Dave Ramsey: Worth It?

Dave Ramsey: Worth It?

I have a soft spot in my heart for Dave Ramsey and his financial teachings. Dave Ramsey kickstarted my personal financial education, and a lot of his opinions continue to shape my personal financial road map.

One day in 2006 on my commute to work, I listened to an episode of "This American Life" that had a story about Dave Ramsey. I was intrigued. I had always thought about financial planners as boring droning voices talking about stuff I didn't understand. But this Ramsey guy seemed to be giving solid advice in plain language, and - most importantly - he was giving it to people like me.

This may be the most revolutionary aspect of what Dave Ramsey is doing. Most financial gurus are speaking to the wealthy. They debate things like "High-yield savings account or CD?" But Ramsey is talking to regular Americans, people in financial trouble, people struggling to make ends meet on minimum wage, people in over their heads.

People like me.

Ramsey has a three-hour radio show every day. That's a lot of Dave Ramsey. I listened to about 30 hours of Dave Ramsey in a week, and it told me everything I needed to know. The depressing thing about Ramsey's show is that you don't have to listen to it very long, because all the callers have the same problem, and Ramsey keeps giving them the same advice.

As to that advice, make no mistake: it is hard core. Ramsey pulls no punches. Two of his well-worn phrases are "beans and rice" and "gazelle-like intensity." He may advise you to sell your new car and buy a beater outright (to save yourself the payments), or get a second job, or - more likely - both.

Ramsey pushes back against America's culture of wealth and privilege, and he does it without a sugar coating. Can't afford the payments on your house? Sell it and move into an apartment. Can't afford the rent on your apartment? Get a roommate. Do whatever it takes to cut your expenses.

This is hard for a lot of people to hear. But they have to hear it. I certainly did.

The core of Ramsey's program is his "Seven Baby Steps." These are awesome, and somewhat revolutionary in the financial world. His first step, the thing that you MUST do before anything else - even before paying off your debt - is to build a $1,000 emergency fund. Emergencies happen, and Ramsey advocates the emergency fund because it lets you pay for those emergencies, instead of having to borrow more money and incur more debt.

The next step is the Debt Snowball, where you start by paying off the smallest debt first, and then roll those payments into the higher debts as you go. This is a little bit backwards from standard advice, but it gives you an important kick of accomplishment.

Where Ramsey's advice falls short is once you get past the desperate stage. If you have paid off your mortgage and all of your debt, then you probably want to look elsewhere for financial advice. But for the rest of us, Ramsey is a much-needed kick in the pants.

Photo credit: Flickr/sj_sanders