I personally have not read Dave's book, but I have listened to his show a lot, so I feel I have a good understanding of his steps and concepts.
You will find a good amount of Dave Ramsey supporters here, as well as some who aren't so impressed with his system and advice.
The reason why I love Dave's approach is because he takes a practical and realistic approach towards helping people change their attitude about money.
For example, most financial experts will tell you to prioritize your debts by the interest you are paying. Dave Ramsey says no, pay off your smallest debts first, and then work your way on up the chain. He calls it the snowball approach.
I think this method works best for most people because it is just as much a psychological plan as it is a financial one.
As far as wanting to start paying off your house early, that is the last step in his plan I believe. There are several more steps before this, which make a lot of sense.
I believe the main steps to have completed before you attempt to pay off your mortgage early are to:
1. Establish an emergency fund with a minium of 6 months expenses.
2. Maximize your retirement savings, i.e. put as much of your salary as possible into your companies 401k plan and or through your personal Roth IRA.
3. Establish savings for College if that is in your future plans.
I might have missed something, but those are the major things he suggests having done first. To me, it makes total sense. Time can either be your greatest enemy, or ally, when investing, which is why it is extremely important not to skimp or retirement savings to start paying off your house early.
I believe, and think most in these forums would agree, that you would be much better served to establish a healthy emergency fund, and to establish a healthy reitrement fund, before you look at investing additional resources into your mortgage.
Again, you will find some critics of Dave's system and approach. In my humble opinion, the people who don't like Dave and criticize him are the very people who never needed his advice in the first place.
That is, if you are currently well off with no debt, live well below your means, live frugally, and are concentrating on wealth building for retirement, then Dave certainly is not your man.
For example, Dave does not believe in credit cards at all for any reason. Debit cards are the way to go. Dave also would never recommend anyone ever getting a mortgage for more than 15 years. You will find that advice like this is usually the reason why people aren't too fond of him.
I have a 30 year mortgage with a low interest rate. I also have a Marriott Rewards credit card that I use a lot. In fact, the wife and I took a vacation to Hawaii last year using those points, worth about $5,000. We always pay off the balance every month, never paying interest. That said, I take Dave's approach for what it is, not aimed at me.
I think a lot of people don't realize that on the whole, frugality, financial responsibility as it pertains to credit cards, living within your means, etc, is the EXCEPTION to the rule.
Dave preaches the evil of credit cards because he knows a very large percentage of his audience, and quite frankly the country, cannot use them responsibly as a tool and abuse them to no end.
Even though I don't follow that particular advice, it doesn't mean that it isn't great advice for a majority of people. For whatever reason, a lot of people hold that against him if it does not apply to them, and don't step back to look at the bigger picture.
Last edited by brig2221 : 03-14-2008 at 08:42 AM.
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