Dave Ramsey = Jeff Galloway if he were a bible thumper
Posted in Money by Klives
I could spend time revising it to make it better, but I am not going to do it. You will just have to deal with it - and get used to it from me. I won’t post daily. When I do, most of the time I will just hammer stuff out.
My friend asked me what I thought of Dave Ramsey. He has a website (daveramsey.com) and nationally syndicated radio program. I had never heard of him before, so I thought I’d see what he was all about. I haven’t spent much time on his website and have only listened to an hour of his radio program, so I still don’t know a lot about him, but my first impression is:Dave Ramsey = Jeff Galloway Bible Thumper
I respect that Jeff Galloway has stirred a lot of people up and got a lot of people, who wouldn’t normally exercise, to take on a physical challenge like a marathon. However, I think his methods are not conducive to maximizing performance. Hell, I would even say that his methodology hinders performance, but I guess participation is better than nothing. He, like Ramsey, should start with some basics rather than jump right into things.
In any case, I listened to the first hour of The Dave Ramsey Show on 9/27 and here is my opinion.
The first ten minutes of the show Ramesy spent promoting himself and talking about the evil credit card companies. He told listeners that they should cut all their credit cards up into pieces and scream in triumph. I guess if someone has a spending addiction and doesn’t have the discipline to pay off their charges each month, I would agree. But I think a lot of people do have enough self-discipline to pay off the charges each month. It is like Galloway dumbing down his training so everyone can do it. The problem is it prevents people with more talent to get the most out of their performance.
If you do have the discipline to pay off the charges, some credit cards offer great deals. I have an American Express Blue Cash card and get 5% rebate off all my charges at gas stations, grocery stores and drug stores and 1% rebate on all my other purchases. This adds up over a year. (A side note: If you ever buy a computer from Dell and plan to pay for it with cash, call them and tell Dell that you want to buy it using American Express. They will knock the price down if you use their financing since they don’t want to pay fees to American Express). The bottom line is that I disagree that everyone should cut up their credit cards.
His first call: A lady called in to tell Ramsey that she was mad at her husband. Without her consent, her husband promised to give $10,000 to their church. They were in debt and she would rather this money help them get out of debt. I was a little surprised when Ramsey started citing scripture when he talked to the lady. There wasn’t much financial advice Ramsey could offer to this caller. He told her that she should communicate better with her husband in the future. Since they make $200,000 a year and the husband promised the church the money, Ramsey felt they should contribute the money.
His next call was a poor sap of a guy. The caller said he believed that God was giving him a blessing by allowing him to enter this special deal that allowed him to own a home with putting only $100.00 down. It turned out the guy bought the home without a home inspection and it was a giant money pit, and the guy didn’t have the resources to fix it up. I agreed with Ramsey on this one. He told the guy to sell the house even it cost him $5000 to $10,000. Again Ramsey started citing quotes from the bible with his response. I thought this was weird, but then I guess the trend these days is to use God to make money ever since the success “The Passion of the Christ.” 20TH Century Fox just announced that they are going to create an entire film division devoted to Christian content. Fox Faith info
The next two callers had to do with home mortgage loans. One of the callers asked about if she should refinance a 30 year home loan at 5.5% to a 15 year loan. I agreed when he said no.
But I disagreed with his advice. He told her to pay it off early. If it is a 5.5% mortgage and they itemize, the couple could deduct the interest. If you adjust for inflation, the loan would be very cheap money.
Here is how I would go about paying off debt if I had extra cash.
1) I’d contribute to the match in my companies 401(k) plan.
2) Eliminate Inefficient Debt (credit cards, equity lines, loans with adjustable rates). Pay off the highest rates off first.
3) Maximize Tax-Deferred Savings (401K, 403B, IRA).
4) Eliminate Efficient Debt (with a 5.5 fixed rate mortgage)
A mortgage with a 5.5% fixed rate is the last thing I pay off, not the first.
A young woman called in saying her boyfriend liked to spend lots of money. She is more of a saver. Ramsey said they should seek marriage counseling before they got married. That may have been the best financial advice he gave on the program since divorce can cost a ton.
So with my limited familiarity with Dave Ramsey, I am not a fan. Maybe I caught on off hour?
September 29th, 2006 at 9:00 pm
I’ve listened to Dave Ramsey here and there and really don’t know if he is good or not, seeing that I really didn’t have any money to have money problems with.
1. Credit Cards… Some people are good with them, but most aren’t. I am currently trying to get my first credit card ever( used a debit up until now) and nobody wants to give me a card w/o an annual fee. If I was still in college people would be jumping to give me a card. So I have not been prudent w/ establishing a credit history… gonna have to work on that.
Most people are idiots w/ credit cards, paying interest on stuff that they probably shouldn’t have bought to start with. It’s not a mortgage, its most likely bad debt or what you call “inefficient”.
2. The 200k couple who made a promise. This is more of an ethical question. Most likely, they’ll have some chance to handle the debt with that type of income.
I really dislike people who have money and then whine when they mess up… one of my first pet peeve posts talked about this.
The mortgage thing might be a preference…
September 30th, 2006 at 10:22 am
Because some people become alcoholics, would you recommend that everyone go into their refrigerator and pour all their beer down the sink? Sure, some people have a problem with spending with a credit card, but it way too far a gross generalization to tell everyone that they would be better off without a credit card.
If you plan to buy a home or condo, you need to establish a credit history. The better your credit history the higher your FICO score will be. If you have a high FICO score, you will be able to get a better mortgage rate. I am surprised you haven’t been able to find a no annual fee credit card with the change in the bankruptcy laws.
Regarding paying off a mortgage first: Sure, it might provide some psychological benefit to pay off the mortgage first and own your home. Just like taking walking breaks provides some psychological relief while doing a marathon, it isn’t usually the quickest way to get to the finish line. The cheapest way to the finish line and become debt free is to pay off the highest interest bearing liabilities first.
October 1st, 2006 at 8:43 pm
hm… wasn’t being critical of your comments really… I wasn’t advocating no credit cards, but I know a lot more people carrying dumb balances on cards then those that don’t have any.
The mortgage thing seemed to be the only issue in your final thoughts of the post. You just said that he recommended they pay off early…i wasn’t sure if this was somebody calling in w/ just a mortgage…or a mortgage, credit card debt, student loans, and a bookie w/ a crow bar.
no real objections…just comments… good job so far… I wish I had more time to work on financial stuff..
October 1st, 2006 at 11:13 pm
I guess I think of Bible thumpers as preaching about different things than financial advice. This guy wasn’t threatening people with Hell when he was giving his advice. Now it’s really easy to use random Bible verses to support just about anything you want to say, but I think if he has a real understanding of the context of the verses and their intended meanings, there’s nothing wrong with quoting it for advice. Being a Christian is more than going to church, it’s something that should permeate your entire life, especially when it comes to financial matters. I haven’t listened to the radio show at all, so I’m really not one to judge, but my point is simply that just because he quoted verses from the Bible doesn’t make him a Bible thumper. It’s entirely possible that he is one, but quoting verses is not enough evidence to prove it. He is talking to people that call into his show, which means that they are most likely believers in the first place, which would mean he isn’t simply shoving scripture down people’s throats. Again, I haven’t heard the radio show, but I just wanted to throw that out there.
October 2nd, 2006 at 1:11 am
jon h, sorry if I sounded like an asshole with my response. It wasn’t my intent. I’d be interested in reading your opinion on Bogle’s book.
IMO The Vanguard website is one of the top 3 financial sites out there. The other two being bankrate.com and Morningstar.
steve, Yes, Bible thumper may not be the description I was looking for. It is more that he is targeting church going folk for his program. It seems like there is a trend to go after that niche audience right now. I was bit taken aback by his quoting Scripture since I don’t usually see religion and investing mixing.
A side note not related to Ramsey: I get advertisements in the mail and an occasionally business card handed to me with the Jesus fish symbol on them. I don’t quite get why someone would put that on their business card. If I want to work with someone, it isn’t because they have a Star of David, Crescent Moon, or Jesus fish symbol on their business card. When I do see the symbol on a business card, I am not sure what to think. Are they insecure in their faith that they have to let everyone know what it is?
Another tangential point…I am all for people investing with how they feel they should based on their morals. If I could find an ETF or low cost mutual fund that tracked the Dow index without Altria, I’d prefer it to DIA, an ETF that tracks the Dow. I don’t really feel comfortable making money off people buying packs of Malboros
November 15th, 2006 at 6:46 pm
I highly suggest spending more than an hour listening to Dave, he will answer all your own objections himself, but here’s a for starters. With the house loan thing, his baby steps say save 1000, pay off all debt (except the house), save 3-6 months salary, invest 15% in 401k/roth IRA, pay off the house… so he recommends paying off all other debt before the house, also, he can explain to you why the tax deduction isn’t worth it, and you can get the same tax deduction by donating the equivalent in charity, rather than pay it in interst to the bank. And about credit cards, Dave says many things, #1 is that he never met a millioniaire who made it all on frequent flier miles, second is that credit cards will screw you if they can. i.e., your payment wasn’t filed until 1 hour late, even though you mailed it in time, and suddenly your rates are through the roof, etc. But really, what happens if you lost your job this month and couldn’t pay your credit card bills? You might even have to use the credit cards to feed yourself, because you didn’t have an emergency funds. Credit cards would be ok in a perfect world. Your plan of taking advantage of minimal benefits fails to take into account the risk using credit represents. We all know this isn’t a perfect world. You don’t need a FICO score to get a great deal on a house if you’ve got significant cash. I bought a house at the age of 20. I had 10% down, and very few questions were asked. I listen to dave ramsey, am now 23 have a net worth of about 95,000 (home equity, 401k, savings). I still owe 68,000 on my home, and plan to have it paid in 1.5 to 3 years, on an income of 80k.
March 14th, 2008 at 2:33 am
Amen des! Well said. Klives (first poster) agrees with dave ramsy except that klives will contribute to retirement while paying 28% interest to a credit card company. Not too smart in my book.
March 14th, 2008 at 2:11 pm
Nah, I don’t pay any interest to any credit card companies. They pay me to use their card.
Credit card companies are not the problem. People who cannot control their spending are the problem. Many people can responsibly use credit cards and gain benefits. I am one of those people. I guess you think everyone is an idiot.