Today I was reading a post on Ninjabudgeter called Why I Stopped Following Dave Ramsey. In general, I disagreed with a lot of his comments, although I understand why he feels as he does. A common complaint he had was that Dave Ramsey “Was kind of a jerk,” or “was condescending and rude.” I think that he misunderstands that Dave Ramsey uses plain and direct language like “that was dumb” and “don’t keep being stupid” because he’s trying to get through to individuals in clear and concise language. If he were to say things like “it would be better if you didn’t do that” or “that sort of thing is not recommended,” he would not be getting his message across that there are things that should not be done. This is not to say that many intelligent, competent people who are doing very well in their careers and other parts of their lives don’t do these very things every day. It is normal to not put much away for retirement. It is normal to get a car loan or two. It is normal to have a set of credit cards and try to get miles and points. But then as Dave Ramsey says often, “Normal is broke.”
You also need to realize that most of the people who are calling his show, if they are not calling for the “debt-free scream,” have grossly mismanaged money. They are the economic equivalent of the alcoholic coming to an AA meeting or the heroin junky coming to the NA meeting. They have huge mortgages and second mortgages on their homes. They have several maxed-out credit cards. They have student loans that are 20 years-old that they haven’t even started to pay down. They are in crisis and they need to wake-up to the fact that they will need to radically change their lives or they will go over the edge into bankruptcy, foreclosure, and possibly homelessness. They don’t need the same enabling language and advice that they have been receiving their whole lives. They need help, now. This is not the time to be nice. It is the time to speak plainly and truthfully. Time for tough love and stark facts.
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There were also complaints that some of his ideas like “Don’t borrow money for college,” or “Save up 10-20% for a home down-payment,” or “Don’t use credit cards,” were unreasonable. I often get these types of comments as well, particularly when talking about saving up a 20% down payment minimum on a home or even trading up in homes, starting off cheap, paying everything off and saving more, then rolling up into a bigger home. I find that many people set artificial boundaries on themselves and then say that things are impossible.
For example, regarding buying a home, a common complaint is:
“Gee, there is no way I could ever save up a 20% down-payment here in San Francisco, or NYC, or Vancouver, because houses are just so expensive and they go up in price so fast.”
Well, then why are you looking in these high-cost places? Go from San Francisco to Fresno, or Phoenix, or Albuquerque. Go from New York City to Buffalo, or Wilmington, or Oklahoma City. People set the false restriction that they need to live in places where the wages are not reasonable relative to the housing prices, then say that they are victims and they have no choice. Eventually, when the prices in these places get high enough that people cannot afford them even with loans, the companies there will not be able to hire workers, which means things like Silicon Valley and Wall Street will need to move. When that happens, you really don’t want to be trapped in a place you grossly overpaid for because you only had a 1% cushion from being upside down in the loan. The housing crisis wasn’t pretty, and there is no reason to believe it couldn’t happen in places like NYC and San Francisco.
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Probably the least valid criticism is:
“I don’t think that Dave Ramsey is really in touch with the problems that average people are having right now. According to this site, his net worth is around 55 million dollars, placing him miles and miles outside the financial realm of us regular folks.”
It is true that Dave Ramsey has built a business that generates a lot of income through his hard work and efforts, but that just means that not only is he a good reference for learning budgeting and debt repayment, but also to learn entrepreneurship and marketing. The criticism would be valid if we were talking about one of the Bush children or one of the Hiltons who started very wealthy. Perhaps their advice for growing wealthy would be to ask your parents to get you a VP position in their business. But Dave Ramsey started out in the middle class, became wealthy through real estate, spent too much, borrowed too much, and lost it all, and then built it all back up again through budgeting and hard work.
Who exactly would be the right person to teach you money management, someone who has amassed millions or someone who has a net worth of $10,000 despite twenty years of bringing in an $80,000 salary? Who would you ask for golf advice, the person who gets pars at each hole or the guy who double bogies? Would you choose the latter because the former wouldn’t “understand the issues of the common golfer?”
If I want to know how to move up the corporate ladder, I don’t talk to the guy at the desk next to me in cubical world. I ask a CEO or VP to mentor me and teach me what she knows. If I want to learn how to catch more fish, I talk to the bass pro, not the guy sitting on the bank next to me having the same luck that I have. Saying that Dave Ramsey can’t teach people how to budget and get themselves to a better place financially is just silly. Hopefully, I’m not being kind of a jerk for saying so.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.