As for investing, I’ll take the guaranteed return of XX% of paying off debt to the hypothetical return on the stock market.

First, Dave is 49. His loans were called due when he was 26, in 1986. At that time, the retail value of his portfolio (not in LLCs in the 80’s) was over $4M. His loans totalled almost $2M.

When his bank was sold to another (that NEVER happens these days), they called them due, and he had 90 days to pay in full. As you can imagine, to sell all the properties within 90 days, he had to sell them CHEAP, and had $300k remainafter all was sold. He went back to selling real estate, and tried to work through the debts. At one point in 1988, the remaining creditors sued him and began wage garnishment to the tune of over $150k, and he filed chapter 7 on that amount.

This is a matter of public record, so there is no disputing the numbers, and Dave has repeated this chain of events many times through his radio show, his live events, his FPU, and his high school curriculum.

As far as how he rebuilt, it was not overnight. He was not even a millionaire again till the late 90’s. He continued in real estate after the bankruptcy, and started counseling people in his church on how to handle financial stress. With a finance degree, he parlayed that into a counseling business. After a few years of this, he wrote his first book, Financial Peace, in 1992. He self-published it until 1996. His radio show started in 1994 in Nashville.
What made him a millionaire was not the book or the financial counseling, but the skyrocketing syndication his show achieved. He also did not work for another company like Hannity or Limbaugh. The show, the building, the studio, and all contract negotiations are by Dave himself.
To this day, however, if you are in financial straits, you can call his office, and they will counsel you at no charge. If you can afford it, they will refer you to a counselor in your area with a charge (I am one).

I hope this answers your questions and addresses your doubts about the man himself. I have never known anyone with a more steady moral rudder in my life.

I too found it suspicious. I have thought about it a lot and always listened intently when he explained how it happened. Here is my conclusion:

Dave owned many properties when he went bankrupt. He was house poor. He had tons of assets and no cash. All his assets were in different LLCs. When the banks called his loans, he had no actual cash to pay up on houses that were leveraged for more than they were worth so he couldn’t pay his loans, his taxes, or his credit cards causing him chaos – and when you’re 24ish, that is a scary thought which would make one jump readily into bankruptcy.

However, the reality is, under his belt, he owned enough assets to sell (along with a very wealthy father to help him out with cash – remember, he never says anything about accepting cash gifts from relatives when times are tough, he just speaks against borrowing from relatives) where, once the housing economy recovered, he was able to sell and within a mere couple of years, be practically a millionaire again. These assets couldn’t be touched because they were separate LLCs which he said he creates for each investment property.

To make a long story short – in my opinion, the bankruptcy did pretty much nil except create some cash and allow him a couple of years to recover until his other investment properties regained their health and he was able to sell in order to bank. It is impossible that someone with such an extensive real estate investment trail who owned “hundreds” of properties were all the sudden called on by the banks for each and every single property. It was properly more like 20% of them, which if you’re highly leveraged, could be enough to suck you dry of cash flow.

The reason why I believe he skips over this detail is two fold (1) it seems like a bit of a sham to the listeners and (2) it is still technically in line with what he preaches. I believe he did go bankrupt and he was house poor and I believe his couple of years post-bankruptcy were tough but I also believe that his bankruptcy was a mere hump he had to get over till cash flow liquidation, rather than bankruptcy out of true poverty like most face. To make a long story short, he was a millionaire before his bankruptcy (on paper), during his bankruptcy (on paper) and after his bankruptcy, (on paper and in his wallet as well). And yes, its much easier to follow Daves’s advice if you know in a couple of years from now when a market recovers you can sell tons of property and be living a millionaire again one day. And THAT is the party he doesn’t mention on the radio.

But if you listen closely, Dave never promises you’ll be a mega millionaire like himself if you follow his principles. Just that you’ll “build wealth”, the definition of which varies, depending on your economic status in life.

This is just my opinion from what I’ve gleaned listening to him. I could be (and probably am) wrong.

As a former bank officer, I can tell you that once bankruptcy is filed, it is impossible to get financial institutions to offer you credit (i.e., for the purchase of real estate). I’m interested in “exactly” what career or business he was in during that time immediately after filing for bankruptcy that allowed him to earn enough cash to rebuild his wealth. I doubt it was a common regular paying career with a company such as the masses work for in the U.S. If he had an angel investor or inherited money to allow him to re-enter the real estate market and parlay that into his multi-millionaire status, then that might explain how he bounced back. However, if he used his sad story, charm, charisma, and the Bible Belt evangelical strategies of preying on the financially weak and uneducated, then he is a charlaton in my book. I am suspicious about the period of his rebound and how he earned enough CASH to supposedly bounce back on his own by purportedly following the financial principles he now professes, without taking advantage of people who don’t know any better. As an executive financial planner myself, I often have to respond to Dave’s step-by-step process that a client of mine heard on T.V. when I am individualizing their financial plan. He has some good financial principles, so don’t get me wrong. Some make really good sense depending on age, educational background, current earnings, future earnings, etc. But some do not make any sense at all when individual circumstances are considered.

I just want to know if this guy really rebuilt himself after bankruptcy or whether there is something he has not disclosed that allowed him to make it big after a financial disaster. If he can provide an audit trail of exactly how he rebuilt himself from financial ruin, then my hats off to him. But until I hear that detailed play-by-play, I will continue to hold a heavy dose of skepticism in my mind about him.

I’m a strong Christian believer, so I hope he can explain himself. However, too many purported Christian evangelical practitioners are getting very rich, living lavish lifestyles on the backs of lower and middle income Americans. I for one can’t stand it. I hope Ramsey isn’t one of these “frauds” in our society.

and for those that criticise Dave for giving simple advice and charging people for it, Hello – read his prologue in his book. Dave says he’s not reinventing the wheel, he’s giving you grandma’s advice. So just follow it!

In fact, I wrote my last debt payment the day before I bought two “Debt Is Normal, Be Wierd” bumper stickers. The man gives away well over $1000 per day in free training/seminars/etc to listeners who he thinks deserve a little help getting started.

No one says anyone has to do it his way. But when it’s used the right way, it works.

He even admits it on his show at least once a day, if not more. This is about changing behavior. This revolves around creating intensity in the individual.

If this were about math, people wouldn’t be in debt in the first place, now would they???

Let’s take an example of someone who has no debt, maybe a college graduate with their first job making $40k a year.

You can skip step 2, so you go straight to the full emergency fund. Then 15% into retirement, which is a little over the max Roth amount of $5k per year. From age 22-62, this turns into $2.6 million, tax free. I think he will be fine.

The other reason behind doing the debt snowball first is that it normally takes between 18 and 24 months to complete step 2. The compound interest, when compared to 20-40 years of investing is a drop in the bucket, and you gain the intensity and practice of running a tight budget over a 1 or 2 year period…again, behavior modification.