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Thursday, October 19th, 2017

Back to Basics Financial Planning: Dave Ramsey

In the world of financial planning personalities, Dave Ramsey is king. His approach is straight old school, no messing around, financial literacy. Ramsey has helped millions of people with his various books and his television show. Some have called his style too harsh and the words he uses too negative. I disagree. I feel that for some, hearing a harsh tone is exactly what they need. Ramsey often uses words like stupid and foolish to describe the actions of people when it comes to their money. His critics will choose to attack the specifics of his advice rather than looking at the overarching theme. For me, I take the advice of most of the financial pundits with a grain of salt. I try to focus on the message, rather than the details. That is why to me, Dave Ramsey remains one of, if not the best financial gurus around. In this post, I will describe what I love about Dave Ramsey and what I don’t like so much. I think everyone should follow him and take from it what I have, fundamental financial education aimed at getting back to basics.

Bio

Born: September 3rd, 1960, Antioch, Tennessee

Occupations: Real Estate, Businessman, Author, Television/Radio Host

Dave is the epitome of the comeback story. Born and raised in Tennessee, he graduated from the University of Tennessee in 1982 with a degree in finance and real estate. He opened a real estate brokerage firm that by the time he was 26, was worth over 4 million dollars. He became one of the youngest broker’s to be admitted in the Graduated Realtor’s Institute, a prestigious distinction. His luck soon ran out however, as tax reforms during the 80’s hit the real estate industry hard. He was soon in a large amount of debt that was being ordered to collect. Ramsey filed for bankruptcy and left his career in real estate. Knowing his calling was in the world of finance, Ramsey ate up any knowledge he could. He was soon developing strategies to help people with financial literacy and counselling couples at his local church. He created a series of lessons and materials through personal experience and the teachings of industry leaders.

Dave Ramsey started his radio show 25 years ago and it soon branched out into the world of television. He now has a dedicated Youtube channel and is featured on Sirius XM radio, iTunes, iHeartRadio and Google Play. His show is followed by over 12 million people weekly. Dave has written more than 7 books on personal finance and has been featured in many more.

What I like

Dave doesn’t beat around the bush when it comes to personal finance. Check out this clip:

He gives his viewers the straight truth as he sees it, which is usually on point. The backbone of David Ramsey’s ideology is living debt-free. Having gone through what being in debt is like, he preaches a non-consumerist lifestyle. He is extremely passionate about debt reduction but also the emergency fund as a means to stay out of debt. Fear of life’s surprises has shown him the importance of the emergency fund. For Ramsey, much like myself, we see debt accumulation as a series of small transactions punctuated with a few large blows. What that means is that your daily latte adds up over time, but then when you make a large payment using credit it strikes hard. He is passionate about living within your means and totally against buy now, pay later methods.

Other things I love about Dave Ramsey:

1) The Seven Baby Steps

In order to relieve money stress and set you on a path to financial freedom, Dave promotes his 7 baby steps. It is a path to follow for people who are lost on where to begin.

Step 1: Save $1000 in a baby emergency fund

Step 2: Pay off debt using the debt snowball method (I will explain this next)

Step 3: Save a 3-6 month emergency fund

Step 4: Invest 15% of your income into retirement savings

Step 5: Start Saving for College

Step 6: Pay off your home early

Step 7: Build Wealth and give generously

His 7 steps are a solid way for people to get started thinking about their financial futures and I even incorporate some of them in my planning. Obviously, if saving for college is not of use to you, skip step 5, and the same goes for step 7. I believe sometimes giving time is just as valuable as money, so donating that may be within your means. Overall the plan is sound in my opinion.

Learn more about the 7 Baby Steps

2) The Debt Snowball Method

I am a big believer in aggressive debt reduction as is Dave Ramsey. In the past, I have been conditioning to think that paying off the debt with the highest interest rate should come first. The debt snowball method plays more on the psychological side of things, attacking the smallest debt first and then working your way up to the largest. The reason Dave loves the debt snowball method is that he believes, as do I, that paying off debt is more about mentality than it is about the numbers themselves. Achieving small victories in the debt-snowball method will provide you with a sense of accomplishment and help you continue on with your debt reduction journey. I fully support this theory as I know from experience that it worked for me.

Learn more about the Debt-Snowball Method

3) Mutual Funds

Dave is a firm believer in growth mutual funds. I as well believe that mutual funds are a great way to capture the market without having to pick stocks. While one should always be cognizant of fees, mutual funds have been the go-to savings product for generations. Much like Ramsey, I believe that mutual funds should be a part of one’s investing strategy that includes fixed income, ETF’s, real estate and cash.

What I don’t really like

Dave is a firm believer in buying term insurance and investing the rest. This is a great strategy but it doesn’t encompass some of the needs that individuals have. This includes final expenses, estate taxes, charitable giving and guaranteed return investing. While a whole life policy will never outperform the market, it will add a piece of guaranteed growth along with the security insurance provides. I think ideally people should have a combination of both, and I do myself, to cover all sides of the equation.

Ramsey is a devout Christian, so sometimes he quotes verses from the bible. While I have no problem with that personally, I do feel a little odd when he gets preachy. The one thing I will say is that his verses are always on point with the subject matter he is speaking about, similar to the quotes I give every post. So he isn’t coming from left field, but be warned, if you follow Dave, God will be mentioned. In my opinion, if believing in a higher power allows people to realize their full potential, I’m all for it.

My Grade – A

Dave is honestly one of my favorite people in the financial world. He is a straight shooter, no-nonsense, old school kind of guy. His methods are tried and true, his concern is sincere, and his reach tremendous. There is a reason millions of people tune in every week to listen to him. My thoughts are that if everyone adopted even one of Dave’s teachings, they would be better for it. He has certainly changed my outlook on money for the better.

Thanks for reading my post today and don’t forget to tune in tomorrow for a milestone at Budget Boss.  Friday, October 20th, 2017 will be our 200th post since our launch and for that, I will be dedicating it to the Guru who was instrumental in getting me out of debt and on the right track. This person was also instrumental in getting me into the financial industry trying to help others the way I was helped. You won’t want to miss it! Have a great day friends!

Dave Ramsey Quotes: 

“I believe that through knowledge and discipline, financial peace is possible for all of us.”

“The thing I have discovered about working with personal finance is that the good news is that it is not rocket science. Personal finance is about 80 percent behavior. It is only about 20 percent head knowledge.”

“There are no shortcuts when it comes to getting out of debt.”

Budgets

The Gentle Genius: Brian Tracy

Email – joe@budgetboss.ca 

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