I read the initial article but missed the petulant response. They intended that stupid response to be read by lots of people, I don't know how they thought it would help them.
This in particular:
> Yes, you will be in a building where 1000 people hate you, but we will assign security to protect you….that is how cults do it
I understand there's jokes in here, but I think the setup is earnest. The part where they invite the author to be in a building with 1000 people who hate him, I don't think that's in jest.
They're talking about a Worship Service, and most of their employees, as I understand it, are Christians. I hope they were embarrassed and ashamed to have it claimed that they hate someone.
Not sure former employees are the ones making Dave look bad:
> “We have people calling in, they are wanting to cancel stuff for a live event in May — let me tell you how much of your money I am going to give you back if you don’t come for the coronavirus in May,” he said. “ZERO. I am keeping your money. You are a wuss.”
Maybe about 15 years ago, I was driving through Kansas with my dad. Dad was going through the radio channels to find something to listen to, and ended up on the Dave Ramsey show. One call has stuck with me all these years: the caller had recently graduated high school, was working for $12/hour on some low-skill job, and was interested in majoring in a STEM major. The caller had one question: should they save up money to go to college (on their $12/hour job) or take out loans for college?
And I don't remember Ramsey's response, but it essentially boiled down to recommending that they save money working their current job, and then go to college. That answer has always struck me as completely bonkers - sure debt can be bad, but this is a case where debt is good: it's going to be much easier paying off college loans with a high paying college-requiring job in STEM than saving up on a low-paying job.
Since then I have always regarded Ramsey and anyone who recommends him with disgust. Totally willing to hear anybody who wants to change my mind, but at least for now I consider these people as charlatans.
If you're really in that situation, you should attend community college, which you can easily afford out of your $12 / hour wages.
In the more likely case that you sort of feel like you might give it a shot, Dave Ramsey's advice looks even better: dropping out will only waste money you already had if you were paying out of your savings. It will waste a lot more than that otherwise.
> If you're really in that situation, you should attend community college ... dropping out will only waste money
In what situation? The way your post reads comes across as vaguely resentful of people who aren't upper class.
Most high school graduates cannot afford university out of pocket. That doesn't mean that they need to lower their bar or that they're somehow at a higher risk of dropping out. Your comment is coming completely out of left field.
Did you know that by judiciously chopping some words out of a sentence, you can create an entirely different sentence? It's usually considered bad form to do this while suggesting you're quoting someone, though.
Compare:
>> dropping out will only waste money you already had if you were paying out of your savings. It will waste a lot more than that otherwise.
> dropping out will only waste money
Did you not notice that the meanings of these sentences are not related? What is the scope of only in each of them?
Sure, I would happily edit my post with the added context if HN would let me (the post is too old to edit now), and yet I would leave the rest of my post unedited because I don't feel it changes anything. You're obviously frustrated, and feel I extracted a snippet from its context to fit my narrative. Unfortunately that's not the case.
> You're obviously frustrated, and feel I extracted a snippet from its context to fit my narrative.
No, I feel you extracted a snippet from the grammatical structures it was part of, producing something that only appeared to be a full sentence by coincidence. You didn't leave out context, you left out the sentence you were supposedly quoting, and substituted a different one.
Imagine me quoting your comment here in the form
> if HN would let me... I would leave
Is the problem really that I left out some context?
$12 an hour is barley enough to live on in most of the country. In many places, it’s not enough to cover rent.
The average cost of community college tuition is around $3.5k a year. Add in books, fees, transportation, lost income from not being available for shifts etc..., and that’s just not realistic unless you can live with your parents or someone else is supporting you.
Yes, perhaps I misunderstood the intent of the original post. I was assuming it was a hypothetical independent adult based on the “unless...” part the OP. If you have other family contributing, the hypothetical breaks down and without further details it’s not really possible to determine if there’s actual financial hardship.
It's an absurdity that we Americans are used to, and have normalized, the idea that higher education is not free at the point of usage. The anecdotes and responses say much about the state of affairs in the United States.
I have an older relative who thought I was crazy to go to law school straight out of college. She thought that instead I should work, save money, and then when I had enough money use it to pay for law school.
But the math doesn't work at all. I could have saved maybe $10k/yr at the absolute maximum, and law school cost $120k for 3 years at that time (now it's around $200k). If I had followed her plan, I never would have actually enrolled.
I remember thinking my relative was foolish for suggesting that I was taking too big a risk by financing law school with loans. But when the financial crisis hit one year after I graduated, I realized that her advice was not all bad.
I ended up weathering the recession fine, but if I had graduated one year later I would have been in a much tougher position.
TLDR: leverage can be great — assuming everything goes well.
But really what were the possibilities? If you were unemployed with no assets and no savings the debt collectors wouldn’t really get anything from you. And once you got back on your feet you’d start making payments.
I don’t think there’s that much difference between making $12/hr and making $12/hr with $200k debt that you make no effort to pay off.
I'm not sure I understand what you're asking. Student loan debt is not dischargeable in bankruptcy, so it would be terrible to take out $120k in debt on the assumption that a job paying $160k/yr would be waiting for you. Also, where does the $12/hr figure come from?
edit: thanks for the downvote, but could someone explain what I'm missing? I literally stared at it for five minutes trying to understand it.
The point you're missing is that for someone who graduates with heavy debt during a recession period where they can only get a low-paying job (say, $12/hr) or no job at all, debt collection is entirely irrelevant because they don't have anything to collect in the first place.
Ah, thanks for explaining. I would much rather be in the position of not having a mountain of debt, which is accruing interest at a rate of $20,000 per year!
I'm in the process of returning to school here soon, and I expected it to be expensive, but man I underestimated it. Luckily I'm already a software developer (though I don't make anything most people here would consider a good salary), so I can do the first couple years at a community college out of pocket an maybe put aside some for later, but its almost guaranteed that the last two years will require some amount of loans, since I'll have to quit working. I'll swallow it because I don't believe it will be too bad, and most decent employers have some form of tuition reimbursement.
I'd be curious to know what field you're in that most decent employers offer tuition reimbursement.
I've mostly heard of this in the context of existing employees, whom companies will reimburse if they go get a degree (and stay with the company afterward).
Larger tech companies generally offer this perk to new hires, sometimes after a probationary period. It’s not Ivy League tuition level, but enough to get by at a local school generally.
With the insane cost of college - it's healthy to express concern for someone you're close with. Some of the people in the worst financial positions got part way through school and had to stop for some reason. They took on a good part of the debt without getting the higher salary they sought. And to top it all off, the debt is not dischargable in bankruptcy with very few, quite extreme exceptions.
Taking the advice of Clark Howard, another personal finance radio personality, your student loans shouldn't exceed your first year's salary. This feels like a pretty good rule of thumb overall. That would keep the payments manageable and you would still have room in a budget for other goals, even when paying the loans down faster than minimum payments.
And for the higher income range, The White Coat Investor doesn't give a rule of thumb, but emphasizes that everyone should buckle down, live like a resident, and pay off all their loans with 5 years of finishing their training.
> The White Coat Investor doesn't give a rule of thumb, but emphasizes that everyone should buckle down, live like a resident, and pay off all their loans with 5 years of finishing their training.
Living like a law student while working as a young lawyer helped me keep the golden handcuffs at bay and build a nest egg so I could leave and start a startup when the opportunity presented itself.
I essentially did that, however I'm taking out loans too. Although it's not because I need to. Also COVID basically gave me double subsidized loans so I'm currently in college at the right time.
But my story was simple. I got an associate's degree and worked a trash job for 2-3 years, living at home just saving. Then went back with a lot of cash. The cash was basically a massive emergency fund for me. Could I have saved time going to college instead? Sure but at that point in my life I wasnt sure yet even (at 24 I planned going back to school).
Overall what I would suggest is doing what I did if you don't know what you want to study. Being in debt for a degree that doesn't increase your salary is worse than being in a crappy job in the first place.
Ramseys financial advice is terrible for anyone who knows how to budget and pay bills on time. The worst is his investing advice which just boils down to getting an ira and 401k. He could at least plug vanguard as it’s a great option for retail investors.
Regarding debt... his debt snowball only works if there’s enough income to cover it and there are tons of examples where there isn’t. This means people spend every penny they earn paying off small loans only to eventually lose everything when they start on the larger ones.
Ramsey's success in spite of mediocre/bad/wrong advice is evidence that luck and connections is more important to success than actual merit, at least for him. By being a pioneer of personal finance radio, so by being early he was able to get a large following and be hugely successful without having to have much talent.
He tells you if you have any car loan to not contribute to your retirement account until your car loan is paid off, even if your company matches 100%. Insane. You could contribute, get the match, and then take the penalty the next year (or whenever is optimal based on match limit etc., withdrawal requirements, etc.) and dump it into the car loan at that point and still come out far ahead.
(edit: replaced mortgage with car loan, as he excludes mortgages from the advice as pointed out below)
Ah no he doesn't, here are the steps from his website.
Baby Step 1: Save $1,000 for your starter emergency fund.
Baby Step 2: Pay off all debt (except the house) using the debt snowball.
Baby Step 3: Save 3–6 months of expenses in a fully funded emergency fund.
When you’re working through the first three steps, you simply do them in order. However, people often have questions about Baby Steps 4 through 6. Here’s a quick definition of them:
Baby Step 4: Invest 15% of your household income in retirement.
Baby Step 5: Save for your children’s college fund.
Baby Step 6: Pay off your home early.
>He tells you if you have any mortgage to not contribute to your retirement account until your mortgage is paid off, even if your company matches 100%.
That is entirely incorrect. [1] Baby step #4 is to invest 15% of your household income for retirement.
Baby step #6 is to pay off your home early.
He does tell you to temporarily stop investing so you can pay more towards you debt. This is sub-optimal. His goal is to get you entirely focused on one thing at a time and go after it with everything you have.
Ok, I forgot he excludes mortgage and chose that as an example as the longest term, lowest interest debt with least depreciation.
It's still worth going into almost any other debt to get a large match, often even expensive credit card debt (you may have to skip matching some years when you take a net withdrawal to keep it optimal).
Paying off an existing car loan before taking a 100% matching contribution is almost always crazy.
It is if you have no emotions involved. The people he is trying to help are the kind that struggle to avoid debt due to lack of self control. His method is about creating emotional feedback that keeps people going.
I agree the method he presents isn't mathematically optimal. We're also on a forum with many engineers and highly analytical people, which isn't his target audience. To use one of his quotes, "if you cared about being mathematically optimal, you wouldn't be in this mess to begin with!"
His target audience is people who are living paycheck to paycheck, routinely taking loans to support a lifestyle they can't afford, and don't see how their spending habits are death by a thousand papercuts to their aspiration of being financially stable.
To be clear, I'm not a Dave Ramsey worshiper. I strongly disagree with some of his workplace policies and hope he gets taken to the cleaners with some of the lawsuits currently going through the system. I have listened to his show many times, but don't follow all his advice. I'm not paying my superbly low interest rate mortgage down faster than required.
I can't think of anyone responsible for getting more consumer debt eliminated than Dave Ramsey, and that should be commended. The vast majority of people would be far better off following his plan than continuing on their current trajectory.
He recently declared war on the time share industry, and I hope he makes waves by throwing his resources behind it.
That whole "get the match from an employer at all costs!" is, imo, silly in its own right for many many many folks. I did that at one point for a bit, then... realized later that if you're fired or quit... that money isn't really there anyway. Most of the time (ime), there's a multi-year vesting schedule, and you don't have control over how long you'll be at a company. IF you're already getting the full value, perhaps, but I've never worked anywhere long enough to get that. I got $x 'matching', but only 25% of that was vested in the first 20 months (after 2 years, it would have been 50% IIRC) but... only that 25% was available to 'rollover' when I left the company.
Some vest right away. Even when they are 25% per year you can often
take an immediate 401K loan from half of your part of the contribution and pay the car loan and still probably have it work out more optimally (even if you then have to turn that into a withdrawal with penalty).
If you can play something like magic the gathering and do basic estimates odds of things happening and payoffs/penalties, you can do better than taking blanket advice from Ramsey. It's not do it at all costs. Work out the basic numbers. It doesn't always make sense at extreme interest rates, but he tells you to do it as blanket advice even if the debt is low interest student loans and the employer contribution vests right away. I've heard people call in with questions like this I think with student loans. He tells them to basically throw away $5000 to save $250.
one of his standard lines is "if you play with snakes you'll get bitten".
what you've described is, of course, technically doable.
many of his listeners may be in jobs that are less stable, and finding another job may take time. 'blanket advice' when you're talking to tens of thousands of people probably needs to be as basic and as applicable across the board as possible.
I do think there's a psychological impact of "grind through it and stick with a plan" that will help create better habits and avoid future debt problems for many folks. Playing a lot of 'move money around' moves gives people the idea that they can always do that, and that's not always the case.
I've never been employed anywhere (nor have I met anyone) who has 'day-1' 401k vesting. Good on you if you have that, but it's nearly always been 3-4 years every place I've been (or my colleagues have been).
He tells you to do this in the extreme short term. The goal is 18-24 months to pay off debt, not 50-10 years. Ultimately this isn't a huge some of money even if you run it out 30 years. The point is getting out of debt and not going back, on average people don't have the discipline to make the most mathematically optimal moves. The individual isn't winning 9 times out of 10 when they try to leverage debt, most don't have access to things that can actually get a return on the risk of debt.
You won't pay off massive low interest student loan debt that quickly, and it is usually a big mistake to give up a free matching contribution just to pay off a little bit more of your student loan.
The guy might be an asshole, but his advice is rock solid and it’s worked wonders for me.
The thing is, Dave showed up at a time when credit cards were how people lived. Leveraged to the hilt and no savings. He will be the first to say that his advice isn’t genius - it’s pragmatic and simple. Learn to budget. Pay off your debt. Fund your 401K.
All of that said, he appears to be a pretty nasty individual. Which is fine. But the unforgivable part is that he does it on the back of Christianity. Absent that variable, he’s just another ruthless businessman.
I think deelowe's point is that people should pay off higher-interest loans first, not smaller loans first. But I'm not sure if there are many people where the difference between these 2 strategies will be significant.
Agreed, and I do think the psychological impact of people seeing some debt bills go away completely is an emotional boost that helps them keep going.
Imagine having bills for $8k, $12k, $6k and $2k. You decide to cut current expenses and take a side job - you're getting serious about this. Getting rid of a $2k bill completely in, say, 4 months, is a decent psychological boost. You might be paying a bit more in interest if the other bills are higher interest rates, but you now have one gone completely. That's bigger progress to many people.
I think one of his quotes - or perhaps from someone else - is that you didn't get in to a bad debt situation purely by numbers and math in the first place. There were usually some emotional factors in overspending (and perhaps hiding the debt from family/friends). Trying to ignore the emotional component of getting out of debt is silly, and the 'debt snowball' is simple enough for people to grok and work.
They may very well be, but consider that what "asset" means to you is probably not what "asset" means to an awful lot of people.
"Yeah, the mortgage company approved us up to $650k... it's a lot, but we found a house in that range. If we're tight on cash, we can always take out a HELOC against the appreciating price! Everyone knows housing prices only go up, they're not making any more land!"
"I just invested in a new car for myself! Sure, it's more than my annual income, but the loan payments are cheap and it's got a butt massager!"
"Yeah, just invested in a brand new Harley. You know, they hold their value well..."
Etc.
The problem with a leverage-heavy approach to things (as Ramsey knows very well - he made, and lost, a fortune doing leveraged stuff in the 80s) is that as long as the conditions that existed when you got in remain, it works great. As soon as those conditions change - property values decrease, your margin loans get called, etc... you can find yourself in a huge world of hurt, literally overnight.
If you take the "Ramseyian" approach, avoid debt outside a few things, spend a good bit less than you make, save, etc, you might not get as fabulously wealthy as you could with leverage - but you're also far less likely to lose it all than you would be with leverage. And that's worth an awful lot in terms of "actual life satisfaction" (though perhaps less if you consider net worth the only thing of value).
My wife and I have made a variety of "suboptimal" decisions (based on the current debt-leverage-max-out-credit-its-free-money style of thinking about money) over the years, and are probably worth somewhat less than we would be had we taken some riskier approaches, but we also have avoided the high risk, and, to us, high stress approaches to money.
Our goal (well, mine, mostly, since I work and my wife stays at home with the kids) is to have our finances automated enough that we don't really have to think about them, and have the surplus to do things we want to do - we just tend to save up first, and then do the things, instead of taking on debt. If we don't have the money, we don't do the thing. It's a very low stress way to handle finances, and while I will absolutely grant that it's less-than-"optimal" from some perspectives, from how we care to have money handled in our life, it's quite nice. And there are very few high-risk downsides we have to worry about. Markets go up? Neat. Markets go down? Well... OK, but I'm not worried about someone calling me to tell them I own them half a million, tomorrow, or else.
I’m not a Dave Ramsey fan and I’m only passingly familiar with his work, but as I understand it his core tenant is that debt is bad, period. Understandable for a guy who went through a very bad personal bankruptcy.
That being said, I don’t think his overall approach is bad for many people in his target demo. IIRC, most of his callers aren’t asking if they should go into debt for college, they are trying to figure out how to get out all sorts of debt they already have. This is where he actually does seem to add value.
Household debt is crippling for so many people. Several childhood friends had parents that struggled with debt, several childhood friends have ended up with debt burdens themselves, and some of them swear that Dave Ramsey (or a similar approach) helped them get their finances in order.
These are people mostly doing blue collar or government work- delivery drivers, teachers, construction workers, etc. Many of them just have predisposition toward illogical or undisciplined behavior with money and do things like take a loan for a vacation, a wedding, or student loans for a 2nd masters in English literature. For them a good answer really is to be allergic debt, to cut up the credit cards, put cash into envelopes for budgeting, and cut costs to get out of debt.
Ramsey and his ilk drive people like me crazy because I like to believe I have decent understanding of money and finance. His advice is wrong for me, and it was probably wrong for the young man you reference. But for the many, many people who don’t think like me an who do things like just look at the monthly payments on what they buy or who use debt to buy status items Dave Ramsey’s advice is often useful.
I disregard his advice on credit cards, but I don’t fault him for making that advice. If he says there are exceptions, everyone will think they’re the exception. And if that was true, credit card companies wouldn’t make any money.
> And if that was true, credit card companies wouldn’t make any money.
Eh. If you can't make money charging 3% (give or take, handwave, pick your method of getting there) on the vast majority of consumer transactions in the industrialized world, you need to pick a better line of business.
Though I believe a lot of their profits come from the writeoffs of "bad debt" that never gets paid. It's a slick little financial slight of hand.
Someone buys a $50 item on a credit card and never pays it. You charge interest, then late fees, then penalty interest, then more late fees, and eventually the balance is $1000.
You sell the "bad debt" to a collections agency for $0.10 on the dollar - you only get $100 out of the $1000 owed to you. Boo hoo, such losses.
Except, in terms of what you paid out, you're actually $50 ahead (because $950 of the $1000 balance is phantom money you put on the account but didn't actually pay out). And you get to write off a $900 "loss."
Adjust numbers as needed, but it's not a half bad game! For them.
This hits home, and probably most people here which are very logic driven.
While buying a home and cars, I felt like too much emphasis was put on the "monthly payment" and how much you can afford. I was more concerned about the interest rate, opportunity cost of downpayment, car depreciation and total cost of ownership.
this is how salesmen get you on loans / leases. any monthly payment can be made with the right down payment. so when they just try to get the buyer to focus on "how much are you looking to pay a month". I had to make it clear, I wasn't trying to optimize the monthly payment (on a lease), but the total payments. Thankfully, GM (or really GMF) has a concept of a "one pay lease" where you literally pay once, all fees and everything and you have no other fees (till return disposition fees or what not). Makes it simple to compare between dealers without any surprise fees being sprung on you.
> any monthly payment can be made with the right down payment.
Or by stretching out the payment period to 60, 72, 84, … months.
> The average loan term for a new car also hit a record high of 70.6 months in March [2020]. The most common term currently is for 72 months, with an 84-month loan not too far behind. In fact, nearly 70% of new car loans in the first quarter of 2020 were longer than 60 months — an increase of about 29 percentage points in a decade.
How applicable would you say his strategies are for startup founders?
Like many founders, I'm not piling away tons of cash for retirement right now. I assume that my growing (and financially breakeven) startup will continue on its current trend and that it will either become a lifestyle business or lead to a liquidity event.
Would someone like me benefit from a course like his?
Haven't taken FP directly, but have read the material and listened to his show before.
It might make you rethink your goals overall. It might make you consider just saving and giving yourself a bigger savings setup, and then pursue your startup goals later, when you can perhaps self-fund a lot more of it, and attack it from a position of stronger financial security.
I'm not a startup founder, so I can't say for sure.
His course is basically just this[0], with some rationale and anecdotes, in a group. I don't want to downplay it because a big part of it all is getting motivated and disciplined enough to want to do it, and so having weekly group meetings made a huge difference. But the overview will give you an idea of what to expect.
His advice is for the masses, so it's don't play the unicorn game. The vast majority of startups are going to end in failure, so not tying your entire personal wealth into them is good because you will more than likely lose it all.
Generally his advice is: if you can't take a salary from your startup it's a hobby/side hustle and you should have a job that pays the bills, until you are confident you can do so. Hoping you get a liquidity event is not sustainable advice for the masses.
Like most people he has good ideas and bad. I think the 7 baby steps are quite good advice for most people, his “snowball” technique may not be mathematically superior but it is likely psychologically superior. But he can also be old fashioned.
I've heard the Ramsey crew on the radio more than a few dozen times..
I must say that they generally tell people that investing in education has a better payoff than any other investment. They will quickly say to forgo the big loan and big name school for a cheaper school.
They also take many individual things into consideration when giving advice to different people. When I read your rememberance, I immediately thought that the person on the call likely had some sort of rent-free situation (like grandparents paid off place to stay or such) -
They do generally frown upon taking on debt in general - and will rail against taking big loans just to get an ivy league diploma - they will generally suggest that someone save money and find a college they can afford - so both saving up cash and searching for cheaper colleges.
I know many people that will say the Ramsey way can be a loss compared to other methods - but he generally has some stats to show that for example 'even though you can make more with stocks than paying off a mortgage' many people don't do it right, and the peace of mind... so pay off your mortgage.
Not writing this to push the Ramsey way - I am on the fence about some of the advice I have heard on the radio, and do not care for some of the religious stuff that comes out on occasion and apparently with how employees may be viewed or treated based upon how they follow or don't follow the book or whatever.. listening to those shows comes only when all the other stations have worse stuff on - so it's rare.
But characterizing the advice in the way mentioned above, likely missed a lot of addition context for that particular call.
I've heard him suggest low wage people move to other states / cities to get ahead.. I've heard them tell someone over 80 that going to college may not be the best use of time / money - I've heard him suggest all sorts of things that go against the 'general rules' they seem to push on 99% of calls - they really do tend to take individual situations into account - even if most of the advice is the same - spend less, spend cash, avoid debt, have an emergency fund, yada yada..
It's the classic feel good "elevate yourself" line of BS from Ramsey. Anyone can be wealthy as long as they spend their whole lives grinding out as many hours of work as possible, and never doing anything with the money. It banks on all rewards and happiness in the afterlife, and is completely inapplicable to a large percentage of Americans who make less than a certain threshold. For a large portion of Americans, the only way they will ever get out of a debt cycle is to not be born poor.
Did you study STEM? I did. This was absolutely the correct choice for me.
In the company I last worked, fresh grads were making $175k/y. I would say you would have to be completely bonkers to work at $12/h instead.
On top of that, tuition increases far faster than inflation. Every year you wait. Tuition can go up by about 6%. That essentially wipes out any savings you have.
On top of all that, student aid is quite generous if you are really broke. By going to school as a broke 20 year old say, you will likely get 50% off your tuition. Then you get lots of subsidized loans where the interest doesn’t start until graduation, then finally a couple expensive loans.
Let’s say you start your first job making $120k, year in computer science. Not average, but you did say STEM. Live with four roommates, and with any luck you’ll have paid off your loans in two or three years.
UC Berkeley costs $43k/y right now fully loaded. How many hours at $12/h wil that take?
Ps- the solution I would use today is actually different. First I would max out community college. This is almost free. This would mean I would only have two years of in-state college to pay for. It would also tell me if I am any good at programming. After community college, I would finish at in-state, then get a job, preferably living at home, roommates if not possible, then aggressively manage my career.
I think you must have misunderstood OP. They're saying that Ramsey recommended not getting a student loan, but rather working and saving until he had the cash to pay tuition.
OP is saying that's crazy, get the loan and start studying today.
Your overall point stands, but I have a feeling it falls into the trappings of the biases of HN which are disproportionately drawn from SV and not normal for the general population. Case and point:
>Let’s say you start your first job making $120k
This may be normal in SV but it's not normal for the industry as a whole. The average starting salary is hard to find government statistics, but BLS says the average median mid-career salary is $110k.[1][2] AFAIK, BLS doesn't track starting salaries, but considering the median salary in [3] aligns with BLS data, it's probably not far off to say a median starting salary closer to $69k. That's just software roles and most other STEM positions are considerably lower. All that being said, I don't think it negates your point, but we have to be careful about generalizing using SV-like numbers.
For context, Dave Ramsey is a popular radio/internet personality that gives financial advice and presumably helps people get out of debt. I've seen him pop up on my feed occasionally but never paid him much attention. Sounds like that was for the best.
I found a video that elaborates on some of the abuse:
2) he is a bible-thumper, so most of his advice doesn't apply after 1970 (post-modernism). His tune would change after a divorce.
3) He says school debt should be shared, which is even worse than paying for foodie calls. Legally, school debt in the US remains with the borrower and is not shared in divorce settlements, so there's no good reason to pay for somebody else's school debt.
For people with no financial knowledge:
1) Dave is better than nothing.
Personally I find watching his shows useful to understand societal financial illiteracy at large, rather than for anything Dave says.
I once dated somebody who was innumerate (couldn't understand numbers or budgets.) That's a level of financial illiteracy you don't want in your life, trust me, since they can make a financial blunder at any time that will end your relationship: "Hey, I bought (got a loan) a new car yesterday. Can you just pay for the expenses?"
I interviewed for a position there. Dropped out when I found out they require their employees to go through their financial management course, which is "faith-based".
Being "faith-based" is more of a marketing gimmick. The advice just has random Bible verses stuck into it. It's a way to convince churches to offer the courses with an endorsement. Which is kinda icky, but different icky.
Yes... it's become quite the irritation to me. Crown isn't an awful lot better. They're both straight up secular financial wisdom with "verses sprinkled on top for seasoning."
Believe the Bible or not, one can (probably) reasonably enough assume that if you try to do something based on Biblical financial wisdom, it should end up at least somewhat at odds with what looks ideal for wealth accumulation in our modern, capitalist, credit-based financial systems.
My major problem with Ramsey is that his whole motivation for people to get out of debt is just so they can consume more later - "Live like nobody else, so later you can live like nobody else." Luxury cars, big house, and all the trappings. It's woven throughout his material, and while I won't argue that it's not an appealing thing to offer as a reason to get your financial house in order, I'm far from convinced it's remotely Biblical.
Also, while it's a minor point, given the prevalence of credit card theft/fraud/etc (which I've dealt with... oh, far more often than is reasonable, every year or two I get a card re-issued, to the point that I have certain cards I just use for recurring payments because I'm so tired of having to update everything), using debit cards for everything is a great annoyance. Having my CC number stolen and someone else's money going missing is far less annoying than having my bank account drained and a check bounce. Yes, I'm not liable either way, but "There's an extra $1000 on Discover that I didn't put there" is their problem first and foremost, not my problem.
Crown Financial Ministries is somewhat better, but (having moderated a version of it a few years back), it's still "secular financial wisdom with a few more verses sprinkled on top." Just a bit less materialistic than Ramsey (which, alone, is reason to prefer it).
I've yet to find a course that actually starts with the Bible. A long form study, starting with going through the (many and verbose) chunks of the Bible that talk about wealth, money, resources, etc, and then work from there to what it looks like in the modern world. There's plenty in there about saving for the future and managing resources wisely, but I'm reasonably certain getting from "What the Bible says about money" to "And therefore you should save for a Mercedes!" requires more than a bit of a stretch.
Ramsey is fairly good at the "You are in deep financial trouble, get your stuff together!" initial motivation, and I certainly won't argue that his methods don't work for a lot of people - at least to the "Get your high interest revolving debt paid down, get an emergency fund, and stop buying trivial stupid crap" level, but I really don't agree with his longer term methods (which tend to look an awful lot like "Buy Dave Ramsey branded mutual funds," which are fairly crap funds, last I looked - but he gets a kickback).
If you know of anything better, I'm certainly interested in what's out there. But the state of "Biblically based financial wisdom" in the US, at least, is pretty well lacking from what I can see.
Unless I'm missing something, the entire product and purpose of the Dave Ramsey company is their financial courses, which they claim are from a Christian perspective, and they certainly sprinkle Bible verses throughout for flavor.
"Knowing the thing the company you're considering working for is literally all about" doesn't seem terribly unreasonable to me as a requirement for a position. Would you find it odd for a car dealership to require a driver's license for a car salesman position, or "having driven a car in the past"?
I'm just a bit confused that you would get so far as to interview for a position with them, without realizing that their entire product is "faith-based financial courses."
Well this was an IT position. If a car dealership had those requirements for an IT position then yes, I would find that odd.
I knew what the product was, but I didn't know about the course requirement. At the time I needed to balance my personal ethics and comfort level with the need to improve my financial situation and mental health. Interviewing was a good way to evaluate if the job would do so, and getting the interview was not as much effort as I think you're implying.
Edit: I should say that I did not find the course requirement _super_ odd. Maybe it's standard for companies with this type of product. But it was too odd for me personally. None of my previous employers have required me to use their products, and I've objected any time they got close. Perhaps that is a privilege.
I remember I listened to one of Ramsey's radio shows about a decade ago. A caller said that they had about $50,000 of credit card debt, and was asking about the best way to lower that debt.
Dave gave a few basic truisms about the "debt snowball", but shockingly he then mentioned that this person should increase the amount of money they're giving to the church, since without Jesus's help you got nothing. I'm not religious, but that always seemed so baffling (and dangerous). Surely a deity would understand you are hurting your long-term giving-to-Jesus potential if you're constantly broke.
That led me to research him a bit, and this guy is a borderline cult-leader, and it's a bit upsetting that he'll be worth more than I ever will be.
In high school I breathed the "gospel" of Dave Ramsey. I was essentially a religiously-bent FIRE [0] advocate.
What I have come to realize is that Dave is like an AA leader. His advice makes a lot of sense if you are in a situation where you need to curtail excessive spending, and (benefit of the doubt, I agree with you that the increased tithe is gross) I could see how Dave is trying to help people find a reason to spend less on themselves.
Just as I wouldn't tell a recovering alcoholic the goal is to drink moderately, I wouldn't tell a person considering bankruptcy that some debt is good.
For people who can control their budgets, though -- Dave's advice may limit your options. Debt when managed right is a great tool for boosting liquidity when you need it. That's why even though Dave (and high school Past-me) would shake their heads at this, I have a small loan for a used car and I have a credit card.
Did they make you watch Ramsey's videos in high school?
He released some idiotic video lecture series for high schools, that we spent almost an entire semester watching. I got to learn about how evil student loans are from an official high school class.
I realize that his advice isn't bad most of the time (minus the Jesus stuff), but it's incredibly simple, and it "works" in the same way that most self-help books "work", in that if have no organization/framework for fixing a problem, adding anything will probably be a little helpful. But like self-help books, it's extremely simple and reductive.
(to be clear, I'm talking about the time-management "getting things done" self-help books; I place absolutely no credibility to any self help book that claims to have any understanding of "quantum physics").
Getting upset that someone else is worth more than you will be is a short path to endless despair... though don't confuse "Worth more now" with "Always worth more." Lots of ways to lose an awful lot of money.
As far as "deeply in debt and giving more to the church," it doesn't make sense from a pure "numbers" perspective, but it does make sense from an "attitude" perspective - and I'll suggest that in most cases where someone is $50k in credit card debt (interest on that being in the range of $15k/yr if you've got the sort of interest rates someone stumbling into that situation likely has), it's less a "numbers" problem than an "attitude" problem.
If you come at finances from a "My parents/friends/social media comparisons have X, I ought to have X, so I will go obtain X regardless of my ability to afford it!" sort of perspective (which is a common enough way to get into that sort of trouble with credit cards), then shifting to a "It's not my resources in the first place, I'm simply managing God's resources that He's granted me" perspective can be worth a lot, and giving to your local church (or other appropriate organization, though the local church is often the best answer) helps reframe those attitudes that got you into trouble in the first place.
In most of the "Dave Ramsey" threads I've come across (in places that tend to have their financial heads screwed on straight), the attitude I see is, "Well, based on the numbers, Dave Ramsey's advice is far from optimal, so, clearly, the best solution based on numbers is..."
And if you had your head screwed on straight with financial numbers, you wouldn't be calling into a radio show about your $50k in credit card debt. Either you wouldn't have it in the first place, or you would have it, for a specific purpose, with a plan to resolve it on your own schedule, and therefore wouldn't be calling in about it.
There exists a rather large chunk of the population who simply has never learned good financial skills. You run across it constantly if you listen - think about people who leave a balance on credit cards "to help their credit score," or work on a "I have money in the bank, therefore I can buy this," or "Oh, hey, I got a raise, time to take on more monthly payments!" point of view. If you don't know any, thank your parents for teaching you what they did, and maybe talk about money a bit more with friends. This sort of thinking is found across the entire range of incomes, and there are plenty of people who make $500k/yr and are still trapped in a debt-based, paycheck-to-paycheck sort of cycle with zero buffer. The book "The Millionaire Next Door" goes into some great detail on the differences between "looking wealthy by the world's standards" and "actually being wealthy." An awful lot of "Fancy home and luxury cars in the driveway" families that look wealthy, aren't. They're drowning in debt. Meanwhile, the researchers found that actual millionaires (and this was published back in 1996, so think $1.7M-2M today) tended to live in mid-sized homes, and drive things like "A Toyota Camry" or "A Honda Civic." Often purchased used. Reliable, non-flashy transportation that wasn't going to leave them stranded, but also didn't cost a small fortune to purchase or run.
If you're in the position to be arguing that Ramsey's approach isn't correct, because it's not financially optimal... you're simply not his target audience.
It's not about being "optimal", I understand that getting out of debt is somewhat psychological. I was broke throughout most of 2016 with about $15-20k of debt (depending on how you looked at certain things) and a lawsuit from my landlord for back rent (I've talked about it on HN before, I don't need to go into elaborate detail).
But being "sub optimal" isn't the problem; I think that telling people to increase tithing is bad advice, and to be honest I'm not even convinced his advice is about reframing the issue as "managing God's money", but instead it's his way of catering to his predominantly conservative audience, who would be unhappy if he said to hold off giving to their church.
I don't really know what your second-to-last paragraph has to do with anything. I never claimed that most people learned good financial skills.
Ok. You're welcome to think that telling people in debt to increase their giving is bad advice. If you're $50k into random consumer debt, you've obviously got a problem with your approach to money and finances, and at that point, I very much do think increasing your giving is good advice, if it addresses the root causes of that.
This is part of the prosperity gospel that some evangelical Christians believe.
It may feel like you don’t have enough money to give more to the church on top of the demands of your life. It might feel like it’s irresponsible. But that’s just god testing your faith. By opening your wallet to the church you’re demonstrating your faith and showing that you’re worthy to receive the financial gifts and success that god _wants_ to give you.
I usually associate “prosperity gospel” with scammy televangelists like Peter Popoff or Kenneth Copeland; I don’t think Dave Ramsay was suggesting that in my anecdote, just regular tithing.
But people can also win a suit despite not having any chance of winning in a court of law. Make it clear to whomever you are suing that it's going to cost them less to settle than win, and they'll settle.
I've heard Dave's show and while his views are extreme and his tone polemical I think his essential message is sound: unmanaged debt will fuck your life up like a car crash.
In a fully financialized society like the US where everything has been privatized and put in precarity and people are encouraged to buy colored pencils on layaway on Amazon, hearing someone, _anyone_, say something like this is a valuable dissenting opinion. This has nothing to do with whether he created a toxic environment for his employees though, of course.
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[ 3.2 ms ] story [ 188 ms ] thread1: https://religionnews.com/2021/01/15/dave-ramsey-is-tired-of-...
2: https://religionnews.com/2021/01/15/full-ramsey-solutions-re...
This in particular: > Yes, you will be in a building where 1000 people hate you, but we will assign security to protect you….that is how cults do it
I understand there's jokes in here, but I think the setup is earnest. The part where they invite the author to be in a building with 1000 people who hate him, I don't think that's in jest.
They're talking about a Worship Service, and most of their employees, as I understand it, are Christians. I hope they were embarrassed and ashamed to have it claimed that they hate someone.
> “We have people calling in, they are wanting to cancel stuff for a live event in May — let me tell you how much of your money I am going to give you back if you don’t come for the coronavirus in May,” he said. “ZERO. I am keeping your money. You are a wuss.”
And I don't remember Ramsey's response, but it essentially boiled down to recommending that they save money working their current job, and then go to college. That answer has always struck me as completely bonkers - sure debt can be bad, but this is a case where debt is good: it's going to be much easier paying off college loans with a high paying college-requiring job in STEM than saving up on a low-paying job.
Since then I have always regarded Ramsey and anyone who recommends him with disgust. Totally willing to hear anybody who wants to change my mind, but at least for now I consider these people as charlatans.
In the more likely case that you sort of feel like you might give it a shot, Dave Ramsey's advice looks even better: dropping out will only waste money you already had if you were paying out of your savings. It will waste a lot more than that otherwise.
In what situation? The way your post reads comes across as vaguely resentful of people who aren't upper class.
Most high school graduates cannot afford university out of pocket. That doesn't mean that they need to lower their bar or that they're somehow at a higher risk of dropping out. Your comment is coming completely out of left field.
Compare:
>> dropping out will only waste money you already had if you were paying out of your savings. It will waste a lot more than that otherwise.
> dropping out will only waste money
Did you not notice that the meanings of these sentences are not related? What is the scope of only in each of them?
No, I feel you extracted a snippet from the grammatical structures it was part of, producing something that only appeared to be a full sentence by coincidence. You didn't leave out context, you left out the sentence you were supposedly quoting, and substituted a different one.
Imagine me quoting your comment here in the form
> if HN would let me... I would leave
Is the problem really that I left out some context?
The average cost of community college tuition is around $3.5k a year. Add in books, fees, transportation, lost income from not being available for shifts etc..., and that’s just not realistic unless you can live with your parents or someone else is supporting you.
...unless you live one of the many places where the average cost of an even a studio apartment is high enough to immediately eat most of your wages.
But the math doesn't work at all. I could have saved maybe $10k/yr at the absolute maximum, and law school cost $120k for 3 years at that time (now it's around $200k). If I had followed her plan, I never would have actually enrolled.
I remember thinking my relative was foolish for suggesting that I was taking too big a risk by financing law school with loans. But when the financial crisis hit one year after I graduated, I realized that her advice was not all bad.
I ended up weathering the recession fine, but if I had graduated one year later I would have been in a much tougher position.
TLDR: leverage can be great — assuming everything goes well.
I don’t think there’s that much difference between making $12/hr and making $12/hr with $200k debt that you make no effort to pay off.
edit: thanks for the downvote, but could someone explain what I'm missing? I literally stared at it for five minutes trying to understand it.
I've mostly heard of this in the context of existing employees, whom companies will reimburse if they go get a degree (and stay with the company afterward).
Do companies do this for new hires as well?
Taking the advice of Clark Howard, another personal finance radio personality, your student loans shouldn't exceed your first year's salary. This feels like a pretty good rule of thumb overall. That would keep the payments manageable and you would still have room in a budget for other goals, even when paying the loans down faster than minimum payments.
And for the higher income range, The White Coat Investor doesn't give a rule of thumb, but emphasizes that everyone should buckle down, live like a resident, and pay off all their loans with 5 years of finishing their training.
Living like a law student while working as a young lawyer helped me keep the golden handcuffs at bay and build a nest egg so I could leave and start a startup when the opportunity presented itself.
But my story was simple. I got an associate's degree and worked a trash job for 2-3 years, living at home just saving. Then went back with a lot of cash. The cash was basically a massive emergency fund for me. Could I have saved time going to college instead? Sure but at that point in my life I wasnt sure yet even (at 24 I planned going back to school).
Overall what I would suggest is doing what I did if you don't know what you want to study. Being in debt for a degree that doesn't increase your salary is worse than being in a crappy job in the first place.
Regarding debt... his debt snowball only works if there’s enough income to cover it and there are tons of examples where there isn’t. This means people spend every penny they earn paying off small loans only to eventually lose everything when they start on the larger ones.
The guy is just a radio personality.
(edit: replaced mortgage with car loan, as he excludes mortgages from the advice as pointed out below)
Baby Step 1: Save $1,000 for your starter emergency fund. Baby Step 2: Pay off all debt (except the house) using the debt snowball. Baby Step 3: Save 3–6 months of expenses in a fully funded emergency fund. When you’re working through the first three steps, you simply do them in order. However, people often have questions about Baby Steps 4 through 6. Here’s a quick definition of them:
Baby Step 4: Invest 15% of your household income in retirement. Baby Step 5: Save for your children’s college fund. Baby Step 6: Pay off your home early.
That is entirely incorrect. [1] Baby step #4 is to invest 15% of your household income for retirement.
Baby step #6 is to pay off your home early.
He does tell you to temporarily stop investing so you can pay more towards you debt. This is sub-optimal. His goal is to get you entirely focused on one thing at a time and go after it with everything you have.
[1] https://www.ramseysolutions.com/dave-ramsey-7-baby-steps
It's still worth going into almost any other debt to get a large match, often even expensive credit card debt (you may have to skip matching some years when you take a net withdrawal to keep it optimal).
Paying off an existing car loan before taking a 100% matching contribution is almost always crazy.
His target audience is people who are living paycheck to paycheck, routinely taking loans to support a lifestyle they can't afford, and don't see how their spending habits are death by a thousand papercuts to their aspiration of being financially stable.
To be clear, I'm not a Dave Ramsey worshiper. I strongly disagree with some of his workplace policies and hope he gets taken to the cleaners with some of the lawsuits currently going through the system. I have listened to his show many times, but don't follow all his advice. I'm not paying my superbly low interest rate mortgage down faster than required.
I can't think of anyone responsible for getting more consumer debt eliminated than Dave Ramsey, and that should be commended. The vast majority of people would be far better off following his plan than continuing on their current trajectory.
He recently declared war on the time share industry, and I hope he makes waves by throwing his resources behind it.
https://youtu.be/o6VNi5hJpiU
If you can play something like magic the gathering and do basic estimates odds of things happening and payoffs/penalties, you can do better than taking blanket advice from Ramsey. It's not do it at all costs. Work out the basic numbers. It doesn't always make sense at extreme interest rates, but he tells you to do it as blanket advice even if the debt is low interest student loans and the employer contribution vests right away. I've heard people call in with questions like this I think with student loans. He tells them to basically throw away $5000 to save $250.
what you've described is, of course, technically doable.
many of his listeners may be in jobs that are less stable, and finding another job may take time. 'blanket advice' when you're talking to tens of thousands of people probably needs to be as basic and as applicable across the board as possible.
I do think there's a psychological impact of "grind through it and stick with a plan" that will help create better habits and avoid future debt problems for many folks. Playing a lot of 'move money around' moves gives people the idea that they can always do that, and that's not always the case.
I've never been employed anywhere (nor have I met anyone) who has 'day-1' 401k vesting. Good on you if you have that, but it's nearly always been 3-4 years every place I've been (or my colleagues have been).
The thing is, Dave showed up at a time when credit cards were how people lived. Leveraged to the hilt and no savings. He will be the first to say that his advice isn’t genius - it’s pragmatic and simple. Learn to budget. Pay off your debt. Fund your 401K.
All of that said, he appears to be a pretty nasty individual. Which is fine. But the unforgivable part is that he does it on the back of Christianity. Absent that variable, he’s just another ruthless businessman.
Imagine having bills for $8k, $12k, $6k and $2k. You decide to cut current expenses and take a side job - you're getting serious about this. Getting rid of a $2k bill completely in, say, 4 months, is a decent psychological boost. You might be paying a bit more in interest if the other bills are higher interest rates, but you now have one gone completely. That's bigger progress to many people.
I think one of his quotes - or perhaps from someone else - is that you didn't get in to a bad debt situation purely by numbers and math in the first place. There were usually some emotional factors in overspending (and perhaps hiding the debt from family/friends). Trying to ignore the emotional component of getting out of debt is silly, and the 'debt snowball' is simple enough for people to grok and work.
Why is that bad? Tax-advantaged accounts are much better than non-tax-advantaged accounts if your goal is saving for retirement.
He is stuck in a 70s mentality. Assets are appreciating faster than ever and interest rates are lower than ever. This makes debt more attractive.
Otherwise, you still have to pay off the debt you take out.
They may very well be, but consider that what "asset" means to you is probably not what "asset" means to an awful lot of people.
"Yeah, the mortgage company approved us up to $650k... it's a lot, but we found a house in that range. If we're tight on cash, we can always take out a HELOC against the appreciating price! Everyone knows housing prices only go up, they're not making any more land!"
"I just invested in a new car for myself! Sure, it's more than my annual income, but the loan payments are cheap and it's got a butt massager!"
"Yeah, just invested in a brand new Harley. You know, they hold their value well..."
Etc.
The problem with a leverage-heavy approach to things (as Ramsey knows very well - he made, and lost, a fortune doing leveraged stuff in the 80s) is that as long as the conditions that existed when you got in remain, it works great. As soon as those conditions change - property values decrease, your margin loans get called, etc... you can find yourself in a huge world of hurt, literally overnight.
If you take the "Ramseyian" approach, avoid debt outside a few things, spend a good bit less than you make, save, etc, you might not get as fabulously wealthy as you could with leverage - but you're also far less likely to lose it all than you would be with leverage. And that's worth an awful lot in terms of "actual life satisfaction" (though perhaps less if you consider net worth the only thing of value).
My wife and I have made a variety of "suboptimal" decisions (based on the current debt-leverage-max-out-credit-its-free-money style of thinking about money) over the years, and are probably worth somewhat less than we would be had we taken some riskier approaches, but we also have avoided the high risk, and, to us, high stress approaches to money.
Our goal (well, mine, mostly, since I work and my wife stays at home with the kids) is to have our finances automated enough that we don't really have to think about them, and have the surplus to do things we want to do - we just tend to save up first, and then do the things, instead of taking on debt. If we don't have the money, we don't do the thing. It's a very low stress way to handle finances, and while I will absolutely grant that it's less-than-"optimal" from some perspectives, from how we care to have money handled in our life, it's quite nice. And there are very few high-risk downsides we have to worry about. Markets go up? Neat. Markets go down? Well... OK, but I'm not worried about someone calling me to tell them I own them half a million, tomorrow, or else.
That being said, I don’t think his overall approach is bad for many people in his target demo. IIRC, most of his callers aren’t asking if they should go into debt for college, they are trying to figure out how to get out all sorts of debt they already have. This is where he actually does seem to add value.
Household debt is crippling for so many people. Several childhood friends had parents that struggled with debt, several childhood friends have ended up with debt burdens themselves, and some of them swear that Dave Ramsey (or a similar approach) helped them get their finances in order.
These are people mostly doing blue collar or government work- delivery drivers, teachers, construction workers, etc. Many of them just have predisposition toward illogical or undisciplined behavior with money and do things like take a loan for a vacation, a wedding, or student loans for a 2nd masters in English literature. For them a good answer really is to be allergic debt, to cut up the credit cards, put cash into envelopes for budgeting, and cut costs to get out of debt.
Ramsey and his ilk drive people like me crazy because I like to believe I have decent understanding of money and finance. His advice is wrong for me, and it was probably wrong for the young man you reference. But for the many, many people who don’t think like me an who do things like just look at the monthly payments on what they buy or who use debt to buy status items Dave Ramsey’s advice is often useful.
I disregard his advice on credit cards, but I don’t fault him for making that advice. If he says there are exceptions, everyone will think they’re the exception. And if that was true, credit card companies wouldn’t make any money.
Eh. If you can't make money charging 3% (give or take, handwave, pick your method of getting there) on the vast majority of consumer transactions in the industrialized world, you need to pick a better line of business.
Though I believe a lot of their profits come from the writeoffs of "bad debt" that never gets paid. It's a slick little financial slight of hand.
Someone buys a $50 item on a credit card and never pays it. You charge interest, then late fees, then penalty interest, then more late fees, and eventually the balance is $1000.
You sell the "bad debt" to a collections agency for $0.10 on the dollar - you only get $100 out of the $1000 owed to you. Boo hoo, such losses.
Except, in terms of what you paid out, you're actually $50 ahead (because $950 of the $1000 balance is phantom money you put on the account but didn't actually pay out). And you get to write off a $900 "loss."
Adjust numbers as needed, but it's not a half bad game! For them.
While buying a home and cars, I felt like too much emphasis was put on the "monthly payment" and how much you can afford. I was more concerned about the interest rate, opportunity cost of downpayment, car depreciation and total cost of ownership.
Or by stretching out the payment period to 60, 72, 84, … months.
> The average loan term for a new car also hit a record high of 70.6 months in March [2020]. The most common term currently is for 72 months, with an 84-month loan not too far behind. In fact, nearly 70% of new car loans in the first quarter of 2020 were longer than 60 months — an increase of about 29 percentage points in a decade.
* https://www.edmunds.com/car-loan/how-long-should-my-car-loan...
I do wonder if any news organizations has ever looked into proof of this bankruptcy, or even if he was actually a Realtor.
I get why people don’t like him, but his stuff was transformative for us. Makes it hard to read things like this.
Like many founders, I'm not piling away tons of cash for retirement right now. I assume that my growing (and financially breakeven) startup will continue on its current trend and that it will either become a lifestyle business or lead to a liquidity event.
Would someone like me benefit from a course like his?
It might make you rethink your goals overall. It might make you consider just saving and giving yourself a bigger savings setup, and then pursue your startup goals later, when you can perhaps self-fund a lot more of it, and attack it from a position of stronger financial security.
Or not...
His course is basically just this[0], with some rationale and anecdotes, in a group. I don't want to downplay it because a big part of it all is getting motivated and disciplined enough to want to do it, and so having weekly group meetings made a huge difference. But the overview will give you an idea of what to expect.
[0]: https://www.ramseysolutions.com/dave-ramsey-7-baby-steps
Generally his advice is: if you can't take a salary from your startup it's a hobby/side hustle and you should have a job that pays the bills, until you are confident you can do so. Hoping you get a liquidity event is not sustainable advice for the masses.
I must say that they generally tell people that investing in education has a better payoff than any other investment. They will quickly say to forgo the big loan and big name school for a cheaper school.
They also take many individual things into consideration when giving advice to different people. When I read your rememberance, I immediately thought that the person on the call likely had some sort of rent-free situation (like grandparents paid off place to stay or such) -
They do generally frown upon taking on debt in general - and will rail against taking big loans just to get an ivy league diploma - they will generally suggest that someone save money and find a college they can afford - so both saving up cash and searching for cheaper colleges.
I know many people that will say the Ramsey way can be a loss compared to other methods - but he generally has some stats to show that for example 'even though you can make more with stocks than paying off a mortgage' many people don't do it right, and the peace of mind... so pay off your mortgage.
Not writing this to push the Ramsey way - I am on the fence about some of the advice I have heard on the radio, and do not care for some of the religious stuff that comes out on occasion and apparently with how employees may be viewed or treated based upon how they follow or don't follow the book or whatever.. listening to those shows comes only when all the other stations have worse stuff on - so it's rare.
But characterizing the advice in the way mentioned above, likely missed a lot of addition context for that particular call.
I've heard him suggest low wage people move to other states / cities to get ahead.. I've heard them tell someone over 80 that going to college may not be the best use of time / money - I've heard him suggest all sorts of things that go against the 'general rules' they seem to push on 99% of calls - they really do tend to take individual situations into account - even if most of the advice is the same - spend less, spend cash, avoid debt, have an emergency fund, yada yada..
Only works if you graduate with a STEM degree
Otherwise there you go stuck with debt
Some people can handle debt responsibly, many cannot. For the masses, avoiding debt is probably a good thing.
In the company I last worked, fresh grads were making $175k/y. I would say you would have to be completely bonkers to work at $12/h instead.
On top of that, tuition increases far faster than inflation. Every year you wait. Tuition can go up by about 6%. That essentially wipes out any savings you have.
On top of all that, student aid is quite generous if you are really broke. By going to school as a broke 20 year old say, you will likely get 50% off your tuition. Then you get lots of subsidized loans where the interest doesn’t start until graduation, then finally a couple expensive loans.
Let’s say you start your first job making $120k, year in computer science. Not average, but you did say STEM. Live with four roommates, and with any luck you’ll have paid off your loans in two or three years.
UC Berkeley costs $43k/y right now fully loaded. How many hours at $12/h wil that take?
Ps- the solution I would use today is actually different. First I would max out community college. This is almost free. This would mean I would only have two years of in-state college to pay for. It would also tell me if I am any good at programming. After community college, I would finish at in-state, then get a job, preferably living at home, roommates if not possible, then aggressively manage my career.
OP is saying that's crazy, get the loan and start studying today.
>Let’s say you start your first job making $120k
This may be normal in SV but it's not normal for the industry as a whole. The average starting salary is hard to find government statistics, but BLS says the average median mid-career salary is $110k.[1][2] AFAIK, BLS doesn't track starting salaries, but considering the median salary in [3] aligns with BLS data, it's probably not far off to say a median starting salary closer to $69k. That's just software roles and most other STEM positions are considerably lower. All that being said, I don't think it negates your point, but we have to be careful about generalizing using SV-like numbers.
[1] https://www.onetonline.org/link/summary/15-1252.00
[2] https://www.bls.gov/oes/current/oes_nat.htm#15-0000
[3] https://appliedcomputing.wisconsin.edu/about-applied-computi...
I found a video that elaborates on some of the abuse:
https://www.youtube.com/watch?v=jrXKsDjACZA
For sophisticated people:
1) his advice is not for you
2) he is a bible-thumper, so most of his advice doesn't apply after 1970 (post-modernism). His tune would change after a divorce.
3) He says school debt should be shared, which is even worse than paying for foodie calls. Legally, school debt in the US remains with the borrower and is not shared in divorce settlements, so there's no good reason to pay for somebody else's school debt.
For people with no financial knowledge:
1) Dave is better than nothing.
Personally I find watching his shows useful to understand societal financial illiteracy at large, rather than for anything Dave says.
I once dated somebody who was innumerate (couldn't understand numbers or budgets.) That's a level of financial illiteracy you don't want in your life, trust me, since they can make a financial blunder at any time that will end your relationship: "Hey, I bought (got a loan) a new car yesterday. Can you just pay for the expenses?"
1) Any debt is bad including purchase mortgages and college loans. More sophisticated financial advisers believe some debts are better than others.
2) DR has a multi-step solution for paying off debts. This I believe is practical because it divides a large problem into more manageable pieces.
Believe the Bible or not, one can (probably) reasonably enough assume that if you try to do something based on Biblical financial wisdom, it should end up at least somewhat at odds with what looks ideal for wealth accumulation in our modern, capitalist, credit-based financial systems.
My major problem with Ramsey is that his whole motivation for people to get out of debt is just so they can consume more later - "Live like nobody else, so later you can live like nobody else." Luxury cars, big house, and all the trappings. It's woven throughout his material, and while I won't argue that it's not an appealing thing to offer as a reason to get your financial house in order, I'm far from convinced it's remotely Biblical.
Also, while it's a minor point, given the prevalence of credit card theft/fraud/etc (which I've dealt with... oh, far more often than is reasonable, every year or two I get a card re-issued, to the point that I have certain cards I just use for recurring payments because I'm so tired of having to update everything), using debit cards for everything is a great annoyance. Having my CC number stolen and someone else's money going missing is far less annoying than having my bank account drained and a check bounce. Yes, I'm not liable either way, but "There's an extra $1000 on Discover that I didn't put there" is their problem first and foremost, not my problem.
Crown Financial Ministries is somewhat better, but (having moderated a version of it a few years back), it's still "secular financial wisdom with a few more verses sprinkled on top." Just a bit less materialistic than Ramsey (which, alone, is reason to prefer it).
I've yet to find a course that actually starts with the Bible. A long form study, starting with going through the (many and verbose) chunks of the Bible that talk about wealth, money, resources, etc, and then work from there to what it looks like in the modern world. There's plenty in there about saving for the future and managing resources wisely, but I'm reasonably certain getting from "What the Bible says about money" to "And therefore you should save for a Mercedes!" requires more than a bit of a stretch.
Ramsey is fairly good at the "You are in deep financial trouble, get your stuff together!" initial motivation, and I certainly won't argue that his methods don't work for a lot of people - at least to the "Get your high interest revolving debt paid down, get an emergency fund, and stop buying trivial stupid crap" level, but I really don't agree with his longer term methods (which tend to look an awful lot like "Buy Dave Ramsey branded mutual funds," which are fairly crap funds, last I looked - but he gets a kickback).
If you know of anything better, I'm certainly interested in what's out there. But the state of "Biblically based financial wisdom" in the US, at least, is pretty well lacking from what I can see.
I'm not a lawyer but I was reasonably certain that most jobs cannot have a religious requirement. If Dave Ramsey is doing that then he should be sued.
"Knowing the thing the company you're considering working for is literally all about" doesn't seem terribly unreasonable to me as a requirement for a position. Would you find it odd for a car dealership to require a driver's license for a car salesman position, or "having driven a car in the past"?
I'm just a bit confused that you would get so far as to interview for a position with them, without realizing that their entire product is "faith-based financial courses."
I knew what the product was, but I didn't know about the course requirement. At the time I needed to balance my personal ethics and comfort level with the need to improve my financial situation and mental health. Interviewing was a good way to evaluate if the job would do so, and getting the interview was not as much effort as I think you're implying.
Edit: I should say that I did not find the course requirement _super_ odd. Maybe it's standard for companies with this type of product. But it was too odd for me personally. None of my previous employers have required me to use their products, and I've objected any time they got close. Perhaps that is a privilege.
Dave gave a few basic truisms about the "debt snowball", but shockingly he then mentioned that this person should increase the amount of money they're giving to the church, since without Jesus's help you got nothing. I'm not religious, but that always seemed so baffling (and dangerous). Surely a deity would understand you are hurting your long-term giving-to-Jesus potential if you're constantly broke.
That led me to research him a bit, and this guy is a borderline cult-leader, and it's a bit upsetting that he'll be worth more than I ever will be.
What I have come to realize is that Dave is like an AA leader. His advice makes a lot of sense if you are in a situation where you need to curtail excessive spending, and (benefit of the doubt, I agree with you that the increased tithe is gross) I could see how Dave is trying to help people find a reason to spend less on themselves.
Just as I wouldn't tell a recovering alcoholic the goal is to drink moderately, I wouldn't tell a person considering bankruptcy that some debt is good.
For people who can control their budgets, though -- Dave's advice may limit your options. Debt when managed right is a great tool for boosting liquidity when you need it. That's why even though Dave (and high school Past-me) would shake their heads at this, I have a small loan for a used car and I have a credit card.
[0]: "Financial Independence, Retire Early." Still not a bad idea overall, minus the dogma (see https://www.reddit.com/r/financialindependence/)
He released some idiotic video lecture series for high schools, that we spent almost an entire semester watching. I got to learn about how evil student loans are from an official high school class.
I realize that his advice isn't bad most of the time (minus the Jesus stuff), but it's incredibly simple, and it "works" in the same way that most self-help books "work", in that if have no organization/framework for fixing a problem, adding anything will probably be a little helpful. But like self-help books, it's extremely simple and reductive.
(to be clear, I'm talking about the time-management "getting things done" self-help books; I place absolutely no credibility to any self help book that claims to have any understanding of "quantum physics").
As far as "deeply in debt and giving more to the church," it doesn't make sense from a pure "numbers" perspective, but it does make sense from an "attitude" perspective - and I'll suggest that in most cases where someone is $50k in credit card debt (interest on that being in the range of $15k/yr if you've got the sort of interest rates someone stumbling into that situation likely has), it's less a "numbers" problem than an "attitude" problem.
If you come at finances from a "My parents/friends/social media comparisons have X, I ought to have X, so I will go obtain X regardless of my ability to afford it!" sort of perspective (which is a common enough way to get into that sort of trouble with credit cards), then shifting to a "It's not my resources in the first place, I'm simply managing God's resources that He's granted me" perspective can be worth a lot, and giving to your local church (or other appropriate organization, though the local church is often the best answer) helps reframe those attitudes that got you into trouble in the first place.
In most of the "Dave Ramsey" threads I've come across (in places that tend to have their financial heads screwed on straight), the attitude I see is, "Well, based on the numbers, Dave Ramsey's advice is far from optimal, so, clearly, the best solution based on numbers is..."
And if you had your head screwed on straight with financial numbers, you wouldn't be calling into a radio show about your $50k in credit card debt. Either you wouldn't have it in the first place, or you would have it, for a specific purpose, with a plan to resolve it on your own schedule, and therefore wouldn't be calling in about it.
There exists a rather large chunk of the population who simply has never learned good financial skills. You run across it constantly if you listen - think about people who leave a balance on credit cards "to help their credit score," or work on a "I have money in the bank, therefore I can buy this," or "Oh, hey, I got a raise, time to take on more monthly payments!" point of view. If you don't know any, thank your parents for teaching you what they did, and maybe talk about money a bit more with friends. This sort of thinking is found across the entire range of incomes, and there are plenty of people who make $500k/yr and are still trapped in a debt-based, paycheck-to-paycheck sort of cycle with zero buffer. The book "The Millionaire Next Door" goes into some great detail on the differences between "looking wealthy by the world's standards" and "actually being wealthy." An awful lot of "Fancy home and luxury cars in the driveway" families that look wealthy, aren't. They're drowning in debt. Meanwhile, the researchers found that actual millionaires (and this was published back in 1996, so think $1.7M-2M today) tended to live in mid-sized homes, and drive things like "A Toyota Camry" or "A Honda Civic." Often purchased used. Reliable, non-flashy transportation that wasn't going to leave them stranded, but also didn't cost a small fortune to purchase or run.
If you're in the position to be arguing that Ramsey's approach isn't correct, because it's not financially optimal... you're simply not his target audience.
But being "sub optimal" isn't the problem; I think that telling people to increase tithing is bad advice, and to be honest I'm not even convinced his advice is about reframing the issue as "managing God's money", but instead it's his way of catering to his predominantly conservative audience, who would be unhappy if he said to hold off giving to their church.
I don't really know what your second-to-last paragraph has to do with anything. I never claimed that most people learned good financial skills.
You're certainly welcome to disagree there.
It may feel like you don’t have enough money to give more to the church on top of the demands of your life. It might feel like it’s irresponsible. But that’s just god testing your faith. By opening your wallet to the church you’re demonstrating your faith and showing that you’re worthy to receive the financial gifts and success that god _wants_ to give you.
As George Carlin put it, "He’s all-powerful, all-perfect, all-knowing, and all-wise, somehow just can’t handle money!"
In a fully financialized society like the US where everything has been privatized and put in precarity and people are encouraged to buy colored pencils on layaway on Amazon, hearing someone, _anyone_, say something like this is a valuable dissenting opinion. This has nothing to do with whether he created a toxic environment for his employees though, of course.