Dave Ramsey's 12% Rule

**feh** · 09-10-2015, 05:18 AM

Originally posted by marywantsmoney View Post

What does everyone think about it? I did a little digging and it is possible at first. But after taxes and inflation, a person can't get 12% in the end. So it's like 12% would be best case scenario but after taxes, it would be something like 5%. That's based on what DR said about taxes being 7% of invested money, I believe. So one can't really use 12% reliably.

So what gives? What number should I use? I like predicting the future, so I'm trying to see how much my investments may be worth down the road.

12% is a pipe dream. Ramsey is good at getting folks out of debt; ignore anything he has to say about investing.

If you want guestimates as to how your investments will fare, to to firecalc.com

**JulieAlbright** · 09-10-2015, 05:25 AM

I personally don't think 12% is achievable over a period of decades.

But I like to do projections to and I'm always playing with the numbers, so what I do is a Good, Better, and Best kind of thing where I usually run the same scenarios 3 times �.. 5%, 8%, and 12% are what I usually use.

My husband and I have a spreadsheet we've kept around for years now of what we'd like out Investment account balances to be at the end of every calendar year. I think that it was based on an 8% average return with an Average savings rate of 10% of the income. That spreadsheet is the numbers we really strive to meet. We've been running 1 to 2 years ahead of schedule consistently and when it starts to lag we sit down and see if there's something we should do (like try to up our savings to compensate for the stock market declining recently).

**disneysteve** · 09-10-2015, 05:42 AM

Saving Advice Forums

http://www.savingadvice.com/forums/general-discussion/80412-what-do-you-think-dave-ramseys-12-return.html

There was another thread about this topic last month.

**Fishindude77** · 09-10-2015, 05:47 AM

Heck, if I could be guaranteed a safe 5% return, I think I'd just stick all cash assets there and be pretty content.

**Nika** · 09-10-2015, 06:10 AM

I think 12% average is not realistic.
And looking at what stock market averaged since inception is not a good measure. Your averages will be different depending on the year you started investing.

that 12% is especially unrealistic when you are in older years and cannot afford to be as aggressive.

Drawing on the portfolio also makes a difference. If the "bad years" fall on your working years, you can just leave it there until it recovers in few years or so. But if they fell at the beginning of your retirement where you have to draw, that changes the picture.

**97guns** · 09-10-2015, 08:05 AM

10% is easy to get, right now you can do 2nd deed loans and get 9-12% return with your principal secured with real estate. My mom and grandfather did these heavily in the 80's and made a killing on them at 22-24% at the time when cd's were paying 14%

I'm netting 10-12% on my money right now

**LivingAlmostLarge** · 09-10-2015, 08:57 AM

What are second deed loans and isn't that risky?

**97guns** · 09-10-2015, 09:05 AM

Your money is secured with the borrowers real estate, its pretty safe but not insured.

My grandfather had a borrower default and after the sale of the property he received all his investment back but lost out on intetest

You see all the numbers and see how much equity they have in the property, investing in good loans will minimize your risk

I would feel comfortable investing in 2nd deeds but that's me and my risk/reward outlook

**Petunia 100** · 09-10-2015, 02:20 PM

Originally posted by 97guns View Post

10% is easy to get, right now you can do 2nd deed loans and get 9-12% return with your principal secured with real estate. My mom and grandfather did these heavily in the 80's and made a killing on them at 22-24% at the time when cd's were paying 14%

I'm netting 10-12% on my money right now

Why would the borrower pay 9-12% when they can go to a bank and pay half that?

**97guns** · 09-10-2015, 02:37 PM

Originally posted by Petunia 100 View Post

Why would the borrower pay 9-12% when they can go to a bank and pay half that?

I don't know why, maybe bad credit but it is there for the taking. Not making it up Google it if your skepticle

**Petunia 100** · 09-10-2015, 05:11 PM

Originally posted by 97guns View Post

I don't know why, maybe bad credit but it is there for the taking. Not making it up Google it if your skepticle

Yes, I know you're not making it up. It doesn't concern you that the borrowers have bad credit? Do you require a conservative LTV, for safety? How do you find your borrowers?

**97guns** · 09-10-2015, 08:45 PM

There are brokers that deal with 2nd and 3rd position loans, you can also loan to a first position mortgage from these brokers. If I were to invest I would do as my mom did and make sure the equity in the property will cover the loan by a good margin

**rennigade** · 09-12-2015, 07:05 AM

For anyone who believes that you can get a guaranteed 12% return...I have a bridge to sell you.

**disneysteve** · 09-12-2015, 09:41 AM

Originally posted by rennigade View Post

For anyone who believes that you can get a guaranteed 12% return...I have a bridge to sell you.

Dave Ramsey never says a 12% return is guaranteed. And when he really gets into the topic, he gives a more nuanced answer to what to expect over time from your portfolio. Still, the whole 12% thing really isn't good advice.

Dave Ramsey's 12% Rule