Thoughts on Dave Ramsay’s Baby Steps in an NZ context?

[biohazardfan03]

@manoah Agree. When we got together a long time ago it was before you tube let alone Dave Ramsey. But the principles we have stick to are the same. Worked multiple jobs to pay off debt. Shared with 5 others to save for a mortgage. Literally beans and rice. Agree his religious stuff is a bit much- but his view that a simpler family life saves money and hassle is also sensible.

 

[joseph124]

@biohazardfan03 As a religious person myself, I still find him too religious, and I hate that he imposes aspects of that lifestyle on his employees. I can only imagine how ridiculous some of what he says and does seems to non-religious people

 

[barbarossa]

@joseph124 I'm religious too, I think some of his quotes are pretty fitting. The Bible actually has some pretty sound advice regarding financial matters (not that I've read them all) It doesn't really matter if your religious or not its a solid foundation I think. Maybe it puts some non religious people off his advice though? I like his rants lol.

 

[resjudicata]

@barbarossa Religion being brought into stuff all the time, almost constantly, is highly off putting to those of us who aren’t religious, yes.

 

[bluerose31]

@barbarossa The problem with the "pretty sound advice" of financial matters in the bible, is there also some very unsound advice. You have to cherry-pick both for financial advice and morality, with verses around not saving, inducements to not create wealth but give it away in exchange of eternal life , and of course not to plan for tomorrow because of another coming of a god

 

[ligm]

@robbentley I feel like Scott Pape’s Barefoot Investor steps are more relevant in an NZ context. I would pay off the house sooner in NZ and not save for kids college.

He is Australian so it’s not perfect but there is a guide to interpreting the steps in NZ.

 

[daughteroftheking2016]

@ligm Why wouldn't you create a fund for your children's future educational costs?

It isn't a traditional NZ thing, but with the cost of a university education, parents need to start saving early. We have a fund for our grandchildren - they may not need it, and their parents may also be doing it, but everything helps to prepare young people as they set out in life.

 

[anonymousme185]

@daughteroftheking2016 University in NZ for a 3 year bachelor's degree is around that 20-40k mark depending on what you are studying, excluding medicine. With the interest free loans there isn't really a big need to save up for their education, unless you can afford it.

It's a lot more common in the states to save up for college because it's so expensive, you're looking around 20k USD upwards of 50k USD for tuition per year.

People in NZ don't realize how cheap our University fees are for domestic students - it's very heavily subsidized by the taxpayer.

 

[bluerose31]

@anonymousme185 Good commentary there..I'd also add, US student loans typically have interest on them and some of them are very high

 

[ligm]

@daughteroftheking2016 Admittedly I’m not up to date with costs of university. But it should be entirely possible to put yourself through university in NZ through (interest free) student loans and a small job.

In contrast it is almost impossible to purchase a first home these days without family help.

 

[daughteroftheking2016]

@ligm Student loans (interest free or not) are one reason that university graduates struggle to save enough to get a first home deposit. It is still a cost, so parents (or grandparents) investing in their children's future (whether that is an education or a house deposit) has become essential. And the earlier that they start saving, the easier it is to reach the necessary goals.

Kiwisaver is an option, but is a less flexible investment vehicle for those years of young adulthood.

 

[biohazardfan03]

@robbentley It works well in my view. You might getaway with lowering step three. I also can’t get past the maths of the snowball method … would have to pay by interest rate.

 

[barbarossa]

@biohazardfan03 Yeah, I think the snowball method is for people who are bad with money? The avalanche method makes more financial sense as you attack the highest debt excluding mortgage first.

 

[friendlyagnostic]

@barbarossa If people need to use either method, they're probably bad with money. People that are good with money don't tend to need debt payment strategies

 

[barbarossa]

@friendlyagnostic True, that's why they use the snowball method rathe than the avalanche method. I can't believe the credit card debt some people have? I wouldn't be able to sleep at night. I'd rather go without than do that.

 

[resjudicata]

@robbentley 2 and 3 are a must and what I recommend to all my friends who are living paycheck to paycheck as they should be a pre-requisite before you getting started on the rest. Before anyone even thinks of investing, they should have 0 debt with enough money to buy a new car if one shits the bed.

 

[mella]

@robbentley This is essentially the 6 steps sorted.org gives you when you go on their website

 

[joseph124]

@robbentley I found it useful, but I think the emergency fund at Step 3 is unnecessarily high for the NZ context, as it's almost impossible to fire a person without notice here and there's a better social safety net. Income Protection Insurance is likely to be a better option if you feel the need for it as you can usually claim the premiums back at tax time.

I also think it's less necessary to worry about how you'll fund university for your kids (Step 5) as fees are lower here and student loans are interest free. The reality of tertiary study in the 21st century is it's no longer a virtually-guaranteed pathway to success. I'm of the opinion that unless you're wealthy enough that your kids don't need to worry too much about their future they should only be looking at uni if they are either exceptionally gifted in some way or have a solid career plan for which a university qualification is necessary. I have three step-kids in their teens. One is keen on uni and we're thinking about course options. One has no interest in tertiary study and will likely leave school after Year 12, work for a year, then join the Army. One is a bit of a special case as he qualifies for the Supported Living Benefit.

I did like the emphasis on avoiding consumer debt (Step 2), especially with the rise of After-Pay and other ways of getting into quick debt, and on prioritising debt repayment and budgeting. His hard line on credit cards is a bit extreme though: if you can use it sensibly a no-frills card is a useful tool that offers better protection for things like online shopping than a debit card does - and in much of NZ you need to shop online at least some of the time because we don't have the same 24/7 big-box stores you get in much of the USA.

Dave also emphasises the importance of a household budget and working as a financial team with your partner. As someone who had gone from being single to a committed relationship, I agree combining finances is a wise approach for many couples. I don't agree that you should wait until marriage to do this, and I also believe anyone committing to a relationship when they already have significant assets should invest in a contracting out agreement to protect both parties in the event of a separation. Dave's entitled to his socially-conservative views on marriage and divorce but that's not how most of us roll here in NZ, so it's worth adapting accordingly.

Finally, I really like that the final step, the purpose of pursuing financial freedom, is to be able to live and give generously. If all the financially-free people in the world held that as their goal the world would be a far better place

 

[lovinganimals]

@robbentley Step 5 should be last here (if at all)

 

[sherylb]

@robbentley Probably. Not sure about the saving for children's college fund though.

I also think fifteen percent sounds too light for retirement saving, especially if you want more options and to have mini retirements or retire early or work pt time. Same in US though.