Dave Ramsey

[Anonymous]

---

@Anonymous wrote:

---

@Anonymous wrote:

---

@Anonymous wrote:

---

@Anonymous wrote:

I agree with all of this I just think Ramsey misses out by not at least explaining to people the absolute most effecient way to get out of debt.  It's kinda like losing weight.  You can do it through diet changes alone, but diet and exercise is a more effecient way.  By explaining the differences and making small tweaks to the snowball idea Ramsey could come up with an even more effective way to reduce debt. 

It certainly needs to be explained that when two debt sizes are close to equal attacking the highest interest rate is 100% of the time the right move.  I'll allow some wiggle room if we are talking small loans to knock out payments. 

---

I don't think he has much of an incentive to change or examine what he feels is the most optimal debt management if he strongly believes it is mind over matter. After all, he's not the only one who pushed the Debt Snowball method hard (Suze Orman was also very big on this). His opinion holds as much weight as the next financial guru in his industry. What people should always remember and not forget about people like Suze Orman, Robert Kiyosaki, Jim Cramer, Tony Robbins, Dave Ramsey, etc. is that they built their wealth on managing their "brand" and not necessarily on their advice or format of their advice alone.

Their advice might be out of date, impractical, or just unapplicable to your financial situation. To me, they're brand salesmen, not that much different from what Donald Trump is/was, and thus they should all be scrutinized with a careful eye, but I also gain insight as to certain concepts and methods I would lose if I had to glance into a finance textbook instead.Anyway, I would hopefully expect people to do their own independent research, compare and constrast guru advice, and not rely on the word/fancies of one "guru" to determine how to fix their personal finances.

---

Excellent point (which is why I also brought up his pushing mutual funds from his "trusted advisors."  And I'm definitely not anti-Ramsey.  I've learned from him and I think his advice in many situations is awesome and what people need to hear.  The problem with not analyzing the snowball method for someone's particular case is the large amount of money you could be essentially wasting.  If debt is bad because you're paying interest on it then staying in debt LONGER and paying more interest is doubly bad!  The thing is depending on the situation we aren't talking a couple of bucks.  People could cost themselves thousands of dollars by paying down their debts in order from smallest to largest. 

In a lot of cases the difference may be minimal, and I definitely think the psychology aspect is important.  ONLY talking about a method that can potentially cost people months or years of time and thousands of dollars is borderline criminal for a financial "guru" imo.  And it just seems like such an EASY fix for him.  Point out both methods.  Weigh the pros and cons of both methods.  Explain to people when one situation works out better than others.  If the difference was like 50 bucks I'd be all for the snowball.  But the difference (depending on the situation) may be thousands and more time in debt.   

---

Doing what you're saying would confuse more than help IMO.

I just finished reading the Total Money Makeover last night. I now understand his logic a bit more than I did before.

He's an all-or-nothing kind of guy. You get that feeling from listening to him speak publicly and across in his writing. Notice that he quotes Bible scripture very often in his talks in order to get his points across. He's very clearly appealing to a specific kind of debtor(s), the one who would accept using Bible scripture as an example of good money management. Someone who needs simple and easy to follow debt management.

That appels to a not-so-small percentage of the US population.

---

How would it be confusing?  If you pay down a 2000 dollar loan at 2% interest faster than a 2005 dollar loan at 21% interest you are making a huge mistake.  You are paying more in interest and will remain in debt longer.  And it is simple for him to show that.  Not talking about the pros and cons of the method is either laziness, arrogance, or stupidity on his part.  It's not even easier to snowball those amounts. 

I just wish he wouldn't be so dogmatic when you can easily and clearly point out the flaws of the method.  Doesn't mean it is bad to suggest and in many cases may be good for a lot of people.  But in a lot of cases it's just stupid and indefensible.  You aren't building momentum or anything in a lot of scenarios, you are wasting money and time. 

[core]

geoforce, hopefully the average listener is smart enough to place the $2000 and $2005 loans in the same bucket when listing their debts smallest to largest.  If they're not smart enough to do that, they probably aren't able to follow a longer discussion about pros and cons.

$5 difference is easy.  It's the same amount.  But where do you draw the line?  With some very small incomes even a small $250 difference may mean several months difference before the one gets paid off.  Every person has to decide for their own situation, of course. 

And you want to explain all this during a radio show in-between the caller trying to interrupt?  The show is painful enough to listen to.  I like it when he mutes and dumps the callers, personally.  Heh I always wonder what they hear when he does that.

[Anonymous]

---

@core wrote:

geoforce, hopefully the average listener is smart enough to place the $2000 and $2005 loans in the same bucket when listing their debts smallest to largest.  If they're not smart enough to do that, they probably aren't able to follow a longer discussion about pros and cons.

$5 difference is easy.  It's the same amount.  But where do you draw the line?  With some very small incomes even a small $250 difference may mean several months difference before the one gets paid off.  Every person has to decide for their own situation, of course. 

And you want to explain all this during a radio show in-between the caller trying to interrupt?  The show is painful enough to listen to.  I like it when he mutes and dumps the callers, personally.  Heh I always wonder what they hear when he does that.

---

This should be pointed out in his book presenting his readers with two options and showing them which one results in paying off the debt the fastest and most cheap way.  Instead of Ramsey acting as if his way is the best way he should attempt to educate readers of his and show where the snowball method can fail and where it may be more successful. 

Depending on the situation we can be talking about thousands of dollars which is not a small amount.  If it's a scenario where the numbers are smaller and the interest amounts aren't going to be significantly different by all means snowball.  Snowball if you have a few small loans you can knock out early.  Just don't cost yourself thousands of dollars and months of time by not understanding a simple formula. 

[Anonymous]

Another possibility is that the snowball method makes the assumption that larger debts (typically mortgages, student loans, and vehicle loans) have lower interest percentages that smaller debts (credit cards, store financing, etc.), which if true would mean paying down larger interest percentages with the smaller balances.

[CatOfSpades]

---

@Anonymous wrote:

Another possibility is that the snowball method makes the assumption that larger debts (typically mortgages, student loans, and vehicle loans) have lower interest percentages that smaller debts (credit cards, store financing, etc.), which if true would mean paying down larger interest percentages with the smaller balances.

---

This has actually always been true in my case. That and there was never a big enough difference in the interest rates to begin with. The other thing people tend to overlook is that if they have a $1000 balance with 25% interest and a $10k balance with 13% interest - they're actually paying the most interest on the $10k balance because there's a lot more money involved. 

[Anonymous]

---

@someg33k wrote:

I have listened to him quite a bit. Some of what he says makes great sense and I agree with. Other stuff not so much..

Telling the average person not to use credit cards is not realistic. When my car breaks down unless I have cash in the bank my credit card saves the day so I can continue getting to work. Dave Ramsey has a net worth of 55 mil so of course this would never be a problem for him. Easy to bark that from his 55 million dollar ivory tower.

IMO 50% great advice and 50% BS.

---

Agred someg. I find that a fair amount of the information he provides does not make sense or is too slanted in one direction. Sometimes I think he has tunnel vision instead of looking at the big picture.

I also like the comment that karma posted earlier in the thread:

"What people should always remember and not forget about people like Suze Orman, Robert Kiyosaki, Jim Cramer, Tony Robbins, Dave Ramsey, etc. is that they built their wealth on managing their "brand" and not necessarily on their advice or format of their advice alone.

Their advice might be out of date, impractical, or just unapplicable to your financial situation. To me, they're brand salesmen, and thus they should all be scrutinized with a careful eye. .Anyway, I would hopefully expect people to do their own independent research, compare and constrast guru advice, and not rely on the word/fancies of one "guru" to determine how to fix their personal finances."

I also agree with UncleB's comment:

@UncleB wrote:

"I don't need someone with a 'direct' demeanor telling me how to spend and save, but there are folks who do."

[sparklerd34]

I Just started listening to his youtube channel and some things i agree but the no credit which is where i just came out of. it was tough for me to get my first credit card after 13 years of no credit cards.  i like the emergency fund and basically a budget but not saving for retirement until after youre done with your debts... hmm just seem to be losing money if your employer is matching contributions.  I see suzie has her pros and cons as well.  it looks like you have to find the method that works best for you

[OldFatJarhead]

Dave's methods of getting out of debt are great. For broke people who can't get off the debt treadmill, following Dave's advice will get you square as well as anyone.

His "wealth building" ideas, however, are terrible. In terms of his "baby steps", steps 1-5 are pretty good. Steps 6 and 7 are only good for high income earners. The simple fact of the matter is you can't save yourself wealthy unless you have a LOT coming in. And paying off your house early is only about one step better than saving your money in your mattress. All that equity is just sitting there doing absolutely nothing for you. Useless. His advice is way too conservatice to build any real wealth for people with average incomes.

[Rossdaniel87]

its not the equity that saves you money, its having the largest item in your budget redirected. instead of paying the bank $1,000 a month its going into an investment account.