Anyone use Dave Ramsey

[lwcgrad08]

I have been using the dave ramsey system since Dec 2011... anyone else?

[shaggy]

You'll find a lot of posts about Dave's system over in the Debt forum.

I have never used his system, but I know many personal friends who have followed his advice and paid down huge amounts of debt.

A word of caution: His advice on investing is questioned by many, so tread with caution if you choose to dive into that realm.

[Wino]

I use a modified Dave Ramsey method, or at least I was until about a month ago. DW wouldn't wait 6 months for a new car, so we have a car payment again. It will be paid off in 1.5 years, but we're not slowing down our other investments over that period. The biggest threat to any debt-reduction plan is impatience.

One correction to the caution above: People question their perception of what Dave Ramsey's investing advice is. In a nutshell, DR's investing advice is to use mutual funds. The allocation of those funds he leaves up to the investor, but he mentions how he splits his investments when asked.

I would question any advisor who says that mutual funds are a bad investment.

You'll get more specific suggestions from this site if you ask specific questions. The biggest disagreement with the DR method is his "lowest balance first" plan for paying off debt. It comes down to the mathematical people who say, "The highest interest should be paid first." Studies show that DR's method works better, but the fact is that highest-interest first is marginally less money. It comes down to the psychology of seeing progress with the DR method versus the miniscule money difference of the highest interest first which will take longer to get the psychological boost.

If you've actually made the decision to get out of debt, then go mathematical. If you're still sticking to your old spendy ways, then go the DR method. In either case, the basic tenet is to stop spending so much and put the extra toward debt repayment. Both cases fail if you don't stop over spending.

[disneysteve]

One correction to the caution above: People question their perception of what Dave Ramsey's investing advice is. In a nutshell, DR's investing advice is to use mutual funds. The allocation of those funds he leaves up to the investor, but he mentions how he splits his investments when asked.

Wino, I don't think there is any "perception" about DR's investment advice. He is very clear in his recommendation: 25% each to growth, aggressive growth, growth and income, and international growth. I listen to his show every day and I don't believe I have ever once heard him say the actual allocation is up to the investor.

[Wino]

I just happened to have DR's May 6, 2013 podcast playing when I saw DS's post. DR just said the four categories of funds without stating the percentages. You're right that he recommends the four areas, but he doesn't state that the user should do 25% in each. I'll be happy to convert that podcast to mp3 and upload it if you'd like to hear it from the horse's mouth. He says HE splits it 25% each, and he might even say that's a decent split. Contrast that with folks who put everything in CD's or everything in a company 401K without any thought as to allocation. At least he gives a guideline that beats what 98% of the folks are doing.

Basically, people don't like DR because he's successful with his business, which is promoting his products to show others how to save money. They think he shouldn't be paid for helping folks, I guess. The thread about McD's trying to help folks budget - for free - shows there is a large percentage of people who want what others have earned, or want to tell others how to spend their money or run their business. I see the DR nitpickers among this crowd. They are more upset that they aren't getting the bucks he is, so they go after DR's minor points.

I didn't do either of the methods I mentioned when I got out of debt. I paid off the loans first, then went for the credit cards. I also still keep three credit cards and two debit cards in my wallet, so I'm not doing the cut-up your credit cards bit. And I never will, I might add.

I support DR because he's gotten millions of people thinking about finances and saving rather than just spending and consuming. Just the fact that so many here on SA know his name and who he is shows his impact. Clark Howard is more for the frugal folks. Suze Orman... I really don't know her target audience, because I never hear her say anything other than "do/don't buy that," which hardly qualifies as long-term help. Dave Ramsey, though, takes on those who have murdered their finances and shows them a path to get out of debt and start saving.

It's like the "Wino Diet:" Consume fewer calories than you expend. That works every time. So does the "Wino Savings Plan:" Spend less money than you earn. Anything you do with the money is a net plus that way. Mutual funds of any type beat a new ATV for investment potential.

[Petunia 100]

I just happened to have DR's May 6, 2013 podcast playing when I saw DS's post. DR just said the four categories of funds without stating the percentages. You're right that he recommends the four areas, but he doesn't state that the user should do 25% in each. I'll be happy to convert that podcast to mp3 and upload it if you'd like to hear it from the horse's mouth. He says HE splits it 25% each, and he might even say that's a decent split. Contrast that with folks who put everything in CD's or everything in a company 401K without any thought as to allocation. At least he gives a guideline that beats what 98% of the folks are doing.

Basically, people don't like DR because he's successful with his business, which is promoting his products to show others how to save money. They think he shouldn't be paid for helping folks, I guess. The thread about McD's trying to help folks budget - for free - shows there is a large percentage of people who want what others have earned, or want to tell others how to spend their money or run their business. I see the DR nitpickers among this crowd. They are more upset that they aren't getting the bucks he is, so they go after DR's minor points.

I disagree. I think many successful people have a problem with DR's investing advice for the simple reason that it is very bad. According the famous Trinity Study, following DR's advice of 100% stocks with an 8% withdrawal rate will fail as often as it succeeds for a 20 year retirement. For retirements longer than 20 years, the failure rate climbs sharply higher. You may consider that "a minor point", but I consider it extremely reckless to promote such a strategy.

[Wino]

...DR's advice of 100% stocks with an 8% withdrawal rate...

Never once have I heard DR mention withdrawal rate on the air. It seems like someone else is expanding DR's suggestions, then nitpicking the results.

[shaggy]

I disagree. I think many successful people have a problem with DR's investing advice for the simple reason that it is very bad. According the famous Trinity Study, following DR's advice of 100% stocks with an 8% withdrawal rate will fail as often as it succeeds for a 20 year retirement. For retirements longer than 20 years, the failure rate climbs sharply higher. You may consider that "a minor point", but I consider it extremely reckless to promote such a strategy.

Yes, this advice is on his site AFAIK.

Also IIRC he recommends commissioned salespeople for financial advice.

[Petunia 100]

Never once have I heard DR mention withdrawal rate on the air. It seems like someone else is expanding DR's suggestions, then nitpicking the results.

This information is available on his website, Wino.

ETA:

How Can You Make Sure Your Retirement Funds Last?

As long as you didn’t take the ready-fire-aim approach to retirement planning, you should already know how to make retirement last. But, here’s a refresher:

You’re going to keep your nest egg invested and averaging 12% growth. We’re estimating inflation at 4%. So, to maintain your nest egg and break even with inflation, you will live on 8% income from your nest egg. That means if you have a nest egg of $625,000, you will live on $50,000 per year: $625,000 x 8% (.08) = $50,000.

http://www.daveramsey.com/article/how-to-wreck-your-nest-egg-at-retirement/lifeandmoney_investing/

[Petunia 100]

Yes, this advice is on his site AFAIK.

Also IIRC he recommends commissioned salespeople for financial advice.

Yes, he does. And commissioned salespeople pay him a fee to be on the ELP list.

[kork13]

I haven't personally read any of his books or used his program personally, though some of my friends have, and I do occasionally listen to his online podcast. I think for individuals deeply in debt and need something, anything, to motivate them to get out of debt, I think Dave Ramsey does a great job of helping people with that. Whether you subscribe fully to his low-balance first strategy or to the "math-smart" high-interest first strategy, his concept of the "debt snowball" is a fantastic way to help people get out of debt, because it's simple, straightforward, and easily understood.

So for getting out of debt, I think he's a great guy to listen to. He also has a great position on the importance of how family, communication, charity, and personal beliefs all impact finances...and he frames alot of his advice with those things in mind.

With that said, for investment advice, I'd probably go elsewhere (John Bogle, specifically)... I just personally disagree with his stance on loaded funds and commission-based advisors (he's okay with both, I'm not), and also the unrealistic figures he uses for estimating returns (he frequently says you can expect 10%-12% annual returns, and as previously stated,

Just to touch on the idea that detractors are simply jealous of Dave's success... I respectfully scoff. Honestly, I respect the man for having managed to somehow make millions then go bankrupt in 2 or 3 successive cycles, then finally "figure it out" and actually create a very successful family business enterprise, brand, and book/product line. Ad Hominem accusations like that are really just rather ridiculous. We're all fully capable of critically evaluating his (or anybody else's) advice and deciding for ourselves what we think of it, whether in its entirety or in piecemeal parts. An observer would see that many of us on these boards pick and choose bits and pieces of advice from Suze Orman, Dave Ramsey, John Bogle, and many other financial "gurus" and conglomerate them together into our own personal philosophy of personal finances, and that shapes much of the advice given out on these boards.

[Petunia 100]

I just happened to have DR's May 6, 2013 podcast playing when I saw DS's post. DR just said the four categories of funds without stating the percentages. You're right that he recommends the four areas, but he doesn't state that the user should do 25% in each. I'll be happy to convert that podcast to mp3 and upload it if you'd like to hear it from the horse's mouth. He says HE splits it 25% each, and he might even say that's a decent split. .

Oh, and towards the beginning of the same article he tells people that they should divide their nest egg into 4 equal parts:

Do You Need To Change Your Investments?
No. If you’ve invested in good mutual funds—divided equally between international, growth, growth and income, and aggressive growth funds—then leave your investments as they are.

[Wino]

How conveniently you both ignored the premise, and just jumped to the conclusion:

You’re going to keep your nest egg invested and averaging 12% growth. We’re estimating inflation at 4%.

With that assumption, he never touches the principle. If you look at the S&P500 over any significant cycle, it has averaged 11%+, so the 12% might be optimistic but not unreasonably so. Also, during the cycle, you can be certain that inflation was higher than 4% on average. So, his assumptions are not reasonable, but his conclusion based on those assumptions is correct. That's pure math.

Also, a good paid advisor can do a lot to increase your earnings on your portfolio. An astute advisor will keep abreast of the markets and laws and news and give good advice for market timing. I can give you at least a handful of good advisors in the Houston area who routinely out-do the S&P index. Would you pay a fixed 1.5% for a possible 8% increase? Now we're down to choices and risks, and everyone knows that risk and possible return are proportional. The higher the risk of losing, the higher the potential for gain. Still nothing but math involved in that statement.

Obviously, a lot of people on this board think that there's no reason for paid financial advisors. I'll be the first to admit that a lot of folks who claim to be financial advisors are actually salesmen selling a product. But a true financial advisor who is not a salesman is a good investment, from my experience. Just stay away from those selling insurance as an investment, or other such "financial advisor" products.

But just because a fund is no-load, it does not mean that fund is better than a loaded fund. I'd gladly pay a 0.5% in and a 0.5% out for more returns in the middle. Is it guaranteed? No. That's where the risk comes in.

But back to the subject: I see so much DR hatred that I can only attribute it to jealousy. You have to realize he is peddling "one size fits all" to all of his audience. If you want to counter his advice, then you need to come up with suggestions of your own that can be followed by EVERYONE listening and have a greater likelihood of success. And you can't change it from month to month (a la Bogle). You have to have a set, non-changing, easy-to-follow plan. DR meets those criteria, and your plan must do likewise.

Then we can all sit back and shoot holes in your plan, just like everyone does with DR's plan.

Disclaimer: I didn't follow DR to get out of debt. I don't follow his investing advice, either. I just see wisdom where others see nits.

[MonkeyMama]

In addition to the bad advice that others pointed out, I have serious problems with Dave's advice "to just hire an advisor and not worry your pretty head about it." This is basically what he tells his listeners on the air. I have not heard him on the air discuss much beyond that. The investing information on his website is absolutely horrifying though. Oh, and he always quotes 12% average stock market returns, which is obviously inflated. Maybe he has to way exaggerate to get people excited about saving, I don't know. But if people take him for his word, they will be in a world of hurt for the long run.

Anyway, going back to my first sentence. Why do I have serious problems with that? When you trust other people with your money, they take advantage of you. Plain and simple. Being an accountant, we deal with so much fraud. You would *never* hire someone to manage your money if you have seen what I have seen.

I know Dave always says to find advisors "with the heart of the teacher." BUT, his attitude about investing has always been, "IT's too complicated for you, so hire it out." I just think that is a dangerous mindset for anyone really serious about building wealth. I mean, heck, I am a CPA. If he said, "Don't worry about your taxes; your CPA will take care of it." It's kind of the same thing. You would do better to have some knowledge and to watch your own back, because no one else will watch your back like you. We have corrected the errors of some pretty terrible CPAs in our practice. I don't have anything against financial advisors, personally. It's just dangerous when you turn off your brain and assume "things are being taken care of." When it comes to your finances, the consequences can be pretty dire. (Financial Advisors, Tax, CPAs, whatever it may be).

P.S. I overall like Dave Ramsey and thinks he has helped MANY people get out of debt, and that is a very good thing. I just think the investing part of his advice is not only BAD, but that it is dangerous.

[MonkeyMama]

Just to touch on the idea that detractors are simply jealous of Dave's success... I respectfully scoff. Honestly, I respect the man for having managed to somehow make millions then go bankrupt in 2 or 3 successive cycles, then finally "figure it out" and actually create a very successful family business enterprise, brand, and book/product line. Ad Hominem accusations like that are really just rather ridiculous. We're all fully capable of critically evaluating his (or anybody else's) advice and deciding for ourselves what we think of it, whether in its entirety or in piecemeal parts.