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November 07, 2007


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Interesting post.

I'm afraid I have to disagree with Dave Ramsey here (or with his billionaire friend). The analysis with the tortise and the hare is a poor one. If you want to do well financially, slowly plodding along like the tortise is a bad move - the time value of money, the power of compounding and the need to avoid parking money in sub-optimal investments (e.g. low interest savings accounts) all would suggest that you cannot afford to simply plod along like the tortise. You actually need to be aggressive in keeping your money working for you (which is very different from taking silly risks).

I just do not see a link between the parable and risk/risky investments - but then I am neither a billionaire nor an author of best selling financial advice books. :-)

The parable makes sense in that consistently doing the right things will allow for much greater reward than going at life haphazard. The other thing to see is that Ramsey is seeking the advice of someone who has already been successful, not someone who thinks they know what is going on.

I don't think it applies to every situation in personal finance, but it is good advice. Making money involves a lot of waiting...waiting for a market to drop, waiting for a stock to top out, etc. Patience is an important virtue. I also think he hits on the problem of people thinking they need to appear successful. I see it a lot where I live; people buying too much house or driving cars they can't afford just to look successful.

I think the original answer he gave you was better. It's not that hard to start investing but some people just don't bother.

It is a good metaphor because it points to the fact the path to wealth for most people is steady consistent saving and investing. (i.e. the tortoise) The hare approach is going for the get rich quick scheme which is rarely happens to anyone. Dave mentions spending to impress people. He is just pointing out that this always makes the first path difficult. i.e. not what the millionaire next door typically does.

Dave Ramsey's advice will certainly prove beneficial to those whom adopt, and commit to the discipline required of his method. The tortoise and the hare concept, is one most of us have been taught early in life. Dave's concept aligns nicely with that story. He simply says get out of debt and begin to control what your money does for you. It is simple……..Control your money rather than letting your money control you.
Dave’s theory on the way to gain control of your finances is to slowly get out of debt, and then begin to slowly build wealth. Compound interest works folks, and is very simple to understand and explain. To put it in perspective, think about pushing a car that has run out of gas to a gas station. Think of the gas station, as not the place to refuel, but as retirement. If you have ever had to push a car, you will agree that it is struggle to get it started, but once it is rolling you can keep it rolling with a little effort and consistent discipline. If you fail to continually apply effort, or come upon a slight incline and fail to apply a tad more effort, you will begin to slow and it will take you longer to get to that gas station. Well if you follow Dave’s plan you will learn to not only apply consistent pressure to your vehicle, but also prepare for those inclines, and thus get to that gas station as quickly as possible.

I am a believer, and have been applying ‘Dave’s theory’ even before hearing of him. Therefore, I can tell you, that through consistent efforts and applied discipline, anyone can build wealth.

Reciently I am a widow, and have a little money I would like to place somewhere, but don"t want to loose the principal. I have been thinking about a Varabile Annunity--what are they and is it a good choice?
Thank you

Joyce --

No one can really answer that without a detailed view of your finances, discussion of your goals, and many other factors. I suggest you contact a financial professional in your area to help you sort through these issues.

Good luck!

Dave i have a Chase credit card that I have used for years,at the end of 2008 they raised my interest rate to about 29% with about 22,000.00 on the card .
I closed the account and entered into a payoff program at 6% interest to pay off the account and completed Nov. 08 to Nov 09 at $535,00 A MONTH. Then entered into another at $454.00 a month for a year or so.
Nov. 2011 I couldn't even make the payments and I called them and ask if I could hold off a few month and catch up in the spring when my business starts making money again, they said sure then just request to get back on the program , so I stopped three month later they said I could not get back on the program because I broke my promise by stopping payments .
now they have offered a payoff deal that has to be paid in 92 day at 40 cents on the dollar, 4 payments . $7,800.00
It well be called settled , not bad for me.......but I owe back property taxes and do not want to loose my business building ,I owe $2000.00 on 2010 and $5000,00 on 2011, Sept will bring another $4500.00 for 2012. over two years and they will sell my store.
I would like to take their deal but am afraid I my not make the taxes if I do.......I heard you on FOX NEWS an d you said not to worry about unsecured debt, take care of taxes ,secured payments first ,,,,how bad will this hurt me ....? Please I have till 24 June to answer them ....

By the way as soon as I stopped paying they put me back at 27.8% interest and I am back up to $22,000.00 ....all those payments wasted.... HELP what do I do ?

Hi Dave:

was currently let go from my job. My 401k account is still with my former employer because i have loans against that i am paying off bi-weekly. If i request a partial rollover. could you give me some insight on tax implications if i go this route verse if i just rollover entire balance and not pay off loans.

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