Jun 13 2010

Does Dave Ramsey stress out frugal people? Is debt truly ‘dumb’?

In my last post where I told you we’re keeping our car for now, I had a few commenters share some pretty interesting points about Dave Ramsey. Here are excerpts. Go to this post and scroll down to see them all.

From Karen:

… Sometimes, I hate Dave Ramsay.

There. I said it. He is just SO rigid, and he makes so many frugal folks feel so guilty! … I just don’t think that ALL debt is the devil. Things like a house and a car, and yes sometimes even a second car, are necessities, and unfortunately our culture has set it up to make it very difficult to buy one without taking on some debt.

It’s not impossible, but at our age with so many other goals to work toward, saving that kind of cash upfront can take a LONG time. I don’t see anything wrong with taking advantage of the healthy credit you’ve built to borrow that money at a good rate, especially since you plan to pay it down quickly. You’re not talking about leasing a brand new sports car here. You’re talking about a used, reasonably priced family vehicle that you will drive for years! …

From Tammy:

… I took the Dave Ramsey course, and I had to learn that all of his ideas were not for me. If I had decided to follow his program to a “T” I would have been completely stressed out!

… if I focused on following the program to the letter I would have been obsessed with our money and thus made it an idol in my life instead of focusing on the great life and family that the good Lord has blessed me with! So while I think his program is invaluable, I do think you have to be wise with it and apply to your own life what works for you. …

From Laura:

… When my husband started listening to Dave Ramsey I seethed with hatred. I thought Dave Ramsey was ruining my life. Now, debt free, I couldn’t be more thankful we applied his wisdom to our finances. …

And from the man himself, Dave, who tells us the truth about debt. Um, he didn’t comment on my blog post — this is from his own site :) :

… Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you’re in debt, then you’re a slave because you do not have the freedom to use your money to help change your family tree. …

He points out just how much more you could contribute to building wealth if you didn’t have a stinkin’ car payment (or any other payment). How you could more effectively help your children attend college. How you could actually afford to retire before you’re 95.

These are all true, valid points.

Is there even a “but” to the “debt is dumb” argument? Some might say yes, but I still say debt isn’t optimal.

When we set out to buy our first house, that could very well come around the same time that we’d need a second vehicle (though Shane is really against it and wants to bike or walk or bus…dunno how reasonable that is out there). Or, we’d need to switch from the Ford to a van.

If that vehicle situation does happen around the time of the house purchase, then I don’t see how we could realistically have enough cash to pay for a reliable van.

So our options would probably be:

1. Continue to rent. Continue padding the savings account. Buy the van with cash, but wait on the house.

2. Buy the house. Put something down on a car loan, and go into debt for a reasonable used van. Pay off as soon as possible.

Neither option sounds like a clear winner to me. Perhaps we would need to rent an apartment or house for a few months after we moved, because of course it does take awhile to find a house and have all the inspections and paperwork go through. (Side question: Can you realistically move to a new city and buy a house quickly? Or do you really need to get a month-to-month lease somewhere while you get it all sorted out?)

Since I’m not particularly familiar with most of the Indy metro, I think it will probably take us at least a little bit to figure out where we’d want to live, and then which house we’d want to buy.

Our minimum down payment is 5 percent but I think we need it to be around 10, plus paying closing costs out-of-pocket. I don’t think we could get up to 20 percent without waiting for several more years. I don’t wanna do that. And Dave even says it’s ok to put 10 percent down on a 15-year mortgage. That’s our intention anyway, so whew!

So circling back to the “does Dave Ramsey stress frugal people out?” I think he does, but with good intentions. He wants to motivate us to get out of debt, so that we don’t go back into debt for any reason, ever again.

Is it realistic? I don’t know.

I do know that I won’t be paying cash for a house, so I will have some debt again. And it is entirely possible that we’ll need to take on a bit of debt for another vehicle.

It can be a slippery slope and I do need to be mindful that we don’t let it get out of hand.

Do you disagree with Dave? Does he stress you out?



16 Responses to “Does Dave Ramsey stress out frugal people? Is debt truly ‘dumb’?”

  1. I guess I’d rather have a house and a little debt than keep renting, especially when you really want your own house. I like that option the best. But, I would say that you need to make the decision that you two can live with. I know that you are responsible and aren’t going to go out and buy a brand new car, so what’s the deal with some debt that you can pay off pretty quickly?

    I agree with you that I’d rather put more down on the mortgage- the amortization is crazy and putting more down makes sense.
    .-= Mrs. Money´s last blog ..What Can You Compost? a List of Compostables =-.

  2. We were just beginning to dig out of debt when the engine on the car died. Our mechanic (whom we trust to the utmost) told us the type of engine is known for this kind of breaking and he recommends getting a much better engine with some updates to stop it from happening.

    We took the car to the dealership and used this information as leverage for a deal on different (slightly newer) car. We took out a 2 year loan. We could have bought a car with no loan whatsoever but it would have been older and less than ideal for my wife’s biz. I have a very secure job (family biz) so I was not worried I would lose the income.

    Did I want to take out a loan? no. Was it the best decision we could make? Yes.

    Crap happens. Debt is bad if it is reckless, not if it is well planned.
    .-= Ted´s last blog ..Selling up =-.

  3. He doesn’t stress me out, but that’s because I don’t frantically follow his advice.

    But for what it is worth, I would say most definitely have AT LEAST 10% to put down on your house, and 3 cheers for doing a 15 year note. I really wish I had gotten better advice about buying a house before I took the plunge 3 years ago (and the advice I should have been given was that I needed to save for at least another year so that I could pay more up front). It makes me sick to pay PMI every month, and the amount of interest we fork over monthly is complete and utter insanity.
    .-= Tiffany´s last blog ..DIY Soda?! Yes! (SodaStream GIVEAWAY!!!) =-.

  4. I personally think Dave has some pretty good money smarts. I’ve read his books and like them. However, I see a real tendancy in some frugal circles to worship every word that comes out of that man’s mouth. Dave is just a man and we must remember that.

    I have used debt in my life without any problems. I have a couple of personal rules that I follow:

    1. The debt must be incurred for a very good reason — such as housing or reliable transportation. NOT a vacation, or fun stuff or to live better than I can afford

    2. I must have a plan to pay it back early. Ideally anytime I’ve used debt it was for a short time, except my first mortgage which was for 30 years. As soon as I could I refinanced to a 15 year loan.

    My latest debt: in early 2009 I took out a 12 month note so that I could pay for a small portion on a new to me car. I had shopped for a long time to find just the car that would meet my needs at a very, good price. It was worth it to me to take out a loan at a small % interest rate for 12 months than take the money out of our savings. For some reason I am much more motivated to pay off a loan early than put money back into savings. So a few months later the loan was paid back and now my car is debt free.
    .-= Trixie´s last blog ..Menu Plan Monday =-.

  5. I did the Dave Ramsey course during the Spring of 09 and taught it during the Summer of 09 (My husband loves Dave). I HATED the budget for the first six months. I moaned, groaned, and could not stand the limitations (so why did they let me teach?). Now that we have been doing Dave Ramsey for a year and a half, I really agree with most of his points. We were able to buy a new car for me in January with cash and our house will be paid off in 9 years (we had a 30 year mortage with 28 years left when we started, re-fied to a 15 year right after we started). So Dave stressed me out for 6 months (when I was debt-free except the mortgage but OH MY WORD how am I going to pay for everything according to this budget…perhaps by not saving quite as much for the car so I could buy groceries???), but now he is just a voice in the background. I think by working his plan, more success can be had, but like everything humans do, we will fall short. A loan isn’t the end of the world, but it isn’t ideal. Small amount, small interest rate, and small time if needed.

  6. You may hate Dave and he may stress you out but……… debt is dumb and ANY debt will limit your savings, retirement, investments, and options.

  7. I love Dave Ramsey! He has a lot of common sense. I listen to his program and every day. He has helped many people get out of the mess they have created by borrowing money.

  8. YES! When we had the opportunity to buy our house, I was so very stressed because we would be deviating off course of saving 20% down for a home! We still have three students loans as well!

    However, we had a healthy 3% down and closing costs, we got an incredible rate and our payment was less than renting.

    We are investing in this home!!

    My husband had to sit me down and tell me, “Rachel, Dave Ramsey’s plan may not be God’s plan for us! Why don’t we just ask God if we can do this?”

    Hmm… he was right and God totally blessed us with this house.
    .-= Rachel´s last blog ..Thirfty Finds… =-.

  9. Not trying to be controversial, but I am pretty sure the bible does not condone debt/borrowing (without knowing if the loan can be paid back) full stop – there’s no good debt and bad debt. Why presume the Lord’s provision for mortgage payments when a mortgage is a much greater DEBT than a car, consumer loan debt or even (possibly) a student loan? Borrowing is a curse, that’s why we are to not owe any man anything but to love.

    See Deut 28: You shall lend to many nations, but you shall not borrow. And the Lord will make you the head and not the tail; you shall be above only, and not be beneath, if you heed the commandments of the Lord your God, which I command you today, and are careful to observe them. So you shall not turn aside from any of the words which I command you this day, to the right or the left, to go after other gods to serve them.

    And then Deut 28 shows us what curses looks like: Locusts shall consume all your trees and the produce of your land. The alien who is among you shall rise higher and higher above you, and you shall come down lower and lower. He shall lend to you, but you shall not lend to him; he shall be the head, and you shall be the tail. Moreover all these curses shall come upon you and pursue and overtake you, until you are destroyed, because you did not obey the voice of the Lord your God

    May the Holy Spirit convict your heart and guide you in wisdom and in truth.

    Finally, why do you not want to wait? What are you afraid of? Do you believe that God will provide for your needs as He promises to do? If so, why are you not willing to wait on the Lord? I hope you will seriously ponder deeply over this, because the bottom line is: Do you trust the Lord with your life and your future. We cannot serve 2 masters.

    I say this in love, because I do not want to see more sisters/brothers go down the path that leads to slavery and deception. Please forgive me if I sounded harsh – I am just very passionate about this revelation as I too, nearly fell into the trap.

  10. Hi Summer,

    Thanks for your comment. I appreciate where you’re coming from in this.

    So if I’m understanding you correctly, it sounds as if you’re advocating buying a house with cash or not at all? I just don’t know if that’s truly God’s will (and I surely don’t presume to understand all of the Bible! I’m still working my way through. In fact, I’ll be getting to Deut. 28 tomorrow so I’ll be able to see it in context). But what I do remember is the Bible says the borrower is slave to the lender.

    That is true.

    But it doesn’t full-out say, “Avoid slavery.”

    Some people may interpret scripture as to mean do not borrow money for any reason at any time. I just don’t see that in there, that cut-and-dried.

    Maybe it is God’s will for us to pay cash for a house, and to rent in the meantime. I don’t know. But I do know it will take us more than a decade to save that kind of money.

  11. Can I just say that I am surprised that you even allowed my comment to be posted? I am impressed! Thank you.

    I will pray for you. I am very encouraged by the fact that you are wiling to put in the effort to research the Scriptures on this.

    Slavery is not a good place to be. God does not want His children to be slaves to anyone but to Himself.

    God sent Moses to deliver His people (children) out of slavery and bondage because slavery is not what God wants for His people. God had compassion on His children and sent a ‘savior’, why would God send a savior if slavery isn’t such a bad place to be? In fact, the Israelites angered the Lord in many occasions because they wanted to return to the way they were – in slavery. They complained to God because they wanted to eat meat in the wilderness and so on. Their complaint was mainly that their fleshly desires were not satisfied and they were not content with plain manna and total reliance on God’s provision. They preferred slavery over God’s best, freedom. Sure it wasn’t easy, and I think I would have probably complained just as much if I were in their shoes. But that is my flesh crying out. So it is hard to resist “eating meat and drinking water” whenever we feel like it. God’s bread is plain. His manna is not as tasty and exciting and fulfilling in the short-term. But in the long-term, the promise that awaits those who trust in God’s goodness will be rewarded.

    Finally, God the Father sent His one and only son Jesus Christ to earth and He paid the heavy price for us to be free from sin and slavery once and for all. So that now we can be free from bondage to the world system and dominion of darkness.

    It would be interesting to do some research on “What does God think of slavery?” or “Does God want us to be slaves (since the world including CNBC, Money magazine, Academic Institutions, my brother, sister, uncle, parents seems to be ok with it?)”.

    God wants us to be different, separate, and not like those in the world who depend on themselves and the god of mammon (money) to survive. We have a God who loves us so dearly that there’s nothing good He wouldn’t give for us/withhold from us, if we ask for a fish, He will not give us a snake. If we ask for bread, He will not give us a stone.

    God does not want/desire/wills His children to have to borrow, yes it does happen,, but that’s not what He desires for us. God is also so gracious and compassionate, and everything including our mistakes are used to bring about good for us who love God and ultimately repent to follow His will. That’s why it is possible that God brings about blessings even through our mistakes and disobedience, but God desires the BEST, plan A for us.

    If no one is putting a gun to our heads or holding a whip, why would we choose slavery? Why choose death when life is available? When our Saviour shed His precious blood so that we may live LIFE (not bondage or slavery) and not just life but ABUNDANT life. To apply this in the situation of buying a house using debt, the question would be why choose to be in debt (and slavery) when the Lord has provided you a way of escape?

    What I like about Deuteronomy 28 is that it shows us what constitutes a blessing and a curse because in this confusing moral era, we can view a curse as a blessing just because everyone says it’s ok or good or even wise. But the bible shows us how to view things from God’s point of view. What does God see as a curse? What does He see as a blessing. Let us not be deceived by the world’s standard of what constitutes a curse/blessing. Let us not let the world define that for us. “Let God be true and every man a liar”.

  12. Summer — Your first (and second) comment was made with respect, so of course I’ll publish it! In fact, I only reject comments that are clearly spam. I can’t remember receiving any truly rude comments here (yay for that!). It’s perfectly fine to dissent here.

    Thank you for sharing some good food for thought. And thanks for your prayers!

    Maybe you can share more about your housing situation — whether you’re renting or if you’re in a house free and clear, or are saving up to do that. I think it helps to see people walking the walk, and how they do it, ya know?

  13. I can understand being stressed out by Dave Ramsay. I think there is “understandable” debt, and there is stupid debt – and he likes to put ALL debt in the same package under “stupid”. When we got married, we needed a new car. Paul’s car was dying randomly; I was constantly having to go pick him up and we were paying to have it towed to the mechanic’s. It was NOT a good situation. He worked a job where he could not be late, and a reliable car was a must. However, even though we had been good about saving money, we were getting married in a few weeks and finances were just tight. We had $1000 to spend on a car, and that would completely wipe us out financially. For $1000 we weren’t going to get a car any better than the one we had. We had to take out a car loan, and then we worked hard and paid it off in less than 2 years.

    It’s best to avoid debt as much as possible, but sometimes life happens. Sometimes to get yourself out of the pit you’re in, you need someone else to throw you a line. This doesn’t mean to be stupid or irresponsible. I don’t know what’s going to happen when we need a new car. At this point, we might have to choose between saving for a car, and saving for some very expensive house repairs that are needed. Fortunately, we still have some time to think about it – but we don’t have enough time (or income) to save up the money needed for a reliable minivan (we’re a one car family as well).
    .-= ashley @ twentysixcats´s last blog ..adding to our list =-.

  14. BOTH! But it’s a message I NEED to listen to and obey! If I were in your shoes, I’d hang on to the car and the apt for a while. You don’t seem to feel “settled” where you are and you don’t want to be in over your head if the right job comes and you can move “home.” I do think Americans have been over-sold the “benefits” of home ownership. For most it is a good thing, but many cannot be satisfied with what they can truly afford and buy way too much on way too risky a mortgage. You seem sensible, so I image you’d put a big down payment on an affordable home with a decent fixed rate mortgage. Still, selling it isn’t easy just about anywhere in the country right now.

    I think what stresses folks out about Dave is popular culture says “some” debt is good. GM/Ford sold their employees a bill of goods with “you always have a car payment, but WOW look at our great employee discount.” The car still devalued faster than they could pay for it!! If 3% down is so risky it takes a gov’t agency to write the loan, than imagine the danger of less than that down! Oh yeah, we did that! Wow, look at the forclosures! For most of us, Dave is tough love that we need!

    My 2 cents–ignore at will!!
    .-= Lisa´s last blog ..FIRST BLOG GIVE-AWAY!!!!! =-.

  15. As someone very new to the whole financial/getting out of debt scene, I know I don’t have the same opinion as people who are debt free or never got themselves into debt. I do have a love/hate relationship with Dave Ramsey!

    Dave Ramsey seemed wonderful (and still does in a lot of ways) when I began my get-out-of-debt-asap crusade. However, I found that my husband and I were arguing over $7 one day and that neither one of us seemed very happy. That was NOT okay with either one of us! If we followed Dave Ramsey’s plan to a T we would be miserable for the next 10 years until we had every single scent of our debt paid off. Finances are one thing, but I am absolutely not willing to sacrifice my happiness.

    Now, modifying his plan slightly we are quickly working our way out of debt and are still enjoying life and working hard to achieve our goals. I have 0 doubt that Dave Ramsey’s plan works 100% of the time, but I do think it is really difficult for some people (like myself) to follow it so strictly.

    Now, if I had read Dave Ramsey’s book when I was 16 years old, I would probably feel a whole lot different about things because I would have been saving and watching my spending all along. So, I do hope to raise my (future) children with is ideals in mind to teach them not to make the same mistakes that I made.

  16. I’m one of the people who said he stresses me out, and I wanted to write again because I totally agree with something you said in your post. He does so (stress you out) with the best of intentions.

    I think if you are in a bad place financially, Dave Ramsey and his course just may very well be the life line that the Lord is throwing to you to help pull you out of the pit. I have a few friends that were so far in over their heads they had absolutely no idea how to begin to get out of debt. I think Dave Ramsey may very well have saved their lives and their marriages.

    But I think I’m more in line with the commenter Courtney. I do believe in his program, 100%. I just found for myself and my husband if we were rigid and adhered to every little rule without flexibility we were going down a very negative path. I don’t know what Dave’s opinion would be about that, but I do know that we took a lot of his tools and have implemented them into our life with GREAT success. We hope to at some point to be able to adhere to all of them…but for now we are using most them to our advantage.

    I do plan on sending both of my children to his course when they are 16. I think that being 16 and learning the lessons he teaches, is life changing. I believe his course should be mandatory for every teen heading off to college. Can you imagine what our economy would be like if everyone began applying his lessons to their lives???

    So to get back to your original question…yes he totally stresses me out…but I know it is for a good reason so I need to suck it up.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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