Re: Why is it important to have health coverage, even if you're healthy?

natecarlson — Thu, 29 May 2008 11:36:17 -0000

I haven't decided yet. ;)

My employer is offering them now, and the premiums are about half of the premiums for our traditional insurance, with an out-of-pocket maximum of somewhere around $2500/yr per person, *including* medication. If either Tiff or myself were to have a major medical issue, the $2500 out-of-pocket maximum would actually be far less money than the maximums with our current insurance - especially since our current insurance does not cap out-of-pocket expenses on medication at all.

Unfortunately, I'm on a name-brand prescription drug at the moment, which would end up costing more on the HSA than the difference in premiums. (With a HSA, you pay out of pocket -- more specifically, out of the tax-free savings account -- until you hit your out of pocket maximum. Then, you are 100% covered.) I'm working on finding a generic alternative that works - if that's a possibility, it will be very tempting to switch to a HSA during the next open enrollment period.

Re: Carnivals, Link and More!

natecarlson — Thu, 29 May 2008 11:30:34 -0000

Agreed that debt can be a slippery slope.. since we're still in the process of getting out of debt (and it's going to be a long one), there's no way I'll enter into more debt right now, especially unsecured. If I ever do, it will be 'secured' with real cash sitting on investments (as in my example above.)

Regarding my 'mathematically correct' comment -- he actually said that it wasn't correct, and then about a sentence later said that it was correct. If I'm really bored sometime I'll pull out the CD's to get an exact quote.

In any case, thanks for the links, and indeed we will see what happens next week! :)

Re: Carnivals, Link and More!

natecarlson — Wed, 28 May 2008 22:21:42 -0000

I think my biggest peeve with the system so far is the $1000 emergency fund suggestion -- that is, how small it is. I understand that this is the 'baby' emergency fund, but in my experience anything that would qualify as an 'emergency' that couldn't be dealt with by flexing the budget for a couple months is going to be well over $1000. It all depends on where you are at in life though, I guess!

I am also constantly irritated by his stance that all debt is horrible - I am in complete agreement that if you are in debt beyond the assets to pay it back, you are going to be in trouble -- however, if you have the assets, most good money managers will tell you that you can be better off taking on some debt versus paying cash.

Let's take the example of buying a $25,000 car (including taxes, delivery, etc).. let's assume you *have* $25,000 sitting in the bank, ready to go, and you are going to purchase this vehicle either way.

First option: Take out a loan. You can usually get 0% interest in this economy, but for the sake of argument, let's say you get an interest rate of 3%, and invest the $25,000 you at an average of 12% (which, again, Ramsey says is perfectly reasonable - that's arguable, but I'm going to use his own numbers for that) over the period of the loan. Your payment on the car would be $449/mo, and your payments would total $26,940. The $25,000 you invested at 12% would now be worth $44,059. So, $44,059 - $26,940 = $17,119 gain.

Second option: Pay cash for the car, and invest the money you would have spent on a payment at 12%. So, you empty out the $25k from your savings account, and then invest $449/mo. After the 5 year period that you would have been paying off the car, you have a total of $36,416 in your investment account. $36,416 - $25,000 = $11,416 gain.

Which option sounds better to you? If you were go purchase the $70k Mercedes that he often refers to, the gains would be even larger, of course. Even though you are entering into debt for this, you have cash backing the debt, and could trivially pay it off if needed.

I also take issue with his tendency to put down other systems, and saying that his way is the only way. One example of this is here:

http://www.daveramsey.com/the_truth_about/debt_...

He states that "When you use one of these companies and then try to get a Conventional, FHA, or VA loan, you will be treated the same as if you had filed Chapter 13 bankruptcy." In the previous sentence, he referred to "Consurmer Credit Counseling Service", which is a process that enrolls you in a Debt Management Plan. On a DMP, once you have completed the plan, your credit is no worse than it was before you started the plan, and generally will be better -- all the creditors do is place a note on your credit report that you are paying off the debt on a DMP; when you are done paying off that bill, it's marked as paid in full and your credit is fine. In my research, it seems like what he's probably trying to discuss are the "Debt Settlement" plans - those are the guys that have you stop all payments to your creditors, pay them, and they will try to settle with your creditor for 40-60%. That is just murder to your credit history, of course. I think that a DMP that is properly researched could actually really help FPU members - the basic concept of a DMP is -- surprise! -- a debt snowball (small debts are paid first, then the payments for the small ones get rolled into the larger ones)! The major difference is that it does not include secured loans and student loans (which could be handled as part of a "larger snowball" outside of the DMP). The DMP has the major added bonus of lowered interest rates, which *will* help you get out of debt faster.

I also get very tired of Dave's double-talk -- for example, in the debt episode, while discussing you the snowball, he talks about how the snowball isn't mathematically correct since you may be paying higher interest loans first, and then goes on in the next breath to say how it's mathematically sound. Personally, I'd prefer that he present the program without the jokes and rhetoric, and let people weigh it on it's own merits and flaws.

That said, his program is the best one I've seen so far, and if followed to the letter, it will probably work. It's just not the only way!

Disqus - Friends of onebigswede

Re: Why is it important to have health coverage, even if you're healthy?

Re: Carnivals, Link and More!

Re: Carnivals, Link and More!