Dave Ramsey's Debt Snowball

[nanamom]

I read the book and I think he has alot of good points. Unfortunately some people need to have the boost of seeing little debts go away before they can handle the big debts, no matter what the interest rate is. If we were disciplined enough to pay the higher interest card off first, maybe we would have been disciplined enough to not get into the mess in the first place. I am glad his book came with a Christian viewpoint.

Originally Posted by baselle

The bone I have to pick with Dave Ramsey's advice is having to sort through the overlay of fundamentalist Christianity to get to some basic financial advice. Spend less than you earn, leave Jesus out of it.

but....he's....a....Christian....?!?!




when I talk about things I believe and opinions I have in conversation with folks, I'm frequently heard to say..."in Texas...."


because....I'm....a....Texan



If a gay author spoke about homosexuality in a general book about poetry and some of the historic reflections of that lifestyle in past works, would that bother you?

how about a black person pointing out the effects of the African American culture in a book about fashion design?

or a woman writing a political book that talks about her personal struggles with equality in work and elsewhere.


in each case, the author tangents away on something personal that isn't specifically covered by the book's subject but nonetheless shaped their opinion of the main subject.

would that still be wrong?


and for what it's worth, a great volume of what he goes on about is Jewish, from the Old Testament, he doesn't mention Jesus all that much (God will provide, consider the lillies, cast off thy possessions and come with me, etc.) He wouldn't get people very far past the get out of debt stage on the Jesus plan.

and if it matters to the conversation, and I'm sorry if I offend, I think religion is in general, full of crap. all of it. and yet still I am able to read a book that mentions Christianity (or Islam, or Judaism, or Hinduism) and not have a problem with it, no matter what it's subject matter.

but I've always been considered strange so there's that.

although I must admit, he does close every show with the line "there's only one way to financial peace, through the Prince of Peace, Christ Jesus"

that's it, can't have a show like that here in a Amerika.

I've changed my stance. get that sluggard's books off the shelfs...pile 'em up! get me a match!

[BAGAGT1]

Originally Posted by dealsaver

His advice that your house payment should be 25% of your take home pay combined with his advice to take a 15 year fixed rate mortgage would have made it virtually impossible for a vast multitude of people to ever afford a house.

I agree, I like Dave for his get out of debt advice, I like Dave because he gets people thinking about their retirement. That is pretty much where I stop with Dave's advice.

He is a little out of touch with the price of property in most urban areas, and if I followed his advice, I would probably never own a home. The fact of the matter is a quarter of my take home monthly pay would be $860 (That is after I've taken out 15% for retirement, and does not include the 10% for charity). I think it would be virtually impossible to buy any home in the Chicago area on a 15 year fixed mortgage for that payment. Using the latest census figures for the suburb I live in, If I bought a median priced home $181,700, put 20% down, a 15 year fixed mortgage would run $1199.31 before taxes.

The 12% returns on Mutual Funds is also a little off base, considering he rarely makes mention of the loads and expense ratios. I suppose he doesn't talk about it for fear of losing his ELP's.

[tigerstar]

Although I don't agree with most of his advice (and therefore don't remember most of what I read), I do remember feeling really encouraged to pay off the remainder of my debt (student loans) and save up as much as I could for a larger house down payment. I wouldn't be able to go the 15-year route, but I would want to pay off the mortgage in less than 30.

His advice really is centered around the emotional part of debt, not, as pointed out earlier in the thread, on the practical. Of course we know it makes financial sense to pay off the debts with the larger interest rates first. But not many people have what it takes emotionally to do what makes the most common sense. Emotionally, some financially unstable people might like to see the number of credit cards go down faster instead of the balance on their highest-rate debt. They find it encouraging to say "I've paid off X of my (many) debts". I'm still trying to convince my mom to put any extra money towards her CC debt, instead of sticking it in the bank. Emotionally, she'd like to see, say, $5000 in her bankbook, even though it'll only make less than 1% interest, than pay off her CCs at 5-10% percent interest. She finds it encouraging to say "I have some money in the bank" (I did talk mom down to $1000, which she reached last month...now the extra $$ can go to CCs)

Also, since Dave's advice is focused on the emotional rather than the financially sound, as a Christian author, bringing God into the picture makes sense. If he were a believer of any other religion, I'd expect him to try to offer comfort to his fellow followers of that religion as well.

[jmjj215]

What I like:

He inspires people.

What I don't like:

Totally anti credit card
25% of your take-home, 15-yr mortgage
12% returns
Disregard of index funds as a great investment vehicle

[enemyofdebt]

Originally Posted by jmjj215

He actually declared bankruptcy and didn't work is way out of a lot of the debts. He was in way over his head.

???????????

Just want to point out that while it's true he filed bankruptcy, it is also true that he paid back ALL of his debts after rebuilding his wealth without debt. I would say that going bankrupt on 4 million in real estate property and paying it off is working his way out of debt.

[Alex_Adviser]

Ramsey suggests that his clients pay off their debts in order of outstanding balance: from smallest to largest.
* This excludes your home mortgage, as well as any similar real-estate or business loans which total more than 50 percent of your annual income.
* If more than one loan or debt have similar balances, list the highest-rate debt first.

[puck36]

What I like:

He inspires people.
Totally anti credit card
25% of your take-home, 15-yr mortgage
12% returns
Index funds as a great investment vehicle

What I don't like:

Suse Orman

[MonkeyMama]

I have to disagree with those who say they will never own a home under Dave's advice. I am not a Dave follower, but was raised with a similar philosophy. Don't borrow a ton for school, and don't spend 5 figures on your first car(s). If you live on the coasts - start with a condo. Think I am out of touch? Median home price is something like $600k where I grew up. Everyone in our family owned our first home in our early 20s. Most our friends were blowing their money on expensive degrees and luxury cars. If you truly follow the Dave philosophy you can own a home under his method, even somewhere like San Francisco. IT's just not going to be large, and it might take more than a year to save up for it. (Some comments were made in 2006 - if one couldn't afford a home in those times they shouldn't have bought. No one could afford that - it was sure to be unsustainable. I Can personally say 1000% I wouldn't have bought a 1st-time home in 2006. We fled Bay Area due to same prices in 2001 - just not willing to pay those prices - valued more space - didn't want to work for eternity).

I actually like Dave overall, and the more I listen (find the show entertaining), the more I like him. Most of the negative comments come from a lack of understanding of his entire position. He's not a "I push my religion down your throat" type. You would realize if you listen to his show for a while. (& believe me, I have low tolerance for religious crazies and "my way or the highway" types. I don't much care for religion, but Dave doesn't bother me much).

What I Can't stand about Dave is his lack of grasp of how much having no FICO score can hurt the average person (when it comes to job hunting, higher insurance premiums, etc.). I think his extreme anti-debt stance is probably good for his core audience (recovering debtors), BUT I don't agree that it is the best financial advice around. I think that is an area he is a bit out of touch with reality. Sure, he is a mutil-millionaire and doesn't need a FICO score. What about the rest of us?

When I knew less about Dave he used to annoy the hell out of me. The more I listen, the more I like him. I think he does a lot of good, overall. There is no doubt that he helps a lot of people.

[Merch]

I don't know if not having a credit score would be that much of a problem. I work in a field that checks credit scores and if you have a low one you probably won't be hired. I also work in a field requiring you to be bonded and fingerprinted by the FBI.

But what they are looking for is what makes you a credit risk. Are you a risk to the firm and your fudicary responsibility. If you don't have a credit score, you don't have debt or a mortgage and you haven't had it in a long time.

[Snodog]

I think Dave generally gives good advice. The debt snowball will work although its not what I would do. He's pretty funny with some of his one-liners too, and I love the "live like noone else so later you can live like noone else."

Things I don't like are:
1. 12% returns
2. His stubborn adherance to no credit cards. He acts like it is impossible to use them responsibly.
3. Saying it is good to have no credit score. This will hurt many people.
4. Doesn't recommend owning bonds.
5. And worst of all saying you can spend 8% of your nest egg per year in retirement. This is terribly ignorant advice and there is really no excuse for such a high profile "guru". Many old people will go broke if they listen to this.

But I have yet to find a "guru" that I always agreed with.