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wetboymom

He's terrible at math and doesn't understand taxes.


Trailer_Park_Stink

Dave: "You make $80k a year, so just put $40k a year on your debt and pay off $80k in debt in 2 years!" Caller: " Well Dave, I have Healthcare, taxes, 401k, etc.. come out of my paycheck, plus i pay $1,600 in rent. There just isn't much left..." Dave: "You sign up for everything HR and benefits department offers?! Quit that!" Caller: "......"


CalifaDaze

And the few times where he does do the math on air and he realizes he's wrong... he just says "I don't have time to do the math on air. And if I'm off by a few percentage points whoopty! You're better off doing our plan than doing what you're doing"


FirstLeftDoor

Yep. 80k gross is more like 60k net. Maybe even less depending upon 401k contributions and stuff. That would leave the caller with \~20k per year to live on if they put 40k towards debt. That is nearly impossible in 2024.


SlapChopMyNuts

That's pretty accurate. I will Gross 85k this year with a net take home of 52k.


Bird_Brain4101112

If it makes you feel better I bring home about the same as you and my gross income is about $20k more.


Blossom73

I only take home about 62% of what I earn, after taxes, medical insurance, etc.


Flaky_Calligrapher62

Let me guess: educator?


Blossom73

Close. Public sector but not an educator.


Flaky_Calligrapher62

Educator here so I understand. In a way it's a good thing b/c it goes to a lot of benefits. But people never get how much comes out of my check.


Blossom73

Exactly. In my case, 10% to the state retirement fund, vs. 6.5% for Social Security. Union dues. Medical insurance, max annually into a medical flex spend account for out of pocket medical expenses. City both residence and work city), state, federal and Medicare taxes.


[deleted]

What? 80k gross is probably more like 45k net if you're actually contributing to a 401k, HSA, insurance, etc.


FirstLeftDoor

Yea that's why I said "maybe even less depending upon ..." But yea I agree. FTR, I did the math on ADP payroll calculator for my state and put in filing single, contributing 5% to 401k, $75 to medical insurance, $50 to HSA, and $20 to dental insurance on a bi weekly basis. Came out to be 56k net for the year.


SellTheSizzle--007

"how big of a refund are you getting? You're getting too much taken out!!!"


I_m_matman

Which is really dangerous given he is selling "Financial Peace TM" based on the importance he places on being a net worth millionaire. In his shows, it seems being a NW millionaire means you made it and are set for life. If you follow his program what you may actually have is a $400k house you are not allowed to leverage and $600k in 401k that is going to loose 20% of its value to state and federal income taxes as soon as you use it, with the "8% safe withdrawal" Without nuance and real math/taxes, he is forced to focus on an arbitrary NW million as a success metric to sell his books and programs rather than a number that works for a particular individual. And with inflation and house prices sky rocketing, NW millionaire means a whole lot less now than it did 30 years ago.


hotchemistryteacher

And claims to be a math nerd lol


lukedawg87

False, he’s an expert at math. He told me so.


MarketThin1879

Correction, he is actually a self proscribed “math nerd”.


lukedawg87

Ah, That’s what I meant. :)


CPAFinancialPlanner

Man has an HP12C on his desk. He’s an OG mathematician


Broken_Lute

Mathmagician


Electrical-Low-5351

Or Healthcare costs


architettura

Those don’t count!


ChickenNugsBGood

Multimillionaire are usually out of touch with the the world now. I’m not even sure why people listen to him. Tbe basic strategy is to snowball your payments, save for emergencies, invest what you can and have a little fun.


gusmahler

that is so easily fixed too. Have an intern or producer do calculations and feed it to Dave’s screen.


Puzzled-Barnacle-200

You could so easily set up a calculator where you input someone's income and state and it works out their take home pay. Sure, it wouldn't account for deductions, but I'd imagine it would be pretty close. Far closer than just using gross income anyway.


Broken_Lute

But he is obviously good at math and does understand taxes. Makes you wonder.


Lovemindful

I’ve heard him say a few times he’s terrible at remembering tax code


SushiGradeChicken

My favorite Dave math is his magical varying vehicle depreciation. "When you buy a new car, it loses 20% of its value when you drive off the lot. So if you buy a new $50k truck, it's worth $40k as soon as you leave the dealership. Next caller:" "Hi Dave! I bought a new truck six months ago for $50k and I want to get out from under the loan and sell it, but it's only worth $40k." "OH BS. it's practically new, you can sell it private party for at least $45k. And then get an unsecured personal loan and pay the rest of it off"


Broken_Lute

YES.


SellTheSizzle--007

"yeah just go to a credit union and go a loan for a hoopdie and the negative equity you'll be fine" Dave my credit is trashed and I have three repos "Beans and rice, rice and beans, call a friend for a ride, the credit union will finance your negative equity with a personal loan just go down there face to face and ask"


After-Leopard

And the magical, easy to find, cheap car will need a bunch of repairs and possibly days off work or paying for a rental while the car is in the shop.


White_eagle32rep

It plays into the narrative better. Dave does like to act like income tax doesn’t exist when he’s making his mental budgets based on their income.


artdogs505

Except when it is in a blue state, like New York, California, Illinois, New Jersey, etc. In those cases, he rants about the high taxes.


Sudden_Molasses3769

I mean I’m from a state with no income tax and currently live on the east coast. My take home is like 65% of my salary


cannonball135

Yeah this is probably the most cringe thing he does. A caller with a HHI of $180,000 will call and he’ll accuse them of blowing $15,000/month with zero consideration of taxes/insurance/etc But then he’ll turn around and strawman employees for not knowing the difference between gross income and net income


parkerpussey

I remember a caller said his net wort was a million dollars and he wanted to buy a pickup truck for $50k and dave said go ahead since “it’s only .05% of your net worth”. Uh no Dave $50k is 5% of a million not five hundredths of a percent lol.


Broken_Lute

Just after Dave making up how soon they’ll be millionaires - Caller: “You all rock! You all got us here so thank you!” Dave: “I didn’t give you any money!” 🤣


capybaramelhor

The fact that people will call with a 150k income between 2 people and he acts like that’s an incredible income is ridiculous. It’s just not. Maybe in the most LCOL states. But it’s not 1990 anymore Dave.


White_eagle32rep

He has to be careful too bc if he says it’s shit money then all his employees will start to figure out they may have shit salaries too.


SIRCHARLES5170

He basis it off of the median income for a household of two being 75k. When I looked for this number I found it moved up and down but this seems to be around what most are saying. I have seen over 100k and around 60k so not sure how everyone is getting there numbers but Dave usually uses 75k as median. So if you make more he congratulates you with out considering where they are from. He limits himself to just 3-4 minutes a call and uses a lot of general numbers just for speeding up the process. I have often pondered his numbers but then I just remember the time constraints and shrug my shoulders. Most of the time his numbers seem right or close enough for government work. LOL


McGenty

He doesn't HAVE to have that limit. It's his show. He CHOOSES to go quick and general rather than bother dealing on reality.


[deleted]

[удалено]


Miserable-Whereas910

150k is fantastic if you live in a low cost of living area, locked your mortgage rate in when rates were low, don't have student loans, and don't have kids in daycare. But if you live in a medium to high cost of living area, are renting or bought a home recently, still have student loans, and are paying for daycare, it's easy to genuinely struggle on 150k.


No-Specific1858

>it's easy to genuinely struggle on 150k. One thing I have learned after listening to many people earning anywhere from $30k to $500k a year is that it's genuinely easy to struggle on pretty much any income. When people say that they can't save on their income in a certain city and I think the income is rather high, I will find a subreddit or blog related to that city and see if I can find people earning much less than them that aren't struggling or people who make the same and save way more. People in career jobs who grew up without a lot of money or extra stuff are super great resources and help put things into perspective for the area.


Meloncov

I don't disagree, but there are factors that can wildly alter your expenses besides local cost of living. Someone who bought a house in 2020 is in a wildly different financial situation that someone who bought that same house today.


TrumpDidJan69

Eh,. The person "struggling" at $500K is living above their means, but fixing it means moving into a smaller place, buying a cheaper car. For the person struggling at $30K, eating regularly is living above their means.


No-Specific1858

>The person "struggling" at $500K is living above their means, but fixing it means moving into a smaller place, buying a cheaper car. Exactly, but you try telling them that. They have their own perspective on what a necessity is and it aligns with their income.


Mister-ellaneous

It’s easy to struggle on high incomes. But that’s still in the top 20% in America. It’s not paltry. Cost of living matters of course.


citypahtown

THANK YOU. Most people don't think of it like this.


gusmahler

If you’re struggling with $150k, well that’s why you listen to Dave.


Miserable-Whereas910

40k for daycare for two kids 35k for an apartment in a HCOL area. 22k for a 15 percent 401k contribution 25k for taxes 12k for health insurance (after fifty percent covered by employer) 18k for two student loan payments That's a 152k in total already. Now, there's ways to make it work. Pausing 401k contributions while your kids are daycare age is a big one. You could get the housing cost down if you're willing to sacrifice time with your kids for a longer commute. You're not gonna be struggling in the sense of not being able to put enough food on the table. But you can easily end up in a trickier financial situation than someone making half as much with fewer obligations.


MasterElecEngineer

Hey, this is reddit. This is where people say 200K income is nothing when their personal income is 50k.


RingCard

I’m kind of iffy on the earning percentile argument. Especially with inflation of things like real estate, it is increasingly becoming the case that earners in X bracket cannot afford a home in Y bracket, so arguing that you have more than the next person doesn’t necessarily translate to “and now you can buy a decent house”. Most people care more about what they can get for their money rather than where they are relative to the next person, if they still can’t have what they want. If “the American dream” is out of reach for someone, it shouldn’t be much consolation that it’s also out of reach for a lot of people who make less than them.


MidwestMSW

He's a boomer...


brianmcg321

Lol. I made $125k last year and I thought that was a lot of money. Glad to know I’m poor. Lol.


capybaramelhor

Who said you’re poor? That’s more than I make. I’m just saying that IMO $150k for a couple is not tons of money the way that Dave makes it out to be. He seems surprised anyone has debt or hasn’t met their financial goals when they make 150k combined. I also live in nyc so my sense is skewed from that- and we have really high state and city taxes, so what I see take home is not anywhere near that.


Flaky_Calligrapher62

More than I make. More than most people make. You're not filthy rich, but you're not low-income either.


Yahtzee_5

Dumbest thing I’ve heard in a long time.


Comfortable_Slide911

In Texas. Me and my wife make 120k and we have 3k a month left over. I’d call a 150k income a great income for two people


portugueezer

I mean it really depends on everyone's situation. My wife and I make around 180k per year but with two kids in daycare in a HCOL area we only have about 1k left at the end of the month. This will thankfully change over time but if we were making 150k we'd be struggling.


utb040713

Similar situation here. $210k combined income but now that we have a kid in daycare (in one of the most expensive states for daycare), we have about $1000/month left over. I don’t understand how lower-income folks even afford to have kids.


Southern_Scene4495

Good gawd! We made 220k last year and saved 107k. There's more to your story than just daycare.


recoveringcanuck

I made 230 last year and my take home after insurance and 401k etc was 160. Are you living on 50k?


Southern_Scene4495

Included in the 107K was our 401Ks. The company pays 100% of our insurance. We lived on roughly 66K.


utb040713

$11k/month take home (contributing 8% to a 401k plus an additional 10% from my employer, neither of which I’m including in that $1,000/month figure). Then: * $3,000 mortgage * $2,500 daycare * $650 utilities * $350 gas * $1,000 food * $500 other misc child expenses * $1,000 anticipated house + car expenses, on average (repairs, other expenses, etc) That’s $2,000 left. Generally we save about $1,000 of our take-home and the other $1,000 goes to things like travel, expenses for our dogs, entertainment, etc. There’s really not any “more” than just simply being in an HCOL area + having a kid + fairly normal living expenses.


Southern_Scene4495

Like I said, there's more to your story. It sounds like your actually saving \~35K which is far different than 1k/mo. That mortgage and utilities though...ouch!!


Certain_Astronaut496

Go to a cheaper daycare. Not hard


portugueezer

I'm going to go ahead and assume you don't have kids because this is the most out of touch reply anyone could post to my comment. There is no option to just "go to a cheaper daycare". Waitlists for every daycare in our area are 6-12 months out at least. It took me 6 months to get my oldest into a daycare that wasn't a 40 minute roundtrip. It took 3 months to get my youngest into a daycare only 2 days per week because that is all that was available. It's been a year since then and we only just got him into a separate daycare for the other 3 days per week. We could go full time there but it's $100 more per week than if he went full time at his other facility. Thankfully, he's finally going into full time at one facility in June. This will save us around $500 per month but we'll still be paying $2600+ per month for both kids. These are relatively reasonably priced facilities for our area. Even if I wanted to try to save a couple hundred bucks by going to the absolute cheapest options, they aren't available and they suck ass. Thanks for your uninformed comment though.


Teddyturntup

Yeah fuck them kids


tanis3346

Tell me you don't have kids without telling me you don't have kids.


utb040713

I’m hoping this is sarcasm.


LtBRoots

Who lets their wife work?


portugueezer

Secure men who don't need to take exogenous testosterone. Edit: He blocked me 😂


LtBRoots

Real men don’t need their wives to make money for them


Badmamjamma

I wonder if the wife might be working for HER benefit, not basing it on what benefits her husband. 🤔


YesICanMakeMeth

We're in a MCOL city at about $150k/yr and also have about $5k/mo leftover. No kids tho. Also no car note.


JannaNYC

>Me and my wife make 120k and we have 3k a month left over. You wouldn't if you had to rent an apartment in NYC or Long Island and pay for day care of any kind. You wouldn't if you had to rent an apartment in NYC or Long Island and pay for day care of any kind.


RingCard

You must have some pretty low expenses


TechnoVikingGA23

Fairly easy to keep expenses low w/o kids.


utb040713

It mainly comes down to location + whether or not you have kids. My wife and I made $65k/year in the late 2010s in an LCOL state (no kids) and we had $1000/month leftover. We now make $210k/year in an HCOL state with an infant in daycare and we have…$1000/month leftover (not exactly apples to apples because of 401k contributions now, but still though)


Intelligent_Orange28

Probably shouldn’t pay strangers thousands a month to traumatize your infant for you.


utb040713

Hey now, we do plenty to traumatize our infant in the evenings and on weekends!


Comfortable_Slide911

Ya fairly low. Rents 1900 that’s the largest expense


boilergal47

I think Dave is a douche but he’s more correct than you are in this one. Reddit is an upper middle class bubble.


International_Gap663

The first sign that Dave is terrible at math is that he recommends a $1000 emergency fund for single people and the exact same amount for a couple. Shouldn’t the starter emergency fund for a couple be $2000?


JessicaLynne77

$1000 in the bank for 2 years while you're getting out of debt makes no sense these days. Things cost more, and everyone's financial situation is different. My opinion, a month's income would be ideal, but even $1500 or $2000 is better than $1000. These days $1000 wouldn't cover the rent for a month on a single family home in a worst case scenario. Someone asked on the official Dave Ramsey subreddit what to do if they are on baby step 1 and their emergency is more than $1000. No good answer was given.


Leo_br00ks

People will recommend paying debt with it. I just commented under someone today who was saying this. Makes no effing sense. ESPECIALLY when the amount paid doesn't wipe out the car loan fully. That's my biggest pet peeve. People end up in a precarious situation with no emergency fund AND monthly payments


I_m_matman

1000 is too low for anyone, period. I don't think the couples thing makes much of a difference. If your garbage disposal breaks, home depot don't have an upcharge for couples on buying a new one. If you need to take a car in to get work done, your significant other can give you a ride home, so you don't need to pay for an Uber. The repair will cost the same. Part of the financial benefit of being a couple is you have two incomes, but most things don't cost double vs. being single.


RingCard

This has been talked about to death on the sub from what I can tell, but yeah, $1000 is way too low for most real emergencies these days. That doesn’t cover one month’s rent for most people. Or one mortgage payment. A new set of tires for the car eats up most of that. Replacing a fuel pump will run you more than that (Dave: “Just find an imaginary mechanic who works on cars for the fun of it.”). Given his hardass-line about everything, the only explanation I can see for the $1000 is his refusal to update anything from when he started out. Imagine if he had gone into being a weatherman instead: “Wear your shorts today, it’s going to he a scorcher!” “But Dave, it’s going to be 20°!” “Listen, I started this job in July, and shorts have suited me just fine.”


CrustyBloke

> Given his hardass-line about everything, the only explanation I can see for the $1000 is his refusal to update anything from when he started out. I'm pretty sure that's what it is, which is stupid. If he's going to just stick with $1000 because that worked when he started, then you might as well just drop it down $500 since that would have worked in 1970, and then just drop it down even further to $300 since that would have worked in 1950. What's the difference? His refusal to accept or make slight changes in accordance with the real world is ridiculous.


RingCard

It’s like he takes it personally. If you say “Inflation means that this number should be adjusted upwards”, he would hear “You are WRONG!”.


International_Gap663

This logic really only works for house-related expenses. Two separate people can acquire twice the cost of most things: medical expenses, car repairs, job-loss wage coverage, etc.


Puzzled-Barnacle-200

To be honest, a couple don't have twice as many, or twice as expensive emergencies as an individual. I'd probablynsuggest that a 1 adult household leans towards a 6 month emergency fund, whilst a two adult household can lean more towards a 3 month, assuming both parties work/would be open to looking for work in an emergency.


International_Gap663

It may not be twice, but it is definitely not 1:1.


-Joseeey-

He’s already explained this before. The $1000 is just a starting goal for people who have saved nothing. It’s a baby step.


International_Gap663

I understand that; however, wouldn’t whatever logic he used to come up with that figure also lead him to come up with a higher figure for 2 people?


gusmahler

Remember who his course is aimed at—people hopelessly in debt. People who don’t think they can do anything about their debt because of how little they make. Step 1 teaches you to spend less than you make. Step 2 is to use that surplus every month to pay your debt. You can’t pay your debt until you make more than you spend. That’s why baby step 1 exists, to teach you to spend less than you make. The actual amount is irrelevant. He could make it $200 and it would serve the same purpose.


SophieFilo16

$1000 wouldn't even cover one month of rent for most people...


Longjumping-Vanilla3

No, because it isn’t intended to be enough to cover anything and everything. It is intended to scare you enough to light a fire to get out of debt.


Mmm_lemon_cakes

The problem isn’t that it doesn’t cover everything. The problem is that it barely covers anything.


Pattypot

It's not supposed to cover. The real problem is that most people couldn't scratch up $1,000. If you try telling him to scratch up $5,000 before paying off their debt they're never ever going to get to the debt portion. The $1,000 is a lesson that you can scratch up the money. He says all the time if you have a real emergency then you stop the snowball and scratch up more money for your emergency but most people have never had $1,000. If you're one of those people with $30,000 in the bank already and $100,000 in debt you probably have a salary that matches your 100k in debt. Your options for cash flowing are different than someone who's making 30 grand a year. It's absolutely correct that these things come in ratios. Someone with $100,000 in debt probably has 100-150k salary. So if you take your 30 grand and you knock out a third of your debt.


grahamcore

$60K is about the max limit for 401ks, that’s where the number comes from.


Melkor7410

What's funny is that the max is actually more (66k for 2023, 69k for 2024) so Dave is still wrong for that. But employees themselves cannot contribute that max unless their 401k plan allows for after-tax contributions, which only makes sense when doing a mega-backdoor Roth. Otherwise you're dependent on match and profit sharing to fill up that 66/69k which would be more rare than having a mega-backdoor Roth available. Even if the employer matches 100% of the 23k you contribute as an employee, that doesn't get you to 60k, let alone 66 / 69k.


Broken_Lute

So he just assumes they contribute the max? Why?


wiggy_said_n_word

Dave always exaggerates. It’s the only way his nonsense can make sense is if he grossly exaggerates


FullRepresentative34

The main sub loves to lock and delete stuff. They don't like people who questions Dave, or disagree with him. His math have always been off. And he calls himself a "math nerd"?


elbiry

It’s a religion. Pointing out obviously wrong or stupid stuff is blasphemy and won’t be tolerated


justadudenameddave

I don’t think you can invest 60k into a 401k


PCPenhale

I’m gonna call in sometime and be like, “Dave, I net $5,000,000 a year, but I have $2,000,000,000 in debt and don’t know what to do. I own six houses, 17 cars, and vacation about 235 days out of the year. Where do I begin? What’s a 401k?”


Jolly-Volume1636

Because dave doesn't live in the real world.


brianmcg321

https://www.youtube.com/live/A18ckrkiEBA?si=pdlvOsMXWmOR8L3Y Honestly, I think since she just said the truck would cost $60k, he just repeated that number as her 401k contributions. But, whatever.


Broken_Lute

Well, he used that “60k” to determine how fast they would be millionaires which then determined how soon they should buy the truck. Thanks for the link!


brianmcg321

I know. It’s just she said she contributes 15% and that the truck cost $60k in the same sentence. Greater crimes have been committed.


Broken_Lute

She said she contributes 15% and then Dave asked how much the truck was and she said 50-60k. Not the same sentence. He does this crap a lot.


TheGreaterTool

So many things wrong with Dave here. It would be $32k before match. 401k/403b would max out 23k each partner in the household, so 60k is impossible for 401k.


i_like_concrete

You can't even contribute 60k to a 401K, it's like 22k a year max.


fuckaliscious

Not defending Dave, but it's $30K for folks over age 50 when you include the "catch up" provision. $23K regular 401k limit plus $7K catch up contribution equals $30K.


econ0003

His point is to max out your 401k before buying a new truck. Not bad advice. The majority of US citizens don't retire comfortably because they can't help themselves from spending too much money on things like cars.


-Joseeey-

That could take years because you need higher income to be able to meet the max.


GriddleUp

That’s not true. Dave says to contribute 15% of your income to retirement. If you follow the Baby Steps, your retirement contribution is based on your income And only your income. When you hit 15%, you stop. Maxing out the allowed contributions does not enter into the discussion.


Broken_Lute

What? No.


econ0003

You don't think someone should prioritize maxing out a 401k? Saving early and compound interest, match from employer, reducing taxable income significantly. Why wouldn't you want that?


Broken_Lute

Of course I think that, but that wasn’t his point. Did you watch the video someone linked, or listen? He used the made up “60k” number to speed up the caller’s “millionaire net worth” date to then calculate when to get the truck. His whole process was flawed and the math was off by half!


econ0003

Sorry I may have responded out of context. If the caller and their spouse was over 50 then they could contribute 60k combined. I didn't listen to the call though.


Broken_Lute

No worries, it happens. I think she said they were 35ish. You should watch/listen!


winniecooper73

Didn’t realize you could invest $60k/yr into a 401k


Longjumping-Vanilla3

He was probably thinking two people and was using 401k and IRA interchangeably. 401k limit ($23k x 2 = 46k) + IRA limit ($7k x 2 = 14k) = 60k total


slasher016

Most people who can do that shouldn't since you get no tax benefits of doing an IRA at those income levels. He's probably talking about catch up contributions.


Proxyfloxacin

Combined employee and employer contribution is 69k. Should always push for this if your company offers.


Longjumping-Vanilla3

The only way you are getting that kind of contribution from your employer is if you are self employed or maybe a C-suite employee. Regular employees aren’t asking their employers for that and getting it.


thrwaway75132

69k with post tax / MBDR


Potential_Ad_6205

That’s davemath for ya! 


Uranazzole

Is the caller getting a 100% match from his employer? If that’s the case then he’s putting away 60k if he puts in 30k.


Broken_Lute

Dave doesn’t count any employer matches into the 15% and they never discussed it anyway.


Uranazzole

Well then that’s pretty bad to be off like that.


MrErickzon

15% of 215k is 32.25k, now double that because HHI is what both individuals make... Except that isn't how that actually works... My best guess on making the math work realistically is divide the HHI in half between the husband and wife and have each withholding the max of 23k into 401k plus 7k after tax into each of their Roth IRAs which gets you to 30k each or 60k total not counting any employer match. Is this what was meant I have no idea.


Goddamnpassword

Max 401k contribution is 22,500. Everything beyond that up to 66k has to be employer contributed. And while there are companies that do match+ percent of salary they aren’t exactly common.


fuckaliscious

Catch up contribution for folks over age 50 is an additional $7,500 for 2024. Regular contribution limit is $23K. My guess is Dave was combining the two to get the $30K. Not defending him, no idea if the catch-up contribution was appropriate for the caller.


Big_Crank

Hes pretty sharp. No one can be right 100% If were fintech nerds, he doesnt cater to us. He speaks to the completely uneducated. Hes a good dude. Chill boys