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[Vade]

I was reading a post by Ron Mexico and it reminded me of one of the big deceptions out there.

Dave Ramsey seems to be the post child for the new age crowd for getting out of debt. I see his books and conferences parroted all over the place. Honestly he reminds me exactly of Suze Orman ,but with a Christian slant.

His ideas of 'debt snowball' meaning you pay off the smallest balances rather than the highest interest rate balances first, his claim that anyone can get an average invested return of 12% annually, his claim that all investments should be in mutual funds, and lastly his thoughts that you should always pay cash for everything and never have a credit card. This border from some common sense to fiscally irresponsible. Honestly I feel he gets away with his snake oil selling of common sense and pie in the sky ideas because he throws out the "Christian" logo.

My personal thoughts on the man is that he selling common sense ; which in this day might actually not be common, and then creating completely unrealistic expectations while profiting on the poor.

What are your thoughts gaf?

 

[-Arcadia-]

and lastly his thoughts that you should always pay cash for everything and never have a credit card.

I know nothing about this guy, but I generally agree about credit cards, just with a small amendment. They’re great for emergencies, and you should have one.

 

[Ron Mexico]

Appreciate the tag Vade .

My problem with Ramsey is that, along with all the outlandish claims like 12% returns and all, is that he views finance as an emotion. It's math. Not your feelings. Math.

So your ideal Ramsey candidate is someone who has dug themselves into a financial hole. At that point, any manageable, structured plan will do them WORLDS of good. But why his plan? That I can't really answer. I do feel like he's doing a disservice to his "followers" by essentially saying you should pay cash for everything because you can't be trusted with plastic. You should pay off your smallest balances first because you're not emotionally strong enough to think logically and pay in order of what costs you the most*. Yet, invest the exact way I tell you because you're savvy for following my exact words. Horseshit.

Just not my beliefs at all. My thoughts are a lot of people that found themselves in these predicaments aren't from a lack of willpower but from a lack of education.

Everyone should have a plan on how they manage their finances. Full stop. It should be simple and it should be repeatable. I'm a tech guy but still do my budgeting on paper. Why? Because it's how I first started and at damn near 40, it still works for me. I'll work out what's going where then hop online and do it. There's a million ways though, this is just the one that works for me.

A credit card, with the proper education and mindset, can be an absolute boon. Credit card companies are desperate for your business even if you never pay them a penny in interest. Why? Because they get a cut of every purchase you make when you swipe/tap/whatever your card. The fact that you may then carry a balance they can charge you for is just icing on an already sweet cake. Non-interest income (like the fee the merchant pays when you swipe your card) is steady. It's predictable. It's the foundation of a lot of banking balance sheets out there. So take advantage! But do so wisely.

The car. The fucking car. Yes, it's a depreciating asset. Yes, you don't want to do something absolutely asinine like taking out an 84 month loan for obnoxious rates. Is there still a case where financing makes sense? Absolutely. If you can pay your vehicle faster than it depreciates, you're gaining equity. I don't make millions. I'm somewhere in the range of what would be considered the space between middle and upper-middle class. I drive a small little 4-cylinder Scion iA. Why? Because I don't need to drive a fancy car to feel better about myself and I could get this one for 0% for 60 months. According to Ramsey, I fucked up. I financed. But I also paid the car off faster than it depreciated and even making .dick% on a savings account would make more for me than the 0% I'm paying in interest. Math.

I could go on and on here and would be happy to offer any advice I can. I've worked in this industry since 2002 and at one point or another worked in everything from the upper crust suburbs to the low-to-moderate income cities. What remained the same throughout it all though is at the end of the day, it's math.

*for things like a mortgage, even though it's my most "expensive" recurring debt at 3.625%, the math gets slightly more murky as the interest is tax-deductible and as such I don't always prioritize throwing extra against it. This would also impact future decisions like refinancing and/or taking things like a home equity to make improvements to the home. YMMV. Still math.

Did I say math enough? Not sure. Fucking Ramsey.

 

[diffusionx]

I paid off my student loans post college with the debt snowball, and I'm glad not to have that albatross around my neck.

I know nothing about this guy, but I generally agree about credit cards, just with a small amendment. They’re great for emergencies, and you should have one.

Sure, if you're the person who truly only uses it for emergencies, or if you're the person who pays off the balance every month and collects points as free money, credit cards are great. However, banks wouldn't be giving away points if most people are like that. The fact that average CC debt in the US is over $8000 shows that for most, credit cards are very dangerous and most shouldn't own one.

Which is the point. We are not Rational Economic Man. Personal finance is as much a matter of behavior and psychology as it is math and accounting - possibly more. Any advice strictly on the basis of math and rational choice is missing a huge component of it.

 

[Ornlu]

I'd say his stuff would be useful for people who genuinely have no idea how money works. In other words by forcing said people to only use cash, it is a hard limiter on their access to credit.

For people who can utilize it correctly, credit is amazingly powerful. For people who don't understand it, it's a nightmare trap that is going to end up burning the user.

I don't know anything about the claim of an average return of 12%, or how he claims to come by the number. It sounds pretty stupidly high at face value, though.

 

[Thaedolus]

AHHHHH!!!! Other people who share my disdain for this guy and his cult...now don’t get me wrong, there’s some goddamn common sense he preaches and mixing that with the emotional aspect seems to be highly effective for a lot of people, but there’s no way I’m putting cash in envelops to learn how to budget better or cutting up credit cards. Set your budget, put everything on a card with good rewards, pay it off every month. You don’t need to go psychotic with this shit.

I will say this: the emotional stuff is effective for some people. Paying off the lowest balance first might seem ludicrous to me if its interest rate is lower, but for some people that’s the victory they need to get the ball rolling. For us, thankfully, of our two loans the student loan is the higher interest with a lower balanced when compared to our mortgage, so I didn’t have to fight that battle with my wife. Also, both of our sets of eyes almost rolled out of our heads when he got preachy with the Bible and stuff. I feel like the value I got out of the class was some decent advice on what to do with retirement accounts, some common sense refreshers on setting your budget, a newly inspired wife who wants her student loan gone ASAP (no argument here), and a bunch of nonsense meant for people who are in a way worse financial situation than we are and need to play mind tricks on themselves to get their shit together.

Ramsey himself seems quite pompous (and apparently litigious toward his critics), his daughter is insufferably annoying and the other guy’s jokes feel ripped out of a Bill Cosby bit from 35 years ago.

Just don’t spend more than you have, pay off debts as quickly as possible and save for retirement. Can I has your money now?

 

[manfestival]

Selling common sense isn't selling snake oil. OP you misunderstand what a snake oil salesman actually is and are grossly mischaracterizing Dave Ramsey because of it. There is no deception here. His biggest pitch are basic principles. Ron's post honestly seems to align with most of what Ramsey teaches despite being pitched as a counter to his teachings. I haven't met many of his followers but I am sure they can't be any worse than Bloodborne fans on here.

Don't fool yourself into thinking he is a one stop shop or selling him to yourself as something far greater. For the record the man does pretty basic breakdowns on his show doing math and throws obvious math in people's faces. We have to consider how dumb the average populace is in order to get a true grip on the real picture. I haven't read his books but I hear his radio show on the way home if I can stomach it since it is interesting but most of the content is repeat or recanting the steps from his book. The most awful thing to listen to is the people telling their stories of how they got out of debt and the ever annoying I AM DEBT FREEE HURRRRRRR. Makes me want to punch something every time.

 

[-Arcadia-]

I paid off my student loans post college with the debt snowball, and I'm glad not to have that albatross around my neck.



Sure, if you're the person who truly only uses it for emergencies, or if you're the person who pays off the balance every month and collects points as free money, credit cards are great. However, banks wouldn't be giving away points if most people are like that. The fact that average CC debt in the US is over $8000 shows that for most, credit cards are very dangerous and most shouldn't own one.

Which is the point. We are not Rational Economic Man. Personal finance is as much a matter of behavior and psychology as it is math and accounting - possibly more. Any advice strictly on the basis of math and rational choice is missing a huge component of it.

In other words, most people are stupid.

That said, with self-control, and modicum of intelligence in signing up for literal debt + interest, a credit card can be a very handy thing to have around.

But yes, if one is sees it as ‘Free Money!’, then they shouldn’t be anywhere near one. Or a variety of things in life. To me, they should fix those issues, rather than deprive themselves of helpful resources.

 

[Ron Mexico]

I paid off my student loans post college with the debt snowball, and I'm glad not to have that albatross around my neck.



Sure, if you're the person who truly only uses it for emergencies, or if you're the person who pays off the balance every month and collects points as free money, credit cards are great. However, banks wouldn't be giving away points if most people are like that. The fact that average CC debt in the US is over $8000 shows that for most, credit cards are very dangerous and most shouldn't own one.

Which is the point. We are not Rational Economic Man. Personal finance is as much a matter of behavior and psychology as it is math and accounting - possibly more. Any advice strictly on the basis of math and rational choice is missing a huge component of it.

I understand the thought regarding behavior and psychology. I do. However, I see a huge chunk of that as a failure to educate rather than some inherent weakness we all have.

To put it mildly, we're fucking terrible at teaching basic fundamentals. So now we have these people without ever having a real grasp of finance being offered all kinds of shit that starts the spiral. How many times have you heard people recommend using a credit card because "It's not your money! It's the bank's!"? It's bullshit. These people were never taught about the fundamentals of credit and with little to no guidance, went completely off the rails.

Call me an idealist but I'm not willing to hold the idea of bad fiscal decisions being something innate. Just can't get there. If we can teach properly, we can start properly. If we can start properly, we can maintain. And then, again, it's actually is back to math.

Student loans would be another fun off-shoot of Ramsey as well. Going to college in the late 90s meant what felt like a huge amount at the time is a drop in the bucket in today's terms. But is anyone really doing a value proposition regarding not just what school but how to finance it? You have loans the size of some mortgages taken out by students who haven't grasped exactly what they want to do in life yet, not to mention how to pay the shit back. And then we wonder why student loan debt is out of control. Little Johnny wants to go to school for underwater fire prevention. Sure, it might not make him a dime, but he wants to see out his dreams!

(And of course diffusionx I'm not taking a shot at you here-- you paid your loans and you should absolutely be proud of that. Not everyone has a) taken your path or b) shown any interest in trying. I would still argue you could have paid it off faster/cheaper by going in terms of rate rather than balance, but the end result is absolutely the most important.)

 

[DunDunDunpachi]

I've heard his name for years (he started / is still in Christian circles but I'm not sure if he is still "biblically based" like his originally book was) . Never took the time to read anything nor saw presentations by him. I have a friend who is re-doing his finances based on this guy and it seems to be working fine for him and his wife, he seems really sold on the advice given.

Basically "cut as far down to the bone as you can, get out of debt, then don't get back into debt".

Sometimes people need an excuse to be responsible and for someone to tell them what to do. That's not a profound observation. Since most people are flippant with money, makes sense that some basic financial advice would be life-changing for a lot of people.

 

[diffusionx]

(And of course diffusionx I'm not taking a shot at you here-- you paid your loans and you should absolutely be proud of that. Not everyone has a) taken your path or b) shown any interest in trying. I would still argue you could have paid it off faster/cheaper by going in terms of rate rather than balance, but the end result is absolutely the most important.)

This is my point though - it is psychology. The debt snowball works because psychologically paying off small loans feels like a win. Not having those $200 or $500 bills every month motivates you to keep going. Once all is said and done, it is better to succeed paying a little more interest than to fail outright and have the debt going forward.

I guess I am more pessimistic - the education is out there. There are bajillions of websites online that lay out all this stuff in detail. After I graduated college, I read a ton of them, I read The Millionaire Next Door, I read Dave Ramsey, etc. Like you, I keep track of my finances with pen and paper, but there are very sophisticated and low cost if not free apps that do it for you these days. The education is there.

I really think that a lot of people are not capable of managing their personal finances in an intelligent and optimized way.

In other words, most people are stupid.

That said, with self-control, and modicum of intelligence in signing up for literal debt + interest, a credit card can be a very handy thing to have around.

But yes, if one is sees it as ‘Free Money!’, then they shouldn’t be anywhere near one. Or a variety of things in life. To me, they should fix those issues, rather than deprive themselves of helpful resources.

Based on evidence, it seems most people are stupid, most people don't have self-control, and most people don't have intelligence. With that context, is telling people that they shouldn't have a credit card bad advice? If a majority of people with a gun shot themselves, is it bad advice to tell people not to own a gun?

 

[Ornlu]

Selling common sense isn't selling snake oil. OP you misunderstand what a snake oil salesman actually is and are grossly mischaracterizing Dave Ramsey because of it. There is no deception here. His biggest pitch are basic principles. Ron's post honestly seems to align with most of what Ramsey teaches despite being pitched as a counter to his teachings. I haven't met many of his followers but I am sure they can't be any worse than Bloodborne fans on here.

Don't fool yourself into thinking he is a one stop shop or selling him to yourself as something far greater. For the record the man does pretty basic breakdowns on his show doing math and throws obvious math in people's faces. We have to consider how dumb the average populace is in order to get a true grip on the real picture. I haven't read his books but I hear his radio show on the way home if I can stomach it since it is interesting but most of the content is repeat or recanting the steps from his book. The most awful thing to listen to is the people telling their stories of how they got out of debt and the ever annoying I AM DEBT FREEE HURRRRRRR. Makes me want to punch something every time.

In other words, most people are stupid.

That said, with self-control, and modicum of intelligence in signing up for literal debt + interest, a credit card can be a very handy thing to have around.

But yes, if one is sees it as ‘Free Money!’, then they shouldn’t be anywhere near one. Or a variety of things in life. To me, they should fix those issues, rather than deprive themselves of helpful resources.

Human beings are dumb as fuck. It's not polite to talk about, but somewhere in the ballpark of 30-40% of people cannot, and never will be able to function and understand the modern world. I really can't fault someone with a room temperature IQ living in a developed society where they get bombarded with nice sounding rent-chasing debt trap nonsense 24/7. The chances of them making it to old age without fucking up financially are miniscule.

I understand the thought regarding behavior and psychology. I do. However, I see a huge chunk of that as a failure to educate rather than some inherent weakness we all have.

To put it mildly, we're fucking terrible at teaching basic fundamentals. So now we have these people without ever having a real grasp of finance being offered all kinds of shit that starts the spiral. How many times have you heard people recommend using a credit card because "It's not your money! It's the bank's!"? It's bullshit. These people were never taught about the fundamentals of credit and with little to no guidance, went completely off the rails.

Call me an idealist but I'm not willing to hold the idea of bad fiscal decisions being something innate. Just can't get there. If we can teach properly, we can start properly. If we can start properly, we can maintain. And then, again, it's actually is back to math.

And what about the people who can't be taught? You can explain how an IRA or a 401k plan functions 1000 times to someone, but if they don't understand it, what good does it do? I think there's certainly a need for people who are literally not capable of ever understanding how finances really work to be able to have someone able to dumb it down enough to a point where they have a viable way of understanding what they need to do.

I really think that a lot of people are not capable of managing their personal finances in an intelligent and optimized way.

I can't agree with this more. Anecdotally, I know a couple that literally thought they were getting a pay increase by their employer switching from weekly checks, to a bi-monthly (once every two weeks, I know some call it bi-weekly) system. They saw the doubled amount, and literally could not put it together in their heads that it's literally the same amount when stretched out and budgeted for two weeks. They're genuinely good, honest people who cannot fathom how it all works.

 

[Ron Mexico]

I've heard his name for years (he started / is still in Christian circles but I'm not sure if he is still "biblically based" like his originally book was) . Never took the time to read anything nor saw presentations by him. I have a friend who is re-doing his finances based on this guy and it seems to be working fine for him and his wife, he seems really sold on the advice given.

Basically "cut as far down to the bone as you can, get out of debt, then don't get back into debt".

Sometimes people need an excuse to be responsible and for someone to tell them what to do. That's not a profound observation. Since most people are flippant with money, makes sense that some basic financial advice would be life-changing for a lot of people.

So you're pretty close imo. "Cut as far down to the bone as you can, get out of debt, then don't get back into debt" is a pretty sound strategy.

The only problem? It wouldn't sell books. So instead you get all these horseshit "rules" that you're to follow *cough* religiously and St. Ramsey will lead you on a path to redemption. Ramsey is about following the method. Not understanding the how or the why. Just follow what I told you to do because I know better and you don't.

It's not a perfect comparison, but compare it to one of those diets like Nutrisystem or whatever that was back in the day. They took all your decision-making away. Didn't tell you why. Just do this because this is the program. Why wouldn't they teach you the why? Because they're in it to sell you more programs. And you'll be back of course, because we didn't teach you anything,

Ramsey wants you to follow his system because he can maintain control. That control will keep you in his ecosystem, faithfully forking over your money to his collection plate.

Seems awfully religious, doesn't it? I mean, shit, it's not like he's some holy roller or anything though, right?

Oops.

 

[Thaedolus]

I've heard his name for years (he started / is still in Christian circles but I'm not sure if he is still "biblically based" like his originally book was) . Never took the time to read anything nor saw presentations by him. I have a friend who is re-doing his finances based on this guy and it seems to be working fine for him and his wife, he seems really sold on the advice given.

Basically "cut as far down to the bone as you can, get out of debt, then don't get back into debt".

Sometimes people need an excuse to be responsible and for someone to tell them what to do. That's not a profound observation. Since most people are flippant with money, makes sense that some basic financial advice would be life-changing for a lot of people.

His main biblical pitch, at least during the course, is that debt is essentially evil and then toward the end he talks about how being financially free allows you to be generous...I can get behind both of those from a logical standpoint, and I get it if “God says so” helps some people too.

And I think your last paragraph is really the crux of the pitch. Some people are stuck in a rut and don’t realize eating out every night or random snacks at the gas station are part of what’s keeping them in poverty, and by taking a whole accounting of where their money is going they can really find a lot of leaks. His first “baby step” is getting a thousand dollars saved up...I was astonished that we were the only couple out of about 6 that came into the class with that being a no brainer, home owners, and having zero credit card debt. But the class did help us focus on plugging more leaks, motivated me to finally refi the house to a 15 year at 1.5% lower interest, and essentially my wife’s entire take home pay plus some of mine is going toward getting her loan paid down in about a year rather than 3-4 now...so as much as I think that class wasn’t 100% for us, it did help light a fire and get us more focused on this shit. Both of us getting large raises in the middle of it helped too.

I think the class is totally fine if you get some good shit out of it, but the cult-like “don’t do it ‘ish’” mentality was a bit off putting. Yo, you guys don’t even have 1k in the bank, don’t come at my credit card with scissors and tell me to start paying cash. One lady said she’d go through the line 3 times at the store to allocate funds appropriately with the envelops. GTFO of here with that

 

[Vade]

Selling common sense isn't selling snake oil. OP you misunderstand what a snake oil salesman actually is and are grossly mischaracterizing Dave Ramsey because of it. There is no deception here.

I would disagree, every snake will put out a few facts that are true. How else can you fool people if you are always misrepresenting. To tell people just invest in mutual funds 12% explaining nothing about how they work. He made his money off you, he is not going to get in SEC trouble by giving actual financial recommendations. He is skirting liability to make money.

If his teaching helped you to get your debt or loans paid. Great that is a real success for you not Dave’s master plan.

 

[Ron Mexico]

This is my point though - it is psychology. The debt snowball works because psychologically paying off small loans feels like a win. Not having those $200 or $500 bills every month motivates you to keep going. Once all is said and done, it is better to succeed paying a little more interest than to fail outright and have the debt going forward.

I guess I am more pessimistic - the education is out there. There are bajillions of websites online that lay out all this stuff in detail. After I graduated college, I read a ton of them, I read The Millionaire Next Door, I read Dave Ramsey, etc. Like you, I keep track of my finances with pen and paper, but there are very sophisticated and low cost if not free apps that do it for you these days. The education is there.

I really think that a lot of people are not capable of managing their personal finances in an intelligent and optimized way.



Based on evidence, it seems most people are stupid, most people don't have self-control, and most people don't have intelligence. With that context, is telling people that they shouldn't have a credit card bad advice? If a majority of people with a gun shot themselves, is it bad advice to tell people not to own a gun?

Human beings are dumb as fuck. It's not polite to talk about, but somewhere in the ballpark of 30-40% of people cannot, and never will be able to function and understand the modern world. I really can't fault someone with a room temperature IQ living in a developed society where they get bombarded with nice sounding rent-chasing debt trap nonsense 24/7. The chances of them making it to old age without fucking up financially are miniscule.



And what about the people who can't be taught? You can explain how an IRA or a 401k plan functions 1000 times to someone, but if they don't understand it, what good does it do? I think there's certainly a need for people who are literally not capable of ever understanding how finances really work to be able to have someone able to dumb it down enough to a point where they have a viable way of understanding what they need to do.



I can't agree with this more. Anecdotally, I know a couple that literally thought they were getting a pay increase by their employer switching from weekly checks, to a bi-monthly (once every two weeks, I know some call it bi-weekly) system. They saw the doubled amount, and literally could not put it together in their heads that it's literally the same amount when stretched out and budgeted for two weeks. They're genuinely good, honest people who cannot fathom how it all works.

Apologies for what I assume will be a double-post, but both these posts touch on the same thing and I'm probably not getting at the root of the problem as well as I'd like to.

diffusionx you mentioned everything you read post-college. I'm not asking you for an exact number, but think about how many thousands in schooling you financed before ever picking up those books.

Ornlu I agree 110% that it's an uphill battle but again I would start WAY earlier in terms of when I'd incorporate finance fundamentals. 30-40% might still be unable to function (and the room temperature IQ line is absolutely phenomenal and I'll likely steal that at some point) but I'd like to at least have a shot. At the very least, say you might not be able to function outside of a rigid system, but you could do A, B, C, or D. Ramsey is about benefiting Ramsey and more power to him for that but there's equally rigid routines out there as well. Doesn't mean we shouldn't at least try to teach the why and do it at an age where it just may stick.

 

[manfestival]

I would disagree, every snake will put out a few facts that are true. How else can you fool people if you are always misrepresenting. To tell people just invest in mutual funds 12% explaining nothing about how they work. He made his money off you, he is not going to get in SEC trouble by giving actual financial recommendations. He is skirting liability to make money.

If his teaching helped you to get your debt or loans paid. Great that is a real success for you not Dave’s master plan.

I disagree, selling you on what you want to hear doesn't have to be based in facts that are true at all. You don't need to fool people with facts and the truth. There are shining examples of where things are grounded in reality and examples of where charisma overrules a persons common sense.

 

[-Arcadia-]

Based on evidence, it seems most people are stupid, most people don't have self-control, and most people don't have intelligence. With that context, is telling people that they shouldn't have a credit card bad advice? If a majority of people with a gun shot themselves, is it bad advice to tell people not to own a gun?

If somebody reads my advice of getting a credit card strictly for emergencies, and plunges themselves into debt as a result, I don’t feel bad about that, because it’s the exact opposite of what I said to do.

I don’t speak towards people that can’t control themselves, follow instructions, or understand how debt stacks. I speak towards mature, rational adults.

Perhaps that’s where the author and I differ. We’re targeting altogether different audiences.

 

[DunDunDunpachi]

So you're pretty close imo. "Cut as far down to the bone as you can, get out of debt, then don't get back into debt" is a pretty sound strategy.

The only problem? It wouldn't sell books. So instead you get all these horseshit "rules" that you're to follow *cough* religiously and St. Ramsey will lead you on a path to redemption. Ramsey is about following the method. Not understanding the how or the why. Just follow what I told you to do because I know better and you don't.

Okay, but let me apply this same logic to another field:

Why does anyone need any training to lose fat and get in shape? Don't you know that you can just exert yourself and eat less food? Duh!

Methods are effective for a reason. The goal is to overcome a person's doubt and timidity for a long-enough period of time so that they expand their paradigm and can "get it" for themselves.

It's not a perfect comparison, but compare it to one of those diets like Nutrisystem or whatever that was back in the day. They took all your decision-making away. Didn't tell you why. Just do this because this is the program. Why wouldn't they teach you the why? Because they're in it to sell you more programs. And you'll be back of course, because we didn't teach you anything,

Ramsey wants you to follow his system because he can maintain control. That control will keep you in his ecosystem, faithfully forking over your money to his collection plate.

Seems awfully religious, doesn't it? I mean, shit, it's not like he's some holy roller or anything though, right?

Oops.

I mean, to expand on what I said above, pretty much everyone loves being told what to do and find great comfort in being told what to do, it just depends on the topic. Un-shouldering the burden of being THE DECISION MAKER is a relief especially if you're a breadwinner trying to get the house in order and to stop drowning in debt.

I think there's an argument to be made that the same personality traits / deficiencies that allow someone to get into debt are the exact traits that need to be reversed should one hope to get out of debt.

His main biblical pitch, at least during the course, is that debt is essentially evil and then toward the end he talks about how being financially free allows you to be generous...I can get behind both of those from a logical standpoint, and I get it if “God says so” helps some people too.

And I think your last paragraph is really the crux of the pitch. Some people are stuck in a rut and don’t realize eating out every night or random snacks at the gas station are part of what’s keeping them in poverty, and by taking a whole accounting of where their money is going they can really find a lot of leaks. His first “baby step” is getting a thousand dollars saved up...I was astonished that we were the only couple out of about 6 that came into the class with that being a no brainer, home owners, and having zero credit card debt. But the class did help us focus on plugging more leaks, motivated me to finally refi the house to a 15 year at 1.5% lower interest, and essentially my wife’s entire take home pay plus some of mine is going toward getting her loan paid down in about a year rather than 3-4 now...so as much as I think that class wasn’t 100% for us, it did help light a fire and get us more focused on this shit. Both of us getting large raises in the middle of it helped too.

I think the class is totally fine if you get some good shit out of it, but the cult-like “don’t do it ‘ish’” mentality was a bit off putting. Yo, you guys don’t even have 1k in the bank, don’t come at my credit card with scissors and tell me to start paying cash. One lady said she’d go through the line 3 times at the store to allocate funds appropriately with the envelops. GTFO of here with that

Good writeup, it definitely jives with my own (limited) knowledge of his program. I think the "pay with cash" thing is a solid example of why programs that work for x% of people can still have glaring flaws / illogical rules. It makes sense from a certain perspective: you aren't going to ever get out of debt if you pay off some of your credit card and then just spend it again. But it does seem stupid if the person is taking the rule too far.

It is plausible that the goal is to impart some sort of "realness" to money that the person might otherwise lack. Paying in cash forces them to acknowledge that realness, especially the limitations. I have no strong feelings about paying cash -- I'm the opposite, I don't want to carry any cash if I can help it -- but it makes sense in the context of the program's goals.

 

[Ron Mexico]

I disagree, selling you on what you want to hear doesn't have to be based in facts that are true at all. You don't need to fool people with facts and the truth. There are shining examples of where things are grounded in reality and examples of where charisma overrules a persons common sense.

I do agree that snake oil might not be the right fit in this case. I'd compare it more to having a cold. You take a walk through your local pharmacy for something over the counter to fix it. Ramsey is the cold medicine that paid for it to be right at eye level, priced higher than any of the 100 other generics surrounding it and all the while you have other shoppers around screaming that it's the miracle cure.

 

[manfestival]

I do agree that snake oil might not be the right fit in this case. I'd compare it more to having a cold. You take a walk through your local pharmacy for something over the counter to fix it. Ramsey is the cold medicine that paid for it to be right at eye level, priced higher than any of the 100 other generics surrounding it and all the while you have other shoppers around screaming that it's the miracle cure.

I disagree with most of your posts. You come across as more of a person with a bone to pick despite actually agreeing with what Dave is saying while over simplifying what is actually happening in order to paint him as a bad guy. I don't even like the guy but it is pretty obvious in your posts.

I also disagree with your metaphor. You are describing a snake oil salesman but not actually applying it in a logical manner to Dave Ramsey. All you are saying is Ramsey is a snake oil salesman, because if you have a snake oil salesman and place Ramsey in place of the salesman then that makes him a salesman.

 

[Ron Mexico]

Okay, but let me apply this same logic to another field:

Why does anyone need any training to lose fat and get in shape? Don't you know that you can just exert yourself and eat less food? Duh!

Methods are effective for a reason. The goal is to overcome a person's doubt and timidity for a long-enough period of time so that they expand their paradigm and can "get it" for themselves.

The bolded is my problem with all things Ramsey. The end goal for Ramsey is you remain a follower indefinitely. There is no "why" and without that why, you're severely limiting the opportunity for those to "get it",

Ramsey does a piss poor job of explaining the why. Why isn't profitable.

There's nothing I'd want more than for people to "get it". That's why I come to work every day. But I want to help you develop your method, to offer support, not an instruction manual. Because if you're an active designer in your financial "diet", you're going to be more likely to stick to it because you have an ownership stake.

 

[SurprisedPikachu]

I know nothing about this guy, but I generally agree about credit cards, just with a small amendment. They’re great for emergencies, and you should have one.

Yeah, my understanding is he's not against credit cards, suggests having one simply for the credit building. But encourages people to only buy what they can afford, aka a credit card isn't your personal bank account. Think of it as a loan that you can use any amount of in the event something happens you desperately need it for, but the expectation is still to pay back that loan.

 

[Ron Mexico]

I disagree with most of your posts. You come across as more of a person with a bone to pick despite actually agreeing with what Dave is saying while over simplifying what is actually happening in order to paint him as a bad guy. I don't even like the guy but it is pretty obvious in your posts.

I also disagree with your metaphor. You are describing a snake oil salesman but not actually applying it in a logical manner to Dave Ramsey. All you are saying is Ramsey is a snake oil salesman, because if you have a snake oil salesman and place Ramsey in place of the salesman then that makes him a salesman.

My bone to pick has everything to do with doing this for a living for the last 18 years. The part I agree with him on is having a system. I'd shout that from the rooftops. We should all have a repeatable, dependable system. There's amount of customization available within that system is nearly limitless. What works for me may not work for you and vice versa. That doesn't make my way inherently right or yours inherently wrong.

Where I veer hard from Ramsey is he throws out any individuality, any sense of ownership, any sense of explaining the why. It's just follow MY system because. The example above about the shopper that gets back in line 3 times to use the proper envelopes-- do you believe for a second she understands any of the concepts behind this? We're not teaching people how to do better. We're teaching them to regurgitate process.

Again, call me an idealist, but I want better than that.

So again-- having a system? Great! Using Ramsey (and to go back to the OP, I'd include Orman here. I'm an equal opportunity asshole about this) exclusively at the expense of critical thinking? No.

 

[BigBooper]

I've heard his show a few times and most people that call in are just that dumb and irresponsible. They basically need an allowance. If they were smart enough to not need his advice, they probably wouldn't be in the situation they are in.

Could there be a better plan or better investment advice? Yeah, but that's not for his audience.

 

[diffusionx]

My bone to pick has everything to do with doing this for a living for the last 18 years. The part I agree with him on is having a system. I'd shout that from the rooftops. We should all have a repeatable, dependable system. There's amount of customization available within that system is nearly limitless. What works for me may not work for you and vice versa. That doesn't make my way inherently right or yours inherently wrong.

Where I veer hard from Ramsey is he throws out any individuality, any sense of ownership, any sense of explaining the why. It's just follow MY system because. The example above about the shopper that gets back in line 3 times to use the proper envelopes-- do you believe for a second she understands any of the concepts behind this? We're not teaching people how to do better. We're teaching them to regurgitate process.

Again, call me an idealist, but I want better than that.

So again-- having a system? Great! Using Ramsey (and to go back to the OP, I'd include Orman here. I'm an equal opportunity asshole about this) exclusively at the expense of critical thinking? No.

I really do wonder if that person is capable of seeing the bigger picture. I'm not even saying this as a slight, or snobbery. But managing personal finances, a job, home, car, bills, debt, etc. is a relatively complicated process that I really wonder is beyond the reach of a good chunk of people, if not the majority. Maybe those people really do need to regurgitate process. I'm a smart person, more intelligent than the median by a decent amount. I treated college as an investment, and I used my increased income to pay off the debt from that investment. But look at the student loan situation now! A lot of people are NOT treating it in this way, or getting led astray along the way. I'd love to say, "if I can do it anyone can", but I don't think that's true. I know I sound like a snob now, but maybe a lot of peole would be better off without going near these things they clearly have trouble handling.

 

[HoodWinked]

Ya his show and Suze Orman's are things you watch to feel better about your own financial situation. Then you get one of those callers that's like i have $2m in investments and make $300,000 a year then you feel bad again.

 

[manfestival]

My bone to pick has everything to do with doing this for a living for the last 18 years. The part I agree with him on is having a system. I'd shout that from the rooftops. We should all have a repeatable, dependable system. There's amount of customization available within that system is nearly limitless. What works for me may not work for you and vice versa. That doesn't make my way inherently right or yours inherently wrong.

Where I veer hard from Ramsey is he throws out any individuality, any sense of ownership, any sense of explaining the why. It's just follow MY system because. The example above about the shopper that gets back in line 3 times to use the proper envelopes-- do you believe for a second she understands any of the concepts behind this? We're not teaching people how to do better. We're teaching them to regurgitate process.

Again, call me an idealist, but I want better than that.

So again-- having a system? Great! Using Ramsey (and to go back to the OP, I'd include Orman here. I'm an equal opportunity asshole about this) exclusively at the expense of critical thinking? No.

Once again you turn to grossly over simplifying what Dave is doing and this time to prop yourself up. I have met plenty of people that have had long tenured positions within their fields that end up being too caught up in their own idealism to really be open to differing perspectives. I disagree that the ONLY thing he is selling is a system and this is far more nuanced then you seem to be willing to make this. The whole system he has is literally about taking ownership of yourself and your life so that you can "bless" yourself and others along the way to "making it." I know he has some saying he repeats every show that encompasses this.

I do not understand why you want to go back to your previous example when you never made a proper parallel. I disagreed on the point you made with it. Going back to it when we do not see eye to eye is folly.

For the record, I am not calling you bad, demeaning, discredit, or anything negative towards you. I just disagree with the logic you are applying here to paint Dave in a bad picture. Dave obviously is not a one stop shop for everyone. He might believe it but everyone knows that there is no one true perfect system that works for 100% of the people out there. Yes he is still selling a product... wait multiple products but there isn't anything overly complicated about this is nefarious.

 

[Thaedolus]

Where I veer hard from Ramsey is he throws out any individuality, any sense of ownership, any sense of explaining the why. It's just follow MY system because. The example above about the shopper that gets back in line 3 times to use the proper envelopes-- do you believe for a second she understands any of the concepts behind this? We're not teaching people how to do better. We're teaching them to regurgitate process.

Ehhh yes and no, I didn’t like the push to go all in on it because clearly we had some of the fundamentals down before we went into the class: my wife grew up with a stingy aunt that taught her to avoid debt at all costs and I grew up the youngest with a religion that taught the same and by the time I left the house my parents had learned the debt lesson the hard way too, so they told me mortgage or education only...so here we are with mortgage and education as our only debts, and the education only came from private grad school, we both left undergrad debt free.

This other lady was going all in because she is on a teacher’s pay and has very little to spare here and there with the prospect of two kids in college next year. Ramsey does explain that the envelop thing is supposed to make you feel the money leaving your possession more than just swiping a card, and he does explain other parts of the method too. It’s almost like keeping alcohol out of the house if you know you’re an addict. Where I got hung up was: ok but my wife and I aren’t addicts. We don’t go do retail therapy after a bad day and we don’t have trouble keeping a budget, party because we were taught that at a younger age than the people in the class with us, part of it is because we are in better jobs, but whatever it is we don’t need to do the envelope thing. Envelopes might work for some people but honesty if I had to carry around and envelope to get anything out of this program, I’d say to hell with the whole thing. And the cultish pressure to adhere to everything 100% was of putting for sure. But I wouldn’t say people were blind to why they were doing what they were being told to do

 

[DunDunDunpachi]

The bolded is my problem with all things Ramsey. The end goal for Ramsey is you remain a follower indefinitely. There is no "why" and without that why, you're severely limiting the opportunity for those to "get it",

Ramsey does a piss poor job of explaining the why. Why isn't profitable.

There's nothing I'd want more than for people to "get it". That's why I come to work every day. But I want to help you develop your method, to offer support, not an instruction manual. Because if you're an active designer in your financial "diet", you're going to be more likely to stick to it because you have an ownership stake.

I understand this sentiment, but I file it away along with "anger toward fanboys who like videogame brands that I dislike". I mean.... the person got a bit better, sometimes that is far better than the path they were on. Ramsey got some profit for putting some basic pieces together and marketing it. If it is so "common sense", then more people should write books and make money doing this "easy" thing, too, and indeed the world is replete with books on managing one's personal finance.

And I agree, a bright person could probably figure it out and spend less money on Ramsey's stuff. An emotionally-stable person could probably figure it out and spend less money on therapy. A person with higher testosterone could probably figure out how to get ripped and spend less money on diet pills or the gym. These products are aimed at people who otherwise would never cross that threshold, who would forever remain fat, broke, depressed, etc.

 

[Ron Mexico]

Once again you turn to grossly over simplifying what Dave is doing and this time to prop yourself up. I have met plenty of people that have had long tenured positions within their fields that end up being too caught up in their own idealism to really be open to differing perspectives. I disagree that the ONLY thing he is selling is a system and this is far more nuanced then you seem to be willing to make this. The whole system he has is literally about taking ownership of yourself and your life so that you can "bless" yourself and others along the way to "making it." I know he has some saying he repeats every show that encompasses this.

I do not understand why you want to go back to your previous example when you never made a proper parallel. I disagreed on the point you made with it. Going back to it when we do not see eye to eye is folly.

For the record, I am not calling you bad, demeaning, discredit, or anything negative towards you. I just disagree with the logic you are applying here to paint Dave in a bad picture. Dave obviously is not a one stop shop for everyone. He might believe it but everyone knows that there is no one true perfect system that works for 100% of the people out there. Yes he is still selling a product... wait multiple products but there isn't anything overly complicated about this is nefarious.

So I was thinking about this while I ran out to grab lunch. It's a much easier conversation to have in person than over text but I think the part that I'm not getting across well enough is that nuance and I absolutely believe we agree on more than we don't. Let me take another crack here. (Also note I don't think it's snake oil he's selling, just an option among many)

There's risk in abandoning all forms of credit. Namely, if your circumstances were ever to change and you in fact needed to borrow, one of the first indicators would be credit history. And where I think it seems like more minute details from the outside and a huge difference from this desk is scope. I've had plenty current and former Ramsey folks cross my desk personally and professionally. I've also had countless of the room temperature IQ types that have no direction and no plan. Short version of a long story-- it makes the next steps for a post-Ramsey disciple far more difficult than it should be. I know this as my fiancee is one of them.

So while Ramsey and I may agree on more than it sounds like we do, those differences represent far more...roadblocks(?)..than it would seem. Those little nuances are essentially a real pain in the ass when there's arguably better ways of doing it. Especially when said individual is on the other side of that debt issue and looking to "rebuild"

So how's this? Does individualized system >>>>> Ramsey >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> nothing make sense?

And for the record, absolutely zero offense taken and nothing personal meant in any of this. For some ungodly reason, I actually enjoy talking about stuff like this.

 

[Ron Mexico]

These products are aimed at people who otherwise would never cross that threshold, who would forever remain fat, broke, depressed, etc.

One more time apologizing for the back to back posts. I don't want to conflate multiple issues here but again, my pie in the sky hope would be to narrow the top of that funnel. Namely, to get to those people before they reach the point of no return so to speak. But Ramsey (and others) comes in well after that ship has sailed.

And again, Ramsey is FAR better than nothing. If I ever implied otherwise, that was purely unintentional. And you're right, there's hundreds of books out there written by hundreds of authors. That's kind of the point-- cult-ish may be too harsh a term, but there's a certain...fervor (again for the lack of a better term) among his followers. As such, you're the top of the totem pole and as such you're going to open yourself up to more criticism.

Eliminating your credit has consequences. Do the ends justify the means? Maybe? Is that a universal truth? I can't get that far. Again, with apologies for sounding like I'm too deep in the woods, kickstarting your credit after you've aggressively closed it all out sucks. Credit scores are a fickle beast and what may seem like a great idea at first (becoming debt-free) can lead to unintended consequences later (i.e. any future need for credit). I've had the exact scenario plenty over the years. If (and this is a big if) you can follow completely debt-free and need-free from there, you'd be absolutely fine. Again though, too big of a what-if for me.

Again though, my personal feelings towards his fundamentalism aside, it IS still better than nothing and a point that was probably unintentionally lost in the shuffle.

I also do think it's mostly common sense but common sense isn't at all common.

 

[DunDunDunpachi]

One more time apologizing for the back to back posts. I don't want to conflate multiple issues here but again, my pie in the sky hope would be to narrow the top of that funnel. Namely, to get to those people before they reach the point of no return so to speak. But Ramsey (and others) comes in well after that ship has sailed.

And again, Ramsey is FAR better than nothing. If I ever implied otherwise, that was purely unintentional. And you're right, there's hundreds of books out there written by hundreds of authors. That's kind of the point-- cult-ish may be too harsh a term, but there's a certain...fervor (again for the lack of a better term) among his followers. As such, you're the top of the totem pole and as such you're going to open yourself up to more criticism.

Eliminating your credit has consequences. Do the ends justify the means? Maybe? Is that a universal truth? I can't get that far. Again, with apologies for sounding like I'm too deep in the woods, kickstarting your credit after you've aggressively closed it all out sucks. Credit scores are a fickle beast and what may seem like a great idea at first (becoming debt-free) can lead to unintended consequences later (i.e. any future need for credit). I've had the exact scenario plenty over the years. If (and this is a big if) you can follow completely debt-free and need-free from there, you'd be absolutely fine. Again though, too big of a what-if for me.

Again though, my personal feelings towards his fundamentalism aside, it IS still better than nothing and a point that was probably unintentionally lost in the shuffle.

I also do think it's mostly common sense but common sense isn't at all common.

I'm kind of an outside observer, only having seen snippets of his material, so I take no offense and I appreciate the in-depth responses.

Getting rid of credit sounds much like an alcoholic choosing not to drink a drop during their recovery. It makes sense within context but fails as a universal fix. Like you mentioned, a person might find out too late that their credit-free lifestyle has damaged their credit score making it more difficult to get a mortgage, or something like that.

I mean, it's all relative. We tell kids "don't hit" when they are learning the basics of socialization and then later on we say "...except if you are defending yourself" (or something like that). Simple, binary, absolute rules for beginners can eventually pave the way to nuanced, realistic rules for those who master the basics.

You mentioned "cult-ish" and "fervor among his followers", and I totally agree. I mentioned it before: the deficiencies and personality traits which lead to someone getting into debt in the first place are probably some of the same traits that would lead someone to lionize a finance program almost as if it was a religion.

 

[zeorhymer]

Finance is an emotional issue. Half of all divorces are caused by money problems. If it was just a 'duh' facts, you wouldn't have these issues. Dave sees this fact and massages the finance problems into smaller emotional pieces. This will prevent people from shutting down right off the bat.

I don't get the hate on a guy who's trying to teach people on to get out of debt. It's not a pyramid scheme where you have to sell a bunch of products to other people and to tell their friends to sell.

 

[Ornlu]

Finance is an emotional issue. Half of all divorces are caused by money problems. If it was just a 'duh' facts, you wouldn't have these issues. Dave sees this fact and massages the finance problems into smaller emotional pieces. This will prevent people from shutting down right off the bat.

I don't get the hate on a guy who's trying to teach people on to get out of debt. It's not a pyramid scheme where you have to sell a bunch of products to other people and to tell their friends to sell.

I agree with what you're saying, but TBH the bolded isn't 100% true. He's marketing a subscription model business, so his it's in his interest to keep people consuming his products for as long as possible.

Not equating it to a pyramid scheme, but he definitely has a vested interest in people continuing with his program.

 

[Ron Mexico]

I'm kind of an outside observer, only having seen snippets of his material, so I take no offense and I appreciate the in-depth responses.

Getting rid of credit sounds much like an alcoholic choosing not to drink a drop during their recovery. It makes sense within context but fails as a universal fix. Like you mentioned, a person might find out too late that their credit-free lifestyle has damaged their credit score making it more difficult to get a mortgage, or something like that.

I mean, it's all relative. We tell kids "don't hit" when they are learning the basics of socialization and then later on we say "...except if you are defending yourself" (or something like that). Simple, binary, absolute rules for beginners can eventually pave the way to nuanced, realistic rules for those who master the basics.

You mentioned "cult-ish" and "fervor among his followers", and I totally agree. I mentioned it before: the deficiencies and personality traits which lead to someone getting into debt in the first place are probably some of the same traits that would lead someone to lionize a finance program almost as if it was a religion.

Spot on and you hit the nail on the head with the part about kids there as well. The key thing there is kids. We set the foundation properly. It may not stick for all of them (again the room temperature IQ that I love so much) but there has to be a better chance of it sticking and then understanding nuance than if we waited to introduce this until later in life.

Alcohol is an interesting comparison. The act of removing any alcohol from the house as compared to the act of cutting up all the credit cards. There's some symbolism to it as well.

And I disagree slightly zeorhymer -- finances become emotional when shit hits the fan. When things are going according to plan, I'd much rather refer to it as mundane or even boring. And I say that with a divorce (my ex-wife also having worked in banking lol) under my belt and a fiancee that was a huge Ramsey follower down to the envelopes before we met. Her first marriage ended with a financial mess and she didn't know a better way out so she took the "popular" approach and went to Ramsey. Now, we've bought a house together and the like and she's on much better footing but the path to get there sucked because she followed those directions verbatim.

So yeah, personally and professionally, this one hits me.

 

[Vade]

Dave wants you to buy his program and tell your friends and their friends. He has a multi-level marketing plan to take you as long as possible, make sure you budget Dave in with your debt everyone. That is the problem he is taking out the individual and just putting the change on this program 'HIS PROGRAM' which you need otherwise you will fall back into your old habits. So Dave keep making money off you, your friends, and anyone else who will listen. It is very scummy.

 

[zeorhymer]

He's marketing a subscription model business, so his it's in his interest to keep people consuming his products for as long as possible.

I thought you just buy the book and do the 5 steps which actually puts you in the path to get out of debt. I'm looking at his site and everything there are financial tools. It's no different than a bank or broker that's selling you products to build wealth. People have no obligation to stick with him once you get out of debt.

 

[zeorhymer]

Dave wants you to buy his program and tell your friends and their friends. He has a multi-level marketing plan to take you as long as possible, make sure you budget Dave in with your debt everyone. That is the problem he is taking out the individual and just putting the change on this program 'HIS PROGRAM' which you need otherwise you will fall back into your old habits. So Dave keep making money off you, your friends, and anyone else who will listen. It is very scummy.

You just hate him cause he's Christian.

 

[Hulk_Smash]

I would disagree, every snake will put out a few facts that are true. How else can you fool people if you are always misrepresenting. To tell people just invest in mutual funds 12% explaining nothing about how they work. He made his money off you, he is not going to get in SEC trouble by giving actual financial recommendations. He is skirting liability to make money.

If his teaching helped you to get your debt or loans paid. Great that is a real success for you not Dave’s master plan.

If it worked how is it snake oil? Dave Ramsey never said any of the parts of his plan were his. It’s the sum of the whole.

I’mnot really into investing, other than a CD I have, so I can’t speak on that but I’m sure once you are out of debt, and have money saved, it’s fielder’s choice what to do with your money.

But to say that paying cash, using envelopes, debt reduction snowball is snake oil is just dumb.

No one in the world of personal finances gets as much flack as Dave. When in reality, almost all of them would endorse the baby steps (maybe with some modifications).

It’s either he gets piled on because he’s famous or because of his personality, neither of which have anything to do with his method.

 

[Alfen Dave]

Interesting thread. I do appreicate the guy and his mindset and advices as well, but like everything:
EVERYTHING IS GOOD TO HEAR, BUT NOT EVERYTHING IS GOOD TO TAKE

The info he speaks about is just knowledge, take some of it, use it in your life but dont mindlessly follow him; sames goes with litterally all Political/Life/Finacial Advisors out there; Jordan Peterson, Chapiro, etc.

I do love his casual rants though.
Fun guy.

 

[Mihos]

His shit works.

I have been debt free except for the house for about 15 years now, and the house gets paid off this year.

And my Vanguard funds are running at 17.7% return since last febuary and @ 15% for the last 10 years.

 

[Vade]

You just hate him cause he's Christian.

Spoiler alert

Spoiler

I am Christian

Dave and everyone else deserves criticism (The Tai Lopez, Jeff Bishop, the RagingBull.com etc. big cons.) when they are being scummy. If Dave was just one book and done like some in the thread want to say I would not be as agitated by his work. He is not just that he is Financial Peace University, Endorsed Local Providers, etc. He is there to keep making some money off you, that is how he makes his living.

 

[Ron Mexico]

...I shouldn't have looked at his site. Just a few choice things here from his FAQ:

His thoughts on a home equity loan are a strawman. You're not going to find a lender* that's going to allow you to borrow more than your home is worth.

Having a joint account is a personal decision. If you do open one, whether with a spouse or anyone, understand that both parties have FULL access to the funds. If you and I had an account together and I decided on a whim that I wanted to take every penny and bounce, you have exactly zero legal standing to protest. My better half and I have 3 accounts in total. She has 1, I have 1, we have a joint that we both contribute to for the monthly expenses like the mortgage, utilities, etc. I respect her autonomy, she respects mine, bills get paid in a way that has a solid paper trail. Again, find a system that works.

He wants you to simultaneously close all of your outstanding credit BUT take a loan if you're hopelessly upside down on your vehicle. You know, take out a loan with the credit history you just turned your back on. If you do find a lender, congratulations, you're going to pay higher because you just shitcanned your credit history. Hard to get that snowball effect going when your principal isn't decreasing because you're overpaying on a loan that's more expensive than the one you're trying to pay off. (A vehicle is collateral. It's a thing. If you don't pay your loan, they take that thing. Because there's a physical piece of collateral, your rate is generally lower because the lender has something to secure).

Waiting to invest until you have all your debts paid is fiscal malpractice especially in today's times. The benefits of compounding your investments will FAR outweigh the loss of those extra few bucks in your contribution. Excess funds? Ok, fine. But your retirement? Especially when you have a potential employer match? Terrible.

And Mihos There's very few Vanguard funds that reach anything close to those heights and those that do come with significant risk. As always, timing is everything and past performance is not at all indicative of future performance. My returns are in a similar position with a gradual move towards slightly more conservative funds as I get closer to retirement. I'm more risk-averse at 40 than 30 and will be more at 50 than I was at 40. All in balance.

(Added the * because there's always some subprime lender that's out there that *might* reach 105% LTV but that's fiscal suicide and not in the spirit of what Ramsey was trying to argue at all)

 

[Mihos]

And Mihos There's very few Vanguard funds that reach anything close to those heights and those that do come with significant risk. As always, timing is everything and past performance is not at all indicative of future performance. My returns are in a similar position with a gradual move towards slightly more conservative funds as I get closer to retirement. I'm more risk-averse at 40 than 30 and will be more at 50 than I was at 40. All in balance.

I am retiring in about 6 years. 10 years ahead of schedule

 

[infinitys_7th]

His main biblical pitch, at least during the course, is that debt is essentially evil and then toward the end he talks about how being financially free allows you to be generous...I can get behind both of those from a logical standpoint, and I get it if “God says so” helps some people too.

And I think your last paragraph is really the crux of the pitch. Some people are stuck in a rut and don’t realize eating out every night or random snacks at the gas station are part of what’s keeping them in poverty, and by taking a whole accounting of where their money is going they can really find a lot of leaks. His first “baby step” is getting a thousand dollars saved up...I was astonished that we were the only couple out of about 6 that came into the class with that being a no brainer, home owners, and having zero credit card debt. But the class did help us focus on plugging more leaks, motivated me to finally refi the house to a 15 year at 1.5% lower interest, and essentially my wife’s entire take home pay plus some of mine is going toward getting her loan paid down in about a year rather than 3-4 now...so as much as I think that class wasn’t 100% for us, it did help light a fire and get us more focused on this shit. Both of us getting large raises in the middle of it helped too.

I think the class is totally fine if you get some good shit out of it, but the cult-like “don’t do it ‘ish’” mentality was a bit off putting. Yo, you guys don’t even have 1k in the bank, don’t come at my credit card with scissors and tell me to start paying cash. One lady said she’d go through the line 3 times at the store to allocate funds appropriately with the envelops. GTFO of here with that

I do think unplanned debt is "evil" and I think too many people purposefully like to run at the ragged edge of what they can afford to get ahead (which works for some and fails for more). However, well-planned debt is basically just trading additional cost for convenience and opportunity.

I have a car loan, but it is over 5 years at 1.9% APY, so while it is debt technically I am getting paid to have the car when you factor in inflation. I have a large property loan at 4%, so the cost is modest and (from my subjective perspective) worth it because I would never have another opportunity to buy that specific land. In both cases I knew I could make the payments.

I guess the rigid budgeting is necessary for some people, but I literally only did it once. I have a bunch of high interest savings accounts that my paycheck gets divided up into:

*One for regular bills like rent, utilities, and subscriptions, with everything possible put onto a credit card with 2% back
*One for my loan payments
*One for automatic investments, a principle payment on my land (which is technically an investment) and tertiary savings

Everything is autodrafted or bill payed. I check once a month on balances.

The rest gets put into a single checking account, and I trust myself not to overspend.

 

[Ron Mexico]

I am retiring in about 6 years. 10 years ahead of schedule

With that being the case, I would personally have a good chat with my financial advisor as my strategy would be vastly different with that close of a finish line in sight. Again though, different thread for a different time. What you need your money to do post-retirement is a different ballgame but you know this already of course. Just going to be damn sure I don't outlive my money because once I go, I'm not coming back to work.

 

[Dural]

What does he say about mutual funds? I have some savings in a mutual fund and I just checked to see what it's paid, I'm at 8% lifetime. The last 6 months it's at 11.5%, so close to the 12% but it's hard to believe he's getting 12% all the time.

 

[Ornlu]

I thought you just buy the book and do the 5 steps which actually puts you in the path to get out of debt. I'm looking at his site and everything there are financial tools. It's no different than a bank or broker that's selling you products to build wealth. People have no obligation to stick with him once you get out of debt.

Ramsey+ One-Year Membership Digital Gift Card

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[fatty]

I think it is refreshing to see, unlike other places, really good thoughtful discussion from both sides.

I see a lot of misinformation about Dave Ramsey here, I am pretty much in agreement with manfestival but will add my two cents. But first, I will say that even though I am a fan, I don't follow everything he says. I don't agree with his 12% average return figure for certain mutual funds (maybe his are but that certainly isn't the average), I use credit cards and personally I didn't follow his baby steps. But I am not the usual person when it comes to finances. Like Ron Mexico , I like talking about this stuff, but we are both the exception. Most people, even highly educated ones like doctors and lawyers, struggle with the subject.

If someone is going to ask me for advice though, chances are they are the typical American with $8,000 in credit card debt, so I just recommend them to Dave Ramsey as he has his baby steps that are very easy to follow and there is a large community out there for support. Of course every person is different and it would be great to modify it to their unique personality and needs but if someone follows his steps, for the most part they are going to be doing great financially.

But anyways, some counter points:

• "Dave Ramsey doesn't say how or why to follow his rules"

I listen to his podcast quite a bit and he absolutely breaks down the reasoning on the 'why' after answering questions. Many times he will quickly answer the question and then spend the majority of the call explaining his reasoning. The baby steps on his website list a summary of the how and why. Listening to his show it can get repetitive because he gets many of the same types of questions and you can predict what he is going to say before he explains why. That includes explaining the types of mutual funds and why he recommends the portfolio breakdown he does. It is right there on his website.

• "Ramsey wants you to follow his system because he can maintain control."

I agree with what you're saying, but TBH the bolded isn't 100% true. He's marketing a subscription model business, so his it's in his interest to keep people consuming his products for as long as possible.

Not equating it to a pyramid scheme, but he definitely has a vested interest in people continuing with his program.

He's been doing his radio show for over 25 years, and he just recently offered this membership plan. Before that it was his Financial Peace University class, which is still offered. After taking the class, you can always go back and take it for free, if for some reason it didn't stick the first time or for whatever reason. You can get his whole teachings by just listening to his show which won't cost you a dime, it will just be in pieces as it pertains to the questions that come in. But let's talk about this membership plan. In addition to what is offered through the classes, you get bonuses like access to his the budgeting software and live streams that have guests that cover a variety of topics like marriage and careers. None of this is needed to follow his plan, but some people like the bonuses offered and they have that option.

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I could go on about other areas such as financing a new car if you are in debt (I think this is a dumb idea), using the envelope system and using the snowball method of starting with the smallest debt first but then has already been touched on. These are debatable but the other things were flat out incorrect.