Dave Ramsey, Total Money Makeover

[Acastus]

I wrapped up Total Money Makeover, and my final thought is it is a great book if you are currently in a financial world of hurt.
If you are up to your eyeballs in debt, especially consumer debt, the debt snowball is the way to go. MMM does a great riff on the important parts with his "Your Debt is an Emergency" Post.

http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/

I am leaving my first thoughts, because I still think you need to look elsewhere for investment advice and safe withdrawal rates.
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I am in the middle of Dave Ramsey's book, Total Money Makeover. He has several more books that he sells you in this one. This should really be named "how to manage your cash flow to enable saving." It looks pretty good at getting you to reduce spending so you can save. His key to success is setting up a budget, but this book does not teach how to do that. You have to buy another book, or buy the seminar. The rest of the book steps through how reducing spending allows killing debt with the debt snowball, creating an emergency fund, and saving for retirement, and finally, giving to your church. It sounds like he holds a lot of seminars at churches, and he comes across as an evangelical on his system. There is 1 page on how to invest, and his assertion that everyone can expect 12% returns with a perfectly safe, 100% growth stock portfolio is just plain bad advice.

I picked this up just so I could talk knowledgeably about personal finance with others who have only heard the pop culture preachers, like Dave. I did not expect to learn much. So far, it met expectations.

I am looking for comments. It looks like he got rich selling a system to help people get rich, not using the system himself. That is my critique for Kiyosaki as well. They seem a little like snake oil salesmen.

[Cwadda]

I am looking for comments. It looks like he got rich selling a system to help people get rich, not using the system himself. That is my critique for Kiyosaki as well. They seem a little like snake oil salesmen.

I mean, a lot of people have said it really helps them.  If it speaks well to the general audience on eliminating debt, I guess that's a good thing.  Some MMMers have enjoyed his pedagogy too.

Kiyosaki is similar.  The biggest value I took away from his books is the importance of cash flow.  If it encourages new RE investors to get in the game, I suppose that's a good thing. 

You might enjoy JL Colins' book better.  It is highly recommended among the MMM community.  It's called The Simple Path to Wealth.

[Chesleygirl]

Dave Ramsey doesn't get it all right. I took a DR course with my husband.

DR advocates loaded mutual funds (which other financial advisers warn against and loaded funds are expensive). He would probably say it's okay to do business with people like Edward Jones and Merrill Lynch. I just find it to be bad advice.

I also think his advice is tailored more towards people who go through all the traditional life stages at the right time: college graduation, start career right after college, marriage in early 20s, have children in 30s, etc. Not everyone goes through those same life stages. Some people struggle to find a decent career in their 20s but I didn't see that really being addressed.  He gives examples of young married couples and how they manage their finances. But gives really no advice on how a single adult should manage their finances. The assumption is also that everyone can do what he did. But not everyone can achieve the same pinnacle of financial success. Having a lifetime of decent employment and a very good salary are crucial to even approach what he has.

[boarder42]

good for getting out of bad debt

bad for everything else.

[HPstache]

Solid advice, not always ideal, for 90+% of the population.  His radio show and books have gotten many people in the FI world (even some of the "big" names) started in their interest to all things financial... I hear people give credit to Dave Ramsey all the time in podcasts.

[gggggg]

Like has been said, excellent for getting out of debt. Now that I have no debt, I don't follow his investment advice, nor his credit card advice (I like my cash back and credit score).

[Chesleygirl]

I find his credit card advice to be extreme. He demonizes credit cards as though they were the instrument of the Devil. To me, they're not. Except for people with impulse control problems. And if someone has impulse control issues, they're going to over-spend with cash, too. They are also going to have other poor decision making problems. Sure, they can cut up their credit cards but that's not going to solve their problem.

[boarder42]

I find his credit card advice to be extreme. He demonizes credit cards as though they were the instrument of the Devil. To me, they're not. Except for people with impulse control problems. And if someone has impulse control issues, they're going to over-spend with cash, too. They are also going to have other poor decision making problems. Sure, they can cut up their credit cards but that's not going to solve their problem.

yep this is 100% correct.  getting rid of CC's is a bandaid.  everyone really needs to learn to spend within their means.

[Chesleygirl]

Right. I think they need to start with scaling down their expectations in life and not feel entitled.  People who can do this, don't have problems with credit card debt.

In my 20s, I dated a guy who went to Europe after college, putting the whole trip on credit cards. He wound up 50K in debt, not just from the trip, but stuff he bought. Why he went on the trip? He said everyone he knew had been to Europe already. He felt he had to go, too. He said he didn't want to start grad school and be the only student there, that hadn't been to Europe.

[saguaro]

I find his credit card advice to be extreme. He demonizes credit cards as though they were the instrument of the Devil. To me, they're not. Except for people with impulse control problems. And if someone has impulse control issues, they're going to over-spend with cash, too. They are also going to have other poor decision making problems. Sure, they can cut up their credit cards but that's not going to solve their problem.

yep this is 100% correct.  getting rid of CC's is a bandaid.  everyone really needs to learn to spend within their means.

Exactly this.   When we found ourselves in some serious debt plus spending down inherited money (double facepunch), it was not just the credit cards, we overspent with cash, too.

[lexde]

Dave Ramsey (like others have said) is a great authority figure for people who have zero financial literacy. His main audience is Average Joe who has paid a whole lot of "stupid tax" by buying things without being able to pay for them, and getting stuck in consumer debt.

If you have any sort of self-control and the ability to do basic math, you have outgrown his teachings.

The snowball method is great for people who need to see accounts close before they "buy in" to financial competency and debt reduction. By the numbers, the avalanche method (highest interest first, balance be damned) is the smarter way to go, but it's also not as rewarding as completely getting rid of smaller balances (with lower interest rates). And if you can't own a credit card without racking up debt, then cutting them up is better than opening up that door again.

That said,

He is a great authority figure. My significant other is a spendypants "normal" person who has a bunch of consumer debt, car loan, student loan, etc. -- I started listening to Dave Ramsey all. the. time. because my approach to finances isn't compelling to him, and doesn't see me as an authority figure on money. So I started playing the podcast in the car. Streaming it on youtube when I was cleaning the house. Left a copy of the book lying around, and my SO started to become interested. Now, we have a debt-reduction chart on the fridge, he's snowballing his debts, and is feeling accomplished. So it's working as intended! And the book definitely helped.