Wednesday, February 18, 2009

Yes, we know we left out the C

As inspired by DogAteMyFinances, here's my history with Dave Ramsey.

I started listening to Dave against my will in junior high or high school, while he was still basically a local radio show. My mom was a fan and listened to him every afternoon while picking my siblings and I up from our various schools. I usually got picked up first, so I wound up hearing pretty much the whole show.

I liked a lot of his no-nonsense attitude, especially back before he was shilling any of his own products (the only book he had out at the time was Financial Peace). Anyway, I listened and I absorbed. I eschewed credit cards and student loans, paid cash for my car, kept an on-paper, on-purpose budget and saved money every month. I was financially independent immediately upon graduating from college. I sent myself to Europe twice. I liked the way this was going.

Except I had no credit history, and that made me uncomfortable. So I got a secured card, and built some credit, then I got a store card and then a regular credit card. I joined Dave's website when it was in its infancy and was grandfathered in to the MTMMO forums, and was a beta tester for Financial Peace University online. I've recommended his books to anyone who wouldn't be offended by the hammer-over-the-head Christianity (I was surprised to learn while writing this post that all his books have been published by Thomas Nelson, a Christian publisher, as opposed to a mainstream one).

Now I have student loans and I use my credit card all the time (but pay it off in full every month). I still save for regular expenses using sinking funds, but I've mostly given up a regular budget in favor of strict tracking of spending. I might be willing to take out a loan for a car (a used car, and a small loan). I'm still aiming to get 15% of my income into retirement savings on a long-term basis. I think consumer debt is a tool to be used wisely but mostly avoided.

The steps listed below are Dave's basic baby steps, with one small addition from the MTMMO forum members (they actually have a lot more specific additions, but these are the ones I'm focusing on).

1 Save $1000 In baby EF I started with $500 since my income was so low

2 Do debt snowball This never applied to me

3 Save 3-6 months EXPENSES in EF It took me about two years, although I'm not sure I was ever hardcore according to Dave's standards

3.1 Start sinking funds I did this while building my emergency fund

4 Contribute 15% to retirement Still working on this one

5 Save for kids college fund HA! Does not apply.

6 Pay off house Need to save for a down payment first!

7 Live like no one else since you have lived like no one else I'm already living like someone else--I don't have that cloud of debt hanging over me that many of my friends seem to have. I can live on my own while many of them still have roommates.

One of my biggest problems with Dave has always been the overt Christianity. But the bigger problem was that I always felt like I was on the outs. I never had debt to pay off; in fact, listening to him probably prevented me from making a lot of costly mistakes. But his whole program is so focused on the getting out of debt part that the "What do you do when you're debt-free?" question never really gets answered. It becomes, well, save money and "live like no one else". JD over at Get Rich Slowly and Trent at The Simple Dollar have both recently addressed this phase of personal finance, and I think they both do it better than Dave Ramsey ever did. Dave is great for getting out of debt--tough love, no nonsense, enough math that you GET it and enough psychology that you'll DO it.

My verdict? Read widely on personal finance until you figure out what you need. Jim Cramer's too rough for me, Suze Orman too saccharine. Dave Ramsey's a great motivator for getting and staying out of debt, building savings, and getting started with money management, but the personal finance blogs that I read every day provide more support, encouragement and ideas for living a financially responsible life in the long run.

2 comments:

  1. I agree with you. I am still in the getting out of debt phase. I have my plan in place and I am following it. I also have my dreaming cap on for the what happens after I don;t have debt phase. I figure being prepared is better than wondering what to do. I think it also helps me do extra things to get that debt down ever faster so I can get to the fun stuff faster.

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  2. I do enjoy Ramsey more. He's more personable on the radio, even if I find his advice to be repetitive ( a good thing if you are trying to get out of debt )

    I tried watching Suze Orman on Oprah in a podcast the other day and just felt a shiver up my spine seeing her too-white toothy smile and really crazed out Cougar Eyes

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