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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

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.

foogazi 5y ago
> it's going to be much easier paying off college loans with a high paying college-requiring job in STEM Only works if you graduate with a STEM degree Otherwise there you go stuck with debt
thaumasiotes 5y ago
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.
- warent 5y ago
  > 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.
  - thaumasiotes 5y ago
    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?
    - warent 5y ago
      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.
      - thaumasiotes 5y ago
        > 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?
        warent 5y ago
        Yes
        thaumasiotes 5y ago
        You should have gotten this from my prior comment, but no, it isn't.
- learc83 5y ago
  $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.
  - bumby 5y ago
    Average Pell Grant comes in at over $4.4K
    - dlp211 5y ago
      Pell grants are based on EFC, so until you are 25, married, or a veteran, your ability to get a Pell grant can be limited by your parents income.
      - bumby 5y ago
        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.
  - Thorrez 5y ago
    This was 15 years ago, so it would be $15.90 today.
- crooked-v 5y ago
  > which you can easily afford out of your $12 / hour wages. ...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.
- syops 5y ago
  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.
gnicholas 5y ago
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.
- spoonjim 5y ago
  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.
  - gnicholas 5y ago
    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.
    - crooked-v 5y ago
      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.
MeinBlutIstBlau 5y ago
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.
- devoutsalsa 5y ago
  College is an expensive way to figure out you didn’t want to go to college. Waiting totally made sense for you.
deelowe 5y ago
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. The guy is just a radio personality.
- paulpauper 5y ago
  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.
- cma 5y ago
  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)
  - xupybd 5y ago
    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.
paulpauper 5y ago
He appeals to people who want solutions and answers that sound obvious or affirm one's preconceived beliefs, but such solutions are often not optimal. 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.
- brightball 5y ago
  Only if by assets you mean “something that makes you money.” Otherwise, you still have to pay off the debt you take out.
- Syonyk 5y ago
  > Assets are appreciating faster than ever... 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.
topkai22 5y ago
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.
- Brendinooo 5y ago
  Yeah, this is a pretty good survey of it all. 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.
  - Syonyk 5y ago
    > 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.
Brendinooo 5y ago
We did his Financial Peace thing a few years ago. Went from doing okay to having a budget and getting rid of all non-mortgage debt. I get why people don’t like him, but his stuff was transformative for us. Makes it hard to read things like this.
- gnicholas 5y ago
  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?
  - mgkimsal 5y ago
    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. Or not...
  - Brendinooo 5y ago
    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. [0]: https://www.ramseysolutions.com/dave-ramsey-7-baby-steps https://www.ramseysolutions.com/dave-ramsey-7-baby-steps
  - ryathal 5y ago
    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.
prestigious 5y ago
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.
stevenicr 5y ago
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..
craftinator 5y ago
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.
RickJWagner 5y ago
Ramsey's advice is fair. Especially considering the student debt crisis. Some people can handle debt responsibly, many cannot. For the masses, avoiding debt is probably a good thing.
david38 5y ago
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.
- UpbeatZoltar 5y ago
  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.
- bumby 5y ago
  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. [1] https://www.onetonline.org/link/summary/15-1252.00 https://www.onetonline.org/link/summary/15-1252.00 [2] https://www.bls.gov/oes/current/oes_nat.htm#15-0000 https://www.bls.gov/oes/current/oes_nat.htm#15-0000 [3] https://appliedcomputing.wisconsin.edu/about-applied-computing/applied-computing-salary/ https://appliedcomputing.wisconsin.edu/about-applied-computi...

foogazi 5y ago

> it's going to be much easier paying off college loans with a high paying college-requiring job in STEM Only works if you graduate with a STEM degree Otherwise there you go stuck with debt

thaumasiotes 5y ago

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.

warent 5y ago
> 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.
- thaumasiotes 5y ago
  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?
  - warent 5y ago
    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.
    - thaumasiotes 5y ago
      > 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?
      - warent 5y ago
        Yes
        thaumasiotes 5y ago
        You should have gotten this from my prior comment, but no, it isn't.
learc83 5y ago
$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.
- bumby 5y ago
  Average Pell Grant comes in at over $4.4K
  - dlp211 5y ago
    Pell grants are based on EFC, so until you are 25, married, or a veteran, your ability to get a Pell grant can be limited by your parents income.
    - bumby 5y ago
      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.
- Thorrez 5y ago
  This was 15 years ago, so it would be $15.90 today.
crooked-v 5y ago
> which you can easily afford out of your $12 / hour wages. ...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.
syops 5y ago
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.

gnicholas 5y ago

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.

spoonjim 5y ago
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.
- gnicholas 5y ago
  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.
  - crooked-v 5y ago
    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.

MeinBlutIstBlau 5y ago

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.

devoutsalsa 5y ago
College is an expensive way to figure out you didn’t want to go to college. Waiting totally made sense for you.

deelowe 5y ago

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. The guy is just a radio personality.

paulpauper 5y ago
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.
cma 5y ago
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)
- xupybd 5y ago
  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.

paulpauper 5y ago

He appeals to people who want solutions and answers that sound obvious or affirm one's preconceived beliefs, but such solutions are often not optimal. 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.

brightball 5y ago
Only if by assets you mean “something that makes you money.” Otherwise, you still have to pay off the debt you take out.
Syonyk 5y ago
> Assets are appreciating faster than ever... 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.

topkai22 5y ago

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.

Brendinooo 5y ago
Yeah, this is a pretty good survey of it all. 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.
- Syonyk 5y ago
  > 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.

Brendinooo 5y ago

We did his Financial Peace thing a few years ago. Went from doing okay to having a budget and getting rid of all non-mortgage debt. I get why people don’t like him, but his stuff was transformative for us. Makes it hard to read things like this.

gnicholas 5y ago
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?
- mgkimsal 5y ago
  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. Or not...
- Brendinooo 5y ago
  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. [0]: https://www.ramseysolutions.com/dave-ramsey-7-baby-steps https://www.ramseysolutions.com/dave-ramsey-7-baby-steps
- ryathal 5y ago
  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.

prestigious 5y ago

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.

stevenicr 5y ago

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..

craftinator 5y ago

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.

RickJWagner 5y ago

Ramsey's advice is fair. Especially considering the student debt crisis. Some people can handle debt responsibly, many cannot. For the masses, avoiding debt is probably a good thing.

david38 5y ago

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.

UpbeatZoltar 5y ago
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.
bumby 5y ago
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. [1] https://www.onetonline.org/link/summary/15-1252.00 https://www.onetonline.org/link/summary/15-1252.00 [2] https://www.bls.gov/oes/current/oes_nat.htm#15-0000 https://www.bls.gov/oes/current/oes_nat.htm#15-0000 [3] https://appliedcomputing.wisconsin.edu/about-applied-computing/applied-computing-salary/ https://appliedcomputing.wisconsin.edu/about-applied-computi...