Dave Ramsey's Financial Peace University

[Deeko]

I'm just gonna :roll: at those of you that are complaining about this guy's methods. Obviously there are ways to make more money but they are much too complicated for the average person. Yes, even something as simple as putting extra money in a money market rather than paying extra towards their mortgage. They can't all be "financial geniuses" like you guys. He isn't "costing" them any money, and through his tactics they can get out of debt and start having a positive cash flow again.

 

[mugs]

Originally posted by: Deeko
I'm just gonna :roll: at those of you that are complaining about this guy's methods. Obviously there are ways to make more money but they are much too complicated for the average person. Yes, even something as simple as putting extra money in a money market rather than paying extra towards their mortgage. They can't all be "financial geniuses" like you guys.

I'm not either. It doesn't take a genius. There is nothing complicated about paying off the account with the highest interest rate first. It is no more complicated than paying off the account with the smallest balance.

He isn't "costing" them any money,

He is.

and through his tactics they can get out of debt and start having a positive cash flow again.

And there are better and faster ways to do it.

Maybe you're just picking and choosing which posts and which parts of those posts to read, but IIRC I've said at least 3 times in this thread that his methods may work better for some people. I'd also said he's doing his customers a disservice by dumbing it down instead of presenting other options that may be better.

 

[Beattie]

Originally posted by: mugs
Yes, it's his show, his book, his plan, and I'm pointing out and criticizing a deficiency in his show, his book, his plan. His show, his book, his plan are centered around giving people financial advice, and he's giving people over-simplified advice that will potentially cost them money.

...

If Dave Ramsey's tactics are what it takes to get you out of debt, then by all means do his plan. But his customers should know that he's costing them money.

He is always up front that this plan is not the mathematically optimum way. He never claims that it is. But that he thinks it is psychologically superior. And the few hundred dollars you lose out on by doing it that way is outweighed by the benefit of not having the debt anymore. I mean, have you even listened to the show? Most of the callers are dumb rednecks that need that psychological crutch to make it work.

So, he's not "costing them money" as you suggest. He's giving them a solution that they can stick to and make work instead of the optimum solution that they will give up on. They make the decision to go with his plan over the alternatives.

 

[Fingolfin269]

Originally posted by: mugs

Originally posted by: Deeko
I'm just gonna :roll: at those of you that are complaining about this guy's methods. Obviously there are ways to make more money but they are much too complicated for the average person. Yes, even something as simple as putting extra money in a money market rather than paying extra towards their mortgage. They can't all be "financial geniuses" like you guys.

I'm not either. It doesn't take a genius. There is nothing complicated about paying off the account with the highest interest rate first. It is no more complicated than paying off the account with the smallest balance.

He isn't "costing" them any money,

He is.

and through his tactics they can get out of debt and start having a positive cash flow again.

And there are better and faster ways to do it.

Maybe you're just picking and choosing which posts and which parts of those posts to read, but IIRC I've said at least 3 times in this thread that his methods may work better for some people. I'd also said he's doing his customers a disservice by dumbing it down instead of presenting other options that may be better.

His rationale behind paying off the smallest first is psychological. I'm not a shrink so I have no idea if someone who is in a lot of debt from a lot of different sources is more likely to continue working on debt by paying off the high interest rate one before the smallest principal or not. On paper it is obvious that paying off high interest first is the way to go but who knows how this works out once you throw the "average person" mentality on the mix?

 

[Beattie]

Originally posted by: mugs

Originally posted by: Deeko

He isn't "costing" them any money,

He is.

If you think this then you would agree that having cash in your wallet is "costing you money" because it's not invested in your magical mutual fund that always averages 17%.

There are, of course, reasons for doing things differently when trying to accomplish a goal. It's not "costing you" because it needs to be that way to function.

 

[Deeko]

Originally posted by: mugs

Originally posted by: Deeko
I'm just gonna :roll: at those of you that are complaining about this guy's methods. Obviously there are ways to make more money but they are much too complicated for the average person. Yes, even something as simple as putting extra money in a money market rather than paying extra towards their mortgage. They can't all be "financial geniuses" like you guys.

I'm not either. It doesn't take a genius. There is nothing complicated about paying off the account with the highest interest rate first. It is no more complicated than paying off the account with the smallest balance.

He isn't "costing" them any money,

He is.

and through his tactics they can get out of debt and start having a positive cash flow again.

And there are better and faster ways to do it.

Maybe you're just picking and choosing which posts and which parts of those posts to read, but IIRC I've said at least 3 times in this thread that his methods may work better for some people. I'd also said he's doing his customers a disservice by dumbing it down instead of presenting other options that may be better.

If it works for them, he's not doing them a disservice. You also vastly overestimate the average person's concept of money (and their ability to learn about it).

And you're right, he does cost them money - the cost of the book, or the class :laugh:

 

[mugs]

Originally posted by: Fingolfin269

His rationale behind paying off the smallest first is psychological. I'm not a shrink so I have no idea if someone who is in a lot of debt from a lot of different sources is more likely to continue working on debt by paying off the high interest rate one before the smallest principal or not. On paper it is obvious that paying off high interest first is the way to go but who knows how this works out once you throw the "average person" mentality on the mix?

I know, I've said that myself at least twice, including my very first post in this thread.

I've gotten the Dave Ramsey followers all up in a tizzy when I haven't said anything inaccurate, apparently have not misrepresented any of Ramsey's views, and all I've done was present examples of the deficiencies in his over-simplified advice.

 

[mugs]

Originally posted by: Beattie

Originally posted by: mugs

Originally posted by: Deeko

He isn't "costing" them any money,

He is.

If you think this then you would agree that having cash in your wallet is "costing you money" because it's not invested in your magical mutual fund that always averages 17%.

There are, of course, reasons for doing things differently when trying to accomplish a goal. It's not "costing you" because it needs to be that way to function.

I said myself that 17% is optimistic, and 8% is more reasonable. I've also said 2, maybe 3 times that a lack of liquidity is a bad thing, so I don't know why you'd think I'd be opposed to having cash in my wallet (although I do not in fact carry more than a few dollars in my wallet in case I need to eat at a fast food place, because I get cash back on my credit cards - I wonder how Dave feels about that? ).

I'm seeing a common theme in this thread... people are missing the point of what I'm saying, and I'm repeating myself a lot. They say insanity is doing the same thing repeatedly and expecting a different result... you people are driving me insane.

 

[Deeko]

Originally posted by: mugs

Originally posted by: Fingolfin269

His rationale behind paying off the smallest first is psychological. I'm not a shrink so I have no idea if someone who is in a lot of debt from a lot of different sources is more likely to continue working on debt by paying off the high interest rate one before the smallest principal or not. On paper it is obvious that paying off high interest first is the way to go but who knows how this works out once you throw the "average person" mentality on the mix?

I know, I've said that myself at least twice, including my very first post in this thread.

I've gotten the Dave Ramsey followers all up in a tizzy when I haven't said anything inaccurate, apparently have not misrepresented any of Ramsey's views, and all I've done was present examples of the deficiencies in his over-simplified advice.

I'm not a follower of his, I'd never even heard of him before I read this thread. I also agree with you that there are ways to make more money than what he says - but I think you are absurd to suggest he's doing them a disservice or costing them money.

 

[Beattie]

Originally posted by: mugs

Originally posted by: Beattie

Originally posted by: mugs

Originally posted by: Deeko

He isn't "costing" them any money,

He is.

If you think this then you would agree that having cash in your wallet is "costing you money" because it's not invested in your magical mutual fund that always averages 17%.

There are, of course, reasons for doing things differently when trying to accomplish a goal. It's not "costing you" because it needs to be that way to function.

I said myself that 17% is optimistic, and 8% is more reasonable. I've also said 2, maybe 3 times that a lack of liquidity is a bad thing, so I don't know why you'd think I'd be opposed to having cash in my wallet (although I do not in fact carry more than a few dollars in my wallet in case I need to eat at a fast food place, because I get cash back on my credit cards - I wonder how Dave feels about that? ).

I'm seeing a common theme in this thread... people are missing the point of what I'm saying, and I'm repeating myself a lot. They say insanity is doing the same thing repeatedly and expecting a different result... you people are driving me insane.

So, 8%, lose a quarter to taxes and you are at 6%. Man, that sure looks like a mortgage rate to me.

Regarding liquidity, his plan includes an "emergency fund" that insures liquidity. Besides, money you put into a 401k or (roth)IRA is not liquid either.

He probably wouldn't like the credit card thing but I do it also because I pay it off and check the balance and stuff often enough that it's not a problem. For most of his fans though, they can't handle it and end up going over and carrying a balance. So in that light, his advice is sound.

 

[Beattie]

Another thing is that the Dave Ramsey plan includes a lot more than just the "debt snowball" as he calls it. A lot of it is insurance, estate planning, retirement, and so on.

 

[SearchMaster]

mugs, let me start by saying I agree with about 75% (probably) of what Ramsey says. I'm not a huge proponent of his by any means.

In general, his advice is geared toward the type of person who will get, say, $10K in credit card debt, take out a HELOC to pay it off, then have $10K in CC debt built back up in 2-3 years. If you're not that type of person, his show and advice are not for you. But if you look in the news, these are exactly the type of people who have caused the subprime disaster.

I listen to him because, well, I've always enjoyed talk radio and his show is on during my drive home. I find him entertaining, and to some extent inspirational (listen to his "debt-free Friday" shows).

 

[Beattie]

Originally posted by: SearchMaster
mugs, let me start by saying I agree with about 75% (probably) of what Ramsey says. I'm not a huge proponent of his by any means.

In general, his advice is geared toward the type of person who will get, say, $10K in credit card debt, take out a HELOC to pay it off, then have $10K in CC debt built back up in 2-3 years. If you're not that type of person, his show and advice are not for you. But if you look in the news, these are exactly the type of people who have caused the subprime disaster.

I listen to him because, well, I've always enjoyed talk radio and his show is on during my drive home. I find him entertaining, and to some extent inspirational (listen to his "debt-free Friday" shows).

This post is completely correct.

 

[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.

 

[Queasy]

I've listened and read up on Ramsey some. My church had a Financial Peace University thing going on for a few weeks. We couldn't attend because of scheduling conflicts.

However, his plan is no different than any other from a financial adviser or even a personal trainer for getting in shape. It seems to be a way to enforce and encourage financial discipline in people which is something that many people sorely need (myself included). While he gives good advice, the success rate is completely dependent on the individual.

 

[mugs]

Originally posted by: Beattie
So, 8%, lose a quarter to taxes and you are at 6%. Man, that sure looks like a mortgage rate to me.

Again I find myself repeating myself... mortgage interest is tax deductible. Your marginal tax rate is likely higher than what you'd pay in long term capital gains tax, and at worst you'd break even on the taxes. The taxes are a wash.

Originally posted by: Beattie

Originally posted by: SearchMaster
mugs, let me start by saying I agree with about 75% (probably) of what Ramsey says. I'm not a huge proponent of his by any means.

In general, his advice is geared toward the type of person who will get, say, $10K in credit card debt, take out a HELOC to pay it off, then have $10K in CC debt built back up in 2-3 years. If you're not that type of person, his show and advice are not for you. But if you look in the news, these are exactly the type of people who have caused the subprime disaster.

I listen to him because, well, I've always enjoyed talk radio and his show is on during my drive home. I find him entertaining, and to some extent inspirational (listen to his "debt-free Friday" shows).

This post is completely correct.

And I've said from the start (I think this is the fifth time now) that Dave Ramsey's advice is fine for certain types of people depending on their personality. If after evaluating the options you think Dave Ramsey's plan would work best for you, then by all means use his plan. If after evaluating the options you cannot determine what would work best for you, then you probably need an over-simplified plan like Dave Ramsey's. By all means follow his advice. But if you have no desire to evaluate the options and determine which plan would work best for you, then there is a reason why you're in the situation you're in (collective "you," not talking about you specifically). People who have no desire to educate themselves about how money really works are destined to remain poor. Why do you think lottery winners so often end up right back where they started after a few years?

I think I'm giving up now.

BoomerD, good luck. :thumbsup:

 

[Kelemvor]

Exactly. Most people have never been through one of his seminars but think they know everything he talks about and then put him down. Debt Snowball is one session otu of like 20. There much much more that he goes over.

 

[spidey07]

His advice is good for people that are just too stupid with money. It helps them get out of debt and that is good.

What it DOESN'T do is teach you how to build wealth and make your money make more money for you. In fact he goes the direct opposite way. For that he is being very disingenuous and should not be used as a financial planner because you are throwing money away if you listen to him.

He is entertaining to listen to because when you hear his callers and the situation they got into it can be very funny.

 

[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.

 

[mugs]

Originally posted by: spidey07

He is entertaining to listen to because when you hear his callers and the situation they got into it can be very funny.

Oh, I saw a great one on Suze Orman's show.

- I believe her income was somewhere in the mid $30s
- She had a ~$50k loan on an SUV that was probably worth much less than that
- She got herself into an endless cycle of paycheck advance loans. She would use each paycheck to pay off her previous $250 loan, then she would get depressed because she had no money so she would take out another $250 loan to buy clothes. There was a service charge of $50 on the loan, plus ~20% interest.

So figuring she essentially borrowed $250 in perpetuity, over the course of a year she would pay 26 * $50 in service charges and about $50 in interest. It cost her $1350 over the course of a year to get $250 TWO WEEKS SOONER.

No doubt Dave Ramsey's advice would have been great for her, but given that she was in the situation she was in I don't think she would have followed his advice. Suze told her to sell the SUV and stop taking out the loans, but I doubt she listened.

I was in a discussion on another forum where a member had (IIRC) somewhere in the range of $20k in credit card debt. She could afford to pay about $500 per month in addition to the minimum payments on the cards. She also had a luxury item, I'll call it a boat, and she had a loan on that. I and others suggested that she should sell the boat to pay off the debts faster. She insisted that she could afford the boat. She meant that she could afford the payments on the boat. I tried to explain to her that it was that very attitude that landed her in $20k of credit card debt in the first place, but she insisted on keeping the boat. In the end she asked to have the thread locked, because she didn't like the advice she got. Some people just won't listen to sound financial advice.

 

[Kelemvor]

Also regarding the Credit Cards versus cash... That's also a psychological thing as well.

If you pay for something with a credit card, you have no emotional attachment to that card so it's very easy to buy stuff.
If you go to pay for something and you actually hand over cash... That's emotionally harder to do. It's actual money you are spending os you will think harder about spending it.

There are studies he sites that state that when you use Credit Cards, you spend 15% more on items because it's just so easy to do.

And if you pay with cash, you can normally get a better price because companies dont' have to pay fees and such. Imaging going in to buy a car with cash and the great deeal you could get. Same goes or furniture or other things like that.

 

[WingZero94]

Dave Ramsey's methodology is quite sound, albeit conservative. I too was wary of using those methods because I like nailing out high interest stuff first. Plus, why not use the power of compound interest for retirement / etc. What I found was putting debt (student loans) to rest is quite rewarding. In fact, we just finished paying off the last of my wifes student loans and can now put our sights on mine. We have destroyed nearly 15k in debt in the last 1.5 years. It is SOOOOO DIFFICULT to NOT purchase a new car, furniture, electronics, etc.... My pay at my new job allows for $1500 per month disposable income. I think to myself, hmmm I could have a nice LCD TV EACH month!!! Very difficult, but I do want to down that debt! The debt snowball is psychologically satisfying and will get rid of your debt fast.

 

[Kroze]

Originally posted by: BoomerD
http://www.daveramsey.com/

I know a couple of people who swear by the guy and his techniques/procedures for helping you get out of debt.

I'm sure he basically teaches the beginning steps in home budgeting and personal financial accounting, along with helping people avoid some of the common mistakes many of us make. BUT, listening to the video posted on the website, he sounds like one of the motivational Amway speakers.

Anyone familiar with the guy and his products?

I listen to his radio show every day and follow his principle. Since I started a couple of months ago, i paid off my car and now working to pay off my mortgage. It's very rewarding to know that you're not in debt to anyone. Imagine how great life is if you don't have any debt? Your boss don't have crap against you for leverage, if you don't like it just say FU and leave.

 

[TruePaige]

Man I have a way better plan to get people out of debt.


http://consumerist.com/consume...cant-afford-252491.php

 

[MrChad]

Originally posted by: shinerburke
Here's how you get out of debt. Stop spending more than you bring in.

Don't Buy Stuff You Can't Afford