In an earlier post, I said I’d talk one day about my thoughts on Dave Ramsey. Today is that day, if only because of a lack of other topics.
First things first, I think Dave is a smart guy. I’ve read a few of his books, I’ve perused his website, I’ve listened to his radio broadcast, and I’ve tried to employ his methods. I am not down on Dave Ramsey. If he’s helped you get out if debt, I am not surprised! Dave Ramsey’s tough love approach is what many people need to hear to hear to get themselves in gear. I know I needed to hear it!!! But…
Listening to Dave’s show years ago, I heard two themes repeated: second job and beans and rice. Dave actively encouraged men to step up and get a second job to speed the debt recovery process. He also, even if jokingly, extolled a diet of beans and rice – but what he was really saying was “drastically reduce your spending”.
I just finished reading America’s Cheapest Family Gets You Right on the Money, and they preach a more balanced approach, even going so far as to say “don’t get a second job” because it takes too much time away from family. Breath of fresh air.
Dave Ramsey originally appealed to me because he had a simple-sounding, ten-step process. As an engineer (or rocket scientist, if you prefer), I love formulas, processes, order and rules. I was looking for a plan to follow, and Dave offers that.
But as we took on Dave’s system, I kept bumping into issues. Our envelops had too much money for me to be comfortable storing them in our house. I couldn’t stand the thought of not taking vacations (even cheap ones) until we were debt-free, which I figured would take around 10 years. I couldn’t imagine living on rice and beans and Ramen noodles for 10 years, nor did I think it was healthy. Our debt snowball, per my budget, would have taken us around 2 years to start “snowballing” payment from one debt to another, meaning that we didn’t have positive feedback to look forward to frequently. For two years, we’d be sacrificing with no pat on the back. That’s hard!
With every deviation from Dave’s rigid, tough love, suck-it-up ways, I felt lazy and wrong. And little by little I gave up.
When we had just started out with Dave Ramsey’s guidance, I figured we could pay off our 20 year student loans in 10 years. (I wasn’t sure of the exact pay-off date. We were newlyweds and I had just started my career while Brian was still in school. We had no idea of our expected income in the next 10 years and we wanted children, too. So many variables!!! But I felt like 10 years was doable). Here we are 10 years later and we are on track to pay our student loans off in – you guessed it – 10 years. Sigh.
I realize now that I just needed to modify Dave’s approach a bit for our specific circumstances. While I love plans and rules, this is an area where there is no one-size-fits-all. Steve Diggs gets that and writes about it beautifully in No Debt No Sweat. I love the advice the Economides dish out as “America’s Cheapest Family”, too. I’ve put down these books thinking I can be frugal and save, but I don’t have to deprive myself of everything until I’m debt free and that I get to decide what is right for my family. Sigh of relief. We can do this!!
With hindsight being 20/20, I can tell Dave’s approach works best for a certain set of folks swimming in debt, so here is the advice I can offer. Go all out Dave Ramsey if you meet many (not necessarily all) of these descriptions:
- You have debt that totals less than your annual salary. With creativity and frugality, you can probably knock out your debt in a few years.
- You have no dependents in your foreseeable future (i.e. taking a second job only impacts you – no kids, no spouse).
- You have several small debts where you can use the debt snowball and pay them off almost immediately, providing additional motivation.
- You are so irresponsible with money that you’ve come to know that you require a tough love approach – otherwise you’ll just keep making a mess of things.
- Credit card debt is one of your major problems.
- You already own a home and a newer vehicle and won’t require major expenses for either category in the foreseeable future. Reason: Dave doesn’t advocate worrying about your credit score, but this can cost you a lot of money in interest rates if you truly must finance something in these categories. He takes such a firm cash-only approach, that you can feel defeated if you need to purchase a vehicle. Reasons for buying a house, even before paying off debt, can also exist, such as moving for a job and/or lack of affordable rentals.
- You have assets you can tap into to get a significant start in your journey. (You can hold a garage sell and make a killing on all the “stuff” you bought but don’t need; you can sell a car or boat; you can sell a vacation home or other real estate; you have investments you can cash out).
If you don’t meet most of these, my advice is to listen to Dave, but just be gentle with yourself – do the best you can.
Did you take any drastic steps to pay off a debt? What did you do and how long did it take to pay off the debt?