What if...

[beam]

I know that the backbone of the American economy is credit...but I hate that word.

I interchange the word debt with credit whenever I hear it.

But what if we looked at things differently?

http://www.daveramsey.com/etc/lms/drive_free/player.cfm

[punkncat]

That is sound "sounding" advice.

The only thing that I hate about these people giving finacial advice based on the stock market is that they act like that is some guaranteed return. That this mythical 12% is what you should expect come hell or high water.

Looked at any of your mutual fund statements lately? My "12%" has actually been about -4% for the last few statements.

I can agree with the main point that making payments on a new car is a fool's game. I purchased a "new" used car one time and quickly realized the folly of that. I own both of my cars. They aren't new, but they are mine. I don't own credit cards, and the only thing I have on a credit line is my home, which at the time was unavoidable.

[beam]

I'm right there with you. My wife and I went through Dave's Financial Peace University, and when it came to the lesson called "Of Mice and Mutual Funds", I came away with the same grumbling. "He's basing returns off of 12%"

Then I looked further. I found this interesting Q&A on his website:
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Q: My investments are losing money, yet I keep hearing Dave talk about 12 percent returns?
A: Great question and one we get often. The answer is that Dave is referring to the average annual return of the stock market since 1926, which is very near 12 percent annually when adjusted for inflation. Even the past few years of negative returns in your funds do very little to lower the average of the last 78 years.
Remember, Dave considers investing to be a minimum of 5 years. Less than that is simply saving and should not be done with mutual funds. This is a good place to disclaim that the past is not an indicator of the future; but we do highly suggest factoring in long track records of success into your plans for the future.
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So, while it doesn't necessarily justify the car buying scenario (since it isn't long term investment), I still agree with the main idea behind it.

[punkncat]

I am far from a financial expert. All I know is what I have seen going on with my investments over the past roughly 6+ years. Now the people "in the know" are going to fall back to track record, and timeline, etc. When something is broken, do you think of all the time it worked properly and just keep dumping money in, or fix or replace it?
Right now, investing is like throwing money in a stream. You are just watching it float away. This is for most people, or course there is still money to be made in the market if you are shrewd and know how to wheel and deal in it. But that is not me, anyone I know, the average guy, or apparently too many of the companies managing these mutual funds and 401, etc, etc.

[Lohman446]

If you are showing negative growth (I love how they don't say loss) in your uninsured investments its time to consider other options. If the number is under the FDIC insurance amount you can protect your money while gaining 4 or 5% at most banks in certificates of deposit, which I beleive are FDIC protected.

While I disagree with 12% and think that 10% ROI on stocks / mutual funds would be optimistic at best there are options out there that give you a "safe" 5%. Personally I think too many people see the stock market as a get rich with no work idea. You cannot invest in a company that does not offer a real good or service at profit and expect it to survive... I'm sorry, I don't understand how people think differently.

Of course, there are also the options of investing into something you are directly running and working at, however, most businesses fail in the short term anyways.

[teufelhunden]

If you're in for the long term (as you should be, unless you're retiring by Halloween), everything is on sale. Excellent time to buy... if you will recall, the adage recommends to buy low and sell high. Things are low.

And CDs are FDIC insured (any bank deposits up to the limit are insured).

[grEnAlEins]

Now the people "in the know" are going to fall back to track record, and timeline, etc. When something is broken, do you think of all the time it worked properly and just keep dumping money in, or fix or replace it?
...
Right now, investing is like throwing money in a stream. You are just watching it float away.

I would tend to disagree. What is happening now is like a clearance sale in stock. In 5-10 years thing will be as they were before and in 15 years we will be back to setting record highs. There really is nothing to worry about.

And the reason for looking at the timeline and track record is that like all things, the economy is cyclical. This is especially true in the market of non-tangible items (stocks, etc), as the whole system is based solely on confidence. Throwing your money into the market now is like shopping at a clearance sale at Wal-Mart. Things are undervalued to begin with, growing cheaper, and there is generally a large availability. Buying large quantities now will hurt your pocketbook in the short term, but you will thank yourself later.

Consider this:

Be fearful when others are greedy and greedy when others are fearful.

[bornl33t]

I would tend to disagree. What is happening now is like a clearance sale in stock. In 5-10 years thing will be as they were before and in 15 years we will be back to setting record highs. There really is nothing to worry about.

And the reason for looking at the timeline and track record is that like all things, the economy is cyclical. This is especially true in the market of non-tangible items (stocks, etc), as the whole system is based solely on confidence. Throwing your money into the market now is like shopping at a clearance sale at Wal-Mart. Things are undervalued to begin with, growing cheaper, and there is generally a large availability. Buying large quantities now will hurt your pocketbook in the short term, but you will thank yourself later.

Consider this:

I agree with this man. Stock market is like global warming. It has it's cycles. While things suck for people about to retire, for youngins ( say 30 to maybe 40s) have nothing to really worry about. The stock market will rebound and people will make a fortune on cheap stock. Global warming on the other hand is making people a fortune now ( al gore ) but long term is going to cost all of us.

[grEnAlEins]

I agree with this man. Stock market is like global warming. It has it's cycles. While things suck for people about to retire, for youngins ( say 30 to maybe 40s) have nothing to really worry about. The stock market will rebound and people will make a fortune on cheap stock. Global warming on the other hand is making people a fortune now ( al gore ) but long term is going to cost all of us.

It is especially good for us 20-somethings

I am gonna retire happily by 45 if I play my cards right and things work out with perfect timing. Worst case scenario 55...

I am gonna have a kick-arse starter home that will make me a profit, an outstanding portfolio, and if things work out for me over the next three years or so, and awesome job with a better pension