Dave Ramsey approach

[retire48in2018]

I followed, generally speaking, getting to FIRE. He has a seven step process, which, as others indicated is heavy on debt reduction.

His view is that the most powerful weapon for wealth is income (and compounding growth from investments). The biggest drag on that is debt - that is mostly represented by people living beyond their means, or living too close to their means.

It is very hard core to get through this process, but it is effective.

As far as direct investment advice, FIRE, etc - it is barely mentioned, and certainly not educating people to learn to invest DIY, etc. I would NOT recommend Dave Ramsey process for those who are looking for DIY investment that are debt free.

I agree with those stating the Dave Ramsey process/concept has helped millions to improve their financial situation. I also agree that it is not helpful for investing and FIRE DIY.

As far as people's beliefs on no CC, and credit score. There are misconceptions on both sides.

I have had no credit score (and no CC) for more than a decade. I have travelled internationally, rented cars domestically (and internationally). I've stayed at hotels, etc. I have bought & sold homes, etc. I've moved twice, rented, etc. All of my insurance policies are rock bottom and I am not paying a premium as a result of no credit score.

It is very possible to do so.

HOWEVER, there are limitations. For example - there are several rental car companies that will work with no credit card & score (such as Enterprise) - and some that won't (like Hertz). When getting utilities, I have had to pay a larger security deposit as a result of no credit score. When buying a new truck, I was paying cash, but the dealer tried to *finance* $750 of truck price, as there was a $750 rebate for using that OEM finance. System would not approve me (with 95% down!). Had I wanted this (which I did not, and was upset that the finance department did this without asking) - I would have lost this $750 rebate.

Another example is mortgages. Manual underwriting would be required vs automatic CC score method. There are companies and banks that work with people who are safe for mortgages, but choose no credit score (example would be Churchill Mortgage). There did not seem to be a premium for this vs auto-credit score (same interest rate and fees). Not all banks and brokers will work with no credit score (such as Quicken/Rocket Mortgage), just as not all rental car companies will rent cars to people without credit scores.

In general, it can be done - but there are inconveniences, at times, and perhaps with some utilities (and car financing) - premiums through larger security deposits, etc.

For us, life is simpler to remain debt free, no CC, etc.

Before Dave Ramsey process, I was a very active CC user with what I saw as large cash rebates, etc. I can say we both prefer this simpler process now - knowing at times, there are some limitations (like rental car companies, etc.) but if you plan your itinerary - these items are worked out ahead of time.

[ERD50]

Quote:

Originally Posted by retire48in2018 ... His view is that the most powerful weapon for wealth is income (and compounding growth from investments). The biggest drag on that is debt - that is mostly represented by people living beyond their means, or living too close to their means. ....

And that capsulizes some of my problems with DR.

Yes, you say "that is mostly represented by people living beyond their means...", but there is that overall message "The biggest drag on that is debt...", w/o consideration to good debt vs bad debt.

So let's back that up - I'd restate it to say "The biggest drag on that is people living beyond their means...". Period.

You see the difference? It is the living beyond means that is the problem, debt becomes the result. It isn't the debt that's the problem. Having a $1M mortgage with $10M in the bank is not a problem. Having $10M mortgage with $100M in the bank is not a problem. Fixating on debt is a distraction. If you want to solve a problem, focus on the problem, not the symptoms.

It just isn't helpful to people to not be straight with them. Blaming all debt is just wrong.

-ERD50

[disneysteve]

Quote:

Originally Posted by ERD50 I'd restate it to say "The biggest drag on that is people living beyond their means...". Period. You see the difference? It is the living beyond means that is the problem, debt becomes the result. It isn't the debt that's the problem.

BINGO! Exactly this!

[Gumby]

Agreed.

[RobbieB]

Yeah. No debt, no problem. Pay in full end of month. No finance charge. Easy.

[Markola]

Quote:

Originally Posted by RobbieB Yeah. No debt, no problem. Pay in full end of month. No finance charge. Easy.

I’d only add, pay in full each month by auto pay. To do that safely, a person needs to keep at least one month of expenses in the checking account as a buffer. In my case, I enjoy using YNAB to have a clear view of all income/outgo. It’s how I start every day and have for years. Call me weird.

[jollystomper]

Quote:

Originally Posted by ERD50 And that capsulizes some of my problems with DR. Yes, you say "that is mostly represented by people living beyond their means...", but there is that overall message "The biggest drag on that is debt...", w/o consideration to good debt vs bad debt. -ERD50

I would argue that if one is living beyond their means, there is no differentiation between "good" debt or "bad" debt. Both are preventing you from achieving whatever goals you desire that require building your wealth. Only when one has the discipline to live below your means can one begin to understand good debt, and to use it appropriately (and wisely, as it *can* turn into bad debt if one does not).

As others have pointed out, if one actually listens to him, Dave Ramsey *does* differentiate between debt somewhat. CC debt - bad because without discipline it it easily out of control. Mortgage - willing to tolerate but prefers looking at consider to pay it off early (not instantaneously).

[TheWizard]

Quote:

Originally Posted by Markola I’d only add, pay in full each month by auto pay. To do that safely, a person needs to keep at least one month of expenses in the checking account as a buffer. In my case, I enjoy using YNAB to have a clear view of all income/outgo. It’s how I start every day and have for years. Call me weird.

Because of my heavy, but irregular, recreational travel expenses, I do it differently.
I generally pay the *balance* on my two CC's twice a month, but I do it manually on my smartphone to keep on top of things

I try to keep around $10k in my checking account to cover lumpy expenses and this month is a good example. I had $5000 in non-CC travel expenses, $2400 in property tax payment, and a few thousand in new CC charges.
So this works for me...

[Markola]

More power to you, as long as you don’t get busy traveling and forget, in which case, GOTCHA! 🤦

[racy]

DR makes a case for tithing to a church even though it slows a young woman's debt payoff.

https://www.youtube.com/watch?v=rv578yZF8uo

[frayne]

DR teaches nothing more than financial common sense. Unfortunately most have neither the desire nor discipline heed it.

[Walt34]

Quote:

Originally Posted by frayne DR teaches nothing more than financial common sense. Unfortunately most have neither the desire nor discipline heed it.

Exactly my thoughts too.

I didn't hear of Dave Ramsey until after I retired and we'd moved to WV, and I was looking through the stacks at the new-to-me local library and found a couple of his books and read them. While I don't agree with everything he says, such as his intolerance for credit cards, I could buy in to most of it and if not in exactitude at least with the intent which is of course the old "live below your means" that serves everyone here so well.

It seems that his target audience wants/needs that more rigid and structured list of rules or lessons, but hey, if it works more power to them. Overall, I'd venture that he does far more good than harm in this world and there's something to be said for that.

[beernutzbob]

Quote:

Originally Posted by frayne DR teaches nothing more than financial common sense. Unfortunately most have neither the desire nor discipline heed it.

Horse hockey. Ramsey teaches all debt and all credit cards are horrible which isn't close to common sense. His investing advice is equally terrible.

He's a huckster who sucks people in with his get out of debt advice then those who can get out of debt are subjected to the second wave of his pyramid with the front loaded funds he recommends.

It's a sophisticated pyramid scheme.

[FANOFJESUS]

Quote:

Originally Posted by frayne DR teaches nothing more than financial common sense. Unfortunately most have neither the desire nor discipline heed it.

It's your grandparents financial common sense. He just figured out a way to sell it. I am a fan because on the whole he has done so much to help the country.

[olyveoil]

Quote:

Originally Posted by beernutzbob Horse hockey. Ramsey teaches all debt and all credit cards are horrible which isn't close to common sense. His investing advice is equally terrible. He's a huckster who sucks people in with his get out of debt advice then those who can get out of debt are subjected to the second wave of his pyramid with the front loaded funds he recommends. It's a sophisticated pyramid scheme.

Funds that he runs / profits from?
Would love to hear more about how his pyramid works.

[frayne]

I agree with 95% of what DR preaches, the exception being is his position on preferring managed mutual funds as opposed to index funds.

[beernutzbob]

Quote:

Originally Posted by olyveoil Funds that he runs / profits from? Would love to hear more about how his pyramid works.

You are not aware of the ELP scam? ELPs pay Dave and Dave in turn strongly recommends that his listeners buy front loaded mutual funds from ELPs.

[RobbieB]

That's not a pyramid, just the usual kickback deal.

[ERD50]

Quote:

Originally Posted by frayne I agree with 95% of what DR preaches, the exception being is his position on preferring managed mutual funds as opposed to index funds.

OK, but that leads me to: Why does he do that? Why does he lie to his audience about market returns?

Quote:

Originally Posted by beernutzbob You are not aware of the ELP scam? ELPs pay Dave and Dave in turn strongly recommends that his listeners buy front loaded mutual funds from ELPs.

He's not helping these people if he's recommending load funds. Kind of a wolf in sheep's clothing, or something.

Maybe it wouldn't bother me so much, and I could just write it off as "a guy's gotta make a buck", but when people treat him like some kind of Saint/Guru, and when DR uses all these religious references, it just bugs me. I stop giving the benefit of the doubt at a point. Fool me once...

-ERD50

[RobbieB]

Rancher has to fleece the flock to get paid. Preacher passes the collection plate. Go big, national scale!