Dave Ramsey - Any Thoughts?

[cbmeeks]

Re: Dave Ramsey - Any Thoughts?

I haven't read all responses so I don't know the general opinion but I must say this.

I really like what DR is doing and I generally agree with his teachings. I think the 7 baby steps is all you really need to get out of debt.

Basically, to me, what he teaches is simple. Spend less than you make. That's it.

Today, on the radio, I heard about a bankruptcy judge volunteering to help out high school kids and credit. He is teaching them to "handle credit responsibly".

WWWHHHHYYYY????

He is teaching them that it's ok to go into debt. This is where I agree with DR. The ONLY debt that is ok is a mortgage. And then it needs to be 15 year fixed rate.

Why doesn't this judge teach that the BEST solution is to save your money, don't buy stuff you don't need, and INVEST. SAVE SAVE SAVE. Not BORROW.

That is a proven strategy that works. Credit cards are a cancer on this country.

Now, granted, there may be other times with a person needs to take out a loan but I would save that for absolute no way around it. Even then, I just don't see why.

I am going to teach my son to not make all the mistakes I have made.

Oh, here's another good example.

We officially went on Dave Ramsey's plan April 25th 2006. We were living paycheck to paycheck.

On May 1st 2006, we started the month with $32 in the bank. Literally all we had to our name. Bills were paid, but we had $32 left over. I followed his plan. Made a budget. TRACKED EVERY SINGLE PENNY THAT WE SPEND. Now, I predict that June 1sth, 2006 we will have over $1500 in the bank!

$1500!!!

With the SAME AMOUNT OF EARNINGS. No, I didn't get a bonus or raise. We were just simply wasting that much money. All bills are current except the ones I will get this weekend. That will be about $250 - $300. And we still have three more paychecks coming! Woohoo!

Since April 25th, I have managed to get a savings account started. We have $400 in it now. I hope to take that $1500 left over this month (almost feels like extra money but it's not) and put the rest of the $600 in to get the savings up to $1000.

Then, I will let that $900 float until next month so that we have a good buffer to start the debt snowball. (baby step 2).

Now hear this, I have always KNOWN how to save money. But I never did. DR just put it into perspective.

I think DR has possibly saved our family and our relationships. We get out of debt, save money, take more vacations, buy better things (WITH CASH) and we are all happier.

Thank you DR.

cbmeeks

[jmjj215]

Re: Dave Ramsey - Any Thoughts?

This is where I agree with DR. The ONLY debt that is ok is a mortgage. And then it needs to be 15 year fixed rate.

Do you stick to this rule when applying it to all areas of the United States?

[dealsaver]

Re: Dave Ramsey - Any Thoughts?

Just a reminder to all the members of the Dave Ramsey Fan club out there, Dave hasn't been able to suspend the rules of mathematics. If you have paid down debt, its probably because you either increased your income and/or reduced your expenses. I'm glad you did, but please realize that not all of Dave's stragtegies for building wealth and paying down debt are the most direct ways of doing so. For those who believe that Dave has changed their lives for the better, just realize there are better alternatives out there. For those who are smart enough to realize this, but believe that it that it took Daves flawed strategies to change their lives, please consider that things that can't go on forever don't. People who are spiraling down into debt eventually hit a point where they either declare bankruptcy or change their lives. Even the worthwhile strategies that Dave espouses aren't worth a dime without a motivated reader. I think a lot of people give Dave too much credit because the motivation to get out of debt was already there. They were on their way to seeking a way of their situation and those who feel they were successful following Dave's advice have some kind of grateful allegiance to him that doesn't easily allow for a critical analysis of some of his flawed strategies and assumptions.

FWIW, my debt has exploded over the last year. I now float more money on lines of credit than I have on my first mortgage. I've also never been wealthier. All of my newly acquired debt has been used to fund federally insured bank accounts, all of which are earning a higher rate on average than all my outstanding debt. I could easily pay off all this new debt by cashing in all my bank accounts that were funded by this debt, but why would I want to? My debt is being used to increase my bottom line, not to fund unneccesary, foolish spending. With my debt financed earnings, I've been able to increase my retirement savings, fund college savings accounts, and go on family vacations that I never previously would have considered. Debt is not the problem. Debt used foolishly is. In large part, I have to thank DaveHanson and Suckisstaples from Fatwallet Finance for showing me the light. I would seek out their thoughts and/or advice if you want to learn more about how to increase your wealth through debt by utilizing credit cards, low rate lines of credit, and federally insured bank accounts.

[Writer@Large]

Re: Dave Ramsey - Any Thoughts?

Just a reminder to all the members of the Dave Ramsey Fan club out there,

Smarminess notes.

Dave hasn't been able to suspend the rules of mathematics. If you have paid down debt, its probably because you either increased your income and/or reduced your expenses.

Indeed. In fact, that tends to be what Ramsey tells people, over and over and over. It's not like he's hiding it. He's a motivator and a gude for people who need it. He's packaged financial advice in a form that inspires people who have made bad choices. He's not a huckster, or a get-rich-quick scheme [in fact, his Total Money Makeover plan is far from quick!]. He's a front-line of basic financial learning for many people who may not otherwise get the message.

--W@L

[jmjj215]

Re: Dave Ramsey - Any Thoughts?

DS, I know you and I think he is flawed in his rate of return assumption for the stock market (12%) and you hate his promotion of smallest-balance-first snowballing (vs. highest interest rate) - which I'm okay with.

In another thread it was discussed that he promotes having a zero credit score...

Have you found any other "flaws" in his principles?

[Ima saver]

Re: Dave Ramsey - Any Thoughts?

cbmeeks, you have done great! I have a friend that bought all his books, went to his seminars and just loves him, but she won't change her life and cut back on expenses. They still live paycheck to paycheck.

[cbmeeks]

Re: Dave Ramsey - Any Thoughts?

Smarminess notes.


Indeed. In fact, that tends to be what Ramsey tells people, over and over and over. It's not like he's hiding it. He's a motivator and a gude for people who need it. He's packaged financial advice in a form that inspires people who have made bad choices. He's not a huckster, or a get-rich-quick scheme [in fact, his Total Money Makeover plan is far from quick!]. He's a front-line of basic financial learning for many people who may not otherwise get the message.

--W@L

That's what I think. I don't have a big poster of him in my bedroom and I don't believe everything he says is perfect. He's a great motivational speaker and he did just that. Motivated me to get active. I was stupid...DEBT wasn't enough to motivate me....weird.

Anyway, his plan is solid and proven. Sure, there are other ways to make money but I like his the best. It's the simplest.

How can you get more simple than this:

"Spend less than you make and you will gain wealth"

And I challenge anyone to prove that doesn't work. It might not make you a go-gillionaire but it works.

I like simple. Simple works. Always.

cbmeeks

[dealsaver]

Re: Dave Ramsey - Any Thoughts?

you have my interest dealsaver, do you have some examples of some of the things you've done?

One of the most basic things I've done is invest the proceeds of 0% balance transfer offers and low life of the balance transfer offers in a mix of high yield savings accounts and cds. Some offers allow you to write a check directly to your bank account. Here's a news article about it - Free Cash! . The example in the article is for small potatoes, however. Here's a guy who's taken it to a whole other level - mbaker4096 . I'm floating around $60,000 on my cards currently, but will be winding my activity down to zero out my debts before going on another app-o-rama in order to acquire more credit. Another easy way I make money is through intro rate HELOC offers. I currently have a huge line available at 2.5%. I dump this all in a high yield savings account and transfer it back to the Heloc at the end of the month so I can have the benefit of using the line without it being reported on my credit report. These two basic strategies are an important part of my stay at home income producing toolbox.

[dealsaver]

Re: Dave Ramsey - Any Thoughts?

Have you found any other "flaws" in his principles?

I'll quote myself from elsewhere on this site:

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.

How can you get more simple than this:

"Spend less than you make and you will gain wealth"

And I challenge anyone to prove that doesn't work.

Well actually a high rate of inflation and taxation could easily wipe away the value of your savings so you could in theory save money and still actually be losing wealth. That doesn't mean that I don't agree with that part of Dave's advice. Simple isn't always best, however, and some of his other advice is just simply bad.

[cbmeeks]

Re: Dave Ramsey - Any Thoughts?

One of the most basic things I've done is invest the proceeds of 0% balance transfer offers and low life of the balance transfer offers in a mix of high yield savings accounts and cds. Some offers allow you to write a check directly to your bank account. Here's a news article about it - Free Cash! . The example in the article is for small potatoes, however. Here's a guy who's taken it to a whole other level - mbaker4096 . I'm floating around $60,000 on my cards currently, but will be winding my activity down to zero out my debts before going on another app-o-rama in order to acquire more credit. Another easy way I make money is through intro rate HELOC offers. I currently have a huge line available at 2.5%. I dump this all in a high yield savings account and transfer it back to the Heloc at the end of the month so I can have the benefit of using the line without it being reported on my credit report. These two basic strategies are an important part of my stay at home income producing toolbox.

You know, that might actually work for you. But one thing I haven't really made clear is that MOST people don't know how to do things like that. That's where I think Dave does a good job. Helping the common man that doesn't have the ability to make those kind of moves. Not everyone is an economics guru.

I'm a computer programmer. I've only recently learned what mutual funds are...I'm certainly not stupid (even though I've done stupid things)....I just put all of my time into other topics.

Dave has a great way of relating "the people"

cbmeeks

[stlsweeti]

Re: Dave Ramsey - Any Thoughts?

One of the most basic things I've done is invest the proceeds of 0% balance transfer offers and low life of the balance transfer offers in a mix of high yield savings accounts and cds. Some offers allow you to write a check directly to your bank account. Here's a news article about it - Free Cash! . The example in the article is for small potatoes, however. Here's a guy who's taken it to a whole other level - mbaker4096 . I'm floating around $60,000 on my cards currently, but will be winding my activity down to zero out my debts before going on another app-o-rama in order to acquire more credit. Another easy way I make money is through intro rate HELOC offers. I currently have a huge line available at 2.5%. I dump this all in a high yield savings account and transfer it back to the Heloc at the end of the month so I can have the benefit of using the line without it being reported on my credit report. These two basic strategies are an important part of my stay at home income producing toolbox.

Wow, I was lost on the first sentence.

[quiznut1]

Re: Dave Ramsey - Any Thoughts?

Like I have said, I don't have anything against Dave Ramsey, I just can't get around his "don't use credit cards" advice.

On that note, I have a question for everyone in this thread who has taken to Dave Ramsey's advice and does not use credit cards in any form whatsoever.

The question I have to ask is, what if you had a card that you were disciplined to use only for gas? There are a plethora of 5% cash back gas rebate cards available today. If you are part of an average American family that spends, let's say on average, $300 a month on gas (modest considering today's gas prices), why not get some of that money back? If you were disciplined to use the card only for gas, that is $3,600 in spending per year, and $180 in cash back. While this is not a significant amount, it's free money you didn't have to start out with.

If you are disciplined to pay your bill on time (and it's so much easier now days to do since the evolution of online payments - you can set it up to pay on the exact day it's due several days in advance), and in full, you wouldn't be paying any interest or fees, and you pocket that $180 as money in the bank.

Ultimately, don't get a gas card if you can't pay the bill, but most people in my mind can pay for this expense using cash. Instead of using cash, why not pocket that $25 cash you intended to use for your gas purchase, and put it on a 5% card. That's $1.25 back! Then put the $25 in your checking account and pay the bill. It's really not that hard to do.

I realize I am in a minority with my opinions, but consider this. My old laptop broke while I was in school last year, and there was no way to replace it as it was a screen issue. I was backed into a corner and had to buy a new one. I ended up purchasing a new laptop that cost around $549, but I can honestly say I would have had no way to pay for it if I had not accrued around $525 in cash rewards from my credit card usage at the time. To this day I have never paid a bill late, and never used my credit card for anything I could not pay with cash. As a result, that $525 at my disposal came in handy at just the right time.

[jmjj215]

Re: Dave Ramsey - Any Thoughts?

I realize I am in a minority with my opinions, but consider this.

I think you're in the majority with using a cashback card - just in the minority w/ not carrying a balance

The question I have to ask is, what if you had a card that you were disciplined to use only for gas?

Ramsey-ites will cite the study done by Dunn & Bradstreet that says you spend up to 18% more when you use plastic than when you use cash - effectively wiping out that 5% cashback reward in a heartbeat.

I used to beat to the same drum and then I decided to try it out for myself:

In December of 2004, we got a credit card (the impetus was the fact that my car insurance quote was sky-high because I was an "unknown risk"). I've tracked our spending since we married in April of 2003 - every penny mind you. I still track our spending - every penny - and I haven't noticed a baseline increase in our costs since we moved from cash to all credit (granted it's a 1% cashback card ).

So, I no longer beat to that drum. If you're actively budgeting, that study doesn't mean a thing in my opinion. It's all the same: cash, debit card, credit card.

The Ramsey-ites, however, will still cite that study - which I've never actually seen published and would love to get my hands on.

[cbmeeks]

Re: Dave Ramsey - Any Thoughts?

...The question I have to ask is, what if you had a card that you were disciplined to use only for gas? There are a plethora of 5% cash back gas rebate cards available today. If you are part of an average American family that spends, let's say on average, $300 a month on gas (modest considering today's gas prices), why not get some of that money back? If you were disciplined to use the card only for gas, that is $3,600 in spending per year, and $180 in cash back. While this is not a significant amount, it's free money you didn't have to start out with.

To me, and that's me personally, still not worth it. I will give a few reasons why it's not worth it to ME.

1) People tend to spend more when they use plastic. MOST people are not that disciplined. Some people are. I am pretty good at controlling my expenses (now at least). But I have to admit, it's "easy" to swipe that card. It's "hard" to hand over that $20 bill. The harder something is, the less likely I am going to do it on a regular basis. I mean, I love a good challenge but when it comes to handing out my money, I want something that makes me think twice about doing it.

2) CC companies didn't get rich by giving money away. I know thier theory is that they can give money away to the 1% of people that are disciplined with their money in hopes that they become like the 99% of people that swipe that card for everything and keep a balance. if you never become a part of that 99%, then you have basically beaten them at their own game. BUT, how long do you think they will let you get away with it? Sure, you might get a year or more. But I bet that somewhere in that 4-point fine print, there is a disclaimer that says they can change the rules anytime they want for any reason. That would scare the hell out of me.

3) Every penny you get from them as a cash-back or reward comes out of the pocket of the people un-educated in finance. Joe-Bob Smith gets a credit card at 29% interest and he has a $10,000 balance on it that he never pays off. When you get your $180 cash-back, you just took that $180 from poor souls like Joe-Bob Smith. SOMEONE is paying for that $180...it may not be you, but it's people like Joe-Bob. What's Joe-Bob ever done to you?

it's free money you didn't have to start out with.

There is no such a thing as free money. Any time you get something for free, someone else had to pay for it. And then that person will make other people pay for it. And it will eventually come back to you. It's called Karma. :-)


well, no offense to anyone but I'm not having the conversation about cash-backs, rewards, using debt to make money, etc. any more.

I'm not really trying to convince everyone that my way is better...it's a dead horse. If some of you are making money by taking it from Joe-Bob, then more power to you. I'd rather invite Joe-Bob over for a beer...he could use it...he's broke.

cbmeeks

[quiznut1]

Re: Dave Ramsey - Any Thoughts?

Joe-Bob Smith gets a credit card at 29% interest and he has a $10,000 balance on it that he never pays off. When you get your $180 cash-back, you just took that $180 from poor souls like Joe-Bob Smith. SOMEONE is paying for that $180...it may not be you, but it's people like Joe-Bob. What's Joe-Bob ever done to you?

Oh, so it's my fault Joe-Bob Smith can't pay his bill? Or that Joe-Bob Smith feels he can "spend what he doesn't have?" Or that Joe-Bob Smith is irresponsible? Hey, I never said a credit card was free money, and I freely admit I am not the average American credit card consumer. Before I got my first credit card 2 years ago I educated myself about how credit card companies work. The credit card companies want to get you to "spend what you don't have", but the truth of the matter is, you are the one who ultimately makes that choice. I for one will have no part of it. To this day, I have never charged anything to my card that I didn't have cash in the bank to pay for it (and I'm a very thrifty shopper too, so I feel the emotion of the money leaving me, even as my card is swiped today). From the first day that I got my first credit card, I have carried this out. I have never ever saw my credit card as free money, and I never will.

There is no such a thing as free money. Any time you get something for free, someone else had to pay for it.

You're right about this, my checks come courtesy of Citibank. They made a couple billion dollars last year, umm...I think they can pay me my $300 limit in yearly rebates without too much of an issue. It's not my fault that America's credit card debt is where it is. However, I'm a broke college student that will take anything that he can get, and the only reason I use credit cards is for the rewards. If my cards suddenly canceled all their reward programs, I would not be ashamed to tell you that I would call every single one of them up and cancel in an instant, all of them with a $0 balance.