Falling Off the Dave Ramsey Diet
By Jennifer Derrick, May 19th, 2008 | 154 Comments »
If you’re interested in personal finance, you probably know who Dave Ramsey is. If you don’t know, he’s a television and radio personality (and author) who preaches a “common sense” approach to getting out of debt and creating wealth. His plan is built around seven “Baby Steps” that are designed to lead you to financial freedom. He calls it the “Total Money Makeover.” Dave is a master motivator who is very good at getting people fired up to do something about their finances, and his advice is generally simple enough that most people can understand what he’s saying. Now that the economy is slowing, I see more and more people turning to Dave for help.
However, there is one problem that I’ve noticed with Dave and his system. I’ve known many, many people who have tried his system and failed because they become frustrated, angry and generally unhappy. Why? Because if you really want to follow Dave’s plan the way he teaches it, there is no leeway, no room for individual circumstances to factor in. The Total Money Makeover is a lot like a very restrictive diet that severely limits your choices and leads to rebellion. Yes, some people are successful, but many others fall off the money diet that is the Total Money Makeover.
If you read Dave’s books and listen to his programs, he is adamant that you follow his seven Baby Steps in exactly the order that they are written, and you may not move on to the next step until the first is completed. While this makes for an orderly approach and is good for those who crave organization, it can cause some problems. Just to review, the Baby Steps are:
1. $1,000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. 3 to 6 months of expenses in savings
4. Invest 15% of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give. Invest in mutual funds and real estate
According to Dave, until you have all your debt paid off, you shouldn’t be saving for retirement. But this ignores the value that compounding interest brings over time. Even if you’re funneling most of your money to debt payments, any little bit that you can put towards retirement will grow much larger in the future. His idea for a $1,000 emergency fund isn’t bad, but in this day and age $1,000 isn’t going to cover many emergencies. You need a bigger fund than that, but you can’t start building it until all debt is paid off. Until then, if you have a big emergency it’s going to have to go on a credit card, putting you further in the hole.
Why can’t there be a compromise between directing large sums of money to debt, but also putting some in savings and toward retirement? Just like a crash diet is a shortsighted approach to losing weight, Dave’s plan is a shortsighted approach to getting control of your finances. His plan focuses too much on getting the debt down as fast as possible without looking at the larger life that you must also prepare for. Paying down debt is a fine goal, but there are other contingencies you need to prepare for, as well.
Dave’s steps also leave no room for fun or unnecessary purchases. He calls it getting “gazelle intense,” but it’s like telling someone on a diet that they can never have chocolate. Of course, deprivation only makes you want it more and can lead to bingeing when the restrictions become too much. Telling someone that they can’t go on vacation or out to eat once in a while is bound to lead to rebellion eventually. Either that or it may lead to depression, which is just as counterproductive to successful financial management. That’s not to say that you need to go on a swanky resort vacation or to a five star restaurant, but his advice ignores the fact that there are less expensive alternatives that can give you a break from the tedium of debt reduction while not breaking the bank. Just like a diet requires you to give up all “bad” foods, Dave’s plan requires you to put off “living” until you reach step seven, which could take years. It’s important to pay down debt and build for the future, but it’s also important to get some value out of today.
His advice also ignores the fact that people have to learn moderation. Just like those who overeat, over spenders have to learn to live in the real world. They have to learn how to spend and save in moderation. Dave’s steps don’t teach people how to live in moderation. You are told from the beginning to simply stop spending, but what happens when you reach step seven and you have built some wealth? Without knowing how to spend moderately, how long do you think it will be before that wealth is gone? His plan does nothing to teach behavior modification. Without that, long term success is iffy at best. As with a dieter, long term success can only be achieved when the causes and triggers of spending are identified and dealt with.
Some people end up feeling like failures on Dave’s plan and give up. Again, look at the dieting analogy. Dieters may be going along great, and then one day they break down and eat a cheeseburger and fries. Then they figure they’ve already screwed up the plan, so why bother to keep trying. This happens to many people who try Dave’s plan. They’re going along great and then they break down and buy a designer handbag (see the rebellion mentioned above). Then they figure that they’ve blown it, so why not get the shoes to match. They resolve to do better tomorrow, but it spirals out of control until they are back where they started. Then they are left feeling like a failure because they couldn’t adhere to this rigid plan and are more reluctant to try again. After all, who wants to feel like a failure? Dave doesn’t teach you how to stop the spiral, deal with the guilt of screwing up, and then get back on track. A more flexible, real-world plan takes into account the fact that we all screw up and shows us how to get back on track.
In what is the great irony of Dave’s model, he frequently advocates that you buy his books, pay to attend his seminars, or pay to join his website. While I understand that the man is a business, he is taking advantage of people’s desperation to get out of debt. Just like diets that promise you that if you buy their food or books or drugs you’ll lose weight, Dave advocates (in a subtle, master marketer’s way) that if you buy his stuff, you’ll lose the debt faster. The simple fact is, with diets or money advice, the more you shell out, the likelier you are to quit when it becomes too expensive. Some people say, “The heck with this. It’s costing too much and I’m not getting anything out of it, so I quit.” Then, not only are they still in a financial or dietary mess, it’s worse because of the extra money spent.
Dave teaches some good things, but his plan is too restrictive to be successful for all people. Yes, some people do very well under rigid restrictions and if this is you, I say, “Great!” However, the people that I have known who have succeeded on his plan have taken the basic steps and then modified them to suit their own needs and life situations.
I would encourage you, if you’re interested in trying his plan, that you modify it to suit your own needs and goals. Learn his baby steps, but also know what will enable you to be successful. Tweak the plan until you find a way to work it that works for you. You don’t have to follow him word for word. The Dave police aren’t going to cart you away if you go your own way. You can move up and down the steps as you need to, going back to an earlier one if you fall off the wagon, or jumping ahead if something is more important to you.
And don’t spend money for materials. You can find his books for free at the library, his show airs on the Fox Business channel, and there are several free websites that are dedicated to his methods. Some churches offer his classes for free.
Without modification of Dave’s plan, you might end up like a frustrated dieter who gives up on the plan because it ends up costing too much and doesn’t take into account the way you really live. Susan Powter, the fitness expert, used to scream, “Modify, Modify, Modify,” during every workout. It’s good advice, both for diets and financial planning.
Image courtesy of .imelda
There are a couple of things I would do differently than Dave Ramsey.
1. I would focus on paying debt faster than building up the $1000 emergency fund.
2. When I snowflaked, I would go for the credit card with the highest interest rate (I understand that some people get more psychological satisfaction out of getting rid of one bill entirely, but paying the highest interest rate first will save more money).
3. I would invest as much as I could in a Roth IRA, because you can only put in a few thousand each year–you can’t use that opportunity to save next year. And Roths are fantastic vehicles for saving.
I have heard lots of people criticize Dave Ramsey but I have yet to hear about one (1) single person who followed his system (to the letter) and failed. You never hear someone say “I really messed up my finances by listening to that Dave Ramsey fellow.” I follow Dave’s advice because it works.
I find Dave tacky for a number of reasons, mostly that he mouths Christianity (which can mean anything these days, actually) and pushes a “tithing” system (totally wrong for a bible believer in these times; you are to give what you can from the heart and you solve your own financial problems first) yet makes money from his advice off those who need it for free the most. Just WRONG. There’s plenty of free good advice to be had out there from honest folks. You don’t need slick Dave Ramsey. (My own preacher, for example, gives great advice for free, publishes books and doesn’t try to make a buck off anyone (he’s a former executive for Kroger and operated several bookstores).
Cindy – I didn’t realize that you have to pay to listen to his advice on the radio and television. *shrug* Of course he charges for some of his material – why shouldn’t he? But he certainly doesn’t expect everyone to buy everything he offers. And the comment about mouthing Christianity – wow! How do you know God isn’t speaking through him to those who really need help financially?
“It
The comments that Dave only caters to the unintelligent are ludicrous. My husband and I both have college degrees, he has an MBA, I was on the Dean’s List in college, and despite that we were on a path to financial ruin before we heard Dave on the radio one evening. Being smart and being smart about money are two different things!
And for the comment about Dave making money off these “poor people” you’re forgetting his FREE radio show and television show. Plus his website and newsletter are also free. The only money we’ve spent on Dave was one of his books.
As for the plan being too rigid, that’s a weak argument as well. Dave outlines his suggested steps, but my husband and I decided that we weren’t willing to sacrifice the free money of a 401K match and weren’t willing to delay our daughter’s college fund while we worked on our debt. We’ve used the steps as a guideline to eliminate 50K of debt while still funding an emergency fund and contributing to 401Ks, Roths, and a 529 plan.
“I find Dave tacky for a number of reasons, mostly that he mouths Christianity (which can mean anything these days, actually) and pushes a
All the comments made above are good, however, we have to keep in mind that no one pill works for every one. Some do better with Tylenol, others with Excedrin or Aspirin. Dave Ramsey is good in terms of motivating one to stay their debt-reduction program. However, everything about debt-reduction starts with saving some money (i.e. emergency funds (EF)). It could be $1000 to $5000. You have to have EF. For me, I listen to Dave because to keep my focus on money. Concerning what I honestly do in my money management, I have relied on Carol Keeffe and Mary Hunt’s books. I have generated high six-figure cash balances following their suggestions. Although these books are dated, the ideas inside them have been extremely helpful. I encourage others to take a look at their suggestion. It has helped me. For example, in 2005, I drove into a dealership and paid cash ($35000) for car.
Dave Ramsey follower, let me put that right out front.
The point of doing the Baby Steps he has outlined is one major thing – short term sacrifice. That’s what the whole theory of Gazelle Intense is about, its not meant to be done forever. Its a means to end to change your family finances forever. You don’t stop contributing to your 401k FOREVER, its only for the intense pay off period. If you aren’t willing to be that intense, then by all means don’t stop your 401k contributions.
The plan is meant as an Overwhelming Force project to fix things once and be done with it. My husband and I are working it and working it hard. We are high earners and we don’t live outside our means, but a job loss almost cost us everything we did own. We racked up credit card debt paying living expenses while job hunting. We will NEVER be in a position of owing more than one paycheck can support a month.
Dave’s plan is about security and minimizing risk to your future by not owing ANYONE.
My sister and her husband both worked for the same company and it was bought out overnight. They are highly specialized and a new job was tough to find. Their lives would have been a lot easier if they had no car payments and a paid off house.
Fast forward a few years of financial changes, they owe nothing but their house and have years worth of expenses in the bank. She has always been great with money, but she says it is the greatest feeling in the world to owe nothing but a mortgage, and a small one at that with what they have been paying.
It’s not for the uneducated, its for the mis-informed. We are told that we should have everything we want, when we want it. No self control, spoiled children who haven’t saved up for anything a day in their life because we grew up with credit cards….its the way things work, right?
This is just teaching people to save their hard earned dollars by not paying interest to anyone…all it takes it lifestyle changes.
That is probably the best critique of Ramsey I have seen (most are just filled with love/hate or other emotions).
I’ve taken the approach of generally following his guidelines, but not 100% (that isn’t how I want to live my life). I don’t think you can argue that if you are able to do what he says, you will get out of debt quickly, but that lifestyle is clearly not for everyone.
I credit Dave with getting me on track and I’ve learned a lot from his FREE podcast (no need to spend money to get his advice every day) and I really appreciate what he does. On the other hand, I’m not following his plan exactly, but so far I am making nice progress and that is just fine with me.
By the way, I’m new here and subscribed to your RSS feed, but then I noticed you only offer partial feeds.
Also, you seem to be posting the same feed across different sites? I don’t know- got very confusing. Do you have a full feed somewhere?
First of all I found this blog on the day of the post which along w/most of the comments have been helpful.
I
By the way, I
In addition to the main article and drawbacks to Dave’s philosophy is the area that is most unsettling that I see is missing from his teaching is the lack of teaching and belief and pursuit of higher income to offset higher cost of living and get out of debt.
Like “Rich Dad Poor Dad”, there is a difference in thinking like an employee vs thinking like a business owner/entrepeneurial/invester.
You know, I read this blog and some of the comments, and wondered why this article bothered me.
It bothers me because like any reasonably healthy diet where you eat less calories and include some exercise, Dave’s financial diet will work to get you out of debt if followed.
The rest of the article is whinning about how “strict” the diet is. For example:
“His advice also ignores the fact that people have to learn moderation”
Someone who is the financial equivalent of a Biggest Loser contestant is not able to use moderation, they need serious help now. If all you have to do is tweak your finances, his advice should not apply to you bacause you should be beyond the early steps or able to achieve them easily.
“Dave
The thing about Dave is that he provides such easy to follow steps that anyone can do it. Much of what he says is really basic and can be found in almost every good financial management book. By having the step by step system, people who are urgently needing help can follow the steps. For others, by following the principles, you can possibly avoid the precise steps. For example, I’ve done some of step #6 recently because I had a lump sum of money come into my life. In reality I haven’t completed step #3 in his precise steps, but for me, as a disciplined individual skipping between steps can be useful.
So, Dave is a multimillionaire, on the Fox Business Channel, regularly interviewed on Wall Street Journal Report, wrote three best-sellers, and is on 350 radio stations…..but he is a HACK?!?
Do you HEAR yourself? Better yet, have you listened to Dave? He has been through bankruptcy. And he is a millionaire today, and has helped thousands of people. But some of you don’t like him (or his advice, I suspect) so he is a flake, fake, or whatever. WOW!!!!
And, oh, by the way, his principles on money management are Biblically sound (yeah, I know, some of you hate the Bible….) Prov. 22:7 — The rich rule over the poor, and the borrower is servant to the lender.
The problem I have with Dave is not him, but his followers who take every little criticisms as a slap in the face and then make outrageous comments on what you don’t like about him.
Dave has a good system. It will work, but it isn’t the best system. You can get yourself out of debt quicker and more efficiently if you disregard some of the things he says. It’s generic but if you learn even a little bit about personal finances, you can do better.
Just because people don’t appreciate the Biblical preaching don’t mean they are religious haters. For me, a system should work no matter what religion you are. His does, so there is no reason to throw in the Religious aspects. Again, this is another thing that is annoying since it doesn’t need to be there.
Dave Ramsey is a joke. hes great to hear about morals an common sense . but he is 100 percent wrong to change his mind on issues. in the day he value stay at home moms . now he yells at them to go to work.what kid needs there dad working 2 jobs. kids need time with there parents. all the money in the world wont get back their childhood. couples need romatic times together.
i get sick of dave sounding like a broken record and begging people to buy his stuff or serices.broke people dont have money to waste.
try telling a kid they cant have a toy for their birthday.
i listen to dave for years . hes all about making himself rich.
Extremism sells books. Balance is the key to life.
I’m currently taking Dave Ramsey’s Financial Peace University, and to be honest I haven’t found it nearly as restricting as you say. He does make some provisions in the budget to allow for entertainment, and “blow” money – money you can spend on whatever you want. So its not all hard work and no play.
I think when you boil it down, all Dave Ramsey is teaching is personal responsibility. Save up for what you buy. Pay off debt. Don’t get new debt. Save & Give.
So far I think his program is great. Are there things that I’m not completely sure about? Yes. Does that mean the program doesn’t work? No. It does, as long as you are invested in it, and you work the plan. If you don’t, you WILL fail. I also think there is some room to work his plan in such a way as to change certain elements a bit. Don’t just dismiss it out of hand because there are small things here and there that you don’t like!
Ramsey’s program is the first my husband and I agree on. We’ve never had a budget (in 17 yrs of marriage), and have about 20K in cc debt. We’re FINALLY on the path to financial freedom. And that’s what it boils down to. Whatever works for you is what you should do.
Someone mentioned Dave encouraging real estate investment. In our lesson a week or so ago, he said real estate is one of the most risky investments, and did not recommend it at all. If you haven’t taken the class, you won’t know all the ins and outs.
As far as his Christianity: Some of us want every part of our lives to reflect our walk with God. Finances are a huge part of that, obviously. Most folks know how to turn off a radio or close a book if they don’t like what they’re hearing.
Thank you for this article Ms. Derrick. It breaks down some of the points where Dave’s program can be too restrictive.
My wife and I are followers of a modified version of Dave Ramsey’s program. We found that his method was a good outline, but the specifics didn’t work completely for our situation.
Here are some changes we made:
1. We saved up an initial emergency fund of $3000. We did this after looking through the types of emergencies we had had and the cost.
2. When we were making the transition to being a one income family, we began building up our 3-6 months of expenses.
3. Because of the one income transition, we also began attacking the debts that freed up the most money in our budget. That meant paying off both of our vehicles instead of credit cards. We now have an additional $100 each month over having paid off the cards.
3. Your mentioning of deprivations lead us to the biggest modification: budgeting “blow” money. Money that is earmarked to be spent on things, be they budgeting for dinner, a movie out,
For anyone who is trying to get out of debt and straighten their lives around, Dave Ramsey is a good place to start. Read one of his books, listen to his radio show (or get the free podcast from iTunes if you haven’t listened to it. It makes Dave more human), and then build the plan that works for you.
I have read many of the financial “gurus” trying to make sense of finances and found Dave to be the most common sense. But his rules are not universal.
“Dave
I’m another who enjoys Dave’s show but have a problem with some of the more fanatical followers. Some examples are here, with the assumption that we’re broke, slaves to lenders, paying stupid tax, weak willed, etc if we don’t follow his plan to the letter.
I got out of debt (other than the house) over 10 years before I heard of Dave. Many things he talks about are things I did, but here are three I don’t agree with:
1. If you are not “weak willed” you CAN use credit cards. I use CCs with no annual fee for everything, but I don’t buy anything unless I can pay off on time so as not to incur interest. I haven’t paid any interest in on them in over 10 years and I get cash back and other perks because the CC companies get paid by the merchants every time a transaction is done. If you pay cash you’re paying the same price I am, but not getting cash back. Also that cash is gone now, mine goes at the end of the month, so I’m still earning interest on it. In addition, due to CC use I have a FICO over 800, which was handy when I refinanced the house, which I did based on Dave’s advise.
2. Over the years before I heard of Dave I built a very healthy investment portfolio, as well as fully funding my retirement plan, and building a little bit larger emergency fund than Dave suggests. I have been averaging over 16%/year on my non-retirement plan portfolio, as I took the time to learn how to invest in single stocks. Dave hates those, and he’s correct, some can go bankrupt. Two of mine have, but my average is still over 16%/year.
3. I will not sell out of my over 16%/year portfolio to pay off my under 5% 15 year mortgage, even though I have enough to do so. First it would be a poor use of funds, and second it leave me over invested in real-estate. My compromise is that I am over paying my mortgage, while continue to invest.
I understand that Dave’s plan will absolutely work, and is a life line to people who have allowed themselves to get in a very bad way financially. As many don’t have the self-discipline to not overspend if they have CCs, Dave recommends no CCs. Some folks have become cultists, though. Wake up folks. Dave has a lot of great advise, and his plan WILL get you out of debt. Along the line though, continue to educate yourselves about money from other sources, so as to maximize your wealth creation after you are debt free.
You are completely right. How on earth can I save $1000 until I pay off my credit cards. If I had $100 I would be in better shape than I am in now.
It is hard enough with all the money saving tips out there that you can not buy something to tell you to save money. I spent $32 on a Quicken program that doesn’t save me a dime.
In an aspect, I agree with you. Having said that, it’ll be clear what i agree with when I explain what I don’t and why I don’t:
1. Dave Ramsey is EXTREME because he HAS TO BE. 90% of the people who call him, are the extreme opposite and need that to drive them.
2. Dave does not require that you buy anything, listening to his show, free online is more than enough anybody would really ever need. Mind you, if you call his show, and mention you’re new, chances are he’ll be sending you a book anyways! How about that for stewardship?
3. Clearly when Dave says: “Beans and Rice, Rice and Beans” 99.99% of the time, he doesn’t LITERALLY mean that. It’s more about, DO NOT BUY THAT FLAT SCREEN TV when you’re having a hard time keeping the lights on. It’s called common sense. Sadly most people are lacking just that. Dave has a keen sense for being able to market to those people who need it most, putting it as it is, as it should be. It’s clear where he stands. If you can not afford the basics, you can not afford to use credit to finance your selfish needs.
Personally, I know that diapers for my daughter comes far before all of the tech-toys that I enjoy.
About financing personal items, I’ve personally heard His-Daveness (joke!) that HE doesn’t do credit. That doesn’t mean that you don’t have to. He’s mentioned previously about getting loans at local credit unions and neighborhood banks.
Clearly if you overdraft your account monthly, you need more help than the “self discipline” method that you describe can do for you. You’ve tried your way, and your way isn’t working.
As such, that is where the FPU program comes in. Now, look at that realistically, the FPU class isn’t much. And even Dave has a slogan before you pay for it:
“* If you do it, IT WORKS!
* If you don
I was $16,000 in credit card debt. After listening to Dave I did get intense, worked insane hours (90+ a week) and paid it all off in 7 months. It didn’t make me depressed, and in fact made me emotionally more positive since I finally focused on personal responsability. HOWEVER, I am single, have a high paying temp job and young, so not taking a vacation doesn’t matter to me. For me, personally, Dave Ramsey changed my life for the better. but I can see why if one has a wife, kids, elderly parents and a crappy job, where his plan will make you jump ship and not work so well.
Also, when you say that a fat person binges because he can’t have the food, that is not a problem with the diet, thats a problem with the dieter. Anyone who needs to binge because he/she hasn’t had the food in a couple of days, is essentially a child in an adult body. Judging a financial plan because a child may act like a child is hardly an appropriate basis for judgment.
Good post. Good luck and being in the right place at the right time always helps with investing and real estate. I spent about 6k on medical expenses last year (after insurance). Ramsey’s system is good for some and not for others. I had a lot of debt several years ago and had to make some sacrifices to pay it off. Time, patience and common sense erases debt.
“Those convinced against their will are of the same opinion still”
Dale Carnegie said that,and Dave quotes it(being from his grandmother)
I believe you fall into that category,for if you truly understood his plan and did it correctly than alot of your points wouldn’t have been an issue.
Dave Ramsey’s system is just that, a system. If you don’t follow it by getting frutrated and quitting of course you are going to fail. If you dont get frustrated when you are dealing with creditors and collectors trying to get your life back then you aren’t human. One other thing, Dave’s $1000 emergency fund is an idea. He frequently tells people to save more than this depending on their income. Do some research before you start a crap blog.
I follow what you are saying but still think Dave has it right. He strongly counsels that you need a “gazelle like intensity” to complete steps 1 & 2 just as soon as you possibly can. It isn’t going to help your family if you are contributing to your 401K (even with matching funds) if your day to day finances are on thin ice. I wish I could see the bank balances of Dave’s critics – all I know is we made more progress in 18 months on Dave’s plan (and continue to make progress now that we are step 3) than we made before. I read financial books constantly (and really just about any plan is better than no plan) but Dave kicked our buts and got us to stop reading about and to stop living on credit. Sorry but Dave’s the man!!!
I disagree.. He does say to still enjoy and do things for yourself. Just cut way back. Besides, there are so many things we did for fun that didn’t cost a dime when we started. It’s just that people don’t want to work, they don’t want to do anything that takes a good amount of effort, they just want to be out of debt. Dave is awesome. He’s just not offering a quick fix, so that is very hard for spoiled Americans to digest.
I want to ask a question of Dave Ramsey how do I do that?
I understand everything Dave is saying right up until the point where he recommends paying off the mortgage early. Then I don’t get it. Yes, people should always buy only as much house as they can afford. But is making extra mortgage payments always a good idea? Arguably the US stock market has had its worst short-term performance in a long time. But the DJIA has still averaged a 7.78 percent return over the last 30 years (Feb 1979 to Feb 2009). If you have a 5% interest rate on a 30 year mortgage, then paying down early likely would not beat the long-term returns of equities. I say likely not because certainly there is some risk here. But risk yields return. No risk/ low risk yields lower returns. If you have 30 years, what is the benefit to paying down early?
WWJD….Dave makes me miss Larry Burkett so much more now than ever. Ramsey is offensive and unprofessional at making his points. The Bible & Jesus spoke of money often, and he taught in parables that made contrasting views, but not the constant condescending remarks.
Yes almost everyone he suggests are very good ideas, but he uses an excessively high volume of negative motivation to something in every point, even if it is toward you. Larry Burkett at least showed you a calm rationale to why he suggested a solution and constantly advised you to pray in partner with his advice. Dave has definitely made himself more globally acceptable for marketing. If you see what I’m talking about…..his picture on every page of everything he hocks to “sell”(what step does he start giving it all away?).
I’ve now in the 8th week of FPU started to see this “short & bald” mans insecure side.
Thank You Larry Burkett for the Christ-like teaching of finances.
I think the reason Dave Ramsey is signifigant is because he helps people get a financial plan. Just a plan. Most people have NO plan at all. He doesn’t claim to be all knowing or a money genius. I think he does know what works. I think he’s very conservative, but for those who never had a financial plan it works just fine. Don’t hate on the guy. If you think he’s a tool and you have a better plan that’s fine. Seriously, we’re all happy for you. I noticed, however, that most of the posts on this site are from people who don’t know much about the TOTAL MONEY MAKEOVER. Check it out. It may change your life.
I am a television news producer by profession. No other culture in the world receives the constant advertising directed at the consumer. that we have in this country. It was unheard of when I went to college to have a credit card. Today I work with new college graduates who are paid very little starting out. I personally have talked to them in the break room. They are usually buying something out of the vending machine to eat at lunch because they barely have enough money for food. They tell me they have $20,000 in credit card debt they are paying. Someone in our society need to teach basic money management skills so they get a stable financial footing. The schools are not doing it and many parents in our society don’t know how to manage money and teach it to their children.
I’ve read Dave Ramsey’s books and I think he’s doing a huge service for our society. How does commercial television in the country make it’s money? By advertising to you 24 hours a day that you need this and that to be happy and you can have it NOW. And guess what? On a local level TV stations think there is something the matter is they are not making 60% profit’s. Go Dave Ramsey . We are going to be a bankrupt nation if we do not become good stewards of our resources. Afterall we are the richest nation in the world.
Gone are the days of pawning traceable stolen goods. These are the days of burglarizing homes with the untraceable money in the envelopes. Thieves are laughing all the way to the bank.
But let’s not blame Dave Ramsey. He does not provide any revolutionary ideas. Who can blame him for packaging other financial advisor ideas then selling them back to you.
It is his personal opinion about credit cards that makes him dangerous. CRA came about in response to the cries of those that thought it unfair that only the rich can recieve unsecured credit. It is important to “TEACH” teens how to use credit wisely. Learning from mistakes while they are young.
The same concept applies to Stock Market Investments. The young can afford to recover from risks. It’s sad to find older adults trying to recover because they lacked the same financial experience.
$1000 emergency fund / 6 mos savings does not make you credit worthy. Many people have investments (401K’s & IRA’s) and still file for bankruptcy. The best Lenders know this.
Those of us with great FICO scores and money in the bank will always receive the best interest rates while the Dave Ramsey followers will be left licking their wounds.
Ok, this write up was ridiculous and by an idiot. I am sorry, but this analogous comparison to a diet shows how people just don’t get self control. Any hammer-head can find balance in Dave’s system and have success. Dave Ramsey just provides the structure to follow…no human is perfect – so Dave sets the standards straight, so if you do stray, you wont mess up too bad. And that is the point. Also, Dave doesnt set limits for saving etc…just minimums. For instance, instead of only saving $1000, aim for that and keep saving beyond that once you achieved your goal (duh). As for paying down debt instead of investing in a compounding interest investment. Pay attention here folks. If you are earning 7-10% on a investment but spending 15-30% on credit card debt, you are losing (ever swam against a river’s current?). Get rid of the debt first! OH-MY-GOSH DUH. I could go on. Anyway, I challenge the writer of this blurb to get a clue. BTW, I am in shape physically and financially. Why? because I follow healthy living plans. Nutritious food and exercise for the body. Smart budgeting for the finances. If I splurge on chocolate…it’s disciplined. Yup, that is the way it is in life. Any other way is just kidding yourself, or unhealthy. The failures this writer mentions are sad, but they need to get their lives disciplined and in order – or, live with the consequences. People, as a financial PROFESSIONAL. You must be determined for success or just be broke (on any income). I bet you this writer is broke.
@money expert
“$1000 emergency fund / 6 mos savings does not make you credit worthy. Many people have investments (401K
Eric Tyson criticizes Ramsey for self-serving marketing. Likewise he apparently had false write-in’s to his columns. That’s too bad but not my biggest concern.
I worry about the many Christian followers of Dave’s that feel like he’s “their man” because he espouses Christianity. I am a Christian and loved the late Larry Burkett because his beliefs were so profoundly impacting on his financial principles. Dave seems to use the “Fox News” ultra-right wing meanness approach to ridiculing his opponents. He’s also overly-simplistic and condescending, patronizing and insulting (apologies to my many brothers and sister in Christ).
Get off your high horse, Dave and get some humility. Go on the Daily Show and take a little abuse from the left–you’ll be a better man for it. At least people will recognize you’re not afraid to face the critics and that the core principles of being good stewards can permeate your finances, politics and just about every other aspect of life.
Great post. i listen to Dave quite frequently and a lot of things he says don’t make sense. Just think about : pay off home early. You do that and you are going to lot more in taxes. I think it is much better to use this money for steps 3,4 and 5 :
3. 3 to 6 months of expenses in savings
4. Invest 15% of household income into Roth IRAs and pre-tax retirement
5. College funding for children
Overall I think Dave is a very smart fellow and he makes lots of money. Does he need to fallow this steps?
I liked your analogy with the diet plans it is right on.
@Ellen
I’m a little confused. Are you saying you do or don’t agree with Dave Ramsey about when to pay off the house? He has it as step 6 — so that would be after all those things are covered.
Re: paying off your home early, you said, “You do that and you are going to lot more in taxes.” Yes, the interest is tax deductible, but when would you end up paying more in taxes than you save in interest?
Personally, I look forward to having my house paid off in full, even though it won’t be any time soon.
Your comments on Dave’s strictness and almost “narrow mindedness” are right on. I like his plan and it does work, but we had to do what worked for us. We modified it a little and wrote our own. Our biggest obstacle is that we did it and tell others how for FREE! We don’t charge people money to tell them how to save money. We wrote a book and give most of them away. “Does God Prefer Paper or Plastic”. It is not rocket science and frankly I’m suprised that he tells people who are upside down on their cars to immediately sell the car for a loss and take a loan to cover the difference AND go get a loan for a $3000 or $4000 cheap car. WHAT? Now they are upside down on a clunker that with monthly payments the same as they had most likely because the interest rate would be rediculous. I know his philosophy is “I’d rather be $10,000 in debt than $20,000″ in debt. Trust me, the math does not work out. Do what you have to, but drive what you’ve got until it farts on the road some place and you get it paid for.
His program is as much about human psychology as it is finances. You’ll hear him reference “The 7 Habits of Highly Effective People by Stephen R Covey” all the time. When you look at Dave’s program you’ll see that it’s modeled on the 7 Habits.
Do people fall off the wagon on Dave’s plan? Sure! But if they can’t stay on a plan as simple as this are they ever going to be in control of their money?
Has Dave been able to profit from helping people with finances? Sure! Isn’t starting a business for profit the American way? Still is in my book.
At the end of the day I would rather see someone spend $14 on the Total Money Makeover (or $110 on Financial Peace University) rather than loose $225 “a month” in credit card interest until Dave woke me up. Sure wish I had at least some of what I paid out in interest back now that I’m about to start “Baby Step 4″.
However you chose to manage your finances I hope you attain Financial Peace as I have.
Your article is very inaccurate. Try again next time
Very inaccurate how?
…posted by squeezed..”I worry about the many Christian followers of Dave