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Chubby vs Ramsey

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Driving home the other night I had KTAR on the radio because I listen to Jayme West and Jim Sharpe going to the office each morning. The Dave Ramsey show was on.

A couple being interviewed by phone asked Ramsey something like, 

“We’ve been renting a home and love it. Our landlord just offered us the opportunity to buy it. The price is fair, we have the downpayment, and we can qualify for a low interest loan. Should we?” 

Ramsey responded to this effect, “What would your payment be?” and “What is your monthly income?”

After hearing their answer, Ramsey advised no. He said the monthly payment was too high even though they met lending guidelines.

He explained that they wouldn’t have much left to save each month to become debt free fast enough (per his recommended timeline). In other words, buying the home would go against the “Debt Free Equation” he champions. 

As a real estate guy, hearing someone advise not to buy a home surprised me, especially in today’s market. Why would you NOT buy a home likely to appreciate 12%+ in the next year when you can finance it at 3%? 

Like I said, Ramsey’s advice to the couple surprised me. What happened next made me sad (for them). 

It was apparent the couple revered Ramsey. But they did object (almost pleaded). They said that if they didn’t buy the home their landlord would put it on the market and sell it to someone else. 

Rents in the area had gone up, so they’d have to move at least 15 miles away to keep their rental payment close to what it was now. 15 miles further from work. 15 miles further from friends. More gas expense. Less time together. 

In essence, Ramsey replied, “Stick to the formula. It can be painful to get where you want to be.”

I’m driving.  I’m thinking. 

**15 miles away is NOT where they wanted to be.

** Unlike rent, their home monthly payment is part principal, like saving. 

** Unlike a rental, they’ll accumulate equity buying an appreciating home. 

It’s now 20 minutes later and I’m home about to get in the shower (don’t visualize) thinking about what Chubby (my dad) would have advised this couple. That got me thinking about my first 911.

When I was 20 I wanted to buy and finance a 1968 Porsche 911 Targa. I didn’t need it (already had a car) and would be stretching to afford it. So I asked Chubby if I should. He asked me why not. I said because the monthly payment was a lot. 

Now I’m relaxing in the shower, steamy water pouring down my face, a few sips of 1776 (a cognac I love) in my tummy, celebrating how lucky I was to have Chubby as my dad.

Chubby asked if I really, really wanted the car. I said more than anything. It would get me girls. It would give me status. It would be fun. 

What did Chubby advise? In essence, “Want the car, find a way. Life is to enjoy. Better to be broke in money than bankrupt in memories.” 

Be clear, Chubby never advocated being broke to live big. Just the opposite. He was about working your butt off (and getting smart) to live big while you got rich. 

Chubby once told me that when I lose (“Greg, you will”), suck it up, pick myself up, and do it smarter. 

Ramsey has helped a lot of people be more financially responsible and made a fortune doing it (estimated worth $200 million). There’s nothing wrong with doing well by doing good. 

But is it “doing good” to advise people to pass on a 3% loan to buy a home they love that will probably appreciate at 12%? 

At you’ll find 25 tips for getting debt free. Among them are “Ditch the gym membership,” “Stop going out to eat,” and “Listen to the Dave Ramsey show.” Even when I didn’t have money, those wouldn’t have worked for me. 

But it’s Ramsey’s debt free tip #3 that had meaning to me… “Sell the car.” No 1968 911 for me!

I reflected on the curves I navigated (roads and girls) over 50 years ago in that 911. Would I rather have the money? Would I rather have the memories? 

What do you think?