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Debt is Dumb, Cash is King
March 15, 2011 10:35 AM   Subscribe

Dave Ramsey - a syndicated radio host, author and revival-style seminar leader leads a Christian-themed, tough love crusade to convince Americans to cut up their credit cards and renounce debt forever. His detractors say our impulses, not our debt, are the problem.
posted by l33tpolicywonk (84 comments total) 8 users marked this as a favorite

 
The first 40 minutes of his three hour daily show are downloadable, if you want a better sense of what's going on here. Personally, I'm kind of disappointed by how addicting I find it.
posted by l33tpolicywonk at 10:36 AM on March 15, 2011 [1 favorite]


Wait... are you telling me that Reverend Billy and The Church Of LIfe After Shopping have crossed out of performance art and into being an actual real person, kind-of?

Okay, the wall between reality and fiction... you can stop breaking down now. Most of 2011 has been too surreal to cope with already, and now it's just getting silly and strange.
posted by hippybear at 10:43 AM on March 15, 2011 [2 favorites]


Ramsey is an oddball. He comes on before Glenn Beck and is clearly part of the right wing radio zoo, but his anti-debt orthodoxy is pure anti-capitalism.
posted by three blind mice at 10:44 AM on March 15, 2011


I'm not into the religion thing, but I've been doing the Dave Ramsey bit (sans Bible) for a couple of years now, and I'm pretty impressed with the process. I own everything but my house, and that will be mine in eight more years.

Lack of debt is a powerful, powerful thing.
posted by Mooski at 10:45 AM on March 15, 2011 [18 favorites]


Christian-themed? Like, it's decorated with lots of Jesus-fish and the cookies are in the shapes of crosses?
posted by brenton at 10:46 AM on March 15, 2011


A lot of Beck's own rantings are anti-capitalist too. Even socialist. But he never calls it that. It's only "common sense" because soshulizm iz eeeeevul.
posted by DU at 10:46 AM on March 15, 2011


I listened to Ramsey for a while a few years ago when I was doing some boring manual work. He's definitely a nut and wrong about some stuff but I think his message is genuinely helpful to a lot of people. I'm sure he's made a ton of money on top of it but good for him I guess.
posted by ghharr at 10:51 AM on March 15, 2011 [1 favorite]


History lesson! The original members of the Protestant reformation very strongly believed in "competency," which in modern terms would mean something along the lines of self sufficiency and a debt free life. This isn't actually a major leap at all from there, but it is something that modern religion has largely ignored. So this isn't as weird and alien as it may seem, although they've admittedly neglected that particular teaching in recent years.
posted by Stagger Lee at 10:52 AM on March 15, 2011 [2 favorites]


Christian-themed? Like, it's decorated with lots of Jesus-fish and the cookies are in the shapes of crosses?

Ramsey: "God's ways of handling money work: in the house of the wise are stores of choice food and oil (Prov. 21:20). Having cash on hand is a good thing, always having some money. Get out of debt; the borrower is a slave to the lender. These are things that worked 1,000 years ago, they worked 20 years ago, and they worked 20 minutes ago. They will work for the next 20 years."

Sounds Christian-themed to me. If it works, it works, but it can't be argued that he doesn't strongly believe that God plays a big role in your financial affairs.
posted by blucevalo at 10:56 AM on March 15, 2011 [1 favorite]


While I disagree with much of his schtick, I can't totally fault a bunch of his methods. I'm also driving a 21 year old $250 crap-can, and we're rolling every spare dime into paying off our dwindling debt. Curbing impulses is the key here. I really like diddly bits and shiny things.
posted by rhythim at 10:57 AM on March 15, 2011 [1 favorite]


Errr, fiddly bits. Damned autospell
posted by rhythim at 10:59 AM on March 15, 2011


Getting out of debt is a good thing. We can worry about their infatuation with their sky god after they pay the mortgage.
posted by Cool Papa Bell at 11:01 AM on March 15, 2011 [6 favorites]


It seems like every Christian financial advisor I've come across is able to ignore all the OT regulations about usury.

I'd be curious to hear whether there's anything else in the Bible it's okay to overlook, or is it just the verses that pertain to investing.
posted by dubold at 11:01 AM on March 15, 2011 [4 favorites]


also, question mark ?
posted by dubold at 11:02 AM on March 15, 2011


There's something to be said for diddly bits too. But yes, truth be told, our impulses can be problematic.
posted by perspicio at 11:03 AM on March 15, 2011


I see nothing wrong with exercising impulses if you actually have the means to do it. But going into debt to satisfy impulses... that seems like something largely manufactured over the past century or so, as our society slowly reprogrammed itself to where people now largely define themselves through "livestyle choices" rather than achievements. It's a brilliant result of decades of mass social engineering on behalf of corporate interests by Madison Avenue.
posted by hippybear at 11:06 AM on March 15, 2011 [5 favorites]


His detractors say our impulses, not our debt, are the problem.

Well, not having credit card makes it harder to indulge those impulses, so I imagine that's had some impact...
posted by EmpressCallipygos at 11:06 AM on March 15, 2011


Dave Ramsey is Bad at Math

This is a relevant criticism of Ramsey's "Debt Snowball" method. By focusing on the lowest debts owed first (instead of the highest interest debt), you could end up paying more on interest over time.

His method is more of a psychological trick to get you hooked on the feeling of accomplishment that comes from paying off debts. It seems designed more for people who feel totally overwhelmed with debt and need little victories to break their habits. Which makes sense if you're dealing with someone who habitually spent more than they made -- they may respond more to emotional gratification instead of logical math.
posted by Dirjy at 11:07 AM on March 15, 2011 [7 favorites]


My wife read Ramsey's book. Thankfully a number of his debt and savings suggestions are moot for us, but we have adopted and stuck to a modified version of his "envelopes" system of budgeting. It's been enormously helpful at helping us visualize and control spending.

Like any financial guy, you have to adopt the suggestions to your own life and leave some of them behind. I didn't pick up on the "Christian-themed" bit at all, but a guy preaching financial independence and spending restraint in a Big Box, conspicuous consumption world is okay by me.
posted by AgentRocket at 11:07 AM on March 15, 2011 [1 favorite]


"competency," which in modern terms would mean something along the lines of self sufficiency

Wouldn't competency be the exact opposite of self-sufficiency? Jack of all trades, master of none and all that.
posted by DU at 11:08 AM on March 15, 2011 [1 favorite]


> It seems like every Christian financial adviser I've come across is able to ignore all the OT regulations about usury.

Well the Wikipedia section says the prohibition on usury was only when lending to other Israelites, instead it was encouraged to give interest free loans in the spirit of philanthropy. There doesn't seem to be many regulations on loans other then that.

But I'm an expert on ancient Israel financial law.
posted by papercrane at 11:08 AM on March 15, 2011 [2 favorites]


*I'm not an expert. Sorry, missed a word. Where's Bev Oda when you need her?
posted by papercrane at 11:08 AM on March 15, 2011 [9 favorites]


I'm not a huge Ramsey fan, necessarily, but I like some of his advice. It seems like most of the "detractor" comments that this post references are mostly quibbles with certain technical aspects of his advice rather than the superstructure of the philosophy itself. And the critique of his debt snowball method -- well, other financial bloggers I've read have recommended the snowball too, in certain situations; it's not just Ramsey.

I'd like to see a more general critique, but it may be that there isn't one. Again, if it works, it works.
posted by blucevalo at 11:11 AM on March 15, 2011 [1 favorite]


In the "our impulses" link, there's more on why Dave Ramsey doesn't know enough about what he's spouting, and not in terms of being debt-free. In fact, that link doesn't address impulses at all, but it's still a good rebuttal to the Ramblings of Ramsey.
posted by filthy light thief at 11:13 AM on March 15, 2011


I'd like to see a more general critique

Virginia Postrel - The Case for Debt.
posted by l33tpolicywonk at 11:14 AM on March 15, 2011 [1 favorite]


I enjoy his show if I happen to be driving around when it's on. I don't have any debt except for my house, so I don't really need to buy in to some kind of contrived system, but it's interesting to hear so many people call in to thank him for the method. It's also fun to hear him chide people for unrealistic financial situations.
posted by Burhanistan at 11:14 AM on March 15, 2011 [1 favorite]


Wow, something about this topic really brings out the "why don't we have an edit window, again?" in Mefites...
posted by Ian A.T. at 11:15 AM on March 15, 2011


It seems like every Christian financial advisor I've come across is able to ignore all the OT regulations about usury.

I'd be curious to hear whether there's anything else in the Bible it's okay to overlook, or is it just the verses that pertain to investing.


No one's overlooking anything. "Usury" means "charging an unjust rate of interest." Interpreting the prohibition against usury as a categorical bar on interest as such didn't come along until the Middle Ages. There are plenty of financial products out there right now which are or at least can be downright usurious: payday loans, credit cards, pawn shops, etc. Even some mortgages can be looked at this way.

In an agrarian culture, almost no one needs to borrow money unless they're destitute. The verses in question talk about people putting up the cloak on their back as collateral for a loan. The sketchy title loan places you see in parking lots across the American South are a pretty good analogy. You're just gouging poor people. But even in ancient agrarian cultures, people with assets would engage in business transactions, and these frequently involved interest, or at least something which looked very much like it. Charging rich people for money they're going to use to make more money is a qualitatively different thing than charging poor people for money they're going to use to eat.

Today, middle class people can reasonably take on a certain amount of debt responsibly. There wasn't really a middle class in ancient times, which is probably why the Scriptures don't really talk about it. You were either rich or a manual laborer. Not a whole lot in between. But the idea that we should not take advantage of the poor, including charging them interest when what they really need is a gift, not a loan, is still something a lot of Christians think about. I've worked in benevolence ministries for a while now, and the churches with which I have been involved would never consider charging interest for the money we give out. Heck, they don't even really expect it to be paid back at all.

Virginia Postrel - The Case for Debt.

Note that that was published in November 2008, meaning it was probably written in September or October of that year. This is before the shit really hit the fan, the economy shed another 2+ million jobs, and foreclosures really started to take off. The idea that consumer debt is problematic has a little more (*cough*) currency than it did two and a half years ago.
posted by valkyryn at 11:18 AM on March 15, 2011 [15 favorites]


Debt is great, and it's one of the most wonderful inventions of human society and without it, we'd all be dead. I realise that this probably goes against MetaFilter's bias toward living in a pesticide-free treehouse and making organic fairy-floss so you can feed your naked hippy children before they bike off to learn Swedish at the zero-emission farm-school, but it's true.

Let me explain just how great debt is. First, imagine you have one dollar. You can hide that one dollar up your asshole, and it will steadily lose value over time. OR, you can INVEST that one dollar by LOANING it to me, and I will USE that one dollar PRODUCTIVELY to build a giant noxious chemical plant in India where nothing bad will ever happen. So DON'T WORRY.

Then, after some minor court cases are settled, you will receive profit in the way of interest payments and a richer person you shall be. And nothing need be stuck up your ass.

Everyday, trillions of dollars are invested in the world economy and DEBTS arise thereby. So don't hate debt, just hate the environmental regulators who try to tell people that cyanide is "bad" for you and it's a "crime" to dump it in the developing world's "water supply". What a bunch of pussies those guys are. GO DEBT.
posted by the quidnunc kid at 11:19 AM on March 15, 2011 [33 favorites]


The mean, or average, unpaid credit card balance [in Jan 2010] was $3,389. The median is $90. This implies there are (at least) two large populations in the US -- a large group that pays off all credit cards every month, and a smaller fiscally illiterate group that amasses huge debts.

Dave Ramsey's message is probably not intended for most people who have a lick of financial sense. Luckily for him, a large proportion of Americans cannot calculate simple returns on interest rates. The simple message of "all debt is bad, cut up your credit cards" is not useful for min/maxing savvy consumers, this is stuff for people who don't know what the hell an interest rate is and don't think they need to know until debt collectors are knocking on the door.
posted by benzenedream at 11:23 AM on March 15, 2011 [6 favorites]


My uncle and aunt sound like his disciples. They are fundamentalist christians with 9 children. They receive "everything that they need" from their church. So, their home next to the oil refinery in Whiting, Indiana and used 15 person van were bought and paid for. No mortgages...no credit. I don't want to think about how they live with 11 people in a three bedroom home. Debt-free though....
posted by zerobyproxy at 11:23 AM on March 15, 2011


I'm not sure it would necessarily be that much better if they did pay attention to the stuff about usury; there's a whole banking industry built around avoiding lending at interest (the Islamic banks), and what they do is largely what here in the West we'd call equity deals or investment banking. (That stuff we keep trying to stop our banks from doing.) They also have (technically) non interest bearing don't-call-them-mortgages which might be analogized as similar to rent-to-own or sale-leaseback deals, but which you can still get foreclosed on just like any other mortgage.

Eliminating interest isn't necessarily the panacea that it might seem to be. You can still cook up a lot of complex financial products with nothing but good ol' contract law.
posted by Kadin2048 at 11:24 AM on March 15, 2011 [1 favorite]


I've never had any need for credit except for student loans. My mom maxes out whatever credit she can get her hands on, because she sees her life as a constant state of emergency that demands immediate action regardless of consequences. Different people have different levels of responsibility and different situations, and one size probably doesn't fit all. Most likely, a large proportion of the people listening to this stuff have some idea whether they're the kind of people who should take his advice or not.
posted by Xezlec at 11:26 AM on March 15, 2011


I was recently startled (and a little disappointed) to learn that there's an official Dave Ramsey iPhone app.

It seems to me the only thing an official Dave Ramsey iPhone app should say is, "Sell the iPhone and cancel your data plan, you deluded fool."
posted by ErikaB at 11:32 AM on March 15, 2011 [13 favorites]


Dave Ramsey is to money as Alcoholics Anonymous is to drinking. His advice is meant for a small percentage of the population who have consistently found themselves unable to deal with their finances in a measured, moderate, sensible way. For those people, the best approach to credit and debt is often abstinence and total avoidance of temptation, at least until they really have the problem under control and understand how to avoid it in the future. Just as AA advises people to quit drinking entirely, make amends for past misbehavior, and create a new lifestyle that doesn't involve the destructive stuff people do when they're plastered, Ramsey advises people to cut up their credit cards, pay off all of their debts, and create a new lifestyle dedicated to saving and being fiscally responsible. And in both cases, there's a lot of talk about God. But that really works for some people, and others find a way to ignore that part and take the practical advice that works for them. The point is that these are people in a lot of trouble--tens or hundreds of thousands of dollars. It's an extreme solution, but the reason people become so slavishly devoted to it is that if they follow the program, it gets them out of some really terrible trouble.
posted by decathecting at 11:34 AM on March 15, 2011 [15 favorites]


ErikaB: "It seems to me the only thing an official Dave Ramsey iPhone app should say is, "Sell the iPhone and cancel your data plan, you deluded fool.""

That McArdle article mentions in passing that Ramsey's website doesn't accept credit cards, only debit cards with credit card logos.
posted by l33tpolicywonk at 11:39 AM on March 15, 2011 [1 favorite]


He's got some good bits and some bad bits. I think some of what he's said in the past about student loans *reeks* of privilege. "Just get a job and pay your way through school, it's easy!" Uh, yeah, if I'd done it that way it would have taken me a decade to get just my undergraduate degree. That works great if you live in a state with cheap state schools, your parents have saved some money for you and you have the option of living at home. It is very bad universal advice. I once figured that in order to be able to be self-supporting and go to school while paying my tuition in full, it would have taken me like nine years to finish undergrad, and that was without taking into account that the income might have lost me my Pell grant.

But not using credit cards? Being reasonable about mortgages? I can go for that. The debt snowball *is* bad math, but I think a lot of people get overwhelmed by the number of bills they're paying as well as they do the total amount they owe, so cutting back to only a couple to pay every month has a lot of power to it. It probably works better with a little flexibility--if you've borrowed $100 from your mom and $300 from a payday loan place, dear god, please pay off the payday loan first. But I think you do get more mental payoff from just not thinking anymore about how you owe your mom that $100 than you do from having a $100 lower balance on your credit card, so there's that.

Like most things, there are some ups and downs. I don't get a lot of the politics he inserts in this and I think he just plain doesn't really get what it's like to be actually poor, rather than temporarily poor, and he has the overall knowledge of economics of a turnip, but it's not a bad place to start if you take it with a grain of salt.
posted by gracedissolved at 11:40 AM on March 15, 2011 [1 favorite]


You can still cook up a lot of complex financial products with nothing but good ol' contract law.

Damn skippy. Some of the more bizarre features of the common law were actually attempts to prevent people from doing just that.
posted by valkyryn at 11:42 AM on March 15, 2011


Ramsey's website actually does accept credit cards, there is no way for a merchant to differentiate between a debit card charged as credit and a regular credit card. They mention that in the fine print on his site somewhere.
posted by ChrisHartley at 11:43 AM on March 15, 2011


I don't want to think about how they live with 11 people in a three bedroom home. Debt-free though....

They live like a lot of Americans lived fifty or a hundred years ago. One of the things Ramsey seems fairly good at is pointing out that a big part of people's money troubles consists of people essentially believing that the lifestyle they want is within their means when it actually isn't. Real wages haven't gone much of anywhere in decades, but aspirations have. This is a problem.

Ramsey's website actually does accept credit cards

Yep. Though if they do catch you using one, they'd be within their rights to decline the transaction. Probably doesn't happen very often though.
posted by valkyryn at 11:46 AM on March 15, 2011 [1 favorite]


This implies there are (at least) two large populations in the US -- a large group that pays off all credit cards every month, and a smaller fiscally illiterate group that amasses huge debts.

Or, at the moment, you might look at that and see that there are two large populations in the US: A large group of people who have regular jobs, and a smaller group of people who are unemployed or underemployed.

The person who pays off all their credit cards every month very quickly turns into the person amassing huge debts when their job goes away or their hours get drastically cut or their health insurance premiums go through the roof. All of which have been happening regularly to people for years now. This is why using them heavily even when you pay them off every month is still risky. All it really takes is one month where that income is suddenly not what it used to be and your stability crumbles fast.
posted by gracedissolved at 11:49 AM on March 15, 2011 [8 favorites]


This is why using them heavily even when you pay them off every month is still risky. All it really takes is one month where that income is suddenly not what it used to be and your stability crumbles fast.

Assuming you have zero savings, which I sadly imagine is a lot of folks.
posted by ThePinkSuperhero at 11:52 AM on March 15, 2011


I think it's worth viewing Ramsey dialectically, taken in isolation his anti all debt attitude seems like paranoid superstition, but as a counterpoint to a culture of reckless borrowing it begins to make more sense.

Like his position on student loans. Does it make sense to oppose all education loans as a matter of holy principle? Of course not. Does that advice make more sense in the context of a country where people will literally borrow as much money as they can for education? Yes it does.

If I were starting from a blank slate I would prefer mathematical rationalism. Figure out what your future salary is likely to be (with at least three scenarios covering 3 SDs of variation between them) and figure out how much you can afford in debt service per month, calculate back to the total you can borrow for university.
Then again, I also have a glass of wine with dinner and a cocktail on a Friday night, moderation doesn't work for everyone.
posted by atrazine at 12:04 PM on March 15, 2011


Christianity desperately needed a corrective for the Gospel of Wealth.
posted by jefficator at 12:05 PM on March 15, 2011 [4 favorites]


Ramsey's website actually does accept credit cards, there is no way for a merchant to differentiate between a debit card charged as credit and a regular credit card.

Well, the preaches personal responsibility. He tells people not to use their credit cards. He's not there to dictate your actions. He there to tell you which are stupid.

I love Dave Ramsey. I've listened to the podcast for years. I never cut up my credit cards, but I don't use them anymore. I looked in my wallet and the one card I carry expired in November.

I wrote Dave a letter once. He responded. (self link)
posted by cjorgensen at 12:10 PM on March 15, 2011 [2 favorites]


Ramsey's website doesn't accept credit cards, only debit cards with credit card logos

Chargebacks make baby Jesus cry.
posted by Blazecock Pileon at 12:12 PM on March 15, 2011 [3 favorites]


As an atheist I am uncomfortable with casting Dave Ramsey as Christian themed. I'm guessing he's firmly in the Prosperity Theology doctrine camp, but I hold no truck with how others choose to live their lives. He doesn't seem to either.

I'm pretty sure I could have a beer with Dave. Most of the other right wing people not so much.

Also, sorry about the typos. CIL syndrome here (Cat In Lap).
posted by cjorgensen at 12:15 PM on March 15, 2011


It's hard to be too down on a guy that's giving people actual tools for getting out of debt. So much of what we do in America is talk about how bad Something is without giving alternatives. So people hear about how awful it is to be in debt, but they have no idea how to actually rectify it. Having an action plan that's *easy* is an awesome tool. I'm reflexively anti-religious and anti-Christian, but I fight it as best I can.
posted by stoneweaver at 12:25 PM on March 15, 2011 [1 favorite]


I'm guessing he's firmly in the Prosperity Theology doctrine camp,

Quite the opposite. If anything, he's hugely against that sort of claptrap and spends a lot of time trying to get people to live within their means instead of believing that God will somehow give them the means to live however they want.
posted by valkyryn at 12:29 PM on March 15, 2011 [6 favorites]


This implies there are (at least) two large populations in the US -- a large group that pays off all credit cards every month, and a smaller fiscally illiterate group that amasses huge debts.

In the credit card industry, they are called Transactors and Revolvers. Revolvers are those who carry a balance and pay the minimum, or close to, every month. This is how credit card companies make money. Transactors use the card and then pay it off right away. They can be an important source of liquidity for credit card companies, particularly those that are not backed by a network of banks, and respond particularly well to rewards programs. Rumor has it that at Visa, they are also called Deadbeats.

Credit companies can often have one of three problems: they recruit too many Transactors through things like cash back or rewards, meaning that while they are getting a return, it is often small, and a number of their assets are tied up in servicing customers who contribute very little to profits; they recruit Revolvers through low introductory rate offers, only to have those customers shift their balance once the introductory period is over; or they recruit customers who are misrecognized as Revolvers (or whose life circumstances change), who end up being unable to pay their debts at all and eventually forfeit.

To make up for these problems, of which at least two can partly be laid at the feet of credit cards encouraging bad credit behavior themselves, the credit card companies have turned to usurious rates, punitive fees and regulatory capture (in the form of increasingly harsh personal bankruptcy laws).

If this guy is so big on biblical injunctions against usury, I wonder how he would feel about a jubilee year.



Where's Bev Oda when you need her?

I think she's out back having a smoke. I'll get her.
posted by TheWhiteSkull at 12:35 PM on March 15, 2011 [5 favorites]


The mean, or average, unpaid credit card balance [in Jan 2010] was $3,389. The median is $90. This implies there are (at least) two large populations in the US -- a large group that pays off all credit cards every month, and a smaller fiscally illiterate group that amasses huge debts.

Dave Ramsey's message is probably not intended for most people who have a lick of financial sense. Luckily for him, a large proportion of Americans cannot calculate simple returns on interest rates. The simple message of "all debt is bad, cut up your credit cards" is not useful for min/maxing savvy consumers, this is stuff for people who don't know what the hell an interest rate is and don't think they need to know until debt collectors are knocking on the door.


This is just one example of many in this thread equating personal debt to stupidity, "financial illiteracy", poor math skills, poor impulse control, etc. It's as offensive as saying the poor and unemployed are lazy shiftless leeches on society.
I have a shit ton of personal debt. Want to know why? Two long legal battles with a vindictive ex and having to sell my home at a loss. I imagine some other folks, particularly in the US, may have huge medical bills causing their financial woes.
A little more benefit of the doubt and a little less high-horse assholishness may be in order here.
posted by rocket88 at 12:40 PM on March 15, 2011 [24 favorites]


History lesson!

I just wanted to say that I love it when a history lesson has an exclamation mark. I'm a big fan of history and I appreciate exciting punctuation drawing attention to it. In fact I'm going to lobby for History GCSE to become History! GCSE, cementing it's awesomeness in the minds of disinterested 14 years olds.

And now I want to be a History! teacher...
posted by longbaugh at 12:42 PM on March 15, 2011 [3 favorites]


He tells people not to use their credit cards. He's not there to dictate your actions. He there to tell you which are stupid.

Using a credit card isn't stupid. I do it every month (woot woot transactors). On the other hand, lots of people can't qualify for a credit card and yet go into debt.

Spending more than your income has nothing to do with the tools you use and everything to do with your social circumstances. Middle-class people do it with credit cards. Poor people do it with payday loans. Rich people do it with a financial planner (and profit from it).
posted by muddgirl at 1:00 PM on March 15, 2011


Ramsey is talking about carrying a balance on your credit card, not simply using one for convenience or bonus programs.
posted by Burhanistan at 1:01 PM on March 15, 2011


I get about $300 free each year for using an Amex Blue Cash card. I pay off the balance 100% each month, automatically deducted from my checking account.

Not all debt is bad, but the devil is in the details, which is why for those confused with math concepts like compounding interest and figuring out which debts to pay off first and which to pay off last might be better off just not partaking at all, or at the very least let someone actively hold their hand.
posted by SirOmega at 1:09 PM on March 15, 2011


Yeah, I just paid for airline tickets with my Amex Blue reward points. I use that instead of my debit card and then pay the balance well before the billing cycle is over. Granted, it has a pretty high limit for a mid-level earner like me, but if I make it a point to just treat it like a convenience card rather than a license to spend more than I have then I'll continue to enjoy its benefits with no detraction.
posted by Burhanistan at 1:15 PM on March 15, 2011


Some of those "confused" people to whom you refer may not have the luxury of "not partaking at all" ("partaking" in what? paying their medical bills or insurance premiums? or buying groceries for the month?) or "letting someone actively hold their hand." Some of those "confused" may also be sick of the paternalism of those who do possess those luxuries.
posted by blucevalo at 1:15 PM on March 15, 2011 [4 favorites]


Well yes, of course that's what he's talking about it. But both situations involve using a credit card.

I wrote a long rant but on preview what blucevalo said.
posted by muddgirl at 1:16 PM on March 15, 2011


His method is more of a psychological trick to get you hooked on the feeling of accomplishment that comes from paying off debts.

This is doubleplusgood. If the system works for people, good for them. But the whole system operates on psychology, preys on the debtor's anxiety without actually teaching them to have a relationship with money that isn't based on anxiety. The detractors are right, consumption impulses manipulated by advertising to satisfy some aspirational desire or soothe an anxiety are what got people into their debt mess. Not financial ignorance.

The usual explanation is that their spending got out of control or it just built up. No. Debt is the sum of all purchases made on borrowed money.

Manipulating those same impulses may get people out of the mess, but only because now they aspire to live a debt-free life, whatever they incorrectly imagine that to be, instead of aspiring to be the kind of person who drives newer cars, or refreshes their wardrobe with high frequency.

The objective should be that spending or controlling money doesn't lead to any better life. It simply leads to a life where most of your time and thoughts are on consumption and money, which is no way to live.
posted by Pastabagel at 1:16 PM on March 15, 2011 [2 favorites]


Basically, when I use my credit card now but pay it off in full at the end of the month, I am going in to debt. Sure, it's interest-free debt, but it's debt and Ramsey despises it either because of his religion or because he's making a lot of money doing so.
posted by muddgirl at 1:29 PM on March 15, 2011


This is just one example of many in this thread equating personal debt to stupidity, "financial illiteracy", poor math skills, poor impulse control, etc

These are all the reasons I got into credit card debt. So, there are some where the shoe fits.

All debt is bad to people who can't handle money well. The comparison to AA is apt. I'm one of those people who shouldn't ever have a credit card even if the points/rewards are amazing. At this point in my life, I couldn't handle it and I get into debt again. For those that handle it and make it work for them, I applaud you. However, that's not everybody and I think a nice simple plan like this works. Also, I for one could use a little more mindfulness about money so I don't feel concerned about spending too much time thinking about it.
posted by josher71 at 1:49 PM on March 15, 2011 [3 favorites]


That's an interesting point, Pastabagel. However, I suspect that most of the people who really need Ramsey's help are already thinking almost constantly about money and consumption.

I don't have a lot to add, except to say that I've probably added more favorites in this thread than any other since I joined.
posted by KGMoney at 1:49 PM on March 15, 2011


"Usury" means "charging an unjust rate of interest." Interpreting the prohibition against usury as a categorical bar on interest as such didn't come along until the Middle Ages.

NOW it means that. The Latin meaning is "charging interest".

There wasn't really a middle class in ancient times, which is probably why the Scriptures don't really talk about it. You were either rich or a manual laborer. Not a whole lot in between.

There are lots of Christians in the US who don't think that cultural differences from that time period to ours should have any bearing on whether or not elements of the Law apply. If you don't think so, great, but there are many people who think that those laws not only still apply, but should be the law of the United States.


thewhiteskull: If this guy is so big on biblical injunctions against usury, I wonder how he would feel about a jubilee year.

I don't know how he feels about usury; I didn't see anything about it on his website.
posted by dubold at 1:54 PM on March 15, 2011


If this guy is so big on biblical injunctions against usury, I wonder how he would feel about a jubilee year.

Heard of bankruptcy? Not precisely the same concept, and the justifications are very different, but the idea that you can wipe out most of your debts every seven years is startlingly similar.
posted by valkyryn at 2:16 PM on March 15, 2011


NOW it means that. The Latin meaning is "charging interest".

Note what I said about the Middle Ages. The original languages of Biblical texts are Hebrew, Greek, and Aramaic. The Vulgate didn't come along until the fourth century, and wasn't the official Bible of the Roman church until the sixteenth.
posted by valkyryn at 2:22 PM on March 15, 2011 [1 favorite]


Note that that was published in November 2008, meaning it was probably written in September or October of that year. This is before the shit really hit the fan, the economy shed another 2+ million jobs, and foreclosures really started to take off.

Those dates are well into the shit hitting the fan(Lehman, AIG, TARP), and well after the large investment banks, rating agencies, and financial insurance firms figured out encouraging bad investments for short-term gains turned out to be a threat to their own financial existence(despite their intelligence and financial literacy, presumably).

I'm sorry, derail, forgive me. Let's see if I can make up for it;

What does the GDP of the American economy look like if every household behaved as if "debt was stupid"? Smaller? Like a recession smaller?

It does seem like good advice, in an economy that has produced wage stagnation for the bulk of households for the past 40 years, that people understand the need to adjust their "lifestyle expectations".

You may live in the wealthiest country in history, but that doesn't mean your wealthy.
posted by dglynn at 2:31 PM on March 15, 2011


Again, it's incredibly insulting to insinuate that debt is, in general, caused by "lifestyle expectations" and not by the fact that a lot of people are not able to earn enough income to cover their basic needs.
posted by muddgirl at 2:40 PM on March 15, 2011 [4 favorites]


Hey, it's nice to see a Christian doing something that doesn't involve blaming women for their slutty stupid ways or that involves kicking the poor whilst they are down. So kudos for that guy!
posted by emjaybee at 2:58 PM on March 15, 2011


Wanted to second the efforts to listen to his show or podcast. If you think your life is messed up with debt wait until he lays into a couple that has 3 kids, one on the way, 2 trucks, a house and just started a 'internet home business' thing.
posted by ao4047 at 3:04 PM on March 15, 2011


This is a relevant criticism of Ramsey's "Debt Snowball" method. By focusing on the lowest debts owed first (instead of the highest interest debt), you could end up paying more on interest over time.

His method is more of a psychological trick to get you hooked on the feeling of accomplishment that comes from paying off debts. It seems designed more for people who feel totally overwhelmed with debt and need little victories to break their habits. Which makes sense if you're dealing with someone who habitually spent more than they made -- they may respond more to emotional gratification instead of logical math.


I think there's more to the debt snowball than emotional gratification -- there's plenty of logical math behind it, it's just short-term math rather than long-term math. For example, "paying more in interest over time" doesn't matter nearly as much to a debt-stricken person's immediate finances as the minimum payments do. Using the debt snowball to get rid of the most easily-paid-off card means freeing up one entire monthly payment, and that gives the person that much more money on a monthly basis. Not on a nebulous "this means you'll pay $1000 less in interest by 2020" basis, but on a this-is-how-much-more-money-you-have-for-the-other-payments kind of level. It's a perfect example of the difference between a bird in the hand versus two in the bush.

Paying off a card has an immediate effect on most people's finances, and it's that same immediacy which makes the program work... because frankly, when you're poor, the long term isn't your primary problem. Acting as if "paying more on interest over time" is the only important variable can get you into a situation where you're choosing between necessities and making five or six different minimum payments, as opposed to having only three because you already paid the lowest three... and failing to make payments is how people really get screwed by fees and skyrocketing interest.
posted by vorfeed at 3:11 PM on March 15, 2011 [13 favorites]


vorfeed's got it. We're talking primarily about people for whom current income is far more important than long-term wealth maximization. The ability to choose the latter over the former means you probably don't need Ramsey's program.
posted by valkyryn at 5:02 PM on March 15, 2011 [2 favorites]


I had a long thing all typed up, but vorfeed says it. The reason to pay down the smaller debts first is to free up money every month -- and that freed up money is what will allow you to deal with the inevitable crises that come, rather than slip further in debt. The people I know who are furthest into personal/consumer debt live from one crisis to the next, never able to make the long-term decisions (like paying off debt from high- to low-interest) that make the most financial sense.

Following Ramsey's advice can really work for someone in that position, more than most financial advice I see.
posted by Forktine at 7:28 PM on March 15, 2011


Cashflow is king.
posted by josher71 at 8:08 PM on March 15, 2011


Ramsey is very specific that once one debt is paid off, that monthly payment+the extra you were paying should be applied to the next smallest debt. That's why it's called a "debt snowball." If they're doing it right, it shouldn't actually be freeing up any extra cash. If this is actually the case, then there is no sound long- or short-term financial reason to pay smallest-to-largest. Even Ramsey admits that the trick is entirely psychological.
posted by muddgirl at 8:19 PM on March 15, 2011


Thanks very much for posting this! He was featured on This American Life once, but I only recently got hooked on his podcast -- I'm hooked on the feelings of schadenfreude and personal shame it evokes, and crazy ranting makes for some good entertainment! But the show's also inspired me to get out from under my student loan debts as soon as possible -- and a lot of people seem to have truly benefited from his program.

That said, I've been wondering just how sound his advice really is, so this discussion is illuminating.
posted by estherbester at 8:22 PM on March 15, 2011


Oops, I thought I'd clicked all the links in the original post, don't know how I missed the one I linked to (again) -- sorry!
posted by estherbester at 8:23 PM on March 15, 2011


Ramsey is very specific that once one debt is paid off, that monthly payment+the extra you were paying should be applied to the next smallest debt. That's why it's called a "debt snowball." If this is actually the case, then there is no sound long- or short-term financial reason to pay smallest-to-largest

Yes, there is. As I said above, having fewer minimum payments makes it much less likely that you'll back yourself into a position where you might miss a payment. On top of that, the debt snowball gives you the ability to use that extra money to cover other expenses in a pinch, whereas paying highest-interest-first does not.

You're acting as if there is "no short-term financial reason" to prefer, say, $150 a month in minimum payments rather than $300... but there is, especially if $150 is a lot of money to you.
posted by vorfeed at 8:30 PM on March 15, 2011 [1 favorite]


And yet The Parable of the Talents is, arguably, all about leveraging your wealth to make more wealth. To do this, you take on debt. Jesus was hella pissed at the dude who hid his money in a jar.

That said, I can't have a problem with a guy telling credit-drunk Americans they need to chop up their credit cards and live within their means. Some people just aren't equipped to be financially responsible, and the credit card industry preys on these people.
posted by bardic at 9:09 PM on March 15, 2011


Note what I said about the Middle Ages. The original languages of Biblical texts are Hebrew, Greek, and Aramaic. The Vulgate didn't come along until the fourth century, and wasn't the official Bible of the Roman church until the sixteenth.

Strong's says the aramaic word was "nashek" or "neshek", which means "bite", and the word is translated as "interest" or "usury".

It's interesting how much leeway people find in verses that they don't like.
posted by dubold at 2:12 AM on March 16, 2011


It's interesting how much leeway people find in verses that they don't like.

It's also interesting how people who want nothing whatsoever to do with Roman Catholic interpretations of other parts of the Bible will adamantly insist that such interpretations are the only valid ones when it serves a rhetorical purpose.
posted by valkyryn at 4:40 AM on March 16, 2011


Which one of those links was the main one you wanted to point me toward?

They are all fairly old...
posted by AndrewKemendo at 6:06 AM on March 16, 2011


I don't consider that a valid defense, as I'm merely pointing out that the players in the game are selectively ignoring their own rules.

If you think you have a consistent approach to interpretation of Scripture, then you have no reason to feel that I'm speaking to you. It does seem to me pretty self-evident that many Christians don't have an internally consistent structure to their faith.
posted by dubold at 6:11 AM on March 16, 2011


I really like Dave Ramsey.

I am okay when it comes to credit cards. I typically use them for buying stuff online.

My husband? He cannot use credit cards. I wanted him to get a gas card, because it would save us ten percent on each gallon, and he refused, because he hears himself in the people on DR's show. It just isn't like real money to him. He is quite a frugal person when paying with cash. It's nice to have someone in the media like DR who basically is saying, listen, don't complicate things. Don't have a credit card! Just use cash in an envelope, it's okay.

DR is also the reason that we'll own our house free and clear before we are 40. I heard him, over and over, saying, "If you can't afford a 15 year note, you can't afford that house." In our case, the mortgage company had to redo the paperwork, twice, because they kept putting it through as a 30 year loan. Even though the 15 year loan was less than $100 more per month than the 30 year loan, with a better interest rate to boot.

We have done his debt snowball a couple of times, once with credit cards and a car loan, and once with really nasty private student loans. I still have some federal student loans, but I'm in IBR and the remainder will be discharged after 25 years so I really don't care- I'm happy to make my $0 to $50 payments each month and not worry about them. The snowball worked for us. You are supposed to add the minimum payment from the previous debt onto the next debt, yes, but practically speaking that extra wiggle room each month keeps you from getting back into revolving door debt, even if the ultimate payoff takes a little longer.

In our case, we paid off $10,000 in debt each year for two years in a row, the first year on a $24K income with one child and the second year on a $32K income with two children, and then we bought a house and got pregnant again. Three years living cheap was well worth it, partially because we gained the skills and knowledge that we needed in order to be able to live cheap.

I think we are going to get a 24 month car loan this year though- we can get one for 3.5%, and our savings (Mango) is paying us 5.1%, not to mention the car we want (used TDI Jetta) will damn near cover it's own monthly payment in gas savings.

We can't do everything DR's way- the above example, plus the fact that we cannot get that "extra" in my husband's paychecks, we HAVE to get a tax return because the bulk of it is in credits that can't be paid throughout the year- but we have found his advice sound and useful for the most part.
posted by Leta at 6:19 PM on March 16, 2011 [2 favorites]


Leta's post above me is related strongly to what I was going to say. A lot of individuals may not need DR's advice but a lot of couples must find it an easier way to negotiate their finances, especially since so many couples do not fully agree on finances since each person comes with their own emotional baggage.
posted by saucysault at 4:31 PM on March 17, 2011


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