Dave Ramsey approach

[Montecfo]

I have taken the course, mainly in order to cherry pick advice to help young people. His baby steps are great. His target audience is most of America (living beyond their means). He has helped millions learn to avoid debt and begin to save.

For investing advice other sources of info are better, but he has been very successful for good reason.

 

[jollystomper]

I'm not holding DR up to the standard of perfection, you are moving the goal posts.

I think much of his advice is just plain BAD, even for (especially for in some cases), his intended audience.

-ERD50

I'm not moving any goalposts; perhaps you moved to the wrong field .

Some of his advice is not good. Which applies even to Warren Buffett. But I think a lot of it, in the context of where the majority of Americans - even the example you cited - is worth listening to. Of course, if the majority of American did not need that advice, many of us would not be in our "rich" position .

I grew in in the midst of folks who, had his advice been available *and* accessible back then, would have been much more of a help than hindrance to them. Perhaps it is just the social classes we hang out in.

But, we'll just agree to disagree on this point .

 

[disneysteve]

I've listened to Dave Ramsey. I've listened to Suzy Orman. I've listened to various other financial "gurus". On occasion, I have heard every single one of them make mistakes and say things that were just plain wrong. Not things I personally disagreed with but information or advice that was factually incorrect.


I think with any financial advice, whether from TV or radio or internet forums or books or CFPs or wherever, it's always buyer beware. Take in all of the information and then do your own research to confirm it and make sure it applies in your situation. Check with your tax preparer. Run it buy some other knowledgeable folks. Don't just blindly follow the advice without doing your due diligence.


Dave Ramsey helps people. Suzy Orman helps people. David Bach helps people. There is knowledge to be gained from all of those sorts of people, but that doesn't mean that any of them have the ultimate answer or that everything they propose is the right way to go.

 

[armor99]

Hi,



Whats your experience or thoughts with the Dave Ramsey approach to investing and debt repayment?



I think the 7 baby steps approach is sensible, however I dont know enough about credit scores (Im from the pacific islands) to understand why alot of people disagree with his stand on credit cards.

I like his advice. I have invested the way he suggests, and that has been working well for me for over ten years now.
I still own credit cards, which always get paid off every month, because I have the financial discipline to do so. Most people do not have financial discipline, so they need artificial “nannies” to remind them not to go over certain limits. That is the idea behind his “envelope” system etc.
Retiring early has been a goal of mine, so saving comes naturally for me.
One thing to note that he also reminds people of (and this is important).
When you finally do make it, learn to SPEND some of it and enjoy it. Far too many forget that part once they arrive..

 

[Exchme]

I've only watched some U-Tube clips my wife sends me. His target audience is clearly the spend-a-holics that need motivation, a no-debt credo, a sense of community and the strong leader schtick that he presents in order to change their behavior. To the extent he helps those folks, he's a force for good.

I accidentally had the AM radio on the other day and there was some huckster program trying to convince me that option writing was a risk free path to wealth if I just bought their super secret method. I turn on the TV news for old folks and get ads telling me that silver is the path to riches (If it's down it's due to go up, up up!. If it's up, you're missing out!). At least Ramsey's recipe is not actively toxic like those things.

 

[Ready-4-ER-at-14]

I had my kids read the Dave Ramsey stuff when they first went out on their own and the pay off debts, limiting new debts, and budgeting ideas were the main gains for them. They too saw the trap that easy spending with credit cards can lead to.

I also liked his rule of thumbs about what was an appropriate amount to spend percentage wise of your income for things like housing, cars, insurance and the like.

 

[Jeffman52]

I have taken his classes and taught a few. As others have said, his target audience doesn't tend to be this board and aren't those that already know how to handle debt and investing wisely. His plan helps those that have dug such a deep hole that they need extreme measures or they might never build wealth or retire with dignity. At 45 I got re-married. My wife and I had 12 credit cards between us, two car payments, and most of our money went to service debt. We had about 30K in retirement and almost no savings.


13 years later, two paid off cars, plenty in savings, 400K house is almost paid for (no other debt), very nice retirement accounts, and we are almost ready to FIRE.


While I agree that you should get your investing advice elsewhere, his advice and tools for getting out of debt so you can be on the road to build wealth were a game changer for us.

 

[Surewhitey]

20 years ago, I only had access to his show on radio for a "plan". Baby steps is an accurate term as once you mature financially, you move on to the meat of finances.

I still think his earlier book is great for the early years of learning. Easy to read and retain. After a year of listening, you will be listening to the same old stories. My only thoughts against his teaching is on credit cards. I spend on my needs and very few wants, so we have this under control vs his stating them being the devil.

 

[Gumby]

I don't know much about Dave Ramsey, but if he contends that all debt is bad, then he is wrong. Borrowing to buy a house, to start a business or to obtain a useful education is, within reason, a good use of debt. That said, encouraging people to avoid consumer debt is fine, as is encouraging people to pay off even good and necessary debt. But not at ALL costs.

 

[RobbieB]

I don't know anything about Dave Ramsey and don't want to. I've seen Suzie on TV once and once was enough.

Entertainers they are. Show biz people. Like Rush Limbaugh. Once was enough for him also.

 

[teetee]

I agree Ramsey's explanation why credit system is doing nothing to our wealth building. Most people got into high interest debt after they start using credit cards. The minority population that use credit cards responsibly and take advantage of the rewards becomes free advertising tool of credit card companies and it is just that. Now many people consider high credit score is part of the wealth but that is totally not true. High score means it is easier for you to borrow money, get a rental, or sign up for a Internet service provider. All of them gives the vendor an impression on how responsible you are to pay them back, it has nothing related to wealth building.

At the end of day credits is a culture that keep most people from reaching their financial goal and keep those credit card companies take advantage of the less informed and undisciplined.

 

[disneysteve]

I don't know much about Dave Ramsey, but if he contends that all debt is bad, then he is wrong. Borrowing to buy a house

He is not opposed to mortgages. If I recall correctly, he recommends your payment not exceed 25% of income. It's been a while since I listened to him though so someone can correct me if I'm remembering that wrong.


He is 100% against any other debt at all.

 

[disneysteve]

I agree Ramsey's explanation why credit system is doing nothing to our wealth building.

He calls the credit score the "I love debt" score and he's not wrong. So many people worship the FICO score and do really toxic things to try and raise it, like purposely carrying a balance on their credit cards (at high interest) just so they can build a track record of making payments on time in an effort to boost their scores. People even take out loans they don't need just to polish their credit record and increase their scores.


As we all know, your FICO score says absolutely nothing about how well you're doing financially, what your net worth is, or anything else. It simply measures how you handle debt.

 

[retire202052]

I tend to follow Garrett Gunderson's approach to finances and life

 

[karen1972]

These financial advisors are like weight loss programs, most preach about the same thing but it resonates with some and not others.

I'm not a fan but I can appreciate that he gets a lot of people to actually put together a budget and while his debt methodology isn't the best solution financially, it may be the best solution for many mentally. Given he seems to target those that have decent incomes but overspend, he has a good demographic that are most likely to succeed if they put any effort in whatsoever and they have the income to be able to afford his program.

 

[harley]

He calls the credit score the "I love debt" score and he's not wrong. So many people worship the FICO score and do really toxic things to try and raise it, like purposely carrying a balance on their credit cards (at high interest) just so they can build a track record of making payments on time in an effort to boost their scores. People even take out loans they don't need just to polish their credit record and increase their scores.

Why would you need to carry a balance on a CC to get a track record of paying on time? Use it, pay it off on time. Every month. You still get the track record and never pay a penny of interest. I don't think carrying a balance gives you a higher credit score. I haven't carried a balance for nearly 40 years and have a 800+ score. Anybody that would do that is already financially stoopid and probably needs to listen to Ramsey.

 

[Markola]

It’s unusual to get so far toward the end of the month before the regular “Dave Ramsey is a helpful educator and/or a charlatan grifter” debate. Come on people, pick up the pace. We almost missed June’s installment. [emoji897]

 

[RobbieB]

Yeah, I've never carried a balance on a credit card in my life. Well except when the bill fell off behind the desk. Score over 800 according to Discover card on my monthly bill which I pay in full each month.

Credit cards, I love credit cards. Who is Dave Ramsey anyway?

 

[teetee]

Yeah, I've never carried a balance on a credit card in my life. Well except when the bill fell off behind the desk. Score over 800 according to Discover card on my monthly bill which I pay in full each month.

Credit cards, I love credit cards. Who is Dave Ramsey anyway?

So are millions of others but there are more who either don't have the discipline or treat credit cards as emergency fund. They eventually got into recurring debt and become the prey.

I really don't see the bragging right in having high credit scores, not when the main benefit is to borrow money easier and its intended effect (from CC company's perspective) is to get more people into debt (the only way to build your score is to borrow and pay back). It is like loan sharks with candies in hand.

CC companies get their profit from 1. Vendors who provide credit cards as payment, 2. CC reward collectors for putting more stuff on their cards, 3. people carrying balances, 4. Credit worshipping culture that get more people to use CCs. It is such a good business model that there is little to no chance for the consumers to benefit from it except some reward points and miles.

 

[RobbieB]

My first job out of school, the Co signed me up with direct deposit and a credit card. This was back in 1978. Because I would be travelling and needing to rent cars and hotel rooms. I was 23 years old.

What else you gonna do? carry around 10 grand in cash for a bond?

 

[disneysteve]

Why would you need to carry a balance on a CC to get a track record of paying on time? Use it, pay it off on time. Every month. You still get the track record and never pay a penny of interest. I don't think carrying a balance gives you a higher credit score. I haven't carried a balance for nearly 40 years and have a 800+ score. Anybody that would do that is already financially stoopid and probably needs to listen to Ramsey.

Oh I agree completely. But lots of people don’t know these things. I’ve had many, many people tell me they carry a balance on purpose because they’re trying to raise their score.

Most people aren’t well educated on personal finance. There’s a reason why 60-70% of Americans live paycheck to paycheck.

 

[mrfeh]

Never listened to him. From reading the dozens of threads about him on bogleheads, it seems his debt advice is pretty good and his investing advice is horrible.

 

[ERD50]

So are millions of others but there are more who either don't have the discipline or treat credit cards as emergency fund. They eventually got into recurring debt and become the prey.

I really don't see the bragging right in having high credit scores, not when the main benefit is to borrow money easier and its intended effect (from CC company's perspective) is to get more people into debt (the only way to build your score is to borrow and pay back). It is like loan sharks with candies in hand.

CC companies get their profit from 1. Vendors who provide credit cards as payment, 2. CC reward collectors for putting more stuff on their cards, 3. people carrying balances, 4. Credit worshipping culture that get more people to use CCs. It is such a good business model that there is little to no chance for the consumers to benefit from it except some reward points and miles.

Lots of misinformation in the above.

A high credit score helps in many ways. Insurance companies use it to help determine rates (you can agree/disagree if this is appropriate, but it happens regardless what you or I think).

And it will affect the rate you can get on a mortgage, which many consider good and reasonable debt, and don't abuse it.

edit/add: I think it is also used by landlords, as a legally unbiased way to select tenants. A low credit score could keep you out of a desirable place, you might end up paying more or settling for a less desirable place with a low CC score. Probably some other things too.

I don't think it's totally unreasonable to use a CC as a short term emergency fund. It's easy, no paperwork, and it might get someone out of a bind. Better to get your car fixed than lose your job. Or buy a suit for an upgraded job interview. Sure, in a perfect world, those people would have an emergency fund, but if they are just starting out, and have an opportunity to step up, a loan might be a good investment, even at CC rates.

And even for someone in good financial shape that decides to keep their money working for them (low cash balance), it might even make sense to avoid selling stock and paying cap gains.

Yes, I know, some people won't pay it off quickly and it becomes a drain on them. But CC is a tool, and like all tools can be abused. Don't throw the baby out with the bath water.

"(the only way to build your score is to borrow and pay back)" - FALSE. Unless you are considering the time during the grace period as "borrowing", where you pay no interest/fees, and that is all win-win for the consumer. You get free float, and can time your transfer rather than having an immediate draw on your account. You do not have to pay interest to raise your credit score. I only paid interest once ( a few $ by an error on my part) in over 40 years, and my score is about as high as they come.

I (and many here) have benefited hugely from CC rewards. I put everything I can on the CC, and I get 2~4% on all that. That would mean even more to someone scrapping by, but DR tells them CCs are evil. I guess hammers are evil too (or maybe I should say plowshares, since DR likes to go into sacred territory)?

-ERD50

 

[ERD50]

Never listened to him. From reading the dozens of threads about him on bogleheads, it seems his debt advice is pretty good and his investing advice is horrible.

The trouble with this, they worship DR for helping them get out of debt, then worship his BAD investment advice (and some of his bad debt and CC advice).

What troubles me is, his advice isn't just BAD because we have different view points. He spreads factually BAD information ("average" market returns vs compound annual rate of return - big difference) and I just can't believe he doesn't know it is bad. That tells me there is something devious going on.

And IIRC, when I looked into it, he directed people to high fee FAs, and I'm pretty sure he's getting a kick back. Fine, but he uses factually BAD information in the process.

-ERD50

 

[teetee]

Lots of misinformation in the above.

A high credit score helps in many ways. Insurance companies use it to help determine rates (you can agree/disagree if this is appropriate, but it happens regardless what you or I think).

And it will affect the rate you can get on a mortgage, which many consider good and reasonable debt, and don't abuse it.

edit/add: I think it is also used by landlords, as a legally unbiased way to select tenants. A low credit score could keep you out of a desirable place, you might end up paying more or settling for a less desirable place with a low CC score. Probably some other things too.

I don't think it's totally unreasonable to use a CC as a short term emergency fund. It's easy, no paperwork, and it might get someone out of a bind. Better to get your car fixed than lose your job. Or buy a suit for an upgraded job interview. Sure, in a perfect world, those people would have an emergency fund, but if they are just starting out, and have an opportunity to step up, a loan might be a good investment, even at CC rates.

And even for someone in good financial shape that decides to keep their money working for them (low cash balance), it might even make sense to avoid selling stock and paying cap gains.

Yes, I know, some people won't pay it off quickly and it becomes a drain on them. But CC is a tool, and like all tools can be abused. Don't throw the baby out with the bath water.

"(the only way to build your score is to borrow and pay back)" - FALSE. Unless you are considering the time during the grace period as "borrowing", where you pay no interest/fees, and that is all win-win for the consumer. You get free float, and can time your transfer rather than having an immediate draw on your account. You do not have to pay interest to raise your credit score. I only paid interest once ( a few $ by an error on my part) in over 40 years, and my score is about as high as they come.

I (and many here) have benefited hugely from CC rewards. I put everything I can on the CC, and I get 2~4% on all that. That would mean even more to someone scrapping by, but DR tells them CCs are evil. I guess hammers are evil too (or maybe I should say plowshares, since DR likes to go into sacred territory)?

-ERD50

This is the culture I was referring to. You are so comfortable on doing things by leveraging debt that it become natural to you regardless of risks. Mortgage is considered good debt until 2009 recession happened. Using CC as emergency fund and enter high interest recurring debt because life happens. Earning single digit percentage rewards from buying goods and thought it was a great wealth building tool.

Debt only works when it works. The point is that things work for you, will not work for everyone and this is a fact based on stats (otherwise CC companies won't keep throwing money into marketing them). Using your experience and labeling CC as the correct way for life that applies to general spending style is wrong, not to mention most people buying into CC are already confused between buying power and borrowing power.