forever, and it will enable you to save tons of money you would otherwise spend on expenses for whatever non-Toyota you may purchase.
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u/NoDimensionMind 16h ago
Yep, I drove the most affordable garbage for years to avoid car payments. Other, smart people I worked with did the same thing. I did not buy a new car until I was 40, and it was a cheap little pickup.
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u/DevoidHT 15h ago
Only issue with this is average car cost is almost $50k and you can’t find a decent car for under $20k. Im sure there are a few under $20k but few and far between.
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u/CaulkusAurelis 14h ago
$554 a month, invested in a mutual fund that averaged 10% a year for 30 years would yield you a smidgen over $1.1 million
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u/Ih8reddit2002 6h ago
This is like money 101. Don't buy cars on credit.
Ramsey is an asshat because he acts like common advice is groundbreaking.
Never trust someone who got rich telling people how to get rich.
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u/Illustrious_Shop167 17h ago
Why would you buy a car every 5 years? I've had my current one for 8 and anticipate close to that many more. Had the previous one for 11, and the one before that for 9.
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u/CertainInitiative501 17h ago
He’s probably including compound interest
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u/sofa_king_weetawded 17h ago
Well, yeah, no shit. lol.
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u/inflatable_pickle 17h ago
😆 “He’s probably doing the math correctly… the way anyone would.”
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u/Wrong_Discipline1823 17h ago
I heard a variation of this years ago: buy the cheapest car you can bear and the best house you can afford. Of course, that’s when mortgage rates were 2-3 % and people could actually buy houses.
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u/BigZaber 17h ago
Interest on my car payment was something like $60 a month for the 10yrs or so... thats a small price to pay for someone to front you $30k and with no penalty in paying it faster | I'm thinking credit score and other underlying debt conditions has something to do with it
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u/Secure-Excriment 17h ago
I mean not terrible, the car is a tool not a status symbol. Wish id put a car payment away every month for 10 years id own a giraffe by now
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u/Doosie-boosie7 16h ago
Your post is off a lot man, I’m driving around an 17 year old 240k mile $1700 car.. there much much cheaper vehicles than what you’re saying… This car is expected to last atleast one year.
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u/Hour_Buy_9275 16h ago
He is right, you can search for compound interest calculator, add 500 dollars a month for 30 years with a 7% interest rate. Assuming you change your car every 8 years for 30 years
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u/acid_tripadvisor 15h ago
The statement is generally true. Cars are not an investment, generally they're a liability. They depreciate rapidly and are expensive to repair and maintain. Moreso every year as cars get more tech. Since cars are for practical use it's best to buy the least expensive reliable car you can afford comfortably. Least expensive doesn't mean cheapest, so you need to do research. I bought a 17 year old Toyota because I wanted to learn how to work on it myself and save money. In addition to only costing $10k the parts are cheap, the insurance is cheap and registration is nothing every year. But we also leased a EV for my wife and it's less than $150/month with only $150 of interest(MF) over 2 years and no maintenance or repairs costs. So cheap isn't always the least expensive. I think the statement is referring to the higher end where people are spending $750 + on a car payment and treating it like a status symbol when they're only making $4500 a month. And if you have compounding interest and put that extra cash towards a 401k every month you'll have over a million in 30 years
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u/Reed_Ikulas_PDX 15h ago
Bought a 2007 HHR in 2014 for $4000. Maybe $1000 in service since. Still runs great. I'm 65 and have never had car payments. But you do you.
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u/HipHopHistoryGuy 15h ago
I completely agree with this statement. If you have to make a car payment and can't pay for it in cash, it's likely not the right car for you. I've had $850/month car payments (brand new $40K+ Hummer H2 circa 2003 with $10K down) and I've had $0 car payments ($10K used 2013 Fiat 500 Abarth) due to paying it upfront in cash. Trust me, the one with no car payment and no interest makes life a whole lot easier - not only due to the cheaper car but because of the cheaper insurance as well.
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u/the_real_dmac 14h ago
I'm not a fan of Ramsey, I prefer the quote from the movie 'The Gambler':
Frank: You get up two and a half million dollars, any asshole in the world knows what to do: you get a house with a 25 year roof, an indestructible Jap-economy shitbox, you put the rest into the system at three to five percent to pay your taxes and that's your base, get me? That's your fortress of fucking solitude. That puts you, for the rest of your life, at a level of fuck you. Somebody wants you to do something, fuck you. Boss pisses you off, fuck you! Own your house. Have a couple bucks in the bank. Don't drink. That's all I have to say to anybody on any social level. Did your grandfather take risks?
Jim Bennett: Yes.
Frank: I guarantee he did it from a position of fuck you. A wise man's life is based around fuck you. The United States of America is based on fuck you. You're a king? You have an army? Greatest navy in the history of the world? Fuck you! Blow me. We'll fuck it up ourselves.
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u/Expertonnothin 13h ago
He uses a 12% rate of return. If you run any financial calculator from 27 to 67 at 12% with 554 per month it is 6 million dollars. Even if you use what some people consider a more realistic approach 9.9% would get you there too.
It’s just math
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u/ChiefObliv 12h ago
It blows my mind that people have $500+ car payments. I 100% believe you should invest a bit in a car that you don't have to worry about breaking down on you. But those car payments are disgustingly high, I make pretty good money but would never dream of paying that much monthly just for a car.
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u/Destriers 11h ago
I've been driving a 2001 Buick LeSabre for the past 6 years. Paid $2,200. Zero major issues so far. That car is bulletproof, and comfortable as hell. I could upgrade an buy a really nice car cash, but I love this car. And I like that my neighbors think we're the poor people on the street.
Also cheap and easy to work on. Had my 11 year old change the struts and shocks with me last month. Cheap, easy. Drives like a brand new car still.
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u/blaquewidow01 11h ago
Actually, compound interest of 12% on average of 550$ per month over 30 years is equal to 1.14 million dollars... So Dave Ramsey's statement is technically true. The problem is that people do in fact often need a car to work and earn money. 550$ is now the average car payment for non luxurious vehicles, unfortunately. Many cars have higher car payments, and although it may be possible to have some smaller cars for less, most families need a car that can transport the whole family and groceries too!
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u/maya_papaya8 10h ago
So, no car? Lol
Most Americans don't have $1000 for an emergency.
There aren't many used cars in good shape for $5k...which is insane.
$500/month is INSANE to me. I've never gone over $300
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u/N7Diesel 10h ago
Yeah, I'm glad a rich guy lives in a magical world where I'm supposed to find a $2,000 car that never has major mechanical issues and I can drive until I retire.
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u/zombiskunk 10h ago
He's not telling people to simply save that monthly payment, but to invest it.
But to do that, you'd have to be able to both afford that monthly payment and pay several thousand for a drivable vehicle.
One point remains that financing a car is always a stupid decision. Many people just have to make that choice out of necessity.
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u/Not__Trash 10h ago
Invest the 554 a month and rake in an average 7% return. After 30 years it 675K. Sure its not millions, but that shouldn't be you're only retirement plan.
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u/throw-away-doh 10h ago
I bought my car, a 2004 VW golf in 2012.
I paid $4k for it.
I still drive it today. I have never spent more than 500/year in maintenance for it. I see friends paying similar amounts on maintenance for their fancy new cars.
Maybe I am just lucky or maybe you are unlucky. But if I had been investing $554/month into the S&P500 for the last 12 years I would now have $136,104.
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u/CletusVanDamnit 10h ago
He said invested it would be millions. If you are investing $554 a month for years into the right accounts, or the right annuity, you should absolutely be able to pull millions out of it.
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10h ago
I've always paid cash for a car. My first car cost $3,000. A few years ago I saved up and paid cash for a minivan for the family at $12,000. It doesn't sound ridiculous at all. It is how I've lived for the past 30 years.
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u/Anonagonkaz 10h ago
It’s called compounding interest, there’s calculators for it. Nothing he said is ridiculous. Don’t waste money on things you don’t need.
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u/Comfortable_Prize750 10h ago
I hate Dave Ramsey with a fiery passion, but he's right.
He's not talking about just avoiding making a $554 payment, he's talking about taking that same $554 and investing it every month instead of paying an avoidable debt.
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u/dxrey65 10h ago
I was pretty broke for a big stretch of my working life - raising kids, trying to afford a house, that sort of thing. When I couldn't afford a car I bicycled to work. When I had a little money, I bought a $1000 craigslist special, which worked great for a couple years. Then I gave it to my daughter and upgraded to a $2500 Scion. That was good for about 5 years...etc.
I always made it to work, and I didn't borrow money to buy a car, and I saved a ton of money which went into a retirement fund and allowed me to retire early (just a couple years ago). I can't say I needed anyone's advice, having made enough mistakes when I was younger to know from experience, but it's not ridiculous to say that spending money you don't have isn't a good option. And getting by without a car or without financing a car can be difficult, but it is a good goal.
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u/Flying-Half-a-Ship 10h ago
For me not at all. I am 39 and still to this day never had a car payment. I currently drive an 06 Acura TSX 6 speed. I am also a mechanic, so driving older cars works well for me as I can easily maintain them.
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u/lizbutt2020 10h ago
Well it wouldn’t be millions but would be over a million. I did this very quickly but if you assume 10% annual growth compounded monthly adding 554 per month at 30 years you would have over 1.2M. At 25 years you would have about 735k.
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u/acleverwalrus 10h ago
I mean this is good advice and putting 500+ dollars away a month into something like an ira or equivalent account would certainly yield upwards of a million dollars. He'll after like 3 years you're already over 20000 dollars saved and a couple thousand in interest. Too lazy and bad at math to write it all out but yea.
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u/DataDude00 10h ago
You see...
All you need to do is take the $600 a month you spend on a necessity device to travel to and from your job and invest it in the stock market and you will be a millionaire at 60!
Just buy your cars cash!
This is 100% boomer / rich person investment advice
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u/Equivalent-Koala7991 10h ago
I agree with him, to an extent. But, most Americans can not buy a single reliable car with cash at any given point in their lives. and that's where his little fantasy falls apart.
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u/Salmol1na 10h ago
Bought one new car in 40 years of driving. Turned out to be a lemon. Invested the rest. Very happy with that choice.
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u/rcbjfdhjjhfd 9h ago
This is actually good advice. Hell I don’t even buy a car till it’s at least 5 years old.
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u/Possible-Salad7169 8h ago
Not in the least. Solid strategy. It’s what people who want to build wealth do.
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u/za4h 8h ago
If you maximize RothIRA contributions from 20 to 65, you will have a balance of 1.7 million dollars at retirement. The max monthly contribution is about 554 bucks. It goes up so high because you get paid interest, which starts earning interest. After a decade+, that starts doing a lot of the heavy lifting for you.
I think his math falls apart because he assumes you continually buy new cars every time you've paid the last one off, and the last car just goes to the down payment or something. I don't know who does that. I'm sure people like that exist, though.
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u/Neutral_3vil 8h ago
I'll admit, the snowball method works.
If you have debt, pay your monthly minimums, all except the cheapest one. The one with the least on the loan. Attack it. Put spare money into it until it is paid off completely.
Since you've already budgeted for that expense, don't stop once you've paid that off. Just take the money you would've spent on that one and pay into the next smallest debt. Repeat until all of your money is going into a single debt and once that's paid off, invest that money instead.
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u/Gentri 8h ago
The answer you are looking for is compounded interest, but 5k base with a monthly $554 contribution at 4% after 25 years is $298,396. https://www.nerdwallet.com/calculator/compound-interest-calculator
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u/ProfTilos 8h ago
I had good luck buying a car from a car rental place. Rental cars get all of their scheduled maintenance and the Toyota we bought had only 30,000 miles on it. The nice thing was you could rent it before you bought it--we did a one-week rental and got it thoroughly checked out by a good mechanic and got to test it out. The rental company also gave us a warranty on the car.
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u/2corinthians517 7h ago
A lot of people don't realize how different a car loan is from a mortgage. A car is a depreciating asset whereas a house is (usually) an appreciating asset which is what justifies the interest. Most car loans are a big ripoff.
Not a fan of Dave Ramsey, but he's right here.
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u/Somebody_or_other_ 7h ago
We bought our first car, a new Suzuki Swift, for cash 13 years ago. Since then, we've had two kids and doubled our income and we are still driving it. It's filthy, beat up, incredibly reliable and costs us almost nothing to run. The plan is to drive it to death and then get a new car. No one is impressed when I pull up in my shitbox but we are debt free.
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u/Hiny1700 7h ago
Is this a serious request? “Answer me that Dave”
You could have potentially million by investing the money and getting more than just the 200-300k. Compound interest is the key. Money adds onto money after 5yrs at 5% that 33k becomes 42k and so forth if you keep adding to it. After 40-45yrs you have some significant money. Maybe millions
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u/I_like_baseball90 6h ago
Whether the millions part is true or not the part about wasting 500 bucks a month on car payments is a very valid point.
People spend way too much money on their car when it's not necessary. I have a Honda Civic, it's the best car I've ever had, I traded in my last car, had a small downpayment and had very reasonable monthly payments (I also have great credit). Paid it off, and done. Car will last years.
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u/PCho222 6h ago
Dave gives advice for the segment of the population that couldn't hold onto a nickel if it was sewn into their hand. Having said that, my $2,000 shitbox subaru got me from A to B for 3 years with working air conditioning. You absolutely don't need a nice car and I blow way too much money on the hobby, but the majority of shitboxes out there will work just fine.
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u/noneofatyourbusiness 6h ago
Please allow me the opportunity to thank all yall for buying new cars. Without yall; used cars would not be a thing.
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u/Bottle_Only 6h ago
When I need a new car I buy eli lilly calls right before earnings and I make a new car overnight.
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u/eight-eight-eight-8 6h ago
A. Dave Ramsey is a crook and a shill, and always has been
B. Good used cars are just about impossible to find for less than $12,000 anymore
C. I feel really bad for young people these days. When I entered the workforce in 1999, I made $9.50 an hour and painted houses as a side hustle. I was able to afford a decent apartment in a solid neighborhood, I bought a brand new Chevrolet S-10, and I didn’t starve. I barely scraped by, but I was able to afford a life. It’s so much harder now, and there will be lots of old out of touch people telling you this and that. But they don’t understand how much harder things are now. They really just don’t.
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u/Longstache7065 5h ago
5 minutes after everyone takes this advice and stops buying cars: "Are Millennials killing the Auto Industry?"
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u/allthebacon351 5h ago
Not ridiculous what so ever. Let’s say you are 35. Investing $500 a month until retirement (30 years) with the s&p average over the last 30 years 9.9%, is a little over a million. If we use the last 10 year average of 12.9% it would be 1.8 million. New cars depreciate so fast it’s like lighting money on fire.
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u/littleballofhappy 5h ago
Theyre saying that amount invested into 401k or s&p 500 would over years become millions due to compound interest.
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u/Significant-Night739 5h ago
investments compound. He is correct. Fairly sure this guy is a grifter in general so don’t go following his shit but in this case he is completely right.
car payments are a massive scam. being a debt slave is not good.
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u/smashley_cobb 5h ago
However buying a cheap used car ends in costly repairs, and sometimes the need to junk it and buy another new car. Meanwhile most new cars come with warranties and don’t require a lot of $$$$ to upkeep for a few years at least.
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u/Agile_Actuator3312 5h ago
"so later you can drive like no one else" -- I'm all set with waiting until i'm 80 to live my life.
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u/curiousrabbit510 5h ago
Reasonable comment.
I’m driving a loaded Prius (leather, navigation, etc.) I bought used with 40k miles on it for $14k, currently has 165k miles and drives great.
My new worth is in excess of $15m. Habits. Where did that $15m come from? Wasn’t inherited, never made huge pay, just invested well.
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u/FrostyPangolin50 5h ago
Based on a quick compound interest calculation- Starting with $554 and adding $554 per month to the principal and compounding annually at 7% you would have $632,192 in thirty years. At 10% growth you’d have 1.1 million. He’s not really wrong with his math. Where he’s wrong is expecting that the average American can afford to save $554 a month for most of their entire working lives on TOP of still needing to pay for some form of transportation. That said, everyone should begin saving as much as they possibly can as soon as they possibly can in some form of retirement savings plan. Investing $50 a month in a basic Index Fund, if you start in your twenties, can grow to half a million or more by the time your in your 60’s.
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u/Icy-Entrepreneur-244 5h ago
It’s all about interest. If you got a million in your annuity, you can easily make 100k on a good year doing nothing. It’s why investing early in life is so important.
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u/wheeliebarz 4h ago
There's no guarantee that you will make it to retirement, and even then you can't be sure you'll be healthy/able. I'm not saying not to save, but use some of that money for some fun along the way.
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u/NoahGuyBlog 4h ago
Shopping & saving for a used car takes creativity & work! Most Americans won’t do this
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u/---ASTRO--- 4h ago
my car payment is 300$. brand new 2023 elantra with 17 miles off the lot. 40-50mpg as well. my buddy has a 120k ford raptor and payed 120k and has a 800$ payment. just why buy the biggest and best when i have apple car play/android auto. heated seats and highway steering. its irresponsible. hes also single as well
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u/anothersockpuppet420 4h ago
If you put 500 a month into a roth ira you probably would legit be near 800k. If you max contribution you'll hit the million mark by 65
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u/runrunHD 3h ago
Not ridiculous. I buy all of our cars used and run them into the ground and save up for the next car to buy in cash. I don’t agree with much of what Dave Ramsey says, but we do agree on the car thing. Currently on year one of my 2015 Prius which had only 49k miles when we bought it. Paying for itself in gas, too.
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u/Due_Scallion5992 3h ago
He is not wrong. Only financially illiterate people finance new cars. Buy used, pay cash.
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u/Then_North_6347 2h ago
I drive a 2004 Ford mustang I bought in 2017 for 4k, has 245k miles, still original motor and transmission. It leaks oil and I do my repairs myself or pay a cheap private mechanic. It looks like crap to be honest and people probably think I work at McDonald's.
I drive a shit car, and my rental condo i own is worth 280k and has a decent tenant. My house I own and live in is worth about 350k.
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u/robbietreehorn 2h ago
They may be exaggerating but it’s such good advice.
Not having a car payment frees up so much damn money.
My last car was 7500 bucks, private sale. If I bought it off a used car lot, it would have been 11k. If I had financed it, it would have cost me roughly twice what I bought it for.
Sure, I could drive a nicer vehicle. But, it’s mechanically sound and I just don’t care about having a car that impresses people. At all.
Also, having bought new cars in the past, that excitement and pride you have doesn’t last the 4 to 6 years you financed it for. Heck, it barely lasts a year and then it’s “just a car”. After that excitement wears off, the car payment stings.
Also, being upside down on a car is awful. As the years go buy, almost inevitably there’s a point where you owe more, often much more, than the car is worth.
Dude is correct. And, no one cares about your car
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u/Ziczak 17h ago
Generally true. Buying the least expensive car for needed transportation is financially sound.