Scale your formula

I love when people who don’t usually listen to Dave Ramsey call in. They come across so arrogant and learned about money, spouting interest rates and all.

I start to chuckle.

Dave gives them just enough rope…

A guy had The following:

A mortgage of $97,000 at about 3%

A car at a little over 1%

And he was earning an average of 12% in investments.

“Why should I pay off my debts when I am making more in the markets?”

Dave always asks these callers one of 2 things:

“Would you borrow $97,000 at 3% to invest it into the stock market?”

Or

“Would you borrow $97 Million at 3%?”

There is always an awkward pause as the caller’s brain begins to process risk. Not risk that can be calculated,

reptilian-brain type risk.

Risk felt in the gut is not typically taught in finance.

The answers are always “no”.

And if the caller is particularly argumentative, Dave will say “I answer questions on this show by asking ‘what would I do if I woke up in your shoes?’

You happen to have 2 nice masters (borrower is slave to the lender).”

Sometimes we get caught up in the logical, math part of things instead of the visceral.

Check your gut.

Wouldn’t you feel amazing with NO PAYMENTS whatsoever?

Suze Orman will play the game of interest rates with her followers and devise complex plans for “your way to an ‘A’. I attempt to follow the math logic but sometimes, I miss it. She uses similar house, car and lifestyle questions and goes into the actual finances of several guests.
I’m much better at the “Can I afford it??” segment of the show where callers who may have not learned the joy of giving or legacy want seemingly outrageous things for themselves like a $200,000 car or a $50,000 wedding or a new $35,000 car “for the baby”. She whollops most of these callers and it makes for good tv. And the Mrs. Badcrumble part of me loves to yell “DENIED!” at the TV.

I can tell you that my car drives better debt-free. Nissan no longer owns me.

When I kicked Sallie Mae out, my house no longer smelled like a government-run old folks’ home. Free air freshener!

And no more resentment about the poverty of grad school. My degree was now truly mine.

I thought about that chain of debt we begin to carry in our 20’s. A little here, a little there, soon weighing us down like Jacob Marley’s chains of regret or a heavy afgan blanket you don’t like to put on your sofa.

We wake up in our 30’s, 40’s, 50’s, 60’s and think “how did I get here?”

A long chain of tiny risks that can not be measured, only felt.

Check your gut. You may have nice masters and lightweight chains upon you.

What would freedom feel and smell like?

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