Dave Ramsey's Financial Peace University

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CPA

Elite Member
Nov 19, 2001
30,322
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My wife and I started using his Total Money Makeover program (I am active on their community forums) and we love it. Yes, we might have been able to do it ourselves, but his program and guidance keeps us on track. Plus, he has a nifty budgeting tool and other financial tools to help you.
 

CPA

Elite Member
Nov 19, 2001
30,322
4
0
Originally posted by: mugs
I've heard that he recommends paying off credit cards with the SMALLEST BALANCE first instead of the cards with the HIGHEST INTEREST, because of the morale boost from having a paid off card. If you prefer financial advice that will boost your morale instead of advice that will be better for you financially, Dave Ramsey is your man.
Dave does believe this and has defended it when folks bring up the overall dollar difference. His belief is that like dieting or any other lifechange, if you don't see some results quickly you will, as quickly, lose focus and hope. And the dollar difference is generally not significant with his snowball approach.


Oh, and for the idiots who claim he sounds like an Amway salesman or a shuckster, he has a friggen two hour segment on Fox Business Channel every weeknight and a sindicated radio show.
 

CPA

Elite Member
Nov 19, 2001
30,322
4
0
Originally posted by: mugs
Originally posted by: Sluggo
Originally posted by: mugs
Originally posted by: moonbit
I used to listen to this guy's radio program, and he sounded like he had some pretty good ideas. He was pretty hardcore with people who had a lot of debt though. He would tell them to sell any second car they had, sell a new one they were paying on and buy something used, and eat the cheapest food you could buy. Most people's idea of "debt free" is "everything's paid off except the mortgage (and maybe a car)." He said, nope, you gotta pay that mortgage off too. He had people call in that actually took his advice and paid everything.

That takes discipline I sure don't have.
It's also bad advice.
Why is it bad advice? I really enjoy not being in debt to anyone.
And that's fine if you prefer that. But telling people that any debt is bad is wrong. He's dumbing it down for people too much. If you dump all of your money into your house, you're losing liquidity and you're losing the opportunity to use that money elsewhere. If you have a life-changing event, you risk losing your house when you otherwise might not have.

If you prefer to have no debt, even if it costs you more money, that's fine. But it's wrong for Dave Ramsey to make blanket statements that everyone should live that way. His listeners would be better served if he explained the benefits of each approach.
Dave states to have 3-6 months expenses saved before paying off the house. So, any life-changing event would be temporarily stayed by the savings. This should give you time to focus on adjusting to the life-changing event.
 

BAMAVOO

Diamond Member
Oct 9, 1999
8,089
41
91
Snowball.....

Pay off the lowest balance and add that to the next highest once paid off.

Continue until you have paid off all debts.

It is not dumb, what he is doing is teaching you how to get ahead of the game. Most are in serious debt with credit cards, behind in their payments on everything and he shows a way to get out of the ditch and get caught up.


The interst rates do not matter because if you work his plan you will pay them off long before you would making minimum or no payments at all.

You need to know his entire plan, not just parts of it to understand where he is coming from.

You start out by putting $1000 in an account he calls the emergency fund. This will give you something to fall back on when something goes wrong. This is not to be touched. The goal in the end is to have 3-6 months of your expenses set aside in this same fund, again to never be touched except for an emergency.

You then create a 0 based budget where you spend every dollar you make on paper before the month begins. You have to give every dollar a name and stick to the budget. you would be surprised how much money you can save just by doing this. Money seems to fly out the window without a 0 based budget.

You then can start on your credit cards, if you have them or any other debt, car, boat, whatever. Smallest to largest in terms of what you owe on them. You take any extra you have and put towards the smallest debt and pay minimum on all others. Once the first one is paid off you add it to the next largest and continue minimum on all others. Do this over and and over until you have debts paid off.

Once you have everything but the house paid for you can then start to expand your savings and extend your emergency fund to reach the 3-6 months expenses.

When you do pay off your house - FREEDOM! Then you can truly start to save and live like noone else as Dave likes to say.

15% should go to savings and you can fund for your kids college or whatever if you don't have children.

He doesn't even preach against not buying stuff, just to do it with cash. You want a Corvette, fine, when you can pay cash for it have at it.

How can this plan be dumb or a scam? It works and he has helped no telling how many people get out of debt.

 

Kroze

Diamond Member
Apr 9, 2001
4,052
1
0
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
 

CPA

Elite Member
Nov 19, 2001
30,322
4
0
Originally posted by: ryan256
For the most part he has pretty good advice. However I disagree with him on a few points. Primarily credit.
He advocates eliminating all credit cards and debit cards and using cash only because with cards its just too easy to spend money. While I agree that using a card makes it easy to spend to me this is where something called self control comes in. With all my credit cards and charge accounts I have the ability to put myself $15k+ in debt. But I don't. I have the ability to refrain from making impulse buys and I know I will have to pay it all back eventually.
Second is keeping a mortgage. I understand how paying extra principal each month adds up and can substantially reduce the amount of interest you pay. However I see absolutely no reason to divert all of my extra funds each month into paying it down. Even if I did this it would still take 20 years to pay off instead of 30. Sorry, but I'd rather have 30 years of debt and still be able to afford vacations, new computers, 401k contributions, ect., than 20 years of debt and having to scrape by.
You obviously have not listened to him or read his book.

1) He does NOT advocate getting rid fo debit cards
2) You contribute to the max in your 401K BEFORE paying off your mortgage
3) You have fun (vacations, computers, etc) before paying off mortgage. This is done with sinking funds and such.
4) You can easily know 15 years off a mortgage by increasing your monthly payment a fraction of the overall payment
 

mugs

Lifer
Apr 29, 2003
48,903
19
81
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
 

ponyo

Lifer
Feb 14, 2002
19,688
2,802
126
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
You should've put 50% down if you could have afforded to. My guess is you've stretched to put 50% and that's the real reason you didn't.
 

SearchMaster

Diamond Member
Jun 6, 2002
7,792
113
106
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
Ramsey uses the cutesy term "fleece" instead of "lease".
 

mugs

Lifer
Apr 29, 2003
48,903
19
81
Originally posted by: Naustica
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
You should've put 50% down if you could have afforded to. My guess is you've stretched to put 50% and that's the real reason you didn't.
I think I made my reasoning for not doing it abundantly clear in this thread.

Originally posted by: SearchMaster
Ramsey uses the cutesy term "fleece" instead of "lease".
Ah, yeah. Paid cash for the wife's car, and the only reason I haven't paid off mine early is because the interest rate is only 2.9%. I owe about $1000 more on it.
 

spidey07

No Lifer
Aug 4, 2000
65,469
5
76
Originally posted by: Naustica
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
You should've put 50% down if you could have afforded to. My guess is you've stretched to put 50% and that's the real reason you didn't.
That's about the dumbest thing you could do financially. With interest rates so low there simply is no good reason to throw money away by putting/locking that much capital into something you can't move.

The purpose of money is to make more money for you, not lock it away in your house that you can't really touch it and it's returns (if any nowadays) are speculative. Plus there the whole tax thing. There are numerous articles out there that run the numbers, read them.
 

BoomerD

No Lifer
Feb 26, 2006
59,817
8,038
136
Originally posted by: CPA

Oh, and for the idiots who claim he sounds like an Amway salesman or a shuckster, he has a friggen two hour segment on Fox Business Channel every weeknight and a sindicated radio show.
In one of my first posts, I said he reminds me of one of the Amway motivational speakers. He DOES come across very much like one of them in the way he speaks, some of the things he does on stage, etc. That's NOT denigrating to his message, it's part of the "show."
As for his Faux News Channel bit...I'm still interested in him and what he says in spite of his medium...in fact, this would be the only time I've ever listened to Faux news Channel with an "open mind." :D

( a quick search of the Faux News Channel doesn't give any information about this show)
 

ponyo

Lifer
Feb 14, 2002
19,688
2,802
126
Originally posted by: spidey07
Originally posted by: Naustica
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
You should've put 50% down if you could have afforded to. My guess is you've stretched to put 50% and that's the real reason you didn't.
That's about the dumbest thing you could do financially. With interest rates so low there simply is no good reason to throw money away by putting/locking that much capital into something you can't move.

The purpose of money is to make more money for you, not lock it away in your house that you can't really touch it and it's returns (if any nowadays) are speculative. Plus there the whole tax thing. There are numerous articles out there that run the numbers, read them.
So I guess you take out max home equity loans and lines out to invest right? You must also margin to the max on your brokerage account since you can use the extra leverage to make more money. Since the rate is low and your investment returns so great. What's your rate of return on investment since 2000? How are your investments doing this year? It only takes couple of screw ups with investment to put you in a big hole.

I don't view my primary home as an investment. I need a place to live and I prefer owning. I prefer paying off things I own as quickly as possible as I hate owing people money.
 

IronWing

No Lifer
Jul 20, 2001
65,414
20,495
136
Originally posted by: Kelemvor
And to quote people who rip on the Debt Snowball I loved one of his quotes.

There are a lot of people who complain that the Debt Snowball isn't the best solution mathematically.
Well, if you were good at math, you wouldn't be in debt in the first place.

It is psychological. He fully admits that. But it gives you the satisfaction of whittling down the number of people you owe money to quickly so you can relieve some of that pressure.
The other factor to consider with the debt snowball is liquidity. By paying off small debts first you create the option of diverting funds away from debt service. I'm not suggesting that doing so is mathematically superior, only that this option becomes possible, and if diverted for a good reason, may be wise. For example, one might use some of his/her cash flow that had been going to servicing that smaller debt to building up an emergency fund instead of snowballing for a few months and then putting it into debt service once an adequate reserve was achieved.
 

spidey07

No Lifer
Aug 4, 2000
65,469
5
76
Originally posted by: Naustica
So I guess you take out max home equity loans and lines out to invest right? You must also margin to the max on your brokerage account since you can use the extra leverage to make more money. Since the rate is low and your investment returns so great. What's your rate of return on investment since 2000? How are your investments doing this year? It only takes couple of screw ups with investment to put you in a big hole.

I don't view my primary home as an investment. I need a place to live and I prefer owning. I prefer paying off things I own as quickly as possible as I hate owing people money.
And that is your belief and it is a good one to make you feel good. I don't do HELOC because they are generally variable. But I'm in the game to make my money make more. I didn't wake up financially until about 2003 so I'd have to check the rate of return from there.

All I can say is when I started focusing on net worth is when I really "got it". Make your money make more money for you.

 

lokiju

Lifer
May 29, 2003
18,536
5
0
Originally posted by: BoomerD
Originally posted by: CPA

Oh, and for the idiots who claim he sounds like an Amway salesman or a shuckster, he has a friggen two hour segment on Fox Business Channel every weeknight and a sindicated radio show.
In one of my first posts, I said he reminds me of one of the Amway motivational speakers. He DOES come across very much like one of them in the way he speaks, some of the things he does on stage, etc. That's NOT denigrating to his message, it's part of the "show."
As for his Faux News Channel bit...I'm still interested in him and what he says in spite of his medium...in fact, this would be the only time I've ever listened to Faux news Channel with an "open mind." :D

( a quick search of the Faux News Channel doesn't give any information about this show)
It's Fox Business Channel that he's on.
 

Corbett

Diamond Member
Jun 8, 2005
3,074
0
76
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
Yet, you still come off as a pompous jerk in this thread. Thus, negating anything you've suggested.
 

mugs

Lifer
Apr 29, 2003
48,903
19
81
Originally posted by: Corbett
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
Yet, you still come off as a pompous jerk in this thread. Thus, negating anything you've suggested.
Fortunately I'm not trying to win a popularity contest here, I'm just giving the OP my opinion of Dave Ramsey, which is what he asked for.
 

CPA

Elite Member
Nov 19, 2001
30,322
4
0
Originally posted by: mugs
Originally posted by: Corbett
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
Yet, you still come off as a pompous jerk in this thread. Thus, negating anything you've suggested.
Fortunately I'm not trying to win a popularity contest here, I'm just giving the OP my opinion of Dave Ramsey, which is what he asked for.
Mugs, you've always been cool in my book and I understand your points. Hell, I would agree with them more if I knew I had better financial discipline. I used to look at paying off the high interest cards first, but those were usually some of my middle to larger debts. When month after month goes by and you don't feel you are making much headway, then it becomes frustrating and before I knew it I lost my discipline and starting spending again. With Ramsey's approach, as each small debt is eliminated (and credit card is cancelled) there is a huge sense of accomplishment. You look forward to attacking the next debt.

I'm a friggen accountant, a CPA. I deal with numbers and huge amounts of dollars every day, but I just have not had the personal financial discipline one would expect from a CPA. Ramsey has given me a plan and enough motivation to stick with it.
 

Kroze

Diamond Member
Apr 9, 2001
4,052
1
0
Originally posted by: Naustica
Originally posted by: spidey07
Originally posted by: Naustica
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
You should've put 50% down if you could have afforded to. My guess is you've stretched to put 50% and that's the real reason you didn't.
That's about the dumbest thing you could do financially. With interest rates so low there simply is no good reason to throw money away by putting/locking that much capital into something you can't move.

The purpose of money is to make more money for you, not lock it away in your house that you can't really touch it and it's returns (if any nowadays) are speculative. Plus there the whole tax thing. There are numerous articles out there that run the numbers, read them.
So I guess you take out max home equity loans and lines out to invest right? You must also margin to the max on your brokerage account since you can use the extra leverage to make more money. Since the rate is low and your investment returns so great. What's your rate of return on investment since 2000? How are your investments doing this year? It only takes couple of screw ups with investment to put you in a big hole.

I don't view my primary home as an investment. I need a place to live and I prefer owning. I prefer paying off things I own as quickly as possible as I hate owing people money.
Well said, i'd like to hear his excuse..i mean rebuttal/response.

 

Special K

Diamond Member
Jun 18, 2000
7,098
0
76
Originally posted by: Kroze
Originally posted by: Naustica
Originally posted by: spidey07
Originally posted by: Naustica
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
You should've put 50% down if you could have afforded to. My guess is you've stretched to put 50% and that's the real reason you didn't.
That's about the dumbest thing you could do financially. With interest rates so low there simply is no good reason to throw money away by putting/locking that much capital into something you can't move.

The purpose of money is to make more money for you, not lock it away in your house that you can't really touch it and it's returns (if any nowadays) are speculative. Plus there the whole tax thing. There are numerous articles out there that run the numbers, read them.
So I guess you take out max home equity loans and lines out to invest right? You must also margin to the max on your brokerage account since you can use the extra leverage to make more money. Since the rate is low and your investment returns so great. What's your rate of return on investment since 2000? How are your investments doing this year? It only takes couple of screw ups with investment to put you in a big hole.

I don't view my primary home as an investment. I need a place to live and I prefer owning. I prefer paying off things I own as quickly as possible as I hate owing people money.
Well said, i'd like to hear his excuse..i mean rebuttal/response.
He already did. Check 5 posts above yours.
 

mugs

Lifer
Apr 29, 2003
48,903
19
81
Originally posted by: CPA
Originally posted by: mugs
Originally posted by: Corbett
Originally posted by: mugs
Originally posted by: Kroze
Just ignore all these idiots CPA. They like their fleece car & leveraged mortgage up to their eyeball because they are sophisticated & smart.
Since I'm the only person who CPA replied to directly, I have to say I resent being called an idiot. You really have no basis for anything you said in this post. I don't know what you mean by a "fleece" car, but I drive a Honda Civic. The mortgage on the house I'm in the process of buying is well within industry guidelines based on income, and thanks in part to being "sophisticated and smart" I could have afford to put 50% down if I wanted to (which I did not). But you're right, I'm probably living beyond my means.
Yet, you still come off as a pompous jerk in this thread. Thus, negating anything you've suggested.
Fortunately I'm not trying to win a popularity contest here, I'm just giving the OP my opinion of Dave Ramsey, which is what he asked for.
Mugs, you've always been cool in my book and I understand your points. Hell, I would agree with them more if I knew I had better financial discipline. I used to look at paying off the high interest cards first, but those were usually some of my middle to larger debts. When month after month goes by and you don't feel you are making much headway, then it becomes frustrating and before I knew it I lost my discipline and starting spending again. With Ramsey's approach, as each small debt is eliminated (and credit card is cancelled) there is a huge sense of accomplishment. You look forward to attacking the next debt.

I'm a friggen accountant, a CPA. I deal with numbers and huge amounts of dollars every day, but I just have not had the personal financial discipline one would expect from a CPA. Ramsey has given me a plan and enough motivation to stick with it.
As I've said from the start, it comes down to personality. If a person evaluates their options and determines that Dave Ramsey's plan is the way to go, there is nothing wrong with that. I applaud anyone who does what they need to do to get their finances under control. And I won't criticize anyone for wanting to pay off their mortgage early rather than investing the money - that's a personal choice. All I'm saying is that Dave Ramsey is doing his customers a disservice if he only explains the PROs of his approach and not the CONs.
 

MetalMat

Diamond Member
Jun 14, 2004
9,691
36
91
I listen to his show when Iam in Houston, but I dont really have a problem with debt. I am in no big hurry to pay off my college loans when the intrest rate is around 2.5% and will get lower next year.

My ex-gf on the other hand is HORRIBLE with money and she would benefit in following his advice.
 

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