Is Dave Ramsey a Cult Leader?

If you have spent any amount of time reading about personal finance, chances are you have encountered the name of Dave Ramsey.  Websites and blogs are devoted to his personal finance methodology.  People offer each other financial advice based on what Dave says to do, “Well, according to Dave you should…”  You would be hard pressed to find a personal finance blogger who won’t say that Dave Ramsey’s advice hasn’t influenced them in some way, including myself.

What is it about Dave Ramsey that makes his advice so great?  Maybe it is his charming smile or shiny bald head, but I think there is something more to his appeal than his appearance.  Let’s see if we can figure out what it is about Dave Ramsey that makes him so exceptional.

Dave is the host of a radio show aptly named ”The Dave Ramsey Show”.  This show is broadcast across the United States on more than 300 radio stations and has over 3 million listeners each week.  He is also the author of the New York Times Bestselling book “The Total Money Makeover” as well as other highly successful books discussing personal finance.

He markets to “ordinary” people and claims to have been able to help hundreds of thousands of people become debt free.  Dave has a bold approach which is what I consider to be his most appealing quality.  He demands that people take responsibility for the situation they have found themselves in.  By making the reader or listener take responsibility for their own actions, their own stupidity and/or the mistakes they have made in their life he is empowering them by allowing them to realize that they got themselves to where they are today and they also have the ability to change that situation.  That is the real appeal of Dave Ramsey.

Dave’s financial advice is incredibly basic, practically common sense, and he is aware of that.  It is in this simplicity that he is able to create his methodology which can work for everyone, no matter who you are and no matter how bad of a situation you are in.  He offers hope to those who feel as though there is nothing to hope for. 

Though his principles are simple, they are not easy and require hard work and sacrifice.  A person must make sacrifices or changes to their lifestyle if they expect to improve their situation.  What you’ve been doing so far has gotten you exactly where you are today, and obviously that isn’t working for you or else you wouldn’t have his book in your hands.

I like a lot of what Dave has to say about motivation and intensity.  I am not a Dave Ramsey purist and I don’t follow his program as it is outlined in the book.  I respond to the overall theme of the book which is to get intense, make sacrifices and get out of debt and onto the path towards financial freedom.

Here is a breakdown of the steps outlined in “The Total Money Makeover”:

1) Establish an Emergency Fund- Dave suggests having $1,000 in the bank as a buffer against emergencies before you begin working towards eliminating debt.  This is sound advice as you don’t want to have to break out the credit cards in order to pay for something you should have prepared for.

2) Debt Snowball- Here you list all of your debts in order from smallest to largest, then begin paying off the smallest balance first (making minimum payments to the rest).  Once the smallest debt is paid, you roll the payment you were making on that debt into the next smallest bill.   You continue rolling the payments over into the next debt until you have eliminated all of your debts.

3) Fully Funded Emergency Fund- After you have effectively eliminated your debts it is time to fully fund your emergency fund.  You should have at least 3 to 6 months worth of expenses saved. 

4) Maximize Retirement Savings- Planning for retirement may seem like a long way off for some of us, but the earlier you start the better off you will be when you are finally able to retire.

5) College Fund- If you have children, Dave suggests saving for their education in order to give them a good financial start in life.  This is a touchy subject for people as some people disagree and think a child should pay for college on their own or work their way through.  As someone who has had to pay for college on my own (with the help of student loans), having help would be nice, but there is something to be said about doing it on my own.

6) Pay off Mortgage- Forget the tax credit on your home loan interest, it isn’t worth it.  Get the loan paid off as quickly as possible so that you can become entirely debt free.

7) Build Wealth Like Crazy- Save as much money as you can.  Begin investing.  Dave suggests mutual funds, and I would have to agree.  You are able to get diversification rather conveniently and they have performed well historically.

8) Live like no one else- “If you live like no one else, later you can live like no one else.”  This circular reasoning has kept me motivated many days at work and while I was paying down my debt.  It means that if you are willing to sacrifice the “pleasures” of today in order to prepare for your future, when the time comes your life will be better than those who weren’t willing to make those small sacrifices.

Is Dave Ramsey a cult leader?  Of course not.  He has good ideas and knows how to market those ideas very well.  His book was the first financial advice book that I ever read and it has made a huge impact on my outlook on money and life.  It opened my eyes to the mistakes I was making with my money and made me realize that I was stealing money from my future.  Since reading his book I have made it a mission to become financially literate and re-evaluate my priorities.

I highly recommend to everyone that they read “The Total Money Makeover”, it may just change your outlook as well.