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[05omegav6]

I have just finished reading his book, Total Money Makeover, and found it quite enlightening, if a little scary in places

My primary question is simply...

Has anyone here followed his plan? The theory is sound, but I have little understanding of how certain aspects of the financial world work, and am a touch dubious as to if the theory can actually be applied this side of the Pond.
My thinking is to simply substitute the dollar amounts mentioned with Sterling and run with it 

Not after specific financial advice, but would be reassuring to know if anyone here has undertaken the plan, and that it is what it says on the tin. Obviously PM me if you'd rather not post publically

[Rog]

I've never heard of him or his book before, but I found a summary of it, see below

http://totalmoneymakeoverpdf.tumblr.com/


It all seem to make sense to me. Obviously his video is all a bit OTT and U S of A style, and I'm really not sure about how practical it is to write absolutely everything down. But the general approach of having a budget and chipping away at small debt and moving onto the next seems absolutely sound.

Personal debt is of something of a hidden issue. Nobody likes to admit it, vast numbers of people have it in some way or another, there is huge pressure and temptation to spend more than you earn. Credit card companies, banks, payday loan sharks etc all like us to have it, Governments ignore it. You want a flash car that you can not really afford ? Easy there will be a way for you to get it.

What he said all seems good to me

[mantahatch]

Well on the personal debt side I can say it is great feeling to not have credit card and loans on my back. We are now free of all of them except the last few years of a mortgage. And we now have some small savings.

I am sorry if that sounds like gloating, it was not meant to sound like that.

We made a concious decision about 5 years ago to become debt free. It was a difficult decision as the kids where teenagers but we new it had to be done as we where getting older and jobs can be difficult.

The last 5 years have been harder than normal, we went without 2 weeks in the sun, settling for 4 nights in the sun. Meals out became birthday treats etc. I have one small vice which I cut it down to save money,

But to me the best bit is knowing credit companies are not making money off me, when I use a credit card I pay it off straight away.

In some ways it has made me a lot less willing to part with my money. In the old days we would just buy something on a whim, Not now. If we buy something it is a neccesity. I am currently selling my bike and am looking for a small project, but look as much as I do and all of these projects are so overpriced it looks like I will not bother, sad really.

Good luck with what ever you decide to do.

[Field Marshal Dr. Opti]

I've never heard of him or his book before, but I found a summary of it, see below

http://totalmoneymakeoverpdf.tumblr.com/


It all seem to make sense to me. Obviously his video is all a bit OTT and U S of A style, and I'm really not sure about how practical it is to write absolutely everything down. But the general approach of having a budget and chipping away at small debt and moving onto the next seems absolutely sound.

Personal debt is of something of a hidden issue. Nobody likes to admit it, vast numbers of people have it in some way or another, there is huge pressure and temptation to spend more than you earn. Credit card companies, banks, payday loan sharks etc all like us to have it, Governments ignore it. You want a flash car that you can not really afford ? Easy there will be a way for you to get it.

What he said all seems good to me

That's how I ended up with a seven year old  £1300 Omega.

I really must learn to be more frugal in future.

[aaronjb]

and I'm really not sure about how practical it is to write absolutely everything down

I'd say it's essential if you really want to know where your money is going.. doing that I realised just how much I was spending on, essentially, 'nothing' - lunches at work, coffee when out etc etc..

Although, to be fair, I no longer do that - what I did was open another bank account and put a set amount of 'spending' money into that account; out of that comes everything but my monthly bills (mortgage, council tax, utilities etc) which come out of my original account. Amazing how easy it is for that money to be diminished by lots of tiny purchases..

It's not without sacrifice, though - I used to have a monthly meet up with a bunch of friends for a meal & a drink in Essex, that's gone for a ball of chalk and I now hardly ever make it as I have no 'spending' money left at the end of the month, we don't really go out much or do anything outside of work, eat and sleep. In terms of morale and emotional/mental wellbeing there's been a big decline, actually, lifted only when I see myself clear a chunk of debt.

All in all.. maybe ignorance was bliss! 

[05omegav6]

The frightening thing for me is the prospect of having to pay £640 a month into a pension arrangement of some sort

It's going to be a pretty steep learning curve. Certainly, accounting for every penny is going to require some hard mirror time

[Field Marshal Dr. Opti]

The frightening thing for me is the prospect of having to pay £640 a month into a pension arrangement of some sort :o

It's going to be a pretty steep learning curve. Certainly, accounting for every penny is going to require some hard mirror time

With the distinct possibility of getting back less than you paid in.

[Rog]

The frightening thing for me is the prospect of having to pay £640 a month into a pension arrangement of some sort

It's going to be a pretty steep learning curve. Certainly, accounting for every penny is going to require some hard mirror time

I didn't read that bit  I would be careful there. Paying off interest bearing debt always takes a priority over everything else. Just look at the interest rates that Credit card companies charge Vs the return on investments. Just a few percent gained on "safe" investments Vs 20, 30, 40 + percent paid on credit cards and others. No brainer.

[05omegav6]

Spot on Rog

The idea as I understand it, is to invest in a spread of funds, giving a return of 8% allowing for inflation, over twenty five years. All things being equal this could give an annual income of 40-50k being paid from the interest.  Need to speak to someone who knows before embarking on such a commitment though.

In the grand scheme of things I have a couple of overdrafts and one loan, with no credit cards, so much better of than some, but no guaranteed income. I should have paid alot more attention a decade or so ago

[I_want_an_Omega]

The frightening thing for me is the prospect of having to pay £640 a month into a pension arrangement of some sort

It's going to be a pretty steep learning curve. Certainly, accounting for every penny is going to require some hard mirror time

Is that actually paying it o thinking about paying it? I suspect the second. The longer it's left the bigger the number becomes.  Pensions are one of several large ticking timebombs that our society has to face upto 

[05omegav6]

Yup, the second fortunately I am the right side of forty, but along way past twenty five

Time to knuckle down...

[MR MISTER]

I don't know quite how to describe my behaviour in matters such as these. I will spend months moaning that we are spending too much on things that we don't need. Which is just as well, becaause the wife can shop for England. Then for no reason, I will wake up one morning, decide I am fed up being a tight git, and go mad.
A good example is the recent purchase of the orlando. There is/was nothing wrong with my zafira. It was seven years old, but tidy with only 48000 miles.
There you go.

[05omegav6]

Saving up to spend it is fine (provided everything else is accounted for of course)

Borrowing to buy stuff is plain stoopid, as I am slowly coming to realise....

[Rods2]

Spot on Rog

The idea as I understand it, is to invest in a spread of funds, giving a return of 8% allowing for inflation, over twenty five years. All things being equal this could give an annual income of 40-50k being paid from the interest.  Need to speak to someone who knows before embarking on such a commitment though.

In the grand scheme of things I have a couple of overdrafts and one loan, with no credit cards, so much better of than some, but no guaranteed income. I should have paid alot more attention a decade or so ago

Pension growth projections are always IME good for a laugh, just don't take them seriously and expect to average this. In the present climate after inflation consider that you have done well if you manage to cover the fund annual costs which are normally 1-2% of the funds value. It may not seem like much but it is over 30 years. 30 X 1.5% = 45% of your funds value have gone to the fund managers. Now this used to be livable with when there was good global growth and tax relief on pension fund dividends, but with the current poor global growth and Gordon Brown with his £5bn a year tax raid has basically IMO screwed the private pensions system.

Personally, I won't lock any further money in pension funds, where there is no stability on how rules and taxes will change, which are beyond my control. I would rather pay the tax now, have complete control over the money and have my own investment strategy.The important bit is having a credible, funded, retirement plan.

Make sure you factor in that inflation will halve the value of your money every 20 years.

As an aside, at the moment the stock market is due a correction where it is overbought. PE ratios have gone up massively where profits are largely flat. The current global rises equity rises are not backed by fundamentals but due to massive QE liquidity sloshing around that has to find an investment and return home somewhere. This is the next global bubble that is just waiting to burst. 

[05omegav6]

The aim was/is aim for 12%overall, less 4% for inflation over 20-25 years

The argument being that although current interest rates are pretty much 0, and not much higher as an average for the last decade, the previous decade averaged 18%. Average growth over the last  80-90 years has typically been near as damn it 12% year on year...

Retirement fund is perhaps more accurate than pension fund. As already said, I will be seeking professional advice before committing to anything, but as a rough idea of what I am considering...

Mutual funds with  proven record of 10+ years growth, split equally

1. Growth and Incomne funds, (Blue Chip).
2. Growth funds, (Equity/S&P500).
3. International funds.
4. Aggressive Growth funds.

As a further thought, presumably there is no reason why instead of paying, say, £500 each month into a pension fund for 25 years, so a total of £150000 hypothetically, that that amount couldn't be saved up and then be invested as a one off amount with a view to allowing it to mature for twenty years

[chrisgixer]

Borrowing is a useful tool for making money though. There's always a risk of course, if your investment doesn't pay off. But research and groundwork are key to a sound business decision of course.

Personal finance ime, means keeping options open, and have as many options as possible. I have little faith in pensions, so don't keep all my eggs in the pension basket. This does involve borrowing though.

Ultimately, money is needed to make more money.


A car loan is an investment, as it allows you to make money at work. Although Esta has a handy cap there being a scouser.

[I_want_an_Omega]

The aim was/is aim for 12%overall, less 4% for inflation over 20-25 years

The argument being that although current interest rates are pretty much 0, and not much higher as an average for the last decade, the previous decade averaged 18%. Average growth over the last  80-90 years has typically been near as damn it 12% year on year...

Retirement fund is perhaps more accurate than pension fund. As already said, I will be seeking professional advice before committing to anything, but as a rough idea of what I am considering...

Mutual funds with  proven record of 10+ years growth, split equally

1. Growth and Incomne funds, (Blue Chip).
2. Growth funds, (Equity/S&P500).
3. International funds.
4. Aggressive Growth funds.

As a further thought, presumably there is no reason why instead of paying, say, £500 each month into a pension fund for 25 years, so a total of £150000 hypothetically, that that amount couldn't be saved up and then be invested as a one off amount with a view to allowing it to mature for twenty years

Ok, so jump forward 20 years and you have a fund worth £150k - with steady investment & growth as you have said. Annuity rates are poor (currently), so (based on current rates) that will "only" get you about £7k p.a as a pension ....... Frightening isn't it 

[biggriffin]

what you need to ask is did thid "dave ramsey" make his money from his seceme or from books,or the lottery.
 

[05omegav6]

what you need to ask is did thid "dave ramsey" make his money from his seceme or from books,or the lottery.
 

The plan was devised from his own hard learned lessons. The books and seminars are (from his point of view certainly), gravy, and you are something like 400 times more likely to be struck by lightening that you are to win the lottery.

The book (and concept as a whole) is sold as a step by step way to become debt free and financially secure for life and beyond. The argument being that once you have no debt, you free up your entire income, which can then be spent/invested/donated as you see fit.

The only person the plan depends on is the individual concerned.

The end result should be...

1. Decent insurance against life, so life/medical/disability...
2. A readily accessible amount of cash, (sitting in a bank account, ) for example, to cover 6 months of bills/unexpected events/insurance excesses.
3. Have NO debt, so bills are simply that... Council tax/utilities/food/fuel/car and house maintenance etc.
4. Have the mortgage paid off.
5. A fully funded pension plan.
6. Be financially ready for kids going to University, enabling them to come out the other side completely debt free.

What could you do if you had no mortgage, no credit cards, no car payments? Or should the real question be..

What couldn't you do?

[05omegav6]

Ok, so jump forward 20 years and you have a fund worth £150k - with steady investment & growth as you have said. Annuity rates are poor (currently), so (based on current rates) that will "only" get you about £7k p.a as a pension ....... Frightening isn't it

What I was driving at was if that hypothetical amount would be better of invested as a single amount from the get go, or invested as a fraction month after month?

I suspect the former

[Sir Tigger KC]

Is there any such thing as impartial advice in the pensions and investment industry?   

The money that IFA's, Mortgage Brokers etc can make in terms of commissions and introduction fees can be huge! Even those Car Salesmen on that Channel 4 show will be making £500 commission on a £10,000 finance deal and that's just the commission on the finance not the car! 

So if Rupert the IFA gets someone wanting to invest a £100,000 lump sum or pay in £500 per month into an investment or pension scheme, he's going to be a happy boy!! and who pays the best commission will be part of his decision making process!    Although I believe that these days they have to declare what commissions they receive and lets face it they have to make a living too.... 

[Sir Tigger KC]

Ok, so jump forward 20 years and you have a fund worth £150k - with steady investment & growth as you have said. Annuity rates are poor (currently), so (based on current rates) that will "only" get you about £7k p.a as a pension ....... Frightening isn't it

What I was driving at was if that hypothetical amount would be better of invested as a single amount from the get go, or invested as a fraction month after month?

I suspect the former

Bricks and mortar! 

[05omegav6]

Ok, lets say that house values double every 10 years or so, as should a long term investment attracting interest year on year. The interest, or part of, coulkd be drawn as income, whereas a house would need to be sold to release the equity in it.

Property investment could be gravy on top of everything else...

Guess they key thing is to spread the eggs carefully and broadly

[Sir Tigger KC]

Ok, lets say that house values double every 10 years or so, as should a long term investment attracting interest year on year. The interest, or part of, coulkd be drawn as income, whereas a house would need to be sold to release the equity in it.

Property investment could be gravy on top of everything else...

Guess they key thing is to spread the eggs carefully and broadly

In the mean time you get a rental income from your property, which if you buy carefully could be as much as 10%.  Property investment can be a lot of hassle though! 

I rented a room in shared house in Bristol a few years ago for £300 per month. There were 4 of us living there so the landlord collected £1200 a month from that house and he had 3 other houses on the same street, so in theory he was getting £4800 a month gross.

I looked it up once and he paid between £35,000 and £40,000 for each house in the early 1990's and he's now sold them all in the last 2 or three years for between £220,000 and £240,000!    He's about mid 40's so has done very well, although none of us could have predicted those sort of gains 20 years ago...    and I'm not sure how he raised the cash in the first place as 20 years ago £140,000 -160,000 was a lot of money and I don't think buy to let mortgages existed. 

However he's done it, fair play to him. He was a good landlord and a really nice bloke! 

[Rods2]

Ok, lets say that house values double every 10 years or so, as should a long term investment attracting interest year on year. The interest, or part of, coulkd be drawn as income, whereas a house would need to be sold to release the equity in it.

Property investment could be gravy on top of everything else...

Guess they key thing is to spread the eggs carefully and broadly

In the mean time you get a rental income from your property, which if you buy carefully could be as much as 10%.  Property investment can be a lot of hassle though! 

I rented a room in shared house in Bristol a few years ago for £300 per month. There were 4 of us living there so the landlord collected £1200 a month from that house and he had 3 other houses on the same street, so in theory he was getting £4800 a month gross.

I looked it up once and he paid between £35,000 and £40,000 for each house in the early 1990's and he's now sold them all in the last 2 or three years for between £220,000 and £240,000!    He's about mid 40's so has done very well, although none of us could have predicted those sort of gains 20 years ago...    and I'm not sure how he raised the cash in the first place as 20 years ago £140,000 -160,000 was a lot of money and I don't think buy to let mortgages existed. 

However he's done it, fair play to him. He was a good landlord and a really nice bloke! 

They did as I found out later to my cost. 25% deposit and 75% mortgage. If I had known that at the time I and the Mrs had the money to buy 2 houses and I've always regretted that we didn't.

[albitz]

I had the money to buy a 3 bed house cash when I was 19 (1979). I did what any self respecting 19 year old would do. Bought a flash car instead.
I could say I regret it now,but hindsight knows everything.

[05omegav6]

Ah yes, hindsight

[chrisgixer]

Ok, lets say that house values double every 10 years or so, as should a long term investment attracting interest year on year. The interest, or part of, coulkd be drawn as income, whereas a house would need to be sold to release the equity in it.

Property investment could be gravy on top of everything else...

Guess they key thing is to spread the eggs carefully and broadly

Depends on your target.

Generally, buy to let on a few property's can and does fill the void of the pensions of yesteryear. It can be hard work, but the rewards are there.

Hence the property boom, with its good points and bad.

But once again, money to make money applies, and hence, borrowing/spending for the right reasons.

[chrisgixer]

Ok, lets say that house values double every 10 years or so, as should a long term investment attracting interest year on year. The interest, or part of, coulkd be drawn as income, whereas a house would need to be sold to release the equity in it.

Property investment could be gravy on top of everything else...

Guess they key thing is to spread the eggs carefully and broadly

Depends on your target.

Generally, buy to let on a few property's can and does fill the void of the pensions of yesteryear. It can be hard work, but the rewards are there.

Hence the property boom, with its good points and bad.

But once again, money to make money applies, and hence, borrowing/spending for the right reasons.

To add. Where pensions fail, buy to let "schemes" give an income, if the figures are right. Of course.