re: Dave Ramsey's Financial Peace

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I disagree. I don't think there is anything wrong at all with having 10K in liquid checking or savings "doing nothing"

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Thats one of the things Dave talks about in his class. Having the class handy make it easy for access in the event of an emergency need, but the side effect is it brings a since of peace to the marriage in that you have the safety net, so it's one less thing to worry about. And the biggest martial issue for couples is money...

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Well that's a little ridiculous. You should absolutely be contributing up to any employer match in a 401k.

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If you have high interest debt you're probably better off paying that off instead of contributing to a 401K

With a lot of employers you don't get the match until you reach a certain duration of time anyway.

My previous employer required 5 years with the company to be fully vested. I got laid off after 4.5 years. The "free money" didn't work out so well for me as it turns out.

Also you have to consider that a lot of the people that call into his show are in a pretty dire financial situation. This issue of not contributing to the 401K makes a lot of sense when you're looking at people with 20K of high interest credit card debt. If they got in that much debt WITHOUT contributing to the 401K there is no way that they could ever improve their financial situation by withholding 15% of their gross income. It just isn't mathematically feasible.

These people need to get their debt wiped out before they even think about retirement. Some people have 20% interest on these cards. It is very obvious that removal of debt is mathematically more sound than getting "free money" from a stupid 401K.

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I would say 50k. With that said in my high yield I'm getting almost 2%. I simply do not understand how people cannot get at least some return on liquidity. It's lazy IMO

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Not to mention it's a guaranteed return with 0 transaction costs

50K might be more liquid than I would have but I can't fault anyone that does

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Don't use a credit card, ever.

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Well that's just dumb.

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One thing where a lot of financial gurus, even on this board really get it wrong is that they scoff at people who have "large" reserves of liquid cash "not working for them"

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I've never seen anyone here or someone considered a "guru" recommend not having some cash stored up. Most people recommend having at least 6 months of living expenses saved up for emergencies. If you are married with kids it is probably reckless not to do this. Personally, I don't mind taking the risk of not having much in cash savings but that is only because I am young and have no one depending on me.

I get disability coverage through work. My company also matches 40% of my 401k contributions all the way up to the max, so hitting that is my # 1 priority no matter what, then Roth, then cash savings/taxable accounts. Bonuses and my tax refund this year will go toward some form of cash emergency fund. I know that I did things a little out of order, but it's worked for me and I'm comfortable with the risk of not having much cash. I know it will pay off in the future when I have a fat stack of cheddar in my 401k by the time I am married/have kids.

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I've never seen anyone here or someone considered a "guru" recommend not having some cash stored up.

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Here's one right here then.

You should have the ability to raise that much cash very quickly at little cost, yes. That doesn't mean you have to have the cash squirreled away somewhere.

For example, if you have a home equity line and need to quickly raise 5k, just write yourself a check and pay it back over the next several months. For amounts that size this should not be a big deal and no you aren't "risking your house". If you can't pay back a 5k loan to yourself at 4% interest on a schedule you set then your problem isn't the loan.

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They need money in an emergency fund.

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agreed.

as i stated in the car payoff thread roths and HELOCS are a great back-up plan IF YOU HAVE IT and it is available to you. some may not own a home or a roth. but i would personally have 6 months emergency money at a MINIMUM.

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No. They need a second job. Seriously. The biggest problem for people in that situation is lack of income, not lack of savings. It is very hard to save if you don't have enough income to start with.

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I respect you man, but what you're saying simply isn't true - just like the federal government, most people have a spending problem. They don't budget, they don't plan for emergencies, they don't save and they spend money prior to ever making it. Some compound this by spending money, prior to ever making AND incurring finance charges on that previously spent money, making it impossible to ever dig out of the hole.

An individual, working 40 hours per week, at $8.50 per hour, will gross right at $1500 per month - at that point, if he's single, he better be living with roommates (or mom/dad). If he's running a deficit every month, he's got a spending problem. Your solution "get a second job", is viable, as that will take out the number of hours he has available to spend money, plus close the gap. However, that doesn't mean he didn't have a spending problem to begin with.

Planning, budgeting, saving are all the very first steps I would suggest to anyone with a money problem. Yes it's possible they have an income problem. Even so, I would wager they have a spending problem and the spending problem is a much bigger factor in 95% of household financial situations (although I could be a little high in light of the recent prolonged unemployment problem).