Monday, March 23, 2009

Dave Ramsey & TMMO: A Reader's Opinion

Yeah, I get my share of reader email.

And I'd like to share one now, mostly from the standpoint of the motivation it provides:

Dear MDM:

In preparing to establish a written recommendation to all of my clients to at least read Dave Ramsey's book, TMMO, I came across your TMMO review. I admit that his website is commercially oriented. However, as a CPA, I sell services and am paid for my time, experience, education and hands-on application of the resulting combined expertise.

Simply put, I am paid for my time. You make the point that if Dave Ramsey can pursuade a multitude of people to become debt free and live a more responsible financial life, where they could not before, then he has accomplished something.

In my experience, most people are not excellent managers of their money, and they do not have the expertise or discipline to adhere to a budget, let alone understand how to even set one up. Most will feel a budget is a restrictive device, but I tell my clients it is meant to be flexible. It is the planning and organizing of obligations that counts.

Many people who think of themselves as entrepreneurs use "debt as leverage" instead of understanding that "debt is risk." Many married couples fell into the mortgage company advertising pit of second mortgages to "make home improvements" and "increase the value of their house" at the same time. Now I have a few clients who are struggling because either one or the other spouse has lost their employment and wages. The market value of homes have plummeted, and the loan-to-value of their mortgage and second are now upside down.

They did not prepare themselves and fell into hidden traps of heavy marketing and borrowing. I remember one day I received three solicitations from one mortgage broker: one sent in my name, one to my spouse, and one to us jointly. What a joke — I never fell into the second mortgage trap.

I do not see that mortgage company's agressive advertising in my mailbox now.

With TMMO, Dave gives people a road map that they've never had before. That road map includes the Baby Steps, and the personal stories give hope to people who feel they are at the bottom and in despair. Unless you've been there, you can't imagine how terrible it feels. This is not a "get rich quick" scheme / guide, but a straightforward plan.

Dave makes the comment, "If you've tried to get out of debt before and you're reading this book then try it my way, because it works." And it does.

So, if Dave can help multitudes of people make headway with a $14.95 book, I say it's awesome. If people are motivated more by attending seminars or listening to tapes in their cars, then so be it. If they put these things to work, they will become one of the small percentage of people in this country who are not a part of the trillions of dollars of consumer debt that had a hand in bringing this economy to its knees. The high interest rates and foreclosures have stripped people of everything, including their self-worth.

I saw a television commercial the other day. It was a furniture advertisement, and the thrust of the ad was to "spend your tax refund wisely." I believe it is unwise to spend a tax refund in the first place. Why not save it, instead? How many people listened to that commercial and thought "Yeah, it's OK to spend my tax refund, and I can't wait to do it."

My sister gave Dave Ramsey's book to me last August on my 50th birthday. Gracefully receiving the book as a gift (I have a nice library), I thought the book would collect dust. In September, I began reading it, and as you might imagine at my level of employment in my profession, I can handle several obligations, and have responsibly.

I began reading the book in September, and skipped over the personal stories. However as November and December rolled around and I had shaved off this obligation and that obligation in my "debt snowball," I began to read the stories. They deserve the attention.

I have since admitted to my sister that I did not think the book would help — but then I explained my story and where I am today because of a $14.95 book.

That is because I now have one to tell, too: I have brought over $30,000 in consumer debt to almost $0.00 in 7 months. Other people may not be as fortunate, or have the ability to do something like this in such a short period of time — and also during a bad economy. However, I believe it would almost be irresponsible not to do so if the means were there. And that's what I got out of TMMO.

I'm tellimg my clients about it, and I am going to hand out his book to a few who I know would be helped. They can be motivated. I'm not saying that my client base is in despair, but these economic conditions call for something creative for some of them. Actually, it's not creative at all; it's simple and straightforward.

My house is next and I'm never going back.

Jack L. Sheldon, Jr., CPA
Mesa, Arizona

Thanks very much for the email, Jack. I know that "never going back" feeling, too. It's a great one.

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— Posted by Michael @ 8:10 AM

Monday, March 16, 2009

Dave Ramsey: Taunting the Bear

I don't listen to Dave Ramsey's radio show nearly as much as I used to. But one evening a week ago I happened to catch a bit of it while driving in my car. The segment I caught made me smack my steering wheel in disgust.

Guess what? It had nothing to do with a caller paying Stupid Tax.

The following snippet is what set me off. It's one of Dave's self-voiced commercials; in this case, he's touting his investment ELPs (Endorsed Local Providers):

Hey folks! Dave here. You've heard me say not to take money out of your mutual funds just because the market's acting like it is. Look — I don't know where the bottom is ... or when the market's going to recover. But did you know that the dollars you invest at today's lows have the greatest potential for growth? Let me explain.

You see, if there's a good fund that's down fifty percent in value today, and you buy shares in that fund, you're basically buying shares at half price. That's a heck of a discount! But the best part is this: If that fund regains its value just to where it was before the drop, your money didn't get a fifty percent return. You got a one hundred percent return. You see, wealth still can be built during tough economic times. Your local investing ELP can show you how it's done...

And then some more audio ballyhoo urging listeners to contact an ELP to learn "how all this investing stuff works."

Okay, guys. Are you ready? 'Cause here comes my rant.

Dave & Mutual Fund Returns

I very much appreciate Dave's contributions to the world of personal finance, at least when it comes to the basic stuff. His Baby Steps plan, as well as his noteworthy Total Money Makeover are my go-to references for folks who ask where to start.

However, Dave loves to talk about "10 or 12 percent annual returns" from "good growth-stock mutual funds" over time. His listeners and readers who have little or no exposure to other market viewpoints will likely take this as gospel, and fall in line with whatever urgings radiate from Dave's Tennessee headquarters.

In my opinion, consistent market returns of anywhere near that mark are going to be MIA for a long, long period of time.

As in decades.

If you're just now getting in the market for the first time, congrats. I guess.

However, if you're one of the unlucky folks who poured big bucks into the markets in 2000 and/or 2006-2007, the makeover your money is getting ain't nearly so pretty.

It's All About Debt

You'd think that a guy like Dave — who understands the horrible impact of debt on American households better than anyone — would grasp the overriding investment picture here: Namingly, that what "economic growth" we've had since the early 2000s has been built almost entirely by debt.

Yes, we've seen growth. And we've also seen debt layered on top of debt layered on top of more debt.

For some economists, this credit-growth situation reaches all the way back to the early 1980s. It then kicked into overdrive sometime the late 1990s. And then did so again in the early 2000s.

Maybe they're right. Maybe they're not.

In any case, now it's all blown up in our face. The piper, as they say, has his hand out. His lederhosen are riding up, and he's grumpy.

Suffice to say that payback is expected.

Look: We had a monstrous stock bubble go pop back in 2000 and 2001. That wasn't pleasant; however, it was necessary. Upside economic excesses must, at some point, balance out to the downside.

It is my contention that that bubble was never allowed to truly deflate. We then followed it up with a housing bubble of enormously larger proportion — and more dire consequence. Our innate fear of recessions and no-growth economic periods — as well as the tragic happenings of 2001 — meant that easy-money policies would be kept in place far too long, fighting a battle in which we'd have been better off giving up some ground.

We could have taken our medicine in the early 2000s, but did not.

Stock bubbles are yucky, sure, but housing bubbles? They're far more pervasive, and far more economically damaging when they go sploosh. It isn't so much about the houses, really, but about the debt behind them.

Because scary-huge amounts of it are required make a housing bubble go.

When banks and outside investors start taking (and/or hiding!) the multiples-of-$100k-per-home losses on the hundreds of thousands of properties they own ... well, that's a crapton of capital going, going, gone.

Balance sheets crater. Investors scramble for cover. Consumers yank in on the spending reins.

Banks, investment houses, retailers, and millions of consumers are introduced to insolvency. Politicians and regulatory agencies start looking for more ways to allow number-fudging. (Erase mark-to-market, anyone?)

What's that you say? The banks and funds were leveraged at 10 or 12 or 30 (or higher) to 1, so the losses became exponential?

And that when you count the potential losses on fancy derivatives and default swaps as companies and pensions and securities detonate, and commercial real estate starts to falter, the financial carnage gets even worse?


Well, never mind. I'm sure the economy (and the markets) will rebound strongly anyway.

I mean, all we have to do is take the losses off the banks' balance sheets and move them to another part of the banks' balance sheets.

What — that might not work?

Okay. How about this: Take the banks' losses off their balance sheets entirely and dump them onto the taxpayer. (But make sure the taxpayer doesn't find how deep the hole is until years later. That's key.)

Genius. A recipe for economic success.

With the taxpayer (read: consumer) as Bagholder of First Resort, and with tax rates on an inevitable upward curve — remember that piper above? — I'm sure new market highs will be here any day now.

Or not.

Friends, the bad debt has got to be absorbed by someone. There are multi-trillions in losses here.

Someone is going to take them.

For years.

(Somebody find us another bubble. And quick.)

Markets and Pricing

I don't know if we've seen the bottom already ... or if we'll not see it until 2012 or later.

What I do know is that the price a stock or market was trading at in 2007 has zero bearing on what it's worth now. Or on what it'll be worth next year. Or the year after that.

In my world, for Dave to talk about buying a "good fund that's down fifty percent in value today" and that by doing so "you're basically buying shares at half price" is financial retardation of the highest order.

Bet he was saying similar stuff back in 2003, too.

Look: What value that stock or fund fell from means absolutely nothing. Well, except that you have a lot of underwater investors who'll be looking to get out on the way up.

Where it goes from here, however, means everything.

So you got lucky and missed out on that first fifty-percent loss. Fantastic. As long as this is the bottom, you're golden.

Same thing applied to those (formerly) lucky 2003 "We caught the bottom!" investors.

Then "six years later" happened. The papering-over of bad debts with more and bigger debts, all in the name of "growth" ... it sort of blew up in our face, didn't it?


So answer this: From a macro standpoint, are we approaching this crisis any differently?

I would answer NO. Econonomic and political leaders are espousing "loosened credit" and "stimulus spending" as our salvations at every turn.

The road we're on scares me.

No, actually, it terrifies me.

In the midst of all this, I'd say I'm surprised that Dave's taking the investing stance he is. Except that I'm not.

So Why Does Dave Tout This?

Because he is, as poker parlance might assert, now "all in."

He's talked up these "10 or 12 percent annual returns" from "good mutual funds" ever since I first heard him, and Ramsey can't back off now. He's committed, and his listeners (er, believers) are committed — even though recent market performance points to stiff losses for all but the longest of long-term fund investors.

And even the long-term guys — think Boomers here — whose asset and risk allocation was, uh, less than optimal?

They're now finding that long-term buy-and-hold maybe only works when you're fortunate enough to retire well ahead of a deflationary debt collapse.

With the S&P 500 index sitting at levels which match the lows of twelve years prior, well, that's a lot of underwater 401(k)s, pensions, and everything else.

Of course Dave is exhorting folks to get in the market. He now has to do so — in order to try and save face.

For most investors, I imagine, those touted double-digit returns haven't come from any of their 2003 stock-fund investments. Or their 2002 fund investments. Or their 2001 fund investments. Or ...

Well, you get the picture. We'll see how this goes.

As a guy who's been almost entirely in cash since January 2008, I'm torn. I'm torn like you can't imagine.

What's holding me back? At "half off," why haven't I started dipping back in the market?

Because I don't think taking an already debt-loaded society and piling on more debt is the answer.

Apparently, I'm the only guy alive who thinks this way.

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— Posted by Michael @ 8:15 AM

Monday, January 21, 2008

Paying Debt & Missing Your Employer Match

If you read Dave Ramsey's Total Money Makeover, one of the things you'll hear him instruct readers to do is this:

...I am a math nerd, and I know the 100 percent match [from employers] is sweet. But I have seen something more powerful — focused intensity. If you are going to be gazelle-intense and do everything in your power to become debt-free very quickly, then stop your retirement plan contributions, even if your company matches them. The power of focus and quick wins is more important in the long term to your Total Money Makeover than is the math.

Here we find yet another instance where Ramsey and I disagree. But on this topic, my disagreement is ... well, relative.

What's that mean?

It means that if someone wants to delay retirement contributions until they've paid off their high (read: double-digit) rate debts, then I can go along with that pretty easily. This assumes, of course, that all extra money does, in fact, go toward debts, and not toward more dining out or a bigger home theater system or whatever.

Sure, missing out on an employer match is yucky. But I do understand when Dave talks about the "power of focus." It's real, and it matters. Postponing retirement contributions with, say, an initial fifty-percent return (supposing the employer matches @ fifty percent) so you can rocketship your way out of twenty-plus-percent interest-rate credit card debt may not make sense in strict mathematical terms, but I can understand doing it. The benefits of paying off high-interest credit-card debt, I would suggest, go beyond strict mathematics.

On the Other Hand...

However, Dave's response to a caller's question this last week — a question very pertinent to what I'm discussing here — about sent me out of my chair.

The call went something like this, as I remember:

Female Caller: Dave, my daughter just graduated from college with a degree in medicine, and she's doing her internship now. She's living at home with her father and I, and honestly, she's been very frugal with her money. Her only debt is student loans, but she has over $100,000 of them. She's earning just under $80,000 per year right now. She has a pretax retirement plan at work, and her employer matches her contributions at fifty percent. She's not yet started putting money in it. Our financial advisor says she should start contributing to it right away, but we've told her that she needs to pay off her loans first. What do you say?

DR: Your advisor is stupid. You know that?

Female Caller: (Laughs) Right. Well, we were thinking—

DR: No, look. She needs to pay the debts. Focus on the debts. Pay them off now. She's making great money; she's living at home with you guys; she needs to get those debts eliminated. At her age — earning that much cash with no expenses, really — forget the retirement plan and the matching. Make her pay off the student loans.

Okay. Deep breaths. Deep breaths.

I don't believe the woman ever told us what rates her daughter is paying on those student loans. But I bet you it's less than ten percent — maybe a lot less. Because the daughter's income is so high, the loan interest probably isn't tax deductible. Let's say she's paying eight percent on those loans.

So Dave's telling her to give up a guaranteed initial fifty-percent return on her investment via her retirement plan in order to speed up the payoff of a sub-ten-percent student loan.

I say this with all due respect:


My Thoughts on "Stupid"

First off, our young graduate's income puts her in (at least) a 25 percent tax bracket. So every $100 that she keeps out of her pretax retirement plan gives her, after taxes, only $75 to put toward her debt.

In the realm of net worth, that's a twenty-five percent haircut right there. "Thanks much!" says Uncle Sam.

Utilize the retirement plan, though, and she gets to keep that money ... and her employer ladles on the gravy, kicking in another $50. This brings her investable, plan-to-retire-with-dignity total to $150.

And keep in mind: For our young graduate, every missed contribution is a guaranteed fifty-percent return on her money which she cannot get back.

It isn't like saying, "Boy, I sure wish I could time-warp back to the late 1980s and invest in Microsoft stock!" Yes, that would've provided a fantastic return on your money. But in the late 80s, Microsoft's stock's meteoric rise was no guarantee — unless, of course, you could read the future.

With an employer match, there's no fortune-telling necessary. The fabulous return — just for setting aside some money — is written in stone.

Here's what I'd tell the caller: Your daughter needs to contribute enough to get the maximum match from her employer. After that, throw everything else at the debt.

At eighty grand a year, Young Grad is making roughly $6,666 per month. She could probably (legally) set aside up to fifteen percent of that, or $1,000 per month, in a pretax retirement plan. Her employer matches her contributions at a rate of fifty percent (up to six percent of income), so she'd need to invest twelve percent ($800) in order to get the maximum match ($400).

Here, in essence, are her choices:

  1. Save $1,200 bucks for the future, or ...

  2. Get $640 bucks to pay for the past.

Tell me again, Dave, since you're so fond of using the analogy: What's that about driving down the road, throwing hundred-dollar bills out your car window?


In my opinion, it isn't the financial advisor here who's "stupid."

Am I way off-base on this?

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— Posted by Michael @ 9:49 AM

Thursday, January 10, 2008

Something Going Wrong? BORROW!

Know what's fun? Fun is finding an article in this past weekend's Parade magazine that has a chunk of advice so tremendously bad, you wonder if they didn't throw it in as a joke.

Here's the deal: The article was titled "Feel Secure About Your Money," and written by Lynn Brenner. The basic premise sought to outline a few actions folks could take in order to "recession-proof" their finances.

The first two headings of advice ("Stay Job-Ready" and "Check Your Mortgage") I was okay with. Number three, however ... well, I'll just quote it here:

Prepare for an Emergency

If you don't have a home equity line of credit, you many [sic] want to set one up to use only in an emergency. "Some lenders charge an annual non-usage fee of about $50," says [Vice-President of a mortgage-research firm Keith] Gumbinger. "But it's still cheap insurance. You can borrow about 90% of the value of your house, so if you have a 70% mortgage, you may get a credit line of another 10% to 20%."

Here's a novel idea: INSTEAD OF PLANNING TO BORROW LATER, SAVE MONEY NOW! I'll refer to a quote from Dave Ramsey that nicely sums up how I view this situation: "The absolute worst time to borrow is when there's an emergency."

Nowhere in the article — not one place — is saving money mentioned. In a story that's supposed to help readers prepare for "uncertain economic times," and suggests that it "never hurts to be prepared," how ridiculous is that?

Wow. Have so many of us just given up altogether on the idea of stashing cash? For Brenner's part, the closest we get is this:

Make sure your longer-term investments are well-diversified. ...And don't keep more than 10% of your investments in the stock of your company or industry. It's risky to keep your paycheck and your nest egg in the same basket.

And will someone please tell me when we're in "certain" economic times?

Because, like, that would be really helpful to know.

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— Posted by Michael @ 7:43 AM

Tuesday, November 06, 2007

New Dave Ramsey Spreadsheet

Excel SpreadsheetLast week a reader kindly purchased my Check Register spreadsheet and subsequently asked if I knew of a site on the 'net where she could pick up a spreadsheet version of one of Dave Ramsey's many Total Money Makeover worksheets. In this case, she was looking for his "Pro Rata Debts" form.

Well, I didn't know if such a spreadsheet was out there at all. Actually, it probably is ... but the question gave me an excuse to MAKE A NEW SPREADSHEET!

IYM: Dave Ramsey's Pro Rata Debts Spreadsheet

In a nutshell, Dave advises readers who are having trouble making debt payments to always send a least a little something — but to do it in a manner that's not preferential to any one creditor. This spreadsheet accomplishes that (I hope!) by computing payments for each creditor which are proportional to that creditor's share of your total debt.

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— Posted by Michael @ 8:59 AM

Monday, September 10, 2007

Dave Ramsey's Baby Steps ... for Farmers

Farming today is an inherently risky business. When a small or beginning farmer borrows money they create an obligation to repay the debt. Uncertain weather conditions, changes to markets, rising interest rates, credit availability, changes to the Farm Bill, and many other events beyond a small and beginning farmer and rancher's control — can affect the prices they receive for their crops and can have a profound affect on their farm finances and ability to pay back their farm loans.
— Intro for "Growing Power" Conference

I am not a farmer, nor have I played one on TV, nor have I slept at a Holiday Inn Express in the last month. Thus I cannot pretend to know all the benefits and challenges that today's small farmers face. What I can do, though, is receive questions by email, and then offer them up to my readers for opinions and advice.

Here's the question I received:

My husband and I farm. We both have the desire to be debt-free. How can we, as farmers, and having a farming business that lives year to year on loans, make the Baby Steps plan work for us? The problem is that farming relies on a great deal of money every year to put a crop in — upwards of $30-50,000 a year. The [profit], consequentially, in years past was not that good. With the bio-fuel industry getting started, it is looking better. The question is, when you have to borrow to put in a crop, and pay it back at the end of the year, how can you feasibly work this plan to your betterment?

It's hard for me to lay out what Dave's response to this would be; in the end, I'm just making an educated guess. But here's what I'd guess:

Each year youíre borrowing money to run your business (farming). What you hope is that your yearly crop will provide enough revenue to pay back the loan, the interest, cover any other costs of doing business ... and also provide you with income over and above all this.

Dave Ramseyís overriding idea is that we all should save enough money so that we DONíT have to borrow at all. Ever. For anything. This would apply to your business interests also: Save up money, control costs like crazy, earn extra on the side somehow, sell stuff, or whatever — accumulate savings so that you donít have to borrow to get the farm, or store, or shop up and running each year.

Or, put another way: Accumulate money, setting some aside each month and each year in what is essentially a Freedom-Account-like concept, so that you have to borrow less and less each following year ... on your way to eventually having to borrow nothing. At that point, you're entirely self-sufficient, and surviving on the merits of your own capital and skills.

As I glanced back through my copy of Total Money Makeover (review) tonight, I couldn't find anyplace where Dave made exceptions to his plan for folks with "out of the ordinary" occupations, or for self-employed persons. He does mention that such situations create an even deeper need for strict budgeting (thanks to uneven incomes over time).

I know this: Ramsey displays a definite affection for businesses which are run debt-free, and he isn't shy to declare the merits of such. Farming is a business like any other, and it's subject to cyclical risks (and rewards) like any other.

Is there a difference between debt used to finance a business (farming, in this case) and debt used to finance the purchase of consumer stuff? Absolutely there is. We take on the first in order to (hopefully) earn a return; we take on the second often because we're impatient, immature, or we simply didn't plan very well.

But just because one reason for taking on debt might be "better" than another, it doesn't mean we're in the clear. Leverage, regardless of its intended use, brings risk in the door. (Yes, even small-time ventures like credit-card arbitrage.)

Besides: Farming is a tough gig, no matter how you look at it. Why rely on the bank to finance your livelihood if you don't have to?

And so, Dear Reader, I'm asking for any and all thoughts on this topic. What guidance might you offer to the couple who emailed me — a couple who has apparently (like so many farming families) relied on leverage every year to get their noble pursuits off the ground?


— Posted by Michael @ 10:16 AM

Thursday, September 06, 2007

New Spreadsheet and New Review

For anyone interested, I've made a couple of new additions to the IYM main site. For one thing, I added a new spreadsheet to my Excel collection:

IYM Spreadsheets: Credit Card Arbitrage Estimator

The zero-percent offers aren't nearly as plentiful as they used to be, that's for sure. But a few workable promos have hit my mailbox over the last few weeks, so I know the opportunity is still out there.

Product Review: Dave Ramsey's Personal Finance Software

A while back a reader asked for my opinion on Dave's Financial Peace Software. I knew nothing about it, so I "borrowed" a discount link (can't find it now) and bought a copy and gave it a whirl.

Results: Bleh.

I noticed that over the Labor Day weekend the software CD could be had for $10. I'd call that a very fair price. Now, though, it's back to regular price ($30), which in my opinion is way too high for what amounts to a package of glorified forms and spreadsheets. (The CD's Debt Snowball Calculator is pretty good, though, and probably worth the $10 or $15 on its own.)

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— Posted by Michael @ 10:07 AM

Tuesday, August 21, 2007

Central AC System Has Been Replaced

Here's a little follow-up to my recent post regarding our replacement of our home's central heat 'n' air system:

All told, we received three estimates from local A/C installers. The first estimate came from the folks who'd always handled our maintenance contract on the old A/C system. They're a Lennox dealer, and wanted almost $8k for the job.

The second estimate came in at $6,600. This dealer specialized in Luxaire system, but priced me a Carrier system also. I had a bit of a preference for Carrier anyway, and the price difference between the two was only about $400. (Luxaire being cheaper, but not really a brand I was considering.)

The third estimate came from a smaller, newer (6+ years old) company based in OKC. They're a factory-authorized Carrier dealer, and their estimator quoted us just under $6,100. On a personal note, I felt much more at ease with this guy — no "Just trust me: Our brand is way better than all the others!" stuff. And he simply seemed much more down-to-earth and practical. Additionally, he picked up on two not-up-to-code electrical items that the other guys missed (or just didn't bother telling me about). I definitely got the feeling that he'd had a great deal of hands-on experience in the field. About the only thing that he didn't have, which I would've liked to see, were some photographs of previous A/C system installs that his company had done.

In the end, the third, smaller company earned our business. The installation took most of a day for the two-man team. (One of which, it turns out, was the guy who'd given us the estimate; he apparently had to fill in for someone else.)

The new Carrier system has been up and running for four days now. I never realized how noisy our old system was until I heard the new one — both the indoor and outdoor components are much MUCH quieter. Visually, at least, the quality of the new installation is worlds better than what was done for our old Comfortmaker: Now I won't open the door to our gas furnace and cringe. Nor will I need to use two intertwined wire coathangers to hold down the air filter. (Which isn't terribly effective, by the way. It never ceases to amaze me just how cheaply and half-assed people can do jobs, especially very important jobs, when they really want to.)

So, in the end, our household savings are now $6,100 lighter ... for a start. That, plus the four new tires required by my Nissan truck ($366), means that August has been an awfully expensive month for us. Thank goodness for savings, right?

• Follow-up on my "Dave Ramsey and Car Payments" post:
I also think it's worth noting here that had we followed strict Dave Ramsey advice and used all but $1k of our savings to pay down our auto loan (@ ~4%) back in June, we'd be in a more difficult position right now. Obviously, if we'd thrown all our savings at the loan, then we wouldn't have had the liquid funds available to pay for the A/C system. Most likely, I'd have been forced to use one of the handful of 3-4% limited-time credit card offers which currently resides in my "To Be Shredded" pile of paperwork. I'm paying interest one way or another, but in my feeble little brain, having the cash available to pay for the A/C system outright feels much better.

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— Posted by Michael @ 10:47 AM

Monday, June 25, 2007

True Cost of a New Car: It Ain't Pretty

My previous post covering my "save money or pay off car loan" dilemma garnered a lot of great comments from readers. One comment, slapped up here by someone with the moniker of "Reason," went like this:

Sell the car, pay off the loan, and buy a lesser car with the money left over. No more debt. You can keep your savings. And you can start saving up for the next car.

Ah yes ... spoken in true, Dave Ramsey "sell the car" style. To be clear, that's not something I'm going to do. But it got me to thinking: Just how big a hit has my net worth taken thanks to my purchase of a new Honda back in late 2005?

Let's start with what price a 2006 Accord SE with 13k miles might fetch from a private buyer in this area. NADA and Kelley Blue Book show me, respectively:

Okay. So I'll "guesstimate" that the car's now worth $18,900 in the private market. Now to do some math, courtesy of Excel 2007:

There you go: In the 19 months that we've owned the Accord, it has nicked our net worth by over $4,200. It's worth noting that my interest rate on our auto loan is fixed at a measly 3.95 percent, so while the loan interest is a factor here, it isn't the primary culprit. Given the $221 "cost per month" shown above, interest accounts for less than twenty percent of that amount per month.

What I wish I had done was write down somewhere what I might've paid for, say, a 2004 Honda Accord LX with 30k miles back then. Then I could play with the numbers on that, too, and see how much less it would've cost me over these 19 months. That would make for an interesting comparison.

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— Posted by Michael @ 11:30 AM

Saturday, June 16, 2007

Dave Ramsey, Car Payments, and a Gut-Punch

Car payments are the mantra of the middle class. As long as you keep a car payment, you're going to be mediocre in your finances. It's just stupid. Avoid that. Pay cash. Save up and pay for whatever you do.
— Dave Ramsey, Radio Show 2007-06-08

Wow. Talk about making me feel this big.

Look over in the right-hand column, and the Debt Paydown amount you see is due entirely to our only non-mortgage debt: it's what's left of the loan on our 2006 Honda Accord.

To date, my plan has looked like this: Since my car loan's at a rate of 3.95%, and my Emergency Fund grows at a rate of 5.05% (~4.025% after taxes), I've made minimum payments on the Honda and pumped extra cash into my E-fund. Rate-wise, this is about as break-even a deal as you can get. And having the plump (for us) E-fund has felt better than being in car debt has felt bad. (Variation on a great Ben Stein quote, by the way.)

But what's becoming less and less "break-even" is how I feel when I hear stuff like the quote posted above. It pretty much feels like a punch in my gut. Because I know that it is absolutely, one hundred percent, dead-on true.

The question becomes: What do I do about this? My E-fund is nearly complete. To drain it now, erase the car debt, and start again on the Financial Security Blanket that is my Emergency Fund seems as tremendously unappealing as, say, being on the receiving end of a wedgie doled out by Shaquille O'Neal. I'm only five-foot seven. I weigh about a buck-sixty. That would do me some serious bodily harm.

Conversely, the longer that loan hangs out there in the right-side column, the longer I'll have to see it for what it is: a symbol of either (1) my inability to save money as quickly as I should have in preceding years, or (2) my still-present penchant for spending above my means — at least where our car is concerned.

Or ... both.

I guess I'll reason my way through this, one way or the other. Just please somebody let me know if you see Shaquille heading this direction.

At five-foot-seven, there are still a lot of good places I can hide.

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— Posted by Michael @ 9:52 AM

Monday, June 11, 2007

Links From the Weekend

I don't usually do this, but to be honest, I need something to get my posting juices flowing. So ... a few financial findings from this past weekend: XL Functions for Personal Finance Decisions
For anyone who might need a refresher (or a primer, for that matter) on the most commonly-used financial functions in Excel, this would be a nice find. My question, though, is why they'd have financial problems at the end of the article ... but no answers anywhere? (Side Note: I used to be very ambivalent toward math stuff like this when I was in school. Now I do money problems on calculators and spreadsheets just for fun. How weird is that?)

Nashville Scene: Dave Ramsey Profile
Thanks to Chris Thomas at Pourout for pointing me to this one. It's the best profile of Dave that I've yet had the pleasure of reading. Interesting that Dave's parents were heavy into the Zig Ziglar and Dale Carnegie stuff, ain't it?

Moment on Money: Really? Why? What's a Blog?
You mean there are actually living breathing people out there who don't know what a blog is? Seriously? Check out this snippet from a comment left there: "But boy, in a few years when blogging is mainstream..."

(By the way, the blog is written by Art Dinkin, a CFP et al. from the Des Moines area. Easily one of the most promising new blogs out there right now.)

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— Posted by Michael @ 11:46 AM

Thursday, April 26, 2007

5 Reasons to Read: Total Money Makeover

Lately I've been contemplating a way to bring some financial books (and discussion of them) back to the light of day here at Money Musings. I'd like to revisit a few of them in the coming weeks and months. To that end, I'm starting a series called "5 Reasons to Read..." and I'll periodically use it as a way for me to get reacquainted with some of the paperbacks that are collecting dust on my shelves.

It strikes me that for some of the books I'm considering, coming up with five reasons to read them won't be easy. Thankfully, the first book on my list — Dave Ramsey's Total Money Makeover — isn't one of them.

So here we go with "5 Reasons to Read: Dave Ramsey's Total Money Makeover" ...

  1. Motivation. I'll say this: Dave did a fantastic job of motivating me — and I came in skeptical, cynical, and everything else. I knew I needed to get my debt dispatched; Dave took it a step further and made me gung-ho about Getting It Done. Put more succinctly, he made me believe.

    This is one area where Suze Orman, David Bach, and all the rest come in a distant second. Where they deliver rationale, Dave Ramsey delivers energy.

  2. Simplicity. There's nothing complicated about Total Money Makeover. And that's exactly what most debt-laden consumers need. Dave draws a straight line from Point A to Point Z. While real life doesn't always cater to such neatness, I'd say the odds for financial progress are heavily weighted to the side where people don't have to "think too hard."

    Also, when Ramsey lays out his plan for debt paydown, he directly acknowledges most people's dire need for quick and visible progress in any long-term behavioral change they undertake. Argue about the bottom line all you want; I am dead certain that seeing quick progress by "paying balances from smallest to largest" is the make-or-break success trigger for a huge number of in-debt households.

  3. The Baby Steps. To my mind, Dave's Baby Steps are the souped-up V8 in his Get Outta Debt Corvette. For me, the Baby Steps' validity is summed up like this: I've heard from way more folks who used the Baby Steps and successfully defeated their debts than I've heard from all other guru's plan's followers combined. (To be fair, though, Ramsey-ites tend to be more vocal about their successes than do others. )

  4. See What All the Noise Is About. Some of Ramsey's followers are devout to the point of ... well, cultishness. Some of his detractors would sooner drink battery acid than give Dave a penny of credit for anything he teaches. Put the two groups together, and you have a debacle — which is what you commonly find on financial message boards and blogs where these folks meet up.

  5. Build Unreasonable Expectations for Investments. Well, to be more specific, I should say "Build Unreasonable Expectations for Mutual Funds." Dave is oh-so-fond of basing his investment models on "12 percent annual returns" garnered from mutual-fund and other stock-market investments. Sorry, but I don't buy it. Not going forward, anyway. Throw in management fees and other assorted costs, and I'd venture to guess that 12 percent annual returns might be your best possible return over, say, any 20-year period in the future. Average returns for the same period? I'd put them closer to 6 or 8 percent annually.

So there you go. Next up? Well, I haven't decided yet. But I have a whole lot of books to choose from!

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— Posted by Michael @ 9:59 AM

Wednesday, March 21, 2007

Discount "Dave Ramsey, Millionaire"?

Overheard on a Prosper message board a couple of days ago:

Dave Ramsey is interesting to listen to, but it's important to remember that he's providing advice from a millionaire's point of view.

It's like Lance Armstrong telling you that all you need to do is pedal really fast. It's true, but you're still not going to win the Tour de France by following his advice.

FWIW, I've loved Alan's posts since Day One. Always a great and insightful read, his stuff is.

Time for An Opinion

There's a sizeable chunk o' truth in Alan's assertion. I buy Dave's story about his "I worked hard to get out of debt and never have to worry about BK again, and you can do this too!" But the simple fact is that at some point, Dave was able to leverage (pun intended) his personality and brains into a business gig that paid stupid-big dividends. And the vast majority of folks he preaches to don't have an ounce of the Dave Ramsey Personality and Marketing Magic that allowed him to build the business that he has.

Their means are not his means, and never will be. Their challenges are not his challenges — and probably never were, no matter what he tells us.

Sure, Dave was at one point "as lost as a ball in tall weeds," and many of us have been there, too. At some point he pressed the BK button, and then worked his way up the other side. Kudos for that. He had resources, both inside and outside himself, that allowed that.

Same for me: I'm nothing special, and haven't attained anything particularly noteworthy in my life. But I've done okay, and there are a lot of things I no longer really have to worry much about. But the resources I've had to work with are not the same resources a single mom with two teenage kids has to work with. I can tell her all day long what to do with her money, but that doesn't mean there isn't a better way for her specific situation ... a way that I would've never had to learn.

Dave's advice is very sound, for the most part. That's why I devote a large amount of space on this site to furthering his message and, in particular, his "Baby Steps" plan.

But I think we do have to be very careful when we place any guru in a "his/her way is the gospel" position.

The world, and how we manage the money in it, just isn't that simple.


— Posted by Michael @ 10:21 AM

Wednesday, February 14, 2007

Try Paying $3,750 for Dave Ramsey

There's a nice little snippet from JLP at All Financial Matters that's been quite the comment-magnet:

AFM: "Dave Ramsey Gets on My Nerves"

I wholeheartedly agree with JLP on this. I appreciate most of what Dave Ramsey espouses, but Dave and chunks of his website do have the occasional infomercial feel to them, and I could do just fine without that. But he's doing what he's doing because it makes him money — and folks could find lots of worse things to spend their cash on, I imagine.

I've purchased three of Dave's books (Total Money Makeover in audiobook and hardback, and Financial Peace), and I've attended a Dave Ramsey Live Event. So I've given my share of change to Dave. But Dave's writing, ideas, and energy helped me get to where I am today, financially, which is to say that he played a significant role in making my life better. What money I've spent has, in my opinion, been well spent.

Three-Dime Dave

Now, for those who might not be so well versed in Dave Ramsey Financial Paraphernalia, it's worth pointing out that Dave also sells "Counselor Certification." The price tag? A mere $3,750 $3,950 as of this writing. Or $2,000 $2,350 if you're doing it as a non-profit, church-related enterprise. [Source] Something happened on the way to heaven, all right — you saved sixteen hundred bucks.

Why do I know these figures? Because I've strongly considered plunking down the cash (and the time) for the training.

You're kidding, right?

Look: I love personal finance, and I'm all about most of what Dave has to say. I love helping people, and seeing people grow and improve their lives. Financial counseling of this sort is right up my alley. What I've done of it so far, I've enjoyed tremendously.

However, while I've gotten a ton of value from Dave's stuff, I just can't see $3,950 worth of substance in re-learning what I (mostly) already know. And I don't know that a link from, or referrals from his group, is worth that kind of coin.

For comparison's sake, I could take the six CFP-prep courses at Florida State University (I've done the Intro to Financial Planning one already) and be out less than $3,750 with books and all. And I'd practically guarantee that I'd learn tons more useful-to-me stuff from FSU than from Dave Ramsey U.

So you won't do Dave Training, right?

I dunno. Maybe.


I just love this stuff that much.

Admittedly, attaching a 3.9-dime price tag to his counselor-training gig is a fine way for Dave to screen out the riff-raff. And the multi-day session can't be a blow-off thing, as it can earn CPA attendees just over 34 CPE credits. Not bad ... I think. (Although, for all I know, you might be able to earn 2 or 3 CPE credits just for punching yourself through a self-serve checkout at Wal-Mart. )

In the end, Dave's in this to make money, and that much is obvious. He's constantly finding new angles by which to sell his schtick, at price tags that range from $5 to almost $3,950. This is a businessman in action, folks. And a successful one, at that. I don't know that it's good ... or bad.

It just is.


— Posted by Michael @ 2:24 PM

Saturday, February 03, 2007

My Liquid Savings Goal

Those of you familiar with Dave Ramsey probably already know about the third of his seven Baby Steps:

3. Create a full-fledged Emergency Fund containing 3 to 6 months' worth of expenses.

While I'm a strong proponent of most of what Ramsey has to say, I personally haven't followed his "Baby Steps" plan (not strictly, anyway) in my own life. At the moment, though, I'm devoting my energy to my equivalent of this "Emergency Fund" step.

Here's what I'm looking to accomplish:

1) $12,000 in a dedicated, stand-alone Emergency Fund at ING Direct.
2) $500 cushion in our Electric Orange checking account (from which we pay all bills).
3) $2,500 cushion in my wife's checking/savings account.

Once achieved, this will give our household balance sheet a "liquid savings" total of $15,000. It would cover roughly four months' worth of expenses for our household.

All of this, of course, is in addition to our Freedom account, in which we save for irregular (but expected!) expenses.

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— Posted by Michael @ 6:24 PM

Saturday, September 30, 2006

Debit Card Hazards ... Again

Lisa at Contentment is Wealth has a very nice post entitled "The Final, FINAL Word on Debit and Credit Card Liability."

Her post is complete with links to FTC pages and interview questions posed to actual HUMANS at that same government department. (Yeah, I know. I was shocked, too.)

We money-bloggers have absolutely beaten this topic to a pulp. This is good, because Dave Ramsey is still out there touting his "exact same protections afforded to debit cards and credit cards" spiel. Well, as blog readers know, Dave is wrong. (And this isn't the first time.)

I suspect that Dave makes this stand mostly because he's looking to blow up any and every excuse ("Money Myths," as he calls them) for someone to swipe a credit card rather than pay with cash they already have. His audience won't whip out the "But in some ways, credit cards are safer than debit cards" retort because Dave's position on this is so well known ... and nobody wants to argue with him about it any longer.

If you'd like to read more on the topic of debit-card fraud, check out my Interview with Debit Card Victims. Also, at the bottom of that article is a list of my related posts on this topic.

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— Posted by Michael @ 8:39 AM

Wednesday, April 12, 2006

Who Cares What the Broke People Think?

There's a story that Dave Ramsey tells in his book
Total Money Makeover
which has always really appealed to me. By "appealed to me," I mean that it usually gives me chills. The good kind.

I suspect that a fair amount of its appeal for me derives from the way Dave narrates it in the audiobook version. There are a few things I hold against Dave, but his abilities to storytell and motivate aren't among them. The man is a performer and motivator, no question about it. But who cares — I'm still going to post the little story here, because ... well, because I feel like it:

First, let me tell you that mortgage debt is the only kind of debt I don't yell about. I want you to pay off your home as part of your Total Money Makeover, and, for all the reasons stated in the previous pages, you have to be very careful. When asked about mortgages I tell everyone never to take more than a fifteen-year fixed-rate loan, and never have a payment of over 25 percent of your take-home pay. That is the most you should ever borrow.

I don't borrow money — ever. Luke called me from Cleveland to tell me that some of our listeners and readers are doing what Sharon and I have done: "The 100 Percent Down Plan." Pay cash. Most people don't think it can be done. Luke did it.

Luke made really good money. His income at twenty-three years old was $50,000, and he married a young lady making $30,000. His grandfather had preached to him never to borrow money. So Luke and his new bride lived in a very small apartment over a rich lady's garage. They paid only $250 a month for it. They lived on nothing, did nothing that cost money, and they saved. Man, did they save! Making $80,000 in the household, they saved $50,000 a year for three years ... and paid cash for a $150,000 home. They closed on the home on Luke's wife's twenty-sixth birthday. If you make $80,000 per year and don't have any payments, you can become very wealthy, very quickly.

Keep in mind, though, that Luke's friends and relatives thought he should be committed. They made fun of his cars, his lifestyle, and his dream. Only his bride ... and his grandfather ... believed in his dream.

Who cares what the broke people think?

And cue the chills. I hear that story, and oh how it makes me wish I could go back in time and erase the multitude of stupid things I did with my money in my early 20s. Gads. Mid-twenties couple, making $80k per year, and no house payments. Wow.

Ask any eighty-year-old if five years of sacrifice is worth it to change your financial destiny for the rest of your life! Ask any eighty-year-old if five years of sacrifice is worth it to have the satisfaction of knowing you changed your family tree. Paying cash for a home is possible, very possible. What's hard to find is people willing to pay the price in sacrificed lifestyle.

I'll be entirely honest: For me, at twenty-three years old, even if Dave's book had been in my lap, I doubt if I'd have been willing. Heck, look at my last car purchase — I'm 34, and I'm not willing now. Sad, but true. I've come a long way ... but not that long, apparently.

Anyhow, I think that's a great story, particularly if you're in the midst of making some tough sacrifices now in anticipation of some lofty goal(s) down the road. The payoffs can be downright astounding.

Oh well ... then there's me, and my underachieving self. Me, and my fifteen-year, fixed-rate mortgage, with a payment that's well beneath 25 percent of my take-home pay.

At least in that regard, I'm within Dave's house-payment guidelines, right?

Plus I can sleep at night.

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— Posted by Michael @ 9:52 PM

Friday, February 03, 2006

Defining "Debt Free"

A twenty-something coworker asked me an interesting question yesterday:

"If you had a friend who you know had lots of debt not long ago," he said, "and now all of a sudden he's telling everyone he's debt-free, what would you think?"

The question gave me pause. In situations like this, my skeptical side kicks in almost instantly. I've seen human nature in all its glory too many times — people will do and say pretty much anything to forward whatever motives they may have at the time. Half-truths and outright fibs often take center stage when there's a social position to uphold. Or gain.

Here's the situation: My coworker's friend is looking to gain converts to a new undertaking. He's working for Primerica financial services, and as is typical with most multilevel marketing setups, he needs to get people "under him" to make all the money that he can. In order to tote his friends and family along for the Primerica ride, he has to make it sound as if his new biz is the best thing that's ever happened to him. That's the only way they'll get interested, and perhaps want to join in.

(If you're new to the Primerica story, just Google that term — or try "Primerica experience." You'll find lots and lots of first- and third-hand accounts of the business. Expect fervent opinions from both sides of the story.)

Primerica may indeed be the best thing to ever happen to Debt-Free Friend. Honestly, I haven't seen the guy's balance sheet, so all I can go on is whatever evidence my coworker gives me. Which, of course, might as well be categorized as heresay.

I told my coworker that "debt free" isn't necessarily a cut-and-dried term. It can mean different things to different people. It can be twisted around like Play-Doh.

For instance, suppose a family has $20k in credit-card debt and $15k in auto loans. They have some equity in their home, though, so they refinance their home to get cash out. They then use that cash to pay off their credit cards and auto loans. Are they now "debt-free except for their mortgage?" Technically, sure. But their net worth is still the same as it was before the refinance. They didn't pay off that debt.

"It's still there," as Dave Ramsey would say. "They just moved it."

Or take that same family. Suppose the refi didn't happen. But what did happen was that rich Uncle Bill passed away. And in his will, Bill left the family $40,000 as a final "See ya!" They used this cash to pay off their credit cards and car loans. Good for them, right? Again, they're now "debt-free except for their mortgage." Undoubtedly, their net worth has improved. But what got them there? Hard work? Or pure unadulterated luck?

I strongly believe that there is a difference, particularly in matters of money.

Why? Because neither of these two methods of attaining debt-freedom do anything to combat the original cause of the debt: Our family spends more than it makes. Cash-out refis, last-testament gifts from rich uncles, and even moderate pay raises only serve as Band-Aids on a small-scale family's large-scale financial illness. Folks consider these things "cures" for their money woes, but in reality they're treating only the symptoms. The actual "money disease" of overspending is left unchecked. And we know how that usually ends up.

Contrast this with someone who racks up decent debt, then at some point figures out "how the world works" and sees the error in his ways. He takes serious stock of his finances, and begins planning his income and outgo to take as much advantage of his money as he can. He takes steps to educate himself about finances. He figures out his money weaknesses, and he works to eliminate (or at least minimize) them. Most importantly, he works hard, over time, to reduce his debt and stress, and he genuinely improves his financial picture — to a marked degree — entirely through his own efforts.

Chances are that this person will remember where he came from. His mindset and his actions will likely dictate that he'll not be in that place again.

Until this past December, when I talked about being "debt-free except for my house," it was genuine. The debt I had, I paid off. It took years. It took work. Heck, it even took building a website, right?

And I didn't roll any other debt into my mortgage along the way. I didn't win any Family Tree Lottery and use the proceeds to erase past transgressions. I immensely valued that debt freedom, and I'm impatient as heck to get back there; i.e., I can't wait to get my new car paid off. (It's a sweet ride, for sure. But when I see it, about all I can think of is "payment.")

In the end, the point I tried to get across to my young coworker was that the term "debt free, except for ..." is as open to ambiguity as anything else. And since most folks won't whip out their Quicken or Money desktops to show you where they really stand, it's all mostly a judgement call. You play the story against the evidence, and see who wins out.

But that's how it is with money and motives. Let's face it: There are a lot of Networth IQ profiles that I just don't trust.


— Posted by Michael @ 8:28 AM

Tuesday, June 28, 2005

Dave Ramsey & Mortgage Payment

Because my site logs consistently show Google searches for this bit of information, I figured I'd go ahead and make a blog entry to help out:

When it comes to borrowing for your home, Dave Ramsey recommends that folks...

  • Utilize only 15-year, fixed-rate mortgages, and

  • Stick to a price range which allows a monthly payment that is no more than 25 percent of your household's total take-home pay.

Of course, Dave would rather see you buy a home with the "100% Down Plan" — meaning you pay for your home with cash.

It can be done, but it ain't easy.

For anyone new to the home-buying experience, it's worth noting that Dave's guideline for mortgage payments (25 percent of take-home) is very conservative. It is NOT going to jive with what your real-estate agent or mortgage broker tells you. Those guys are paid by commission, as a percentage of the price (mortgage dollars) they "move." Thus, it's in their interest to get you into as much home as you can possibly qualify for. So be ready to battle them on this issue.

For more on this subject, you'll want to grab of copy of his book, The Total Money Makeover. In it, he devotes a fair amount of time to discussing mortgages and the financial perils of owning a home.

Additionally, I wrote an article on this topic in August of 2002: "Home, Expensive Home"

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— Posted by Michael @ 11:31 AM

Sunday, February 13, 2005

Dave Ramsey Live Event

Well, today was the day. I attended a Dave Ramsey Total Money Makeover Live! event this afternoon.

Actually, I attended only half of it.

Thanks to a searing headache that became unbearable around the halfway-point of the show, I most certainly did NOT get my money's worth ($20 per seat) out of the deal. But that wasn't Dave's fault. Stupid me forgot to have painkillers handy for just such an emergency. That's what I get for not planning ahead, right?

I will say this: Dave Ramsey (talk-radio host, creator of "The Baby Steps", and author of Total Money Makeover, among others) is an energetic guy, a great communicator, and a salesman of notable ability.

"The world we live in today is pretty strange," he told the audience early on. "It is one where common sense has become a marketable commodity. I've simply packaged it better than anyone else in my generation."

He may be right. The auditorium was wall-to-wall full, with extra fold-out seats crowding all aisles. Lines at his book- and media-product-sales tables outside the auditorium were heavily populated, too. Most of the people around me seemed excited to be in attendance. I got the distinct feeling that most folks were there due to ties with churches and other religious groups. No big surprise, as Dave leans heavily upon these groups for readership and networking of sales. And readers of Ramsey's books know he does not shy away from outright religious overtones and missives in his financial advice. ("God's and Grandma's system of managing money," as he describes it.)

If you're willing to look a bit beyond all that, you get to hear a pretty good and entertaining fiscal sermon delivered by a guy who's obviously had lots of practice. Much of his live message duplicated the content of Total Money Makeover, but there was enough fresh material thrown in to make the hours of sitting in not-so-comfortable pews a little more bearable. Would it have been worth the $20 if I'd have been able to stay for the duration? Yes, probably so.

One anecdote of Dave's that I found rather interesting:

Ramsey offered the following what-if to the audience: Suppose your young child at home has been diagnosed with a terminally ill condition. She will die in exactly one year unless a $5,000 vaccine can be purchased and administered. Your insurance does not cover this vaccine in any portion. You must pay for it yourself, but you cannot under any circumstances use any funds which you already have. You may not borrow the money for it; you may not pay for it with credit in any way. You may use only what cash you can raise over the next year.

"How many of you," Dave then asked the audience, "would find a way — somehow, some way — to raise that five thousand dollars?"

As you might imagine, the number of arms raised was ... extremely high.

The point behind this macabre scenario? According to Ramsey, one reason for why debt has become such an out-of-control problem in this country is that people have become almost entirely ambivalent to the ramifications of it. Debt, he said, obviously causes consumers varying degrees of financial discomfort for years and years. Yet until things get so painful that drastic change is the only way out, people simply do not care about paying off their debts, because it doesn't matter enough to them on a personal level.

"If the end result matters enough to you," Ramsey said, "then you will do whatever it takes to get it accomplished. Failure will not be an option. You would take any action necessary to save your daughter's life. Yet people will not do the same to save their financial lives."

There is significant truth in that, I think. If it matters enough to you, you will do it.

Unless, of course, your headache is just too bad. :)


— Posted by Michael @ 1:06 PM

Saturday, November 27, 2004

I feel a bit guilty.

This afternoon I put in my order for two tickets to see Dave Ramsey at his OKC "Total Money Makeover" live event in February 2005.

Dollar cost for The Wife and I to attend: $38.
Cost per event hour per person: $3.80.
Driving time to get there: 30 minutes, tops.
Amount of credit-card debt I'll have by then: $0.
Amount of student-loan debt I'll have by then: $2,100.

So why guilty? Dunno. But that's how I feel. Folks who've been reading my stuff for awhile know that of all the broad-base financial gurus out there, I respect Ramsey and his plan far more than anything anybody else has put forth. (I'm talking media-centric types here, like Suze Orman, Jean Chatzky, and David Bach. Those people, IMO, have a penchant for serving up mediocre advice, sound-byte aphorisms, and a hearty helping of fluff.)

Now, I can get hardnosed with Dave, too, as I did in my review of his latest book. But he tends to dispense sharp, to-the-point advice, with little room for whiners or "woe is me" types. That's what I like about him, mostly, and that's why bits of Dave are all over this site. And I guess that's why I'm looking forward to hearing him in person. Hearing him, that is, probably regurgitate everything I've ever heard from his radio show and everything I've heard from my 25+ readings of his Total Money Makeover audiobook. (Look, the guy is a great motivator. He keeps me on point. And local radio sucks.)


— Posted by Michael @ 12:31 AM

Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


Start (2005-12): ~$21,900
Currently: $0
[About Our Debt Paydown]


Savings Goal: $15,000
Currently: ~$15,115
[About Our Liquid Savings Goal]