Our week 5 class was interesting but not mind blowing, earth shattering information. Basically, without coming out and saying it, Dave Ramsey tried to teach that contentment is a huge piece of the puzzle to your finances. Not needing that big screen TV, new fancy car, kids in a private school, etc are all factors in the financial equation of keeping an affordable lifestyle so that you can payoff (and then stay out of) debt, become financially secure and build wealth. He touches on the fact that there’s nothing wrong with having nice things and of course there are things that need replacement. That 10 year old couch can get the heave-ho, long as you’re buying a new one with cash, and it’s not a fancy designer name, hot off the pallet at Costco will work just fine.
Most of the class was regarding marketing tactics that companies use to get us to buy their products. Financing offers like 90 days same as cash are also unwise ideas. However Dave outlines some smart guidelines for wise purchasing decisions, such as never buying anything that you do not understand, seek the counsel of your spouse or another accountability partner prior to making a large purchase, and consider the opportunity cost of your money. One example that really hit home was a man who went to purchase a $40,000 Mercedes car in the 1980’s, and had liquidated some of his mutual fund to pay cash for it. Paying cash was smart, but something nagged at the man to not purchase the car, as it was a very expensive purchase. He instead reinvested the money back into a mutual fund, and within 15 or 20 years (I can’t remember the exact timeframe) that money was worth around $300,000, and the man had found out that the value of the car he had been about to purchase was around $5,000.
My favorite part of this lesson was the negotiating tactics that were presented, which gave some rules such as using the power of cash (do you think a furniture store manager will frown away $3,800 in cash on a $4,000 living room set if you promise to move his inventory?) learn to shut up after making your request/point and see what the sales person can offer during a negotiation, and don’t be afraid to say “That deal’s not good enough. What more can you do for me?”
Definitely some great information presented in this lesson, however I’m more interested in what’s to come next week, when we learn about insurance. Stay tuned!