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Dave Ramsey is America’s go-to finance guru. Millions listen to him to escape debt, build wealth and create an independent lifestyle.

But while some of his ideas are great, other parts of his advice can decrease your wealth and make you more dependent on others. You shouldn’t blindly follow advice because many others do so. Your way to wealth should be as unique as you are.

In this episode, you’ll discover a new perspective on Dave Ramsey’s financial advice. That way, you can choose for yourself what advice to listen to and what to ignore.

Want to create your own path to wealth instead of blindly following what’s on TV? Listen now!

Show highlights include: 

  • Why haggling with business owners over expensive purchases is terrible for your community (even if you save money in the short-term). (1:16)
  • How Dave Ramsey’s “get out of debt” message can keep you from realizing your dream of running your own business. (3:14)
  • Why Dave’s negative view of debt might come from his bankruptcy. (5:48)
  • Ramsey’s “Baby Steps” method you can use to escape extreme financial situations (without sweeping changes in your life). (6:44)
  • Why the $1000 “emergency fund” should be called the “minor inconvenience fund”. (13:26)
  • How asking your parents for their bank statement helps you make better investment decisions. (17:09)
  • 5 questions to ask yourself to avoid financial advisors who only work for commission checks. (20:04)

Remember to download Grandma’s Top Tips for an Independent Financial Future by dropping into https://grandmaswealthwisdom.com/free/. It's time for YOU to break through to a smart, stable, financial future.

If you’d like to see how Grandma’s timeless wealth strategies can work in your life, schedule your free 15-minute coffee chat with us by visiting www.grandmaswealthwisdom.com/call …just like Grandma would want us to do.

Links mentioned on the show:

Episode 45 – How to Get Out of Debt (https://grandmaswealthwisdom.com/podcast/how-to-get-out-of-debt-and-stay-there/) and Stay There Episode 65 – Why Whole Life & Red Flags to Avoid (https://grandmaswealthwisdom.com/podcast/why-whole-life-red-flags-to-avoid/)

Read Full Transcript

A hearty welcome to “Grandma’s Wealth Wisdom” with your neighborly hosts, Brandon and Amanda Neely. This is the only podcast that helps you take charge of your cash flow and leverage your assets, simply and sustainably, the way Grandma used to.

Amanda: Hi. I’m Amanda Neely, and welcome to Grandma's Wealth Wisdom, where we help you break through to a smart, stable, financial future, with the tried and true wisdom Grandma used.

Brandon: And I'm Brandon, and today's episode is titled “Ramsey's Advice—How Is That Working Out For Your Parents?” We are the first to admit that we've never really gotten into the whole Dave Ramsey thing prior to working in this industry. I mean, honestly, we didn't really know much of who he was except he did some stuff in our church, even though he didn't go to our church. [00:58.8]

The closest was back in 2008-ish when the church we went to offered that Financial Peace University and some of our friends attended. We were hanging out in the lobby during one of the classes, or maybe we heard it on one of the promos, how Dave advocated for haggling to save money on a washer or dryer.

Now, I remember being put off at this idea because I was planning to start a business and I wouldn't want somebody haggling with me if I were trying to sell them a $3 cup of coffee and they were like, Well, I only want it for $2.49 or whatever. I was just like, And there's margin and all of that stuff. The business needs to make money. I guess I saw myself buying from a local business owner, so I wanted him or her to be profitable, too, not just the person going through FPU, that really made me decide that that FPU wasn't, Financial Peace University wasn't for me. [02:06.7]

Amanda: And I remember that, too. I don't remember this haggling thing being too much of a big deal to me. People haggle all over the world and we've been known to haggle at a time or two in different circumstances, but what I really thought was that we were doing okay with our money, that we didn't really need Financial Peace University because we weren't on the edge. We weren't in a financial extreme place. We were tithing, doing all the things.

I was also thinking more that the church was pretty much only offering the program because their tithes were going down during the recession and they wanted people to be able to keep tithing more than anything else. So, I was a little jaded and cynical. Hopefully, that wasn't really the church’s just motivation. They were really trying to help people be smarter about their money, but that's how it kind of came across to me in terms of the timing and everything, so I was kind of like, Eh, we can skip it. [03:00.0]

Brandon: Also, here's the thing. If we would have followed Ramsey's advice during those years, we would never have started a business and learned all the things we've learned over the last decade-plus of entrepreneurship, because in order to start that business, we had to take on some debt and we had to do a lot of things to start that business. So, had we followed that advice probably we'd never or we wouldn't be anywhere where we're at today.

Amanda: Yeah, and we did. We also had student loan debt still when we were getting started, so he would have probably said we needed to get out of that first or that's how we would have interpreted his advice.
But setting aside our personal experiences and beliefs for a second, let's go to some facts. Brandon, there could be people listening right now who don't know much about Dave Ramsey. Can you tell us maybe five things about who he is?

Brandon: If you don't know who he is, I mean, I don't know how you don't because he's just everywhere I feel, which is great for business. [04:04.3]

Amanda: For his business.

Brandon: For his business. If you're not familiar with Dave, we've got five fast facts. One, Dave is a boomer that's born in 1960. Therefore, he has a different spin on things because, again, he was born during that time and there's a lot of context that goes with it.

Amanda: Yeah, stick to the facts here.

Brandon: Number two, he has a radio show that's on 500 radio stations in podcast form and on the YouTubes. I mean, I would love to have this podcast and YouTube channel be on 500 other places. That would be super awesome. Now, for three years, he even had a television show on Fox, so he had tried even the TV thing. I don't know how it went, but he was there for three years. He's written numerous books, so he has plenty of books that probably he shares or has his advisors share out, and so there's that. [05:07.4]

Now, here's an interesting thing. One of his teachers in the 1980s was Art Williams, A.L. Williams, who we talked about in the last episode. Now, you would think that we made that up, that there's a lot of—what do you call that?—there's not real facts or it could be speculation. It's actually on his own Wikipedia page. He learned a lot from A.L. Williams. Check out the previous episodes from last week's about the origin story of buy term and invest the rest.

Now, number five, Dave has a pretty strong stance against debt, which might stem from how he started out as a real estate investor, but filed bankruptcy when the bank was sold to a larger bank, which then demanded immediate repayment of his loans. [06:03.7]

I'm wondering, and again, this is just me thinking, hmm, if that did not happen to him, would Dave be more like Robert Kiyosaki—and Robert Kiyosaki's is a different method of thinking. They're both extremes—or would that experience have changed him if he didn't have the banks do that?

Amanda: Yeah, now you're getting outside of the facts and into speculation zone. I want to jump into what Dave gets right. There are some things that are really good about what he teaches and I want to share those, and then Brandon's going to jump in with the things Dave gets wrong.

Overall, Dave is targeting people at the extreme in their financial lives. They're quickly moving toward bankruptcy, right? If they're not on the edge of that already. Keep that in mind when we're talking about what Dave gets right because if that's the kind of people he's talking to, and some of his advice works really well for them. [07:05.0]

For example, number one here, he gives people practical, small actions as baby steps they can take so they aren't overwhelmed, and he has definitely brought personal finance and human behavior together to create his system to help people on that extreme to start walking the other direction and through small actions instead of big sweeping changes that don't stick.

Brandon: I think that’s super, super important to our human behavior about our finances. I mean, we really need to think through that.

Amanda: Yeah, and then, number two, he advocates for living within your means by using budgets or his envelope method. We love that and that helps people not go further into debt by spending more than they earn but embracing that living within your means, and if you like using cash, the envelopes totally work that way. [08:00.0]

Number three, with him being wary of debt, especially carrying a balance on a credit card with really high interest, that totally makes sense for someone that's marching quickly toward bankruptcy. Some Americans have big problems with credit cards and with going into debt, and his hard stance is right for them to stop and to turn around, and head the other direction, to kind of have a conversion of sorts, to use Christian language, to do that 180 of walking in one direction and turn the other. For them, that idea of being really wary of debt in that situation makes a lot of sense.

Brandon: Yeah, I think that's huge and really powerful.

Amanda: Yeah, and then we also love that he advocates for seeking out professional help. If professional help and financial advice, if the smartest, most financially savvy people still get it, why shouldn't the average American? Especially the person who is marching quickly in the wrong direction and hasn't done a good job with their money so far, professional help makes a lot of sense. [09:04.1]

Now, who he tells you to talk to might not be the best. We're going to come back to that, but we agree seeking help from a financial professional is something I think everyone should do.

Brandon: Yeah, sure.

Amanda: Then, number five, what Dave gets right, probably his best thing is that he's a really good businessman. He makes lots of money in all kinds of different ways.

He sells his material and his information, both in book form and media form on lots of different media forms. He has corporate sponsors that pay him lots of money. He trains financial advisors. I imagine they're compensating him in some way for that training and for the leads that he sends their way to talk to you.

Then, if you ever looked at his YouTube channel, he's got lots of followers. He’s got ads on his videos. Who knows how much he's making from those YouTube ads every month? Probably more than he spends on YouTube ads would be our guess, but that's pure speculation. [10:00.0]

Brandon: Yeah, I don't know if I’ve ever seen a YouTube ad from him, but, I mean, he doesn't need to do YouTube ads. Everybody shares his stuff anyway.

Amanda: That's true.

Brandon: Which brings me to what Dave gets wrong. Now, these are, again, blanket statements that show he's still operating in the ’90s, right? And so, these are things that he says that maybe things are changing, especially with where we're at right now in 2020.

One thing that I really think is a challenge and some of it may be clickbait or something on that for YouTube, I don't know, but he calls people idiots and stupid all the time. Here's one of the things that I found really interesting. We are Profit First professionals and we love the Profit First system and how that is set up in our business, and basically in that book, in Profit First, they talk about human behavior and the envelope system, and all of that in the book. [11:03.8]

Amanda: I'm pretty sure they mentioned Dave by name.

Brandon: They mentioned him by name in a couple of places and they say this is really good stuff.

Amanda: And what they're doing is taking what he's done for personal finance and applying it to businesses.

Brandon: Yeah, so Dave never heard of this book apparently and somebody was asking his opinion on it and he said that’s stupid, you shouldn't do that, and it was really negative towards Profit First, and I'm like, He apparently didn't read the book and even says he didn't read the book, so he doesn't know much about it, but run away from it, and I’ve found that really interesting. I had just a challenge with that because I believe in Profit First and some of the concepts of Dave’s in Profit First are really important.

Amanda: And, especially, because you get those entrepreneurs and business owners who are on the edge and quickly headed towards bankruptcy. A lot of Profit First helps them turn their ships around and head in the right direction. [12:01.0]

But this whole calling people idiots, and calling people stupid and their ideas stupid, I have a really hard time watching any of Dave's content for that very reason, just because of his style. Brandon can watch some of it sometimes and he complains to me about what it is, but I steer clear.

It's kind of like Brandon has been forcing me to watch this Netflix show called Cobra Kai. That's like I used to love The Karate Kid movies back when I was a kid. I took taekwondo, so I could relate to what was going on there. But in the new Netflix show, one of the main characters is Daniel-san’s archnemeses and he's restarting Cobra Kai, and the way that he treats his students, calling them idiots, telling them they're stupid, insulting them, there's a part of me that can't watch that show very long with Brandon and Brandon is forcing me to watch it because of that. [12:53.4]

That's just totally the style from the ’80s, maybe some of the ’90s, but I'm more of A Spoonful of Sugar kind of girl. If you can't tell, I love that way of influencing human behavior and helping people change, to do it in a way that helps them feel good and doesn't degrade them at the same time, and I think that's totally more of a 2020 it's kind of way of doing things and kind of Grandma's style, too.
Brandon: Yeah, and Mary Poppins.

Amanda: Of course.

Brandon: The second thing that I think he gets wrong is that $1,000 emergency fund, that doesn't cut it anymore. Remember he started in the ’80s and maybe $1,000 was powerful more so, but a $1,000 maybe if your phone breaks it could cover that, and so I think that we need to have a bigger emergency fund. I remember watching one of his videos where he said, Put the baby steps on hold and build your emergency fund past the $1,000. He started changing because of pandemic, I think, but then, I don't know.

Amanda: Yeah, that was something he said at the beginning of the pandemic, that when you're in this kind of situation, the baby steps can be put on hold and that you want to keep as much cash available. But we were thinking, why not do that before the pandemic, in case something like this happens, right? [14:13.3]

Brandon: Yeah, not when an emergency happens. Then you start saving more for an emergency that's already happening. Anyway…

Grandma always said, “Eat your vegetables. Look both ways before crossing the road. And never risk your financial future on elements of the market you can’t control.” That Grandma, always good for some tried-and-true advice. And although some of her wisdom seems to have skipped a generation, you don't have to be left behind.

Download “Grandma's Top Tips for an Independent Financial Future” absolutely free, when you visit Grandma’sWealthWisdom.com. Don't wait. Get Grandma's best tips today.

Brandon: Number three, his simplistic view of the stock market returns. Now, Amanda, you have a lot of math and a lot of evidence of the contrary. [15:06.6]

Amanda: Yeah, he is always saying you can get a 12% return in the market and there's been lots of people that have written and talked about how that's not really true anymore, including this really awesome guy named Wade Pfau and this thing called the Dalbar Report that did the really in-depth research that found that over the last 30 years, it's been more like 3.88%, which is a far cry from 12% in terms of the average American, what kind of returns they can see.

Actually, as we started recording today, you might've heard a ding in the background. We’ve got a text message from a friend of ours that totally relates here. I think we've mentioned this on the show previously that we have a friend named Les who calls the period between 1980 and 2000, the roaring 20. That's when the stock market was experiencing really high growth and kind of had that up into the right curve that everybody wants. It was, of course, because of things like the buy term and invest the rest, 401(k) becoming popular, lots of people getting into the market. [16:13.7]

Then our friend, Mark, has now used that as inspiration to call the period of the next 20 years from 2000 to 2020, the boring 20, because it's kind of been really low yields, right? And we're not really very much higher than we were in 2000, right before the dotcom and we've seen a lot of volatility over the past two decades.

Then kind of comes the question, what's the next 20 going to be like? Kind of just putting this out there. No one knows the future, but maybe it's the pouring 20 with how many boomers are going to be retiring and cashing out all those stocks, so that they can go buy groceries and retirement and stuff. Maybe taxes are going to go up. There could be all kinds of things that are headed into our future and we have to seriously ask ourselves, Do we still really believe we can get a 12% return in the market? [17:07.7]

Brandon: Yeah, and maybe even, again, ask your parents, did they get that for real? And see if they did. Do the math. Don't just look at their averages.
His number four thing that I think he gets wrong is all debt is bad. Now, we wouldn't have Apple without them leveraging debt. We wouldn't have a lot of businesses without leveraging debt. Now, again, leveraging that in a smart way is the way to think about it, but we've talked about this in other episodes of the whole idea of debt and the money system.

Amanda: Yeah, and you have to ask yourself mortgage rates even in the late-80s versus today, does it really make sense still to pay off the mortgage as fast as you can?

Brandon: Yeah, because the rates are a lot different than they were in the ’70s and ’80s and all of that. Yeah, and then the other thing is what happens if you have your house paid off and you lose your job because of a pandemic and you have no income? Again, that's something only you can answer. [18:11.7]

The fifth one is the debt snowball method is the only way to go. Again, I think that the snowball method is a powerful method. Now, we've also had clients on his show and actually on our show screaming, I’m debt-free, only to go back into serious debt shortly after, and our thing is thinking about screaming, I'm better than debt-free. That's what I want people to be screaming, which is hard to quantify, but…

Amanda: Yeah, but if you want to learn more about our alternative to the snowball method that kind of builds upon it, check out Episode 45 where we talk about how to get out of debt and stay there.

Brandon: And that’s using the snowbank method that you mentioned, Mark, a4nd recently he coined that term of the snowbank method, which is another powerful method that we like. [19:04.6]

Number six, he trains financial advisors or coaches to follow his advice when working with clients, and only has them recommend products from his corporate sponsors.

Amanda: Now, this is totally anecdotal. We don't know if that's a hundred percent true a hundred percent of the time, but from people we've talked to that have worked with some of the coaches that he has trained, the products and services that they recommend, if you go to Dave Ramsey's website, you see that those are also some of his corporate sponsors and you have to ask yourself, Why are these coaches recommending those products? What's really going on here? and make sure that we're getting…

I think, again, we think it's absolutely a hundred percent true that financial professionals and their wisdom can be very helpful when it's personalized and tailored to you, but you have to ask yourself who you're working with, who has trained them, what kind of products are they trained in using, do you agree with that, all of those things. [20:14.3]

Brandon: And the seventh one that I think that he gets wrong is he hates all whole life insurance and partially because some of the life insurance that he's mentioning, I don't like either actually. For me, if I would have heard that back when I was in the church days way back when, we wouldn't be where we're at today, not just doing what we do and in the financial services world, but we would have probably gone bankrupt ourselves and a lot of things. But we set up policies and we used them in a properly structured way, policies that worked for us, not just for our advisors, but for us and for the many stages that happened in our life and our business. [21:03.3]

If you want to hear more about that, go to Episode 65, why we chose whole life and the red flags to avoid. Again, we've chosen it for different things and it's part of a bigger picture of our financial foundation, financial story, but it does play a part.

Amanda: Yeah, so the whole thing, there is the blanket statement of hating all whole life, that maybe there is a place in time that fits for people, and we discuss that and a more thorough way in our Episode 65 of this podcast.

But the biggest thing for us? All of these things are really important, really good things to consider, but the biggest thing for us is that if you want to see if his advice really works, you need to look at what's been happening since he's become popular and generated all these fans, and all these people are following his advice.

You would think national debt would be going down and credit card companies would be going out of business, because people are following the baby steps and they're not using credit cards and all those things, but it seems like the opposite is happening, that we're actually going in the opposite direction. [22:14.1]

Here's a fun experiment to try. Try to find someone who has been using his advice for a long time, maybe since the early-90s, over 30 years, and ask them, How has it worked out for you? They could be your parents. They might be your parents’ friends. Ask, Have you really gotten the returns you promised? Have you been happy paying off your debt? What's worked for you and what hasn't worked for you? And take that and see what applies to you.

Brandon: Yeah, and the main thing is to take the best and run, right? I think that idea of an emergency fund is good. I think increasing it, not everything should go into the market that you can't touch until you're 59 and a half without penalty, especially if a flood happens or the car breaks down or whatever. And so, take the best and run. [23:05.7]

Don't just take blind statements. Don't just listen to his advice or even our advice, or anybody's just big advice. You want to see how it plays into everything, how it all works for you and find those personalized strategies that work for you. Again, taking some of that, and I believe some of his stuff is really powerful, but we need to modify it for the 2020s, not for the 1980s, and realize that the world is changing and it's changing fast, so we need to modernize some of our thinking behind it.

And look at people like Wade Pfau and ask, Hmm, this guy has researched, has a doctorate and retirement.

Amanda: Pretty much.

Brandon: Yeah. Find out and say, All right, he's not an entertainer. He is a…

Amanda: Researcher.

Brandon: Researcher. Let's look and see? Does that measure up? I don't know. Anyway, that's all I’ve got for that. [24:05.2]

Amanda: Yeah. Long story short, take the best and run. Find personalized strategies that work for you. Especially as you have success and walking away from bankruptcy and toward a smart, stable, financial future, find out how you're going to be able to continue along that path for the long-term.
Then, of course, subscribe and join us next time where we take on another well-known financial educator. This next time we're going to be talking about Suze Orman. I have a lot more experience with her information, so we might…

Brandon: You read that giant book I remember.

Amanda: I did. She was my go-to resource when I had financial questions in my early twenties.

Brandon: Used the highlighter, all kinds of stuff on that.

Amanda: Yeah, so we're going to talk about her next time.

Brandon: Until next time, keep building your wealth simply and sustainably, so you, not just Dave, can break through to a smart, stable financial future. [25:03.7]

The topics presented in this podcast are for general information only and not for the purposes of providing legal, accounting or investment advice. On such matters, please consult a professional who knows your specific situation.

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