I’ve heard a little about him, and since I work for a debt counseling agency paying attention to these sorts of things has become more relevant to my life of late. I used to have more debt than I could handle, but I paid it off with a windfall and vowed ‘‘never again.’’ At 24, my financial life is fine and under control, very little credit card debt and some student loans I’m paying on regularly. I started saving for retirement this year, so I really have no complaints… that and the fact that I anticipate a major increase in income within the next couple of months.
I guess I’m just trying to figure out what Dave Ramsey’s whole point is. I went to his website and it was sort of hard to figure out what he stood for in a nutshell. I listened to some audio in which he said nobody should ever own a credit card, and borrowing to prove you can borrow for the sake of borrowing in the future is stupid.
While I might be able to get on board with the idea that the principles behind establishing credit are a bit ludicrous, I’m not completely sold on the idea that it isn’t necessary to establish credit given the current bank lending system. I think there might be a certain danger to living completely outside the system. Your credit score is considered for everything from employment positions to renting an apartment. It seems like something one ought to pay attention to.
So basically I’m looking for a summary of Dave Ramsey’s financial philosophy, how it’s so different from the traditional financial management outlook, whether or not you think it’s dumb or brilliant, and why. I am desiring of both personal anecdotes and citations, anything you might have to throw my way to help me get a grip on this guy.
I never understood Dave Ramsey’s appeal. He doesn’t tell you anything that your grandmother didn’t tell you: Save your money, don’t buy stuff you can’t afford, don’t get into debt, etc. Seems pretty basic to me…
Some people really, really can’t handle credit. They think of available credit as available money and invariably max out their cards. For those people, Ramsey is an evangelist and gives them a simple, easy to understand way to approach and get out of debt. He’s got a lot of fanatical followers with the zeal of converts because they’ve come to a huge epiphany. I think a lot of his advice is simplistic but it does seem to help a lot of people and with an entire financial system conspiring to get you to spend, spend, spend, they need the help.
His shtick in a nutshell is: don’t have debt. In his ideal world everyone would pay for cars, houses, and the like with cash, eliminating the need for mortgages and loans.
I think his message on how to get debt under control for those who have it is actually pretty good. First he suggests that everyone create an emergency fund before they start tackling their debt so that when the unexpected expenses come up, they can pay for them out of the e-fund without going further in debt.
To tackle the debt, he uses a plan coined a “debt snowball”. Basically, start with your smallest debt and pay it off first. Then roll that payment into the second smallest debt, and so on and so forth until all debts are gone. This way people get a taste of victory for paying things off and then continue to want that feeling - starting with the biggest debt can be overwhelming and cause people to just give up.
It all seems like common sense, but it’s pretty obvious that there are many out there who need someone to tell them what to do fiscally. Dave Ramsey seems to fill this role.
It IS all common sense - but common sense is far from common.
The one non-common sense thing he recommends is the debt snowball, starting with your smallest debt. This is psychologically good sense, it gives you the reward to keep moving. Its less good financial sense, since an accountant would say “go for the highest interest debt first.”
This is his big hook- he blends common sense financial advice with Old Time Religion and thus sells books in two markets. He’s okay as a financial advisor- gives some practical tips on how to set up a month, then 3 months, and eventually 6 months safety net- but on the whole I prefer the secular and more detailed Suze Orman.
[HIJACK]Did anybody see him on Larry King last night? I wanted to smack the guy who kept telling callers who were asking how to save their house or deal with huge credit card debt that “the market today’s an opportunity! It’s like the stock market and the real estate market are having a sale and you have to look at it like an investor instead of a debtor!” Great advice for people who are liquid and debt free but the callers obviously aren’t either one- you may as well be extolling the virtues of the Harry Potter series to a caller who’s asking for advice for a book about diabetes.[/HIJACK]
We’re on Baby Step 2 right now, and with our tax refund we should be moving right along.
Ivylad and I aren’t religious, and we don’t find Dave Ramsey overly religious. I like his advice, it makes a lot of sense, and it’s working for us.
This is his philosophy, if you’re looking for it. It’s called the 7 Baby Steps.
I haven’t used my credit card since May 5 of last year. The budget is helping Ivylad and I communicate more about money, and we’re learning that it’s better to save up for things, rather than charge them. We bought a second fridge for our house with cash, and believe me, that felt good!
You may have gotten this advice from your grandmother, and I was lucky enough to get it fom my tightwad father, but many, many people never hear this advice growing up. Either their parents have terrible financial habits themselves, or they just never bothered to teach their kids about money. You’d be surprised at how many financially stupid adults are out there. Ramsey’s advice seems basic, but good–exactly what these folks need to hear.
Yeah, I find his Christian spin unnecessary and distracting, but it’s probably great for those who live within the Christian universe. His financial advice is excellent for those of us who did not learn this uncommon “common sense”. In a world that discourages self-discipline his is a needed alternate voice.
Ivylad and I listen to his radio show and watch his TV show, and we haven’t found him to be overly religious. Oh, he’ll throw in the Bible verse about how the borrower is the slave to the lender, but he doesn’t open the show with a prayer or anything like that. He has a lot of common sense, and while we live in a country where 80% of Americans don’t have a will and think leasing cars is a good way to build wealth, his message of “be weird” is starting to resonate.
It works for us. We don’t go to church. He may be a Christian, but that’s not his primary message about financial planning.
Regarding the credit score…my son is running into this. He’s in ROTC, and one of the things he’s been told is that in order to get a security clearance, he must have a good credit score. Well, my son has read The Total Money Makeover and has no intention of getting a credit card. When he spoke to his superior about it, the major told him having a bad credit score will affect him getting a security clearance, but having no credit score will not affect it. There are ways around it…you just have to look for them.