Dave Ramsey

[Anonymous]

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@marty56 wrote:

I like Dave for the most part but I disagree with him on auto loans and the use of credit cards if you PIF.  His program has helped people get out of debt using the Debt Snowball concept where you make minimum payments on all CCs except for the one with the smallest balance and then attack it till its PIF and then repeat to the next smallest and so on.  I owuld view his program like AA or Weight Watchers in that churchs and schools host his FPU course in a group setting..

I used a DMP program to cure my CC addiction which also uses the Debt Snowball approach.

You may like his group approach or go it alone like I did.  I dont know what I would have done if I knew about Dave prior to using a DMP.  The DMP worked for me and I know people at work who are taking FPU.

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When I was getting out of credit card debt I used a snowball approach, but put it towards the credit card with the highest interest rate.  I don't understand, and I don't think I will ever understand, how DR can advocate the snowball approach towards the smallest balance.  That leaves people in debt longer than they need to be.  Depending on how much debt someone has will determine how much longer the smallest balance snowball will cause.  

Don't get me wrong, I can understand how some people need the psychological high that comes from getting a credit card paid off, I just don't get how any one person can advocate strictly and soley for one method of paying your cards down, when that one method will cause people to be in debt longer.

[marty56]

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@Anonymous wrote:

When you mention the DMP.  where are you finding rescources for this?  Is this a program or speaker like Dave Ramsey?  Or is the throught the cc's

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DMP are run by companies who negotiate with the credit card companies to reduce the interest rates and OTL fees in return for closing the account and not appying for new credit.  You make a single payment to them and they inturn pay your creditors.   They only work with revolving credit card debt.

I sent you a PM on the company that I used.

[marty56]

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@Anonymous wrote:

When I was getting out of credit card debt I used a snowball approach, but put it towards the credit card with the highest interest rate.  I don't understand, and I don't think I will ever understand, how DR can advocate the snowball approach towards the smallest balance.

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I cant speak for others but the reason why that approach worked for me was that it took me over 5 years to get out of CC debt as then number of accounts with balances droped, I got more and more postive that I would finally climb out of the hole I dug myself into.  Going from say 10 account with a balance to 9 accounts, seemed better to me than say going from 70k of debt to 65k where both results happend at the same time.

For people like me, that approach worked even if it cost me more money in the long run.

[marty56]

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haulingthescoreup wrote: 
They might in fact need to swear off credit forever.

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Rather than that I say swearing off revolving balance.  After justifiying in your mind to revolve the first balance, others come much easier.  20 buck here, 30 bucks there and your back into 70k of CC debt. 

[haulingthescoreup]

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woopah wrote:

...Don't get me wrong, I can understand how some people need the psychological high that comes from getting a credit card paid off, I just don't get how any one person can advocate strictly and soley for one method of paying your cards down, when that one method will cause people to be in debt longer.

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This is a great summary of two points about Dave:

-- He does understand that a lot of people haven't acted rationally with their credit, and now isn't necessarily the time to start. Many, many or them are instant-gratification folks (that's how a lot got into trouble in the first place), and having a few cards paid off relatively quickly might be critical to their success.

-- He's terrible about one-size-fits-all solutions!!!


eta: posted this before I read marty's comments. He explained the psychology part a lot better than I did.

Message Edited by haulingthescoreup on 03-17-2009 03:21 AM

[Anonymous]

the most  outragrous DR he's belives if find a lender that will do a manual review , that person with no credit would able to obtain a house loan on income  and personal reference alone .

[Anonymous]

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@marty56 wrote:

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@Anonymous wrote:

When I was getting out of credit card debt I used a snowball approach, but put it towards the credit card with the highest interest rate.  I don't understand, and I don't think I will ever understand, how DR can advocate the snowball approach towards the smallest balance.

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I cant speak for others but the reason why that approach worked for me was that it took me over 5 years to get out of CC debt as then number of accounts with balances droped, I got more and more postive that I would finally climb out of the hole I dug myself into.  Going from say 10 account with a balance to 9 accounts, seemed better to me than say going from 70k of debt to 65k where both results happend at the same time.

For people like me, that approach worked even if it cost me more money in the long run.

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Oh, I get it.  I think anyone whose ever been in a significant amount of credit card debt knows what it felt like as the credit cards get paid off.  It may not have been the approach I used, but I do understand why people use it.  When I had almost $30K in CC debt I had to keep focused on how much the individual CC I was paying off at the time and then how much my overall debt had gone down. I picked the method I did because I didn't want to be in debt any longer than I had to.  It's the same reason why I liquidated my down payment savings to get my car paid down and then off faster, that's the debt I'm currently working on.  In the long run it will probably still take me nearly the same amount of time to get my down payment built back up, but I won't owe on my car as long. 

Regardless of the method that someone chooses, they have to choose the method that works for them, and it doesn't matter if they're in debt longer because of the method they chose.  

What I don't understand how is how Dave Ramsey can preach that for every person the way to get out of debt is to pay the smallest balances first.  As HTSU said, it's that "1 size fits all approach" that I don't get, when it's that "1 size fits all approach" that leaves them in debt longer.  

[Anonymous]

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@haulingthescoreup wrote:

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@MidnightVoice wrote:

Insert standard MV rant on DR's financial incompetence in certain areas  

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Yes, we know, we know.

My modified DR rant: Some people are so determinedly in denial that they might well need DR's shock therapy. They might in fact need to swear off credit forever.

Many others just need to get real about what got them where they are, and what it will take to get them back to a healthy state.

It's like people and booze: some need to go the straight AA route and never drink again. Others need to go the temperance route, stopping drinking to the point of wearing a lampshade and singing "My Way," but they can still handle a glass of wine with dinner. It's going to vary by the individual.

His tactics can be useful; his overall presentation of credit is decidedly skewed and incorrect.

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Nice analogy there. Dave Ramsay has some really great advice, and like many 'experts' there are things he says that you have to take with a grain of salt. Apply what he says to your own situation and disregard the rest. His take on credit & FICO is a little extreme IMO, but at least he doesn't call every caller 'Girlfriend!' 

[Anonymous]

That's why I like a snowball spreadsheet that allows you to play around the order. 

You can plug in all your cards, then change their order really easily.

You have much more flexibility and can figure out what works best for YOU.

You can also enter in teaser rates, like BT rates.  That really appealed to me! 

You could see that killing off cards 1 and 3 - the little guys - would made you feel good.

(oh, and I DO like to think of it as 'killing' off that debt, stomping it into the ground, annihilating it, grrrrr   bloodthirsty, no?

and then a balance transfer at 5% for 1 yr would save you $x amount of money and you would be out of debt in x months.  but if you change the order you could get out of debt in x months.  and if you are able to throw an extra $100 down one month, what's the impact of that...

The visual is very motivating!