Dave Ramsey - The Total Money Makeover:

This fellow has written a book The Total Money Makeover: Classic Edition will give you the tools and the encouragement you need to:

- Design a sure-fire plan for paying off all debt--from your cars to your home and everything in between
- Break bad habits and make lasting changes when it comes to your relationship with money
- Recognize the 10 most dangerous money myths
- Secure a healthy nest egg for emergencies and set yourself up for retirement
- Become financially healthy for life

The seven baby steps are:
- Save a $1,000 beginner emergency fund.
- Get out of debt using the debt snowball.
 This means to list all debts arranging them by smallest to largest amount. Make only the minimum payments on all except the smallest debt.
 Use any available money to pay as much as possible to the smallest debt. When the smallest debt is paid off add that money to the payments of your next smallest debt.
 Repeat until all debts except the house mortgage are paid off.
- Save a proper emergency fund that is 3-6 months of expenses.
- Invest 15% of household income for retirement.
- Save for children's college.
- Pay off the home early.
- Build wealth and be generous.

I have not read this book, but it was mentioned in a Topic I started about GOOD DEBT / BAD DEBT
The suggestion at the time seemed to be that all debt is bad, I dont agree.

I will read the book, but running through the points made about it, I doubt he labels 'all debt as bad.'
He mentions the old proven method of reducing multiple small debts, I am guessing credit and store cards but keeping the house mortage.
Then he talks about better money management for the rest of you life and aim to pay off the house early.
He does not suggest you pay the house off whilst living like a church mouse.

He speaks of financial fitness, not abstinence or gluttony

My topic is similar, but the inference that any debt is bad is something some need to think about.
Good luck with it.

I've listened to far too much of Dave Ramsey's show than I care to admit, but I'll address some of your points.

John C Daley wrote:I will read the book, but running through the points made about it, I doubt he labels any debt as bad.

He might not exactly use the words "bad debt" but when he say's "a car payment is a good way to stay broke" I'd say that qualifies as him labeling it as bad debt.
https://www.youtube.com/watch?v=NvZJb_ydvUk

John C Daley wrote:He mentions the old proven method of reducing multiple small debts, I am guessing credit and store cards but keeping the house mortgage.

He usually suggests a 15 year mortgage and paying it off as fast as possible.

John C Daley wrote:He does not suggest you pay the house off whilst living like a church mouse.

One of his general guidelines is that you shouldn't buy a new car until you have a million dollars net worth. I'm a cheap SOB, and even I didn't follow that one.

While Dave Ramsey has some great advice for paying off debt, his investment advice tends to be crap.

John Wolfram, I agree;
-  a new car payment can be a BAD DEBT
- 15 year mortgage is a GOOD DEBT, but a longer period may not be a bad debt if the figures are good.
- I need to alter a comment about labelling any debt as bad, to 'all debt is not bad'

I’ve read his books.

My understanding from them is that he labels

- all debt, aside from a mortgage, bad.

- all credit cards, bad

- term life insurance (the only kind one should buy)

I learned a lot from his books and a class he offers usually via churches called Financial Peace University. They helped me a lot and shifted my mindset significantly.

His books line up well with the details found in the book, The Millionaire Next Door.

That said, after 5 years of not having credit cards, I do have credit cards (I pay in full each month.) I have a great credit score (which if I worked his plan, he says I wouldn’t need.) I recently got some debt to pay for a biological dental procedure that I was confident I would be able to pay off prior to the 6mos when I’d be charged interest (definitely not what Dave would suggest.) I can’t speak on the investment side of things because I haven’t made any, in a traditional financial sense… mine have been in myself and others. I also don’t think it’s a waste for a woman to have degrees and decide to stay home and raise her children. However, I do understand and agree with his point that young adults ought not to get $100K student loan debts and then decide to stay home and their spouse be paying that off for as long as a traditional mortgage.

…
I’ve heard it said that it’s beneficial to read books like eating a watermelon… eat the fruit and spit out the seeds…

That metaphor doesn’t work as well in a permie crowd… some would eat the seeds or plant the seeds and pickle the rinds, give them to the chickens, or compost them.

However, I would say for a majority of Americans Dave’s books and resources (especially the EveryDollar App) are incredibly beneficial… for the permies crowd seeking Gerthood… I don’t know if they’d be as beneficial.

I look forward to hearing your thought/opinions about what you read.

I have been a fan of Dave Ramsey for as long as I can remember.

I have not read his book though I recommend his website.

The baby steps are easy to follow.

I would highly recommend getting started using the Envelope System as that is how I started off and became Debt Free:

The envelope system is a way to track exactly how much money you have in each budget category for the month by keeping your cash tucked away in envelopes. At the end of the month, you can see how much cash is left by taking a quick peek in your envelope. How easy is that?

https://www.ramseysolutions.com/budgeting/envelope-system-explained

John C Daley wrote:John Wolfram, I agree;
- 15 year mortgage is a GOOD DEBT, but a longer period may not be a bad debt if the figures are good.

Dave Ramsey really isn't into optimizing for the most mathematically favorable situation (e.g., 30 year loan at 3.5% when inflation is 8%). Instead, he pushes for the situation that  produces a fairly good economic and psychological outcome. For example, paying off debts ranked on interest rates would be mathematically favorable, but paying them off smallest to largest has a big psychological benefit.

Taken to the extreme, Dave Ramsey even advocates for quickly paying off student loans when public service loan forgiveness is a real possibility.

That was me, I said that in your post. I stand by it. You stated that you thought buying business stuffs was "good debt" and I strongly disagree.

Being debt free = freedom.


This is a perfectly timed post from you because my boss just told me that because of his declining health he is going to be retiring July 1. I am the only employee at my firm and I have no other bosses so his retirement means my joblessness. My husband stays at home with our kids. So this will mean 0 members of my household will have a job. I'm not scared at all. My husband even suggested I take the summer off to hang out with the kids. If we had debt we'd be freaking out and having totally different conversations. Debt= slavery and I'm no one's slave. HURRAY!

Ramsey’s advice is great for those who are just starting out and/or those whose finances are a wreck and need some order.  He is not about optimizing one’s finances to the nth degree.  I love to optimize, so I favor Mr. Money Mustache’s advice.

If you view debt as a tool to make money vs a way to get the things you want before earning them, you might look further than Ramsey.

Maybe Ramsey has changed, but I think he used to advocate investing with your typical brokerages with management fees of 1-2%, which are often baked in so you really never know what you are paying. I’d recommend using Vanguard’s target retirement funds over these brokerages, which cost a fraction in fees.  The difference can add up to HUNDREDS of THOUSANDS of dollars over a lifetime.  

This is, of course, if you can ride out swings in the market without panicking and selling out at the bottom.  If you can't, an investment advisor, that can also offer products such as risk limiting annuities, is well worth what the charge.

Gray Henon wrote:Ramsey’s advice is great for those who are just starting out and/or those whose finances are a wreck and need some order.  He is not about
Maybe Ramsey has changed, but I think he used to advocate investing with your typical brokerages with management fees of 1-2%, which are often baked in so you really never know what you are paying. I’d recommend using Vanguard’s target retirement funds over these brokerages, which cost a fraction in fees.  The difference can add up to HUNDREDS of THOUSANDS of dollars over a lifetime.

He's a big fan of the American Funds which not only have a 0.6%-1.0% expense ratio, they also have an eye-popping 6% front end load fee. Short of something really exotic, most funds haven't had loads since the late 90s.

As I read this article this evening: https://www.ramseysolutions.com/retirement/how-to-retire-early

I thought of this post and the early retirement posts.

I liked that this article covered the ‘Baby Steps.’

Debt Freedom and being at the beginning of Baby Step 4 allowed me to take almost a 2 year ‘Gap year’ and pursue philanthropic interests. Though I’m bummed to go back to Step 2 (because of some dental work I want done a specific way) and Step 3… it was a wonderful feeling to not be a slave to my job like many of my co-workers who stayed in a toxic work environment for years longer than I did because they had debt and didn’t keep a budget. It was also exhilarating to go serve at-risk youth and abused mothers and children without having to ask for money (depend on it) from others to fund my livelihood while I did acts of service.

My most conflicting idea in the Dave Ramsey books and other money saving books is their food budget/health philosophy and the types of foods they recommend. As a permie, voting with my dollar for local, organic, non-GMO produce is important to me… as well as pastured eggs, grass fed (& finished beef) so on and so forth. Because our food contributes to our health, and as permies the food we consume often relates our core values… it is part of the budget that I couldn’t skimp on. That being said, eating at home, packing lunches & snacks & water bottles, eating more organic rice & beans, using glass reusable storage containers… composting, gardening, and meal planning all helped.

The good debt, bad debt is a challenging topic and I’d say that many successful people I’ve met looked to me like they followed a blend of Dave Ramsey’s  and Robert Kiyosaki’s philosophy (author of Rich Dad, Poor Dad.) …I’ve never been a big risk taker with money but that has prevented me from seeing larger gains. However, I sure wish I started investing in aggressive mutual funds right out of high school. It is one of my regrets.

Retirement: I also think our world is changing drastically and it seems difficult to predict if retirement strategies that previously and currently work, will work in the future. After teaching in various capacities for the last 20 years and then in public schools… I’d much rather live a Gert lifestyle than work to obtain what I’d need to to retire ‘well’ but working as a teacher, in a traditional sense for the next 25-30 years. Do I trust the state of CA to manage what I’d be mandatorily paying into to be there in 25 years until I die? (I don’t.) Teaching has also morphed into something I find very difficult to participate in after being exposed to John Taylor Gatto books.

Permies has really inspired me to live more of a ‘conserver’ lifestyle and the diverse DIY skills of the permies on this website never cease to amaze me! The book, How to Survive without a Salary, reminds me a lot of Gert while implementing some of the shared philosophies of Dave Ramsey.

Happy budgeting!

John C Daley wrote:

I have not read this book, but it was mentioned in a Topic I started about GOOD DEBT / BAD DEBT
The suggestion at the time seemed to be that all debt is bad, I dont agree.

I like what Marco shared here: https://permies.com/t/93089/Living-debt-free#762584

That agrees with your sentiments that not all debt is bad.

The Ramsey approach certainly provides a reasonable system.  If applied it will work.  I do have a problem (s) with it.  The most obvious one is that, as stated here, it does not consider interest rates.  If interest rates are generally equal, then the approach works well.   If they are not equal, the approach will still work, just not as well.

To explain, if I owe $14,000.0 @ 28% and $12,000.00 at 4%,   I would choose to pay down the higher loan first.

But to stress a couple of points, I realize that was was presented here was in short- form, and the approach may account for interest rates. And, as I already stated, the approach will still work as stated.  It just won’t be optimal.

I took the Dave Ramsey course at our church and it was the best money I ever spent. He had some really good sayings and one is what I see happening on here: "People will defend to the death how they spend their money, even if it is not working for them". I have applied the Dave Ramsey system and I am out of debt and fiscally well. I can tell you first hand that it works. There are other methods for sure, but I've seen too many people struggling financially still, and yet downing the man and his methods...

No one picked up on his first advice for investment. "You ability to make money is based upon your job". People, it is really simple math. A great stock option will net you 15%. My job in renewable power nets me 3000%. I put $50 in my car, drive to work, and pull a $1500 paycheck the following week. You don't get a better return on investment than working. My girlfriend does the same thing. Trying to make easy money on cyrpto currency, the stock market and other factors is just not that effective. Do the math...

"You are working yourself out of debt... as long as you do not get back into debt". This is so true. If you pay your payments on time, like say a car payment, in time you will pay off that debt... even your home, but the problem is, people pay off a car and then buy another on credit as soon as they do. Its getting out of that borrow/buy/pay-off-borrow again cycle that stops the financial nonsense.

Overall, the only way to win at the financial game of 2022 is to simply NOT PLAY.  85% of American's do not have $1000 in savings. that means 85 out of 100 people you meet today are living paycheck to paycheck and are one major failure from poverty. As I always said: "What do you call a Lawyer who spends $300,000 a year and makes $250,000?

BROKE (Its not how much you make, but how much you spend that matters)

Stop trying to play a game that cannot be won.

Today, I am no different than Dave Ramsey: I could not buy a one acre homestead on credit... but I can buy a 100 acre homestead with cash. Live to have great credit, or live for yourself: you be the judge.

John F Dean wrote: I do have a problem (s) with it.  The most obvious one is that, as stated here, it does not consider interest rates.  If interest rates are generally equal, then the approach works well.   If they are not equal, the approach will still work, just not as well.

To explain, if I owe $14,000.0 @ 28% and $12,000.00 at 4%,   I would choose to pay down the higher loan first.

I am not sure I remember how he teaches that part if he does.

To me, it would be obvious to most folks which loan to pay off first though that is not necessarily the way I looked at it.

I used his website to go debt free though I never attended any of the classes offered.

If I had $12,000 cash to pay off just one loan I would probably take the route of paying off the $12,000 loan for personal reasons not that picking that loan was the smart thing to do.

Everyone chooses how to live their lives while doing the Total Money Makeover.

I used the Envelope Method while another person might choose something else to concentrate on.

This concept might also depend on who is teaching the class.  Teacher A picks (the interest rate concept) to concentrate on while Teacher B might pick (the Envelope Method).  Do the teachers have an outline to go by to teach the class or are they using their own teaching skills?

I think he teaches to pay off the smallest loans first so that a person feels they are accomplishing debt reduction

But I don’t think it matters.

I would pay down the high interest first myself, but to each their own. It’s more of establishing a new mind set and sticking to a budget

I think he's normally talking to people who have many small debts and a few bigger ones.  They haven't paid any off in 5 years and are juggling which minimum payment to skip each month.

By paying off the smallest one first they get that first dopamine hit of actually getting rid of a debt.  Then the money they were sending to that company can be added to that which goes to the next smallest debt.  That way in a half a year they can have several debts paid off and then start knocking out the big debt with a lot of that money that used to go to the small debts.

Yes, a perfectly logical and responsible person would probably do better paying the large, higher interest, debt off first but if that takes 4 years to accomplish, even they might fall off the wagon.

My issue with Dave Ramsey has to do with insurance.

He is a huge advocate for insuring everything, but for me, my greatest wins have been in not paying insurance. I have saved enough over the years that I could build a new house on what I saved.

True, but he's often advising people who have zero dollars to their name.  One little accident and they can't recover, whereas they can kind of handle an insurance premium.  And often to own a house or car (in the US) you need to have insurance so skipping it can cause additional problems.

Mike Haasl wrote:True, but he's often advising people who have zero dollars to their name.  One little accident and they can't recover, whereas they can kind of handle an insurance premium.  And often to own a house or car (in the US) you need to have insurance so skipping it can cause additional problems.

The only insurance that is required is to have liability insurance on your vehicles. You do not need it on a house as long as you own it outright.

What I did not like about his advocating for insurance, was that he wanted it on everything! But why? It really went against everything else that he was saying right up to that point. So, I dug deeper, and it seems he is also an insurance agent... now it made sense.

Insurance is odd because it becomes quite circular. in the end it is all about odds: what is the chances that something bad is going to happen? The thing is, people can play their own odds. That is what I did. If my house burned to the ground in the first few years it was built, it would have really hurt, but now 30 years later, I have saved enough money by not having it, to replace it. It is that kind of financial mindset has enabled me to have multiple-houses. But there again, that means I am not just saving a $1400 homeowners insurance premium every year, I am saving $7,000. Now after 30 years, I have saved $200,000 just on insurance premiums. Now consider that savings for cars and other things that is insured...

This is why I say, the only way to win the financial game, is to not play it in the first place.

In my situation, I own my houses out right so I do not need insurance. Yet if I did lose a home, I would just move to one of my other houses. I would still lose that financial asset, lowering my net worth, but I would not be homeless.

Here is Dave Ramsey's article on insurance:

https://www.ramseysolutions.com/insurance/types-insurance-cant-go-without

   Term Life Insurance
   Auto Insurance
   Homeowners/Renters Insurance
   Health Insurance
   Long-Term Disability Insurance
   Long-Term Care Insurance
   Identity Theft Protection
   Umbrella Policy

Advice on savings from the "Baby Steps":

Baby Step 1: Save $1,000 for a starter emergency fund. Baby Step 2: Pay off all debt (except the house) using the debt snowball. Baby Step 3: Save three to six months of expenses in a fully funded emergency fund. Baby Step 4: Invest 15% of your household income in retirement

https://www.ramseysolutions.com/banking/how-much-should-i-have-in-savings

Once a person has followed these steps and gotten debt free it is amazing how much money will build up in the checking accounts.

I know as I watch my checking account get bigger every month even though we do have a mortgage on our land only as the house is paid for.