Howdy Ags,

Just wanted to get some insight on what you all thought of the Dave Ramsey principles to handling finances in your life. Has anyone subscribed to them?

JDCAG nailed it.

If you're struggling w/debt and/or need simplicity with your finances, Dave is great.

I'm a banker and previously held my securities investment licenses. I'm very comfortable with debt, investments, and overall finance. My wife is not. We took Financial Peace as a couple and it gave us a baseline to discuss financial matters.

We are both generally debt averse and conservative financially, so many of his principles were already everyday applications in our life. But we're also capable of managing our money with the inclusion of some risk (credit).

El Chupacabra said:

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7 pages, 9 staff edits, 3 timeouts.

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lol, are you just talking about by COB today?

I'm a CPA - there were several times that I would read through the book/lesson and think "wow, this doesn't apply to us at all" or "wow, that's not how I would do that." And the short of the matter is, in many instances, we didn't do exactly what the FPU regimen said. We never used the envelope system, we maintain credit cards (although we always pay them off each month as we did before the class). We were probably different than most in the group, in that we weren't in any kind of chronic situation, and were already intuitively frugal. We just wanted to get that student loan monkey off our backs.

TLDR - you're right, it wasn't for everyone, but I'm glad we did it.

I think his methods are great for people struggling with debt, struggling to live within their means, or need a strict reality check on how to handle finances.

For others who are comfortable with finances, live within their means, and have no debt issues, I think some of his principals are good, others are probably too conservative.

Basically, if you have a spending problem or a debt problem, DR is great in my opinion. If you have no issues living within your means and have a good, solid, achievable plan on attacking debt, I say listen to some of what he espouses, and then maybe supplement that with a "Boglehead" type of philosophy too.

I personally identify better with a more Boglehead-y type of approach than a Dave Ramsey one, but I'm comfortable with managing my own finances, debt (or lack thereof), and investments. But I realize I'm also just dealing with myself and no spouse or partner, so it's easy to make sure I'm always on the same page with my beliefs.

It does have to be something you are serious about. I relate it to getting off an addictive substance. So many people say they can quit, take classes/rehab to quit, but don't really mean it and fail.

You can say you want to quit spending and being upside down, but until you really BOTH mean it, his suggestions will not work.

To add, I see more people fail after his class than actually change for the better. It is difficult to change a behavior that has been a lifestyle for 30+ years.

My wife and I gravitate towards DR and have coordinated a few FPU classes in the past as well.

The only thing I will add to the surprisingly cordial conversation is that I am not sure it's an easy thing to self diagnose one's self as competent enough to stray from simplicity (leveraging debt mostly). Everyone has blind spots in all areas of their life and even financial minds can lose sight of things and get in trouble.

I'll buy that it's not a one size fits all plan, but it's pretty close to being fool proof if you do it right. Can't say the same about playing with debt, etc.

birdman said:

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It's simple. Following Dave Ramsey isn't going to hurt you financially, but it definitely might help.

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Well said. It is impossible to argue that following his steps all the way could hurt you in any way. If you follow his steps 100%, it will work, and you will be better off financially. Does that mean his way is the only way? No.

Having taken the class, I will say:

-When you don't use credit cards, you spend less. Using credit cards "for the points" is not worth it. You're not coming out ahead. You would save and invest more (thereby getting greater returns) by not using credit.

-Using a written budget every month is a good idea for everyone.

-Saying a 15 month mortgage is good, while a 30 year is bad is arbitrary, imo.

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Mutual Funds: His recommendation of higher-cost mutual funds really flies in the face of everything else he preaches. Continually paying higher fees for lower returns is not what a smart, frugal saver should do. It's what a person with zero knowledge of the financial world should do

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Which funds is he pushing?

When I took FPU, mortgage rates were around 8%, near historic lows (2001-ish). Even with those "low" rates, paying off a home early made sense.

Now with rates for the past ~10 years being below 5%, combined with high taxes, I changed my view on paying off a home. We also use a credit card - I keep my emergency fund in a money market tied to a credit card rewards programs, and get 2.625% cash back. It works out to about 4.5% annual return on the money market - if you look at the annual rewards as a percentage of the MM fund balance. Not a world-beater investment, but a higher return than my mortgage rate, and darned good for an emergency fund.

cgh1999 said:

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Duncan Idaho said:

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Mutual Funds: His recommendation of higher-cost mutual funds really flies in the face of everything else he preaches. Continually paying higher fees for lower returns is not what a smart, frugal saver should do. It's what a person with zero knowledge of the financial world should do

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Which funds is he pushing?

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I don't know that he's pushing higher cost funds. I just laugh at his insistence of the funds getting a 12% YoY return.

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the other day he calculated out a 15% return over 30yrs

Pendragon12 said:

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I don't mean to contribute to the downfall of this thread, but I spend what I'm going to spend whether I use CC or cash. The method I use for actually making the purchase is irrelevant to my spending habits.

Again, for SOME people, what you said may be true. But to pretend that EVERYONE feels the way you do is short-sighted.

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That's really good for you and others that do the same. I just think it's psychological, and the vast majority of people will spend less when using cash and debit card.

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Dave would probably endorse a 15 month mortgage. The payments would be killer though.

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Yes, he strongly says you should only take out 15 month mortgages, which I don't agree with 100%. I agree that, yes, if you get your house paid off sooner, then that frees up $XXX that you can invest and grow. But with a 3.25% rate, I've put a hold on paying much extra so I can invest and grown that amount NOW.

I see some misconceptions of Dave in this thread. While he is a Christian, in no way does he "God-guilt" people into following his plan. He never says taking on debt is a sin. But he does site scripture that talks about the potential pitfalls of debt.

As for mutual funds, I've never heard him push any specific fund. Basically he says if your company has a 401K, you should max it out. And if you're eligible, you should max out a Roth IRA for you and your spouse. He advises a mix of different mutual funds. Big fan of growth stock funds. He does advise against individual stock picking.

I think his advise on the insurance side is sound. No to whole life policies, and yes to term. Disability. Long term care if you're over 60. Having a will.

I do cringe at some of the examples/projections he uses in his material, b/c frankly I think it's misleading or not accurate, in terms of rates of return.

I remember one example he described was something like "if you invest $XXX a month from age 30 to 70 in a mutual funds you'll retire with $7,000,000!" I turned to my wife and said what am I going to do with $7MM when I'm 70?

One thing I will say: Dave Ramsey did not become Dave Ramsey by following the Dave Ramsey plan. Did he use that plan to recover from bankruptcy, get out of debt, and get his life on track? Yes. But he became a multimillionaire by selling books, selling classes, and having a national radio show. There's nothing wrong with that obviously. But he got rich - a lot faster than his followers will - by being an entrepreneur. And a lot of people take risks, and take on debt, in order to build successful businesses. So he and I differ a little in that way.

TL;DR, I don't think you can objectively analyze Dave's plan and say it's bad advice. It involves simple, straightforward steps that are easy to follow. You can also be successful using other methods.

His insurance advice is pretty hypocritical and while he tries to keep it simple so that followers don't use selective hearing for certain policies, they tend to take it too far and use the words "never" and "always".

The beef that most have with him about funds is that for years he just harped A-shares, A-shares, A-shares, and claimed an average of 12% was to be expected across the board. Investment and financial planning is not a one size fits all arena but his entertainment persona took over at times and made it seem that way. Granted, most of his opinions and writings were from a time when easy access to low cost funds and investments was pretty much non-existant, but he took a long time to edit and amend his messages to fit the changing environment.

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Christian guilt

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???

I think you need to read his money makeover book and then come back to this board with concerns and questions. After that, you can weigh all the info and decide for yourself. I didn't read this entire thread, but I think SOME of what Dave is accused of saying he didn't say, or it is taken out of context. Not that I agree with everything he says or the ways he does things, but you have to understand Dave himself:

-- he WILL NOT borrow money, so he doesn't ever advise you to either; he will, however, suggest that IF you are going to get a mortgage, get a 15 year with so much down and no more than x% of your income. There is nothing wrong with this advice.

-- he will NEVER, EVER say anything nice about AMEX. He and/or his wife were treated poorly by them once and his view is understandable. I personally like Amex and think that most people, particularly those that travel, need 1-3 CREDIT (not debit) cards, but that disagreement doesn't stop me from taking his other sound advice. I don't like Starbucks and would never do business with them, but no client is going to fire me for that stance even if they like Starbucks.

I understand his advice to stay out of using credit cards and he even goes so far as to advocate having nothing at all on your credit report. It just so happens that he has a mortgage company that writes loans for people without any credit history.

The thing is, if you don't have any credit history, insurance is more expensive, good luck renting a car, etc.

We've changed our budgeting habits and some are around his ideas.

And we use his envelope system or sorts, only we use credit cards with rewards. One with the best gas reward is for our gas envelope. One with the best clothes reward is for the clothes budget. One with the best grocery reward is for the grocery budget.

Keep track and pay them every month and we know what we are spending our money on and where it is going. Only we are getting money back with the rewards as well as building credit.

cgh1999 said:

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Duncan Idaho said:

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Mutual Funds: His recommendation of higher-cost mutual funds really flies in the face of everything else he preaches. Continually paying higher fees for lower returns is not what a smart, frugal saver should do. It's what a person with zero knowledge of the financial world should do

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Which funds is he pushing?

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I don't know that he's pushing higher cost funds. I just laugh at his insistence of the funds getting a 12% YoY return.

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He's not pushing any specific funds. He is technically correct, however, when he references a "Growth & Income Stock Mutual Fund... that has averaged 12.03% per year since 1934, as of this writing." (TMM, 2013 ed. pg.xvi) That fund is real, and I'm 99.9% confident that I know which exact fund he's referring to in that instance. btw, I would NOT call that fund a High-Cost mutual fund - quite the opposite, actually.

I'll also agree that his off-the-cuff statements on the radio make it sound like that 12% return is YoY, which it most definitely is not.

jrdaustin said:

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That fund is real, and I'm 99.9% confident that I know which exact fund he's referring to in that instance.

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jrdaustin said:

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cgh1999 said:

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Duncan Idaho said:

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Quote:

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Mutual Funds: His recommendation of higher-cost mutual funds really flies in the face of everything else he preaches. Continually paying higher fees for lower returns is not what a smart, frugal saver should do. It's what a person with zero knowledge of the financial world should do

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Which funds is he pushing?

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I don't know that he's pushing higher cost funds. I just laugh at his insistence of the funds getting a 12% YoY return.

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He's not pushing any specific funds. He is technically correct, however, when he references a "Growth & Income Stock Mutual Fund... that has averaged 12.03% per year since 1934, as of this writing." (TMM, 2013 ed. pg.xvi) That fund is real, and I'm 99.9% confident that I know which exact fund he's referring to in that instance. btw, I would NOT call that fund a High-Cost mutual fund - quite the opposite, actually.

I'll also agree that his off-the-cuff statements on the radio make it sound like that 12% return is YoY, which it most definitely is not.

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Where he loses me, is when he tells people that if they invest X at 12%/year they will have Y at retirement. It's just intellectually dishonest.