Dave Ramsey kills dentist's wife dreams

[Dipdoc]

This video was kind of depressing, Dave Ramsey's reaction to the debt load of this girl's husband was kind of unsettling. I mean, I understand that 480K in student loan debt sounds insane to everyone in the outside world. But in the world of dentistry this is a very likely reality for recent graduates and those graduating in upcoming years.. it's nearly impossible to get around it for most.. Any thoughts?

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[distressstudent]

Ramsey is correct. She's a broke dentist's wife. Thinking about buying a home at 480k debt just shows how out of touch she is with her husband debt.

Even in the world of dentistry 480k is an insane amount of debt. Ask any practicing dentist. Things seem "okay" because to students because everyone seems to be heading into the same direction. Little do they know they are heading straight off a cliff. Sadly it's the norm but don't make the mistake of thinking it's normal.

Liked what he said. You dont get a pass on math for being a doctor. Crunch the number folks

 

[DrJeff]

One of the best bits of financial advice that I ever received was to manage my existing debt before I considered taking on any new substantial debt!

A new/recent grad with large loans realistically shouldn't consider "living like a dentist" (whatever that means to them) until they've gotten their debt load to a point where they start really seeing their savings increasing month to month because they've both managed their existing debt well and lived within the budgetary means they've set for themselves - this can be a significant issue if you have at least 1 spouse who using Dave Ramsey's great terms is a "spender" and the other is a "saver" especially if you haven't set aside some money to spend! Dave Ramsey himself is a spender by nature (and him and his daughter are a wealth of solid financial information with books, radio shows/podcasts highly worth checking out if you've never heard of him before!)

The reality is that if you've got 400k in loans, you've got a 400k mortgage before you even start thinking about taking on either an actual house mortgage and/or practice purchase debt. The reality is the sooner you start putting retirement money away, the more you'll have when you want to retire. That is the concept that is lost on many new grads, since to compare what a dentist salary can mean lifestyle wise with today'c common debt loads to what that meant for a dentists lifestyle (especially for the "new grads" which I will call 10 years and less out of dental school) because the debt loads as a percentage of annual income are so much more now than 15-30 years ago, and the reality is that as a whole, dentist incomes have been at best flat, if not in some decline for close to a decade now. It's not the same economic world for a dentist from the day the graduate dental school as it once was/used to be. It still can be a very financially rewarding career though, you just need to show financial restraint and live within your means and keep your debt levels under control

 

[Big Time Hoosier]

Awesome! This needs to become a sticky thread and a must watch for any and all predents. Given her perceived sense of entitlement, I'd literally bet $1,000 they bought a house anyway.

Big Hoss

 

[GypsyHummus]

Ramsey is correct. She's a broke dentist's wife. Thinking about buying a home at 480k debt just shows how out of touch she is with her husband debt.

Even in the world of dentistry 480k is an insane amount of debt. Ask any practicing dentist. Things seem "okay" because to students because everyone seems to be heading into the same direction. Little do they know they are heading straight off a cliff. Sadly it's the norm but don't make the mistake of thinking it's normal.

Liked what he said. You dont get a pass on math for being a doctor. Crunch the number folks

What I don't understand is that even at these private schools, its still really hard to get into dental school! Why are all these lemmings going off the cliff? I suppose it was either go to private dental school, or try to get into medical school.

 

[Incis0r]

Thank you for sharing!

Hahahaha I loved Ramsey's reaction. He was expecting it to be around 50-60K.

So how much debt is it?
480K....
"GOOD LORD!"

I'm going to create a thread in pre-dental and share this post with them since I think it's a good perspective to have on student debt. I'll credit you, @Dipdoc in that thread.

The reality is the sooner you start putting retirement money away, the more you'll have when you want to retire.

Albert Einstein once said the following:

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

 

[GypsyHummus]

Thank you for sharing!

Does the wife not work? All I heard was that their lease is expiring, and that he has a job and student debt.

Hahahaha I loved Ramsey's reaction. He was expecting it to be around 50-60K.

So how much debt is it?
480K....
"GOOD LORD!"

I'm going to create a thread in pre-dental and share this post with them since I think it's a good perspective to have on student debt. I'll credit you, @Dipdoc in that thread.

She doesn't have to work, she is a Dentist's wife. That was part of the marriage agreement after all.

 

[Incis0r]

She doesn't have to work, she is a Dentist's wife. That was part of the marriage agreement after all.

Ouch!

 

[fellowstudent92]

I love how she keeps trying to get Dave to sign off on them buying a home before the entire loan is paid off:

Dave: "Yeah, you should rent until you get that [debt] cleared up"
Her: (in a sad, disappointed tone) "Okaayyyy.......for the whole thing? the whole amount cleared up before we purchase a home?"

...later...after Dave learns about his income (120K) and his debt (480K),

Dave: "You need to be acting like your hair is on fire because it is"
Her: "I know...so even if the rent....I mean even if we're throwing that money away [on rent]!" **thinking please Dave, approve my house!**

Well at least this will wean out all them covert gold diggers, until of course the dentist is debt free but until that point, it will reveal a girl's true colors haha 😉

 

[GypsyHummus]

I love how she keeps trying to get Dave to sign off on them buying a home before the entire loan is paid off:

Dave: "Yeah, you should rent until you get that [debt] cleared up"
Her: (in a sad, disappointed tone) "Okaayyyy.......for the whole thing? the whole amount cleared up before we purchase a home?"

...later...after Dave learns about his income (120K) and his debt (480K),

Dave: "You need to be acting like your hair is on fire because it is"
Her: "I know...so even if the rent....I mean even if we're throwing that money away [on rent]!" **thinking please Dave, approve my house!**

Exactly. This goes to the Gentlemen out there:

Gentlemen, marry a Women who has an incredible work ethic who actually works for a living and supports herself- not just a tall good looking gal with........assets, expecting to be kept. She never mentioned that she was working or going to school. In fact, from how much debt that they took out, I would assume that they were both living off of student loans. She kind of sounds like she is way over her head and expected a cozy 300K/year salary from a "doctors wife".

120K turns into 80K pretty quick after uncle Sam comes around. Even if they live off of 20K/year, throwing 60K at the debt might take 10+years to fully get rid of. Not everyone is a small business dentist pulling in 500K/year. The Bureau of Labor Statistics gives Percentiles for a reason.

 

[GypsyHummus]

Well at least this will wean out all them covert gold diggers, until of course the dentist is debt free but until that point, it will reveal a girl's true colors haha 😉

MGTOW, brother. At least until you get the debt paid off.

 

[Incis0r]

I posted this video in the pre-dental forum so that more people can get exposure to the reality of so much debt.

 

[charlestweed]

She and her dentist husband can buy something like a duplex or a triplex. They can live in one unit and rent out the other unit(s). That's a lot better than throwing away money every month renting an apartment. That's how my dad was able to afford to buy a $134k house with a job that only paid him $12 an hour (it went up to $19/hour by the time he retired at 71 yo). We lived in 1 bedroom and rented out the other 3 bedrooms. The house was paid off and my parents have enjoyed their retirement. If my dad didn't buy a house back then, he would never have a chance to own a house because the average home price in his area has risen up to $450k.

California may not be a good place to practice dentistry but at least the home price here appreciates over time. My wife and I owed $450k in student loans and we paid them off in 5 years. It wasn't our dental income that helped us pay off our student loans so quickly but they were the profits that we made from buying and selling our houses.

 

[Bear_Down]

Well you can also look at it this way: lets say they are paying $1200 in rent for a 2 bedroom apartment. Instead, they can buy a 2bedroom house, paying about the same ~$1200 in mortgage/month. Of course there are other costs to owning a home, but the money she would be paying in mortgages would go toward their own capital vs wasting it on rent. And they can potentially sell that house and get all that money back, possibly even more. But theres also a lot of risk when taking on that much in debt.


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[gatorfan99]

Well you can also look at it this way: lets say they are paying $1200 in rent for a 2 bedroom apartment. Instead, they can buy a 2bedroom house, paying about the same ~$1200 in mortgage/month. Of course there are other costs to owning a home, but the money she would be paying in mortgages would go toward their own capital vs wasting it on rent. And they can potentially sell that house and get all that money back, possibly even more. But theres also a lot of risk when taking on that much in debt.


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That all sounds great... but then the housing market crashes and you are in huge trouble.... The thing about student loan debt is that it is almost impossible to forgive, even if you die someone has to pay it.. Stop trying to find "my buddy did this.. my dad did that.." those are unicorns, do like what we do with scientific research and look for averages and trends NOT random off the wall examples..

 

[charlestweed]

That all sounds great... but then the housing market crashes and you are in huge trouble.... The thing about student loan debt is that it is almost impossible to forgive, even if you die someone has to pay it.. Stop trying to find "my buddy did this.. my dad did that.." those are unicorns, do like what we do with scientific research and look for averages and trends NOT random off the wall examples..

Why would you be in trouble when the housing market crashes? Regardless of what happen to the housing market, you still need a place to stay. You continue to live in the same house and continue to make mortgage payments…just like when you rent. Bear_Down made a good point. If the monthly rent payment and the mortgage payment are similar, then there is no reason to rent. You can at least write off on the mortgage interest. Since dentists rarely get laid off, the likelihood of a dentist losing a house is very slim.

 

[Afualo12]

Hmmmm...I might be naive bc I'm on the HPSP scholarship with the Navy, but I think Ramsey is unaware of the potential earnings of a dentist. I have 7 really good friends who have been practicing for around 4 years. They all had similar if not higher debt. They work hard and are smart and they all seem to be very optimistic about their position. If you start at 120k/yr minimum you're going to be making significantly more within only a few years. I say buy an affordable house. Use the equity in that house to your advantage. Renting is one of the worst things you could do especially if you're settling down in one place for a long time. The women didn't seem spoiled or unrealistic to me. If you're going to be a spender, there's nothing better to spend money on then a house. I know, our house from undergrad is making us money; from the difference between the rent and Morgage (+ $550/ month) & the fact that the value of the home is going up, and our renter is increasing our equity. We are making money 3 ways from that one small house we bought in undergrad. The way I see it is Ramsey is used to talking to ppl who have little in the way of earning potential and debt from things that depreciate. 2 things to go into debt for in my book are: house & education. That's it, unless their is a medical situation. What do you think?


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[distressstudent]

http://www.dentaltown.com/MessageBoard/thread.aspx?s=2&f=214&t=279065&r=279065&v=1

DT's take on the topic

 

[Bear_Down]

That all sounds great... but then the housing market crashes and you are in huge trouble.... The thing about student loan debt is that it is almost impossible to forgive, even if you die someone has to pay it.. Stop trying to find "my buddy did this.. my dad did that.." those are unicorns, do like what we do with scientific research and look for averages and trends NOT random off the wall examples..

I agree, student loans are impossible to forgive/default on, but it's irrelevant to the conversation. We're talking about buying a house which can be defaulted on, but as a dentist, you'll almost always have employment opportunities, so unless you're buying a house in a dentist saturated market, I dont know why we are talking about defaulting on any loans.

Second of all, yeah you're risking a housing crash and you're home value decreasing, but so is everyone in the World who buys a home.
But you can also be risking a housing market surge if you wait long to buy a house(for example the housing markets in NYC and California), in that case you would be risking paying a lot more for a house in the future + all that money wasted on rent.

Last, lets say there is a housing market crash. You're in "huge trouble"? How so? You're not a banker or a factory worker who is going to be out of your job due to a housing market crash. Although your house may be worth less, you'll still have a job as a dentist and you'll still be able to make you're mortgage payments.

I mean, it all depends on the person and their ability to handle their finances. If you do everything right, you will come out on top. If you're scared of risks, then stick to the safer route where you are giving your money away to a landlord. Just my opinion.

 

[DocJL]

Interesting thread.

Will have to watch the videos when I have more time.

Dave Ramsey has made a fortune for himself with nothing more than common sense advice.


What nobody has commented on in this thread is the potential hamstringing of this young doctors income prospects, if he should take on a large mortgage (and then put a pool in the backyard, and a BMW in the garage, as his associate income rises, eventually topping out about $200-250k in most markets, and this is only once they have developed their skills and clinical speed)

The fact is that the vast majority of dentists who are making a really good income (as a general dentist, think $350-600k), are those who own their own practices. Getting a loan to purchase a practice, either a scratch start, or a thriving existing practice, will be MUCH harder, if the doctor has hundreds of thousands of dollars in student loans, PLUS hundreds of thousands of dollars in mortgage and consumer debt.

The result: the young doctor in our example may NEVER leave the chains of associateships / corporate dentistry, or will be several years behind when they might otherwise have made the transition to practice ownership, and their lifetime career earnings could easily be 1, 2, or 3 million dollars less.

 

[gatorfan99]

Interesting thread.

Will have to watch the videos when I have more time.

Dave Ramsey has made a fortune for himself with nothing more than common sense advice.


What nobody has commented on in this thread is the potential hamstringing of this young doctors income prospects, if he should take on a large mortgage (and then put a pool in the backyard, and a BMW in the garage, as his associate income rises, eventually topping out about $200-250k in most markets, and this is only once they have developed their skills and clinical speed)

The fact is that the vast majority of dentists who are making a really good income (as a general dentist, think $350-600k), are those who own their own practices. Getting a loan to purchase a practice, either a scratch start, or a thriving existing practice, will be MUCH harder, if the doctor has hundreds of thousands of dollars in student loans, PLUS hundreds of thousands of dollars in mortgage and consumer debt.

The result: the young doctor in our example may NEVER leave the chains of associateships / corporate dentistry, or will be several years behind when they might otherwise have made the transition to practice ownership, and their lifetime career earnings could easily be 1, 2, or 3 million dollars less.

+1

New grads should be SAVING as much money as they can to build up an emergency fund, what happens if you get hurt? What if its enough to stop you from doing dentistry? Those loans will still come after you...

 

[Cello]

Well you can also look at it this way: lets say they are paying $1200 in rent for a 2 bedroom apartment. Instead, they can buy a 2bedroom house, paying about the same ~$1200 in mortgage/month. Of course there are other costs to owning a home, but the money she would be paying in mortgages would go toward their own capital vs wasting it on rent. And they can potentially sell that house and get all that money back, possibly even more. But theres also a lot of risk when taking on that much in debt.


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Property taxes, maintenance, insurance. There are lots of hidden costs to owning a home. We did a spreadsheet comparison of owning a home vs renting for 3 years of dental school (renting 1st year in a new market) and found that for our situation there was is likely no significant financial benefit to owning unless we live here longer.

+1

New grads should be SAVING as much money as they can to build up an emergency fund, what happens if you get hurt? What if its enough to stop you from doing dentistry? Those loans will still come after you...

This is why disability insurance is necessary.

 

[Cello]

Dave Ramsey is way off base here IMO.

First of all, he provides no reason for why a person should have to clear 100% of a debt before taking on further debt. Why not? This is some hard and fast rule he lays out like it is the law, but he gives no supporting argument for it.

As some previous posters pointed out, there is simply no reason that she and her husband should have to rent instead of purchase. If they plan to stay in the market and the market has good future growth potential then why shouldn't they buy a home? Don't go crazy and buy a mcmansion, but you are going to be spending money on a rental anyway so why not get equity out of it? Ramsey is oversimplifying things here and the patriarchal tone is pretty condescending to my ears.

This reminds me of his snowball method for tackling debt, which, if you are good with money, is actually a terrible idea. As I understand it, he suggests that you list your debts from least to most. So for example:

$5,000; $50,000; $70,000

Pay off the smallest one first according to Ramsey.

Bad idea! It may be great advice for your average Joe who gets psychological satisfaction from eliminating a loan quickly, but it fails to take interest rates into account. What if the $5,000 loan has a 3% interest rate, the $50k loan has 5%, and the $70k loan has 8.5%. You would be a fool not to put every dollar you can towards the loan with the highest interest rate first while making minimum payments on the other two!

Furthermore, his assertion that you should pay off your existing debt first is completely misguided for those of us who will manage to refinance our loans after graduation. Most financial types these days suggest paying the minimum on the loans if the interest rates are lower than ROI on the markets and then put whatever money you would have paid towards the loans into the markets for your retirement and savings. Why would you put $40,000 against a student loan at 3.5% interest if you could put that $40,000 into the market with an expected 7-8% return over the long-term? That is just bad advice.

If you are a dentist with $480k in debt making $120k per year and you want to buy into a practice, Ramsey would say that you should pay your debt off first, but that could be very costly if you would be buying into a practice with significant income potential. My fiancee has to buy into a surgical practice after she's made a partner and it will be expensive up front. But within 3 or 4 years she will break even on the investment and from there it is pure profit from ancillary (passive) income. She will be taking out more loans on top of existing loans, and yet it would be absolutely foolish not to and miss out on years of passive income.

Running a business, being good with money, it requires you to take calculated risks and to know how to manage your debt. Debt is not your enemy if you can manage it well.

 

[Peoplejudge]

This video was kind of depressing, Dave Ramsey's reaction to the debt load of this girl's husband was kind of unsettling. I mean, I understand that 480K in student loan debt sounds insane to everyone in the outside world. But in the world of dentistry this is a very likely reality for recent graduates and those graduating in upcoming years.. it's nearly impossible to get around it for most.. Any thoughts?

Wow. Just wow. Most people on this thread judge just as much as Dave ramsey. Let me get a few things straight, since I am the caller on the other end of Dave's voice.
I am not entitled, a gold-digger, or even asking for a ridiculous house. In fact, we were wanting to purchase the home we are currently living in during dental school, which is modest, to save the money from being wasted, considering rent would cost more than the mortgage. My husbands job has research to show the amount of money he will make in the next five years and we already have projected to have our loans paid off in six years. Also, not forgetting to mention that my husband, top of his class, and a soldier for the US Army, we will obtain other financial means. Because it is easier to judge and type online than say it to someone's face, have some grace since you do not understand someone's full background based off of a three minute conversation. It was a valid question since we were not sure it was worth it. I was not asking to buy a large home, entitle myself to a brand new car, or live like a rich dentists' wife. We live within our means and we know what it takes to pay our dues and live on a budget. This may be a shock to some who are so hungry and focused on money, but my husband went into this career because it is his passion. And all of his service deployments can tell. I'm just saying, don't judge our circumstances based off of what Dave said and what you assumed I was thinking. I appreciated his opinion in what he thought we should do, which is why I called in the first place. But what I don't appreciate is some filth that has been shown on this post because you believe you know the entire circumstance and think your opinion is the correct way.

 

[Cello]

Wow. Just wow. Most people on this thread judge just as much as Dave ramsey. Let me get a few things straight, since I am the caller on the other end of Dave's voice.
I am not entitled, a gold-digger, or even asking for a ridiculous house. In fact, we were wanting to purchase the home we are currently living in during dental school, which is modest, to save the money from being wasted, considering rent would cost more than the mortgage. My husbands job has research to show the amount of money he will make in the next five years and we already have projected to have our loans paid off in six years. Also, not forgetting to mention that my husband, top of his class, and a soldier for the US Army, we will obtain other financial means. Because it is easier to judge and type online than say it to someone's face, have some grace since you do not understand someone's full background based off of a three minute conversation. It was a valid question since we were not sure it was worth it. I was not asking to buy a large home, entitle myself to a brand new car, or live like a rich dentists' wife. We live within our means and we know what it takes to pay our dues and live on a budget. This may be a shock to some who are so hungry and focused on money, but my husband went into this career because it is his passion. And all of his service deployments can tell. I'm just saying, don't judge our circumstances based off of what Dave said and what you assumed I was thinking. I appreciated his opinion in what he thought we should do, which is why I called in the first place. But what I don't appreciate is some filth that has been shown on this post because you believe you know the entire circumstance and think your opinion is the correct way.

If you read through this thread I think you'll see that many of us are on your side. I think Dave Ramsey was in the wrong on this for all the reasons I laid out above, and I do think that he came across as condescending towards you. As far as the judgment on these forums go, take it with a grain of salt. The posters here don't know you aside from the brief caricature formed of you on a segment of a podcast. We are a soundbite culture and most of us make decisions about people based on short snippets of their lives. It sounds like you and your husband have done the research and have made some sound financial decisions. I think you guys should make the best decision based upon YOUR situation, not what Dave Ramsey or posters on this forum assume to be your situation.

 

[doc toothache]

Wow. Just wow. Most people on this thread judge just as much as Dave ramsey. Let me get a few things straight, since I am the caller on the other end of Dave's voice.
I am not entitled, a gold-digger, or even asking for a ridiculous house. In fact, we were wanting to purchase the home we are currently living in during dental school, which is modest, to save the money from being wasted, considering rent would cost more than the mortgage. My husbands job has research to show the amount of money he will make in the next five years and we already have projected to have our loans paid off in six years. Also, not forgetting to mention that my husband, top of his class, and a soldier for the US Army, we will obtain other financial means. Because it is easier to judge and type online than say it to someone's face, have some grace since you do not understand someone's full background based off of a three minute conversation. It was a valid question since we were not sure it was worth it. I was not asking to buy a large home, entitle myself to a brand new car, or live like a rich dentists' wife. We live within our means and we know what it takes to pay our dues and live on a budget. This may be a shock to some who are so hungry and focused on money, but my husband went into this career because it is his passion. And all of his service deployments can tell. I'm just saying, don't judge our circumstances based off of what Dave said and what you assumed I was thinking. I appreciated his opinion in what he thought we should do, which is why I called in the first place. But what I don't appreciate is some filth that has been shown on this post because you believe you know the entire circumstance and think your opinion is the correct way.

Why did you call the "guru" for advice?

 

[Panis et Circenses]

If you read through this thread I think you'll see that many of us are on your side. I think Dave Ramsey was in the wrong on this for all the reasons I laid out above, and I do think that he came across as condescending towards you. As far as the judgment on these forums go, take it with a grain of salt. The posters here don't know you aside from the brief caricature formed of you on a segment of a podcast. We are a soundbite culture and most of us make decisions about people based on short snippets of their lives. It sounds like you and your husband have done the research and have made some sound financial decisions. I think you guys should make the best decision based upon YOUR situation, not what Dave Ramsey or posters on this forum assume to be your situation.

You are on her side because are probably graduating with a similar debt load.

 

[Cello]

You are on her side because are probably graduating with a similar debt load.

And your parents are financing your dental school I take it?

 

[Panis et Circenses]

And your parents are financing your dental school I take it?

Nope, but I refuse to pay 400k+ for a dental education. I have other plans if it doesn't work out.

 

[Bereno]

Ramsey is not familiar enough with the scenario of most dentists to be fully informed on the topic IMO. Ramsey is great for people who are not financially savvy and who just need a simple method of dealing with finances, who otherwise would flounder. For those who have a plan, and those who know how to use money as a tool, I think he is far from correct. This is just my humble opinion though - take it for what it is worth. 🙂

 

[cmcner]

Nope, but I refuse to pay 400k+ for a dental education. I have other plans if it doesn't work out.

Your options in this category dwindle every year where even some public schools charge their residents $300k plus with private schools under $400k being very rare and many public schools jacking up the price quite a bit for nonresident the $400k school is the unfortunate new standard

 

[Panis et Circenses]

Your options in this category dwindle every year where even some public schools charge their residents $300k plus with private schools under $400k being very rare and many public schools jacking up the price quite a bit for nonresident the $400k school is the unfortunate new standard

I'm aware. I have a thread in the pre-dental category talking about school costs. There are a number of options for me that will bring my school cost from 0 to much less than $400,000. Provided those options don't work, I'm not going into dentistry and I have other plans as backups that I'm already working on.

 

[Likkriue]

Wow. Just wow. Most people on this thread judge just as much as Dave ramsey. Let me get a few things straight, since I am the caller on the other end of Dave's voice.
I am not entitled, a gold-digger, or even asking for a ridiculous house. In fact, we were wanting to purchase the home we are currently living in during dental school, which is modest, to save the money from being wasted, considering rent would cost more than the mortgage. My husbands job has research to show the amount of money he will make in the next five years and we already have projected to have our loans paid off in six years. Also, not forgetting to mention that my husband, top of his class, and a soldier for the US Army, we will obtain other financial means. Because it is easier to judge and type online than say it to someone's face, have some grace since you do not understand someone's full background based off of a three minute conversation. It was a valid question since we were not sure it was worth it. I was not asking to buy a large home, entitle myself to a brand new car, or live like a rich dentists' wife. We live within our means and we know what it takes to pay our dues and live on a budget. This may be a shock to some who are so hungry and focused on money, but my husband went into this career because it is his passion. And all of his service deployments can tell. I'm just saying, don't judge our circumstances based off of what Dave said and what you assumed I was thinking. I appreciated his opinion in what he thought we should do, which is why I called in the first place. But what I don't appreciate is some filth that has been shown on this post because you believe you know the entire circumstance and think your opinion is the correct way.

Rent a cheaper place and live off rice and beans till that debt is cleared. If you work as well, that would be even better. Just throw everything you can at, it. The babies and vacations and all that stuff should wait.

 

[Likkriue]

Dave Ramsey is way off base here IMO.

First of all, he provides no reason for why a person should have to clear 100% of a debt before taking on further debt. Why not? This is some hard and fast rule he lays out like it is the law, but he gives no supporting argument for it.

As some previous posters pointed out, there is simply no reason that she and her husband should have to rent instead of purchase. If they plan to stay in the market and the market has good future growth potential then why shouldn't they buy a home? Don't go crazy and buy a mcmansion, but you are going to be spending money on a rental anyway so why not get equity out of it? Ramsey is oversimplifying things here and the patriarchal tone is pretty condescending to my ears.

This reminds me of his snowball method for tackling debt, which, if you are good with money, is actually a terrible idea. As I understand it, he suggests that you list your debts from least to most. So for example:

$5,000; $50,000; $70,000

Pay off the smallest one first according to Ramsey.

Bad idea! It may be great advice for your average Joe who gets psychological satisfaction from eliminating a loan quickly, but it fails to take interest rates into account. What if the $5,000 loan has a 3% interest rate, the $50k loan has 5%, and the $70k loan has 8.5%. You would be a fool not to put every dollar you can towards the loan with the highest interest rate first while making minimum payments on the other two!

Furthermore, his assertion that you should pay off your existing debt first is completely misguided for those of us who will manage to refinance our loans after graduation. Most financial types these days suggest paying the minimum on the loans if the interest rates are lower than ROI on the markets and then put whatever money you would have paid towards the loans into the markets for your retirement and savings. Why would you put $40,000 against a student loan at 3.5% interest if you could put that $40,000 into the market with an expected 7-8% return over the long-term? That is just bad advice.

If you are a dentist with $480k in debt making $120k per year and you want to buy into a practice, Ramsey would say that you should pay your debt off first, but that could be very costly if you would be buying into a practice with significant income potential. My fiancee has to buy into a surgical practice after she's made a partner and it will be expensive up front. But within 3 or 4 years she will break even on the investment and from there it is pure profit from ancillary (passive) income. She will be taking out more loans on top of existing loans, and yet it would be absolutely foolish not to and miss out on years of passive income.

Running a business, being good with money, it requires you to take calculated risks and to know how to manage your debt. Debt is not your enemy if you can manage it well.

I have a friend who works in forensic accounting at a big firm detailing me all of the "claims" put in by failed dental practices. What happens if god forbids the practice does not generate enough income and closes? There are alot of overhead costs and I believe newly minted dentists coming right out of dental school should NOT take the risk without learning more about the business side of dentistry while hauling 480k on their shoulders.

I agree that you don't need to tackle ALL of the debt (even though I would prefer to do it), but I think going to work as an associate for a couple of years or more to gain experience and live cheaply to get rid of a good chunk of the debt before buying a practice is better. As an associate you will learn how to run a business, learn all of the overhead costs and how to manage an office during that time. I do not believe a dental school clinic will emulate a general practice. A general practice in NYC would be run differently than one in Baltimore.

What this guy did:
http://forums.studentdoctor.net/threads/experience-first-five-years-out-of-school.1137149/

Is what i think the best way to tackle the debt.

 

[Peoplejudge]

Ramsey is not familiar enough with the scenario of most dentists to be fully informed on the topic IMO. Ramsey is great for people who are not financially savvy and who just need a simple method of dealing with finances, who otherwise would flounder. For those who have a plan, and those who know how to use money as a tool, I think he is far from correct. This is just my humble opinion though - take it for what it is worth. 🙂

I agree. He is an intellectual person, which is why I brought the posed question to him in hopes he had a differing opinion, or alternate options I didn't think about previously. But it is true, he isn't well educated on the medical model of debt to income ratio. I can see how from his stats he has on paper with how much the "average" dentists make that it wouldn't be a good idea to even go into debt. But to humiliate someone on his podcast just embarrasses me! He lumped me in with the average not knowing our story and almost convincing listeners not even to go to a med school. Education is important, but especially more important if you know this is what you were meant to do. I am not worried about paying off our debt, purchasing a home one day, or other financial issues. I merely just wasn't sure if it would've been a good idea to purchase a home right after graduation or wait a bit longer when finances come easier.

I do thank everyone who has been fair (not necessarily on my side) but who hasn't attacked my personal self or motives.