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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

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.
  - prirun 5y ago
    There's also the customers that charge $1000 and end up paying back 5x that amount because of 29.95% interest.
cocoa19 5y ago
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.
- compsciphd 5y ago
  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.
  - throw0101a 5y ago
    > 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. * https://www.edmunds.com/car-loan/how-long-should-my-car-loan-be.html https://www.edmunds.com/car-loan/how-long-should-my-car-loan...
rumblestrut 5y ago
“Understandable for a guy who went through a very bad personal bankruptcy.” I do wonder if any news organizations has ever looked into proof of this bankruptcy, or even if he was actually a Realtor.

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.
- prirun 5y ago
  There's also the customers that charge $1000 and end up paying back 5x that amount because of 29.95% interest.

cocoa19 5y ago

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.

compsciphd 5y ago
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.
- throw0101a 5y ago
  > 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. * https://www.edmunds.com/car-loan/how-long-should-my-car-loan-be.html https://www.edmunds.com/car-loan/how-long-should-my-car-loan...

rumblestrut 5y ago

“Understandable for a guy who went through a very bad personal bankruptcy.” I do wonder if any news organizations has ever looked into proof of this bankruptcy, or even if he was actually a Realtor.