Know anything about Dave Ramsey?


R

Rich Carreiro

I got the following message from a relative
of mine:

I was reading about this guy Dave Ramsey in Money magazine. Have
you ever heard of him? Is he a snake oil salesman. I looked him
up on Google. The article in Money was profiling 5 families, with
5 different incomes, goals, and life situations. The family that
was like mine with roughly the same income and debt, got out of
their debt, including mortgage in three years following this Dave
Ramsey method. Sounds too good to be true, wondering if this guys
gives regular advice, that I could get anywhere, or if this his
method is well planned out, etc... We have [several tens of
thousands of dollars] in debt including a home equity loan. I
have not touched my investments, and pretend they are not there,
because that is our retirement. Your thoughts?

I've done some quick Googling and the main thing I've seen is
that he talks about paying off the smallest balance debt first
rather than the highest interest rate one, presumably to give you
a psychological boost of having paid something off.

Unfortunately I really don't have the time to look into him in
any detail and so was wondering what people here know about him.

Is he a scammer? Is he just selling repackaged mom and apple pie
advice (i.e. nothing particularly harmful, but nothing worth paying
for)? Does he actually have anything useful to say?

Thanks!
 
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J

JoeTaxpayer

I got the following message from a relative
of mine:

I was reading about this guy Dave Ramsey in Money magazine. Have
you ever heard of him?
He appears to be more celebrity than financial planner.
He is best know for his anti-credit card stance ("there is NO such thing
as responsible credit card use") regardless of whether one pays in full
each month or carries a balance.
He is also known for his "debt snowball" method of debt repayment.
Simply put, you pay all you can to the smallest balance card/debt each
month till it's gone. This creates a sense of accomplishment which
further motivates you. Ok. He answers the question "But wouldn't lining
up the the debt by rate charged and paying highest rate debt first be
better?" with "No, how dare you question the great and powerful Dave" (I
exaggerate, but only a bit.)
Last, his long term retirement planning assumes a return of 12% over
time, so one can spend 8% each year. I wonder how his followers made out
in the naughty-naughts when the decade's return was close to zero.

I disagree with him on multiple fronts, obviously.
Joe
 
D

dumbstruck

Is he a scammer?  Is he just selling repackaged mom and apple pie
advice (i.e. nothing particularly harmful, but nothing worth paying
for)?  Does he actually have anything useful to say?
I half-watched a lot of his shows til I couldn't stand it anymore, but
I think he is more level headed than the ghastly Suze Orman. I suppose
their online courses are more sane than their cartoonish shows,
because those very much are theater (although Dave chats with course
takers). These could make a great theme for a sociology term paper,
because each depicts callers in certain extreme stereotypes - which I
guess in a few cases might be accurate and help those few.

All these TV finance showpersons have a simplifying "hook" to make
things less dry and nuanced than they would need to be in a
responsible analysis. They assume for instance that anyone asking for
help is good hearted but wildly irresponsible, and needs radical
surgery regardless of bad side effects.

Dave in particular seems to have an evangelical christian based
approach, with implications being drastic removal of temptation
regardless of that even worsening your finances (for example; hard to
describe). Suze is the secular shoulder to cry on, telling callers to
stand tall, love themselves (tough love), and with the slightest
suspicion to slash that significant other out of your life (financial
or otherwise).

Ahhh, it's a ripe subject that's hard to describe. But surely don't
take these to be on a level of considered logic, wisdom, and knowledge
as you would expect from normal books. They use gimmicks to attain pop
recognition, just as vending machines spike food with salt, grease,
and sugar. Sometimes they provide what a person may need in the only
way they are prepared to accept it. But on the other hand consider how
sick you feel after making a meal from a vending machine while staying
late in the office.
 
M

Mike

Dave Ramsey is a Christian that takes a Biblical view of personal
finance...essentially all debt is bad. The group he caters to is the
group that has never heard of a budget, and living within their means
equates to being able to make the minimum monthly payments on their
credit card, boat, and truck. Unfortunately, because of the dismal
state of our country's personal finance IQ, he speaks to a LARGE
percentage of our overly debt-ridden population.

To the above mentioned group, he offers an uncomplicated way of
getting out of debt...spend less than you earn. You would be amazed
as to how many people have never heard of, and don't know anyone, that
applies that principal. From a pure financial standpoint, the debt
snowball is not the best way to reduce debt. However, it gives people
an early sense of accomplishment that can be repeated again and again.

Once you get out of debt and begin to invest, there are others that I
would go to for better advice. His 12% rate of return that he uses
for his investment calculations is not realistic, and his investment
recommendations are not specific enough for people to act on. Quite
simply, that is not his strength.

As you might guess, I am a big fan of his principals. It is not rocket
science, and there are certainly other ways to go about it, but the
fact is his methods work for a lot of people that many in the wealth
management industry deem not worth of their time.
 
H

HW \Skip\ Weldon

The group he caters to is the
group that has never heard of a budget, and living within their means
equates to being able to make the minimum monthly payments on their
credit card, boat, and truck. Unfortunately, because of the dismal
state of our country's personal finance IQ, he speaks to a LARGE
percentage of our overly debt-ridden population.
IMO this is a good example of well-balanced commentary.
 
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E

Elle

All these TV finance showpersons have a simplifying "hook" to make
things less dry and nuanced than they would need to be in a
responsible analysis.

I would wager one could google and quickly find the biggest financial
malady of the masses is debt followed by not saving for retirement.
The cure is in fact simple. Implementing it is the difficult part. If
putting on a show with dramatic flair is what it takes to get people
to implement the cure and live within their means, I am for it.

They assume for instance that anyone asking for
help is good hearted but wildly irresponsible, and needs radical
surgery regardless of bad side effects.

They do need radical financial surgery. I do not see bad side effects
when the TV and radio show people speak about curing debt.

But surely don't
take these to be on a level of considered logic, wisdom, and knowledge
as you would expect from normal books.

I think the norm with financial books is to try to sell a product
deleterious to one's financial health, like day trading, timing, and
hedge funds. I think it is the latter that is the sugar to which you
refer. Ramsey, Orman, Clark Howard, Oprah and some others by contrast
hugely emphasize avoiding debt. Debt is the equivalent of financial
obesity.


The only thing that bothers me about Ramsey is his show's language of
non-inclusiveness, as though Christians are all that matter. Real
Christians do not think like this, in my experience. But this
objection is unrelated to his core message. If his advice actually
gets people to pay down debt, I am 110% behind it. I bear in mind that
some 72% of the 28-year-old and older masses do not have a bachelor's
degree and that even those with a bachelor's degree are prone to be
reckless with money. As much as I want to object to, say, these same
masses putting a fool into the oval office, there is nothing I can do
about it other than work with the reality of what sells to them.
Ramsey sells. My bet is that if more people followed his (and Orman's,
Howard's et al.) cure for Americans' main maladies, things would be a
lot better in the U.S.

I would tell the relative Ramsey's debt plan is fine but maybe
consider paying off the high interest debt first now and then.
 
D

Don

I would wager one could google and quickly find the biggest financial
malady of the masses is debt followed by not saving for retirement.
The cure is in fact simple. Implementing it is the difficult part. If
putting on a show with dramatic flair is what it takes to get people
to implement the cure and live within their means, I am for it.
Excessive debt can be as damaging to one's future security and well-
being as alcohol, drugs, or gambling. What could often be helpful is
an intervention, in which responsible family members all get together
and brow-beat the addicted person into getting help. Unfortunately,
that strategy has not found its way into the financial realm, and
sometimes the whole family has the same problem.
 
C

Chip Wood

Excessive debt can be as damaging to one's future security and well-
being as alcohol, drugs, or gambling. What could often be helpful is
an intervention, in which responsible family members all get together
and brow-beat the addicted person into getting help. Unfortunately,
that strategy has not found its way into the financial realm, and
sometimes the whole family has the same problem.
New reality TV show?

Chip
 
D

Don

New reality TV show?
That might not be a bad idea. If "The Biggest Loser" gets people's
attention, maybe "The Biggest Payoff" (debt, that is) could do well in
the ratings. Or, how about "The Amazing Race from the Red to the
Black."? Or, maybe still better, "Financial Survivor," whereby those
who do not survive not only are voted off the island, but are sent to
the bankruptcy court or the poor house.
 
D

dumbstruck

I would tell the relative Ramsey's debt plan is fine but maybe
consider paying off the high interest debt first now and then.
My objection to Ramsey (or Orman) after listening to them for hours
isn't because they are debt hawks or that they need some fine tuning
about which debt, or about their religion. I too instinctively avoid
debts and have little sympathy for loose or even non-tight spenders.

It is the abrupt scorched earth plans Ramsey sometimes prescribes to
debtors on TV, regardless whether they will wreak havoc on their
ability to make a living - maybe needlessly selling a house or vehicle
at a huge loss just for the sake of of doing it, when alternative
living or commuting options will cost even more. It may suit some
people's needs if they are wildly out of control, but these folks
appeared not to be and the advice seemed either for melodramatic
ratings or an off balance host.

Again, the advice may fit some minority and his non-TV advice may be
more reasonable. Why did I listen if I doubt his advice? He raises
interesting issues, and the answers can be left as a TBD question mark
to mull over. Basically it appears to lean toward pop culture fluff,
and I assumed there must be some books elevated higher out of that.

What I am following in this area is a bit oblique way of seeing the
same principles. In the the online OYC Yale course on financial
markets, Schiller talks a lot about financial planning and how it
should be gov't subsidized (why not simply made a mandatory school
course?). He discusses the official web site (is it http://www.fpanet.org/
?) and makes comments on how his students will likely half fall into
bankruptcy, but due to their income it will be chapter so and so.
Compiles various measures of statistical personal debt, and most of
all wrings his hands on how folks recognize his famous shiller home
price index, but refuse to purchase the house price hedge instruments
his company provides... which would insure against loss in peoples
biggest asset.
 
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P

PeterL

He appears to be more celebrity than financial planner.
He is best know for his anti-credit card stance ("there is NO such thing
as responsible credit card use") regardless of whether one pays in full
each month or carries a balance.
He is also known for his "debt snowball" method of debt repayment.
Simply put, you pay all you can to the smallest balance card/debt each
month till it's gone. This creates a sense of accomplishment which
further motivates you. Ok. He answers the question "But wouldn't lining
up the the debt by rate charged and paying highest rate debt first be
better?" with "No, how dare you question the great and powerful Dave" (I
exaggerate, but only a bit.)
The people he gives advice to are not the logical thinking type. So
psychologically he has a good point. It's not just mathematics and
finance, but also psychology.
 
J

JoeTaxpayer

The people he gives advice to are not the logical thinking type. So
psychologically he has a good point. It's not just mathematics and
finance, but also psychology.
I concede the psychological benefit of his method. I object to his "my
way or the highway" approach. There is a cost to his method, and
spreadsheets that allow you to see the difference (between low balance
card first vs high rate first). Not every social drinker is an
alcoholic, and not every indebted person needs Dave's medicine. But I do
concede that for the "sick" indebted person, he's a help.
 
I

Igor Chudov

I would like to know if, in your opinion, irresponsible financial
behavior (abuse of credit, failure to save etc), can be fixed by
lessons, lectures, admonitions, appeals to higher authority, or any
other means. Or is that, perhaps, a unchangeable trait of a person?

The idea that one can have money only by spending less than one earns,
is not that complicated to begin with. It is obvious to pretty much
anyone. The question is, do people follow this obvious idea or not?

i
 
B

bo peep

The idea that one can have money only by spending less than one earns,
is not that complicated to begin with. It is obvious to pretty much
anyone. The question is, do people follow this obvious idea or not?
I would be happy if we could just get the federal government to follow
it.
 
I

Igor Chudov

I would be happy if we could just get the federal government to follow
it.
Federal government is somewhat different, actually, as its job is to
regulate the quantity of money.

i
 
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H

HW \Skip\ Weldon

The idea that one can have money only by spending less than one earns,
is not that complicated to begin with. It is obvious to pretty much
anyone. The question is, do people follow this obvious idea or not?
My opinion is that the answer varies with how loosely you define "live
within your means".

To me it means saving the max for retirement, saving for future big
ticket items (vacations, education, cars, etc.), maintaining an
appropriate emergency reserve and covering everything else without
debt. (While I view debt as obvious evidence that someone is not
living within their means, I give 1st mortgages a pass as long as all
of the above is being done and the current payment amortizes the loan
by their early-50s.)

Using that definition, my answer is that not many people do this.
Which, in my opinion, explains why not many people ever achieve real
financial security.
 
B

bo peep

Federal government is somewhat different, actually, as its job is to
regulate the quantity of money.
I would be happy if they would do that, but they keep *increasing* it
endlessly instead. I don't remember them *ever* decreasing it.
 
B

Bill

bo said:
I don't remember them ever decreasing it.
In the early '80s Paul Volcker stopped the prolonged double digit
inflation that was plaguing the country by choking down the money
supply and letting interest rates rise dramatically.
 
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J

JoeTaxpayer

I would like to know if, in your opinion, irresponsible financial
behavior (abuse of credit, failure to save etc), can be fixed by
lessons, lectures, admonitions, appeals to higher authority, or any
other means. Or is that, perhaps, a unchangeable trait of a person?

The idea that one can have money only by spending less than one earns,
is not that complicated to begin with. It is obvious to pretty much
anyone. The question is, do people follow this obvious idea or not?
To the extent that there's a profile which indicates some deeply seated
psychological issues (e.g. the gal with not a dime in savings who, at
50, continues to add to her shoe collection) it may very well be an
unchangeable trait. In which case, I suppose the rest of the discussion
is pointless. Whether to pay one's debt one way or another means little
when the person targeted isn't likely to take any advice regardless of
source.
 

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