What would Dave Ramsey do? - Mothering Forums
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#1 of 15 Old 09-21-2007, 09:16 PM - Thread Starter
 
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Many years ago, my father bought some stock in my name and as of now, it's worth a decent amount. Somewhere around 2000, the company spun off a division and formed a new company of which stockholders received shares of as well. As of now, it's worth a pretty decent amount of money. Would Dave Ramsey say to sell it (or a portion of it) and put it towards debt or keep it?

I am considering selling at least a portion of it put towards the $1000 emergency fund, to buy two used cars when our leases are up within the next six month, and put the rest towards debt. We would then use the money we are currently paying towards the car and put it towards debt. After all the credit cards are paid, we would put it towards retirement, college funds, other investments, etc. If I sold all the stock from the spin off, we could pay off just about all out debt, even considering the money we would set aside for taxes on the gains. I would mostly likely keep the stock that was originally bought and just sell the stock from the spin off. I didn't even know about the stock from the spin off until recently and I want to do what's wise.

Any ideas what Dave Ramsey would do?

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#2 of 15 Old 09-21-2007, 11:28 PM
 
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Look out. If it is in a taxable account, you will have to pay taxes on any gains that you make from the sale of the stock. Make sure you have kept good records on how much paid for the stock, and make sure you have the money at tax time to pay what you will owe the IRS.

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#3 of 15 Old 09-22-2007, 12:16 AM
 
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haha, your title made me think that you should make little green rubber/plastic bracelets that say WWDRD?

sorry i dont have any real input. :
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#4 of 15 Old 09-22-2007, 06:59 AM
 
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TBH, now is not the time to be selling stock. I am certainly not one for market timing, but right now is just a very, very unpredictable time.

I honestly don't know this Dave Ramsey guy... haven't read any of his work as I understand he is a "get out of debt" guy, but I'm trying to learn about him here to understand his "draw" for so many people. I would figure out how much you will "take home" after capital gains taxes (15%) and see if it's profitable. I'm not Dave Ramsay, but I wouldn't do it.

I would be careful about how you invest money left over, too. You talk about retirement, for example. This money is going to be post-tax dollars from your father. Then, you are going to pay taxes on it when you cash it in... then if you put it into a traditional IRA, it will be taxed yet again when you withdraw. That is triple-taxation. If you invested in your company's 401(k), you get pre-tax investment, matching company dollars (automatic positive return) and taxation only once when you withdraw. Anyway, my point is that this money can sound great, but paying taxes over and again on it rips horribly into your returns (taxes are actually the number 1 culprit for bringing down investment returns).

Good luck!
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#5 of 15 Old 09-22-2007, 09:44 AM
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Ok, I'm going to argue the opposite. We're headed for a recession. Now IS the time to sell stock before it tanks.

"Our task is not to see the future, but to enable it."
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#6 of 15 Old 09-22-2007, 09:54 AM
 
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Originally Posted by A&A View Post
Ok, I'm going to argue the opposite. We're headed for a recession. Now IS the time to sell stock before it tanks.
Recessions don't last *that* long historically. My argument is to keep it for decades. I was suggesting she sell not it *anytime* in the near future (5 - 10 -20 years or so).

I agree that we are headed for a recession. If I were in her situation I would wait out the recession if there is one, and most certainly wait out these turbulent times that were caused by all these people taking out sub-prime mortgages. Encouraging people to pull out of the market is just going to make things worse.
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#7 of 15 Old 09-22-2007, 02:36 PM
 
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How are you going to pay for these things without selling the stock? If your answer is go into more debt then the answer is really easy.

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#8 of 15 Old 09-22-2007, 04:31 PM
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Playing the stock market is sort of like gambling. Take the sure bet and pay off your debt. Then don't get into debt again.

"Our task is not to see the future, but to enable it."
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#9 of 15 Old 09-22-2007, 07:02 PM
 
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Didn't read the other replies...

BUT -

Dave would say sell ALL of it and put it ALL on debt. Dave wants you to put all your money that isn't in RETIREMENT towards debt. So go and do it!
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#10 of 15 Old 09-22-2007, 07:03 PM
 
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Originally Posted by xmysticprincessx View Post
haha, your title made me think that you should make little green rubber/plastic bracelets that say WWDRD?

sorry i dont have any real input. :
I think i need to make me AND dh a bracelet like that
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#11 of 15 Old 09-23-2007, 12:54 AM
 
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Dave would say sell it, use it to pay off the debt.

Personally, I'd keep it and pretend it doesn't exist. Why? Because it's a bandaid if you sell it.

If you work the steps hard, and work them right, you will change your life, yourself, and your money, forever.

If you just cash out the stock, and use it for BS1 and BS2, you've skipped right through those steps w/o the hard work and sweat. Which sets yourself up for going back into debt.

Alternately, how about working BS1, BS2, and part of BS3, and then cash in the stock to finish BS3, OR as a downpayment on a home or to establish college funds for kids? That way you would change your life, and establish strong habits that will keep you from debt again, while still making the middle steps a lot easier.

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#12 of 15 Old 09-23-2007, 01:00 AM
 
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Originally Posted by beansmama View Post
I think i need to make me AND dh a bracelet like that
Dave's "store" sells orange bracelets (we got one in our FPU materials) that say FREEDOM:
http://www.daveramsey.com/shop/5_for...b7ce4b4f4c537a
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#13 of 15 Old 09-23-2007, 12:57 PM - Thread Starter
 
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From what I understand, there would be no taxes as a transfer from my father since it became mine the minute he bought it since this stock was bought under the Uniform Gift to Minors, but it is something I am going to double check with an accountant. Of course, there would be taxes on the gains and that is something I have considered.

I have previously thought about some of the points that people brought up. I have thought about whether cashing in the stock is "taking the easy way" and would we really learn anything since we didn't have to struggle to pay it off. That is part of the reason I have considered only selling enough to buy the two used cars and then use those payments towards the debt but then I think of the finance charges that we'd be paying over the time we'd be paying off the debt and think if we sold the stock, we'd avoid a lot of those. If we don't sell at least part of the stock, we'd have to finance the cars and that would defeat the some of the purpose of starting the plan to pay off our debt.

I don't know what I am going to do and I don't plan on making a decision immediately, but I am taking into consideration what "experts" like Dave Ramsey, Suze Orman, etc would say to do. However, just because they say to do it, doesn't mean I will, but I am looking into other's perspectives before making a decision.

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#14 of 15 Old 09-23-2007, 10:05 PM
 
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Dave would say that no individual stock is a good savings option. He would tell you to sell it and pay off as much of your debt as possible with any savings that is not specifically retirement. He would also caution you to keep what's needed for the IRS based on your gains. Most of all he would tell you NOT TO SELL ANYTHING if you haven't changed your behavior so that you will not go into debt again. If you do, you've just wasted your money. (Somehow that sounds so mean for me to write, but it really is exactly what I've heard him say repeatedly.) He would tell you that if you want to invest money in the stock market -after you're out of debt- then you should invest in mutual funds because they're more reliable over time than any single stock. Hope that helps!
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#15 of 15 Old 09-24-2007, 02:02 AM
 
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Originally Posted by ferrum97 View Post
From what I understand, there would be no taxes as a transfer from my father since it became mine the minute he bought it since this stock was bought under the Uniform Gift to Minors, but it is something I am going to double check with an accountant. Of course, there would be taxes on the gains and that is something I have considered.

I have previously thought about some of the points that people brought up. I have thought about whether cashing in the stock is "taking the easy way" and would we really learn anything since we didn't have to struggle to pay it off. That is part of the reason I have considered only selling enough to buy the two used cars and then use those payments towards the debt but then I think of the finance charges that we'd be paying over the time we'd be paying off the debt and think if we sold the stock, we'd avoid a lot of those. If we don't sell at least part of the stock, we'd have to finance the cars and that would defeat the some of the purpose of starting the plan to pay off our debt.

I don't know what I am going to do and I don't plan on making a decision immediately, but I am taking into consideration what "experts" like Dave Ramsey, Suze Orman, etc would say to do. However, just because they say to do it, doesn't mean I will, but I am looking into other's perspectives before making a decision.
Under UGMA you didn't have to pay taxes when you received the gift from your Dad. However, when you sell/cash in the stock its considered income, as in something you report on your income tax return and you will or will not owe money on the income from the sale of the stock depending ont he circumstances of the recipt and sale.
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