Thoughts On The Total Money Makeover
Posted on 30. Nov, 2007 by The Gimcracker in Theory & Philosophy
Yes, that’s a $5,000 bill, which did actually exist at one time (as did the $10k and $100k bills). But that was before VISA-vis hell, Discovered in debt, Bastard Card, and American Express train to bankruptcy took away our need for large denominations.
That didn’t make sense. Vis-a-vis. Ergo. Concurrently. Hitherthenceforththeless.
What I’m getting at is, I just finished listening to Dave Ramsey’s Total Money Makeover, which promises to get you out of debt and back on track financially in a few years’ time. I had a few problems with some of Ramsey’s points, especially when he goes heavily into the myth/fact section, but generally it was a very good audio book. It was very inspirational and motivating for people swimming in a deep sea of debt, as well as people who are on the right track but need confirmation that their efforts will be rewarded.
This guy was a millionaire by the time he was 26, lost it all a few years later, and spent 15 years building back his wealth. Now he has a radio show, has written a few books, and councils thousands of financially secure and insecure people. Best of all, he didn’t stumble upon any magic formulas or get rich quick schemes; rather, he details 7 “baby steps” (a What About Bob reference) for becoming totally debt free and getting yourself to the point that you can use money for the three real reasons it exists:
- Having fun
He is a Christian and believes firmly in the principles of giving, avoiding becoming a slave to money and putting up false idols, and that the love of money is the root of all evil. Here here. Now if I could only anchor these principles to my every day life.
Luckily for me, I have a wife who is financially savvy and has the tendency to save. This compliments my lifestyle since I have a tendency to spend. I have learned most of what I know about money from my parents, my wife, and, now, Dave Ramsay, who hammered home a lot of the stuff I already knew in my head that I’ve been trying to teach my heart.
Ramsey suggests a whole life makeover rather than a purely money makeover. Our behavior needs to change entirely, especially us Americans. His unorthodox views are a smack to the face of “broke finance professors” who say that debt is a tool. The Total Money Makeover tells us exactly the opposite: there is nothing good about debt.
Some of the points in the myth-debunking chapters contained flawed arguments and were not nearly as strong of points as they should have been. For instance (the facts may not be entirely accurate, but the argument is the same):
Myth: a good way of building credit is to get a credit card in college and maintain a zero dollar month-to-month balance.
I thought maybe he was going to say it’s not a good way because of such and such reason – like it’s bad on your credit score or something. But he goes on to “debunk” it by saying:
Fact: 70% of Americans don’t maintain a zero dollar month-to-month balance
This is a classic example of red herring fallacy. He changes the subject by presenting a similar true argument that diverts attention away from the real issue. I don’t care about 70% of Americans, I want to know if that’s a good way to build credit. He goes on to refute several other similar myths using this same tactic. I know what he’s trying to say, and I completely agree with him, I just wish he would say it without using a flawed argument and thereby losing some of his credibility.
Overall, I would definitely recommend this book. It sure has given me a lot to think about and inspired me to get to the point where I can use money for it’s original intent: to help myself and help others in need to the Glory of God, not the glory of the CEO of Visa’s new yacht.
O snap, I got paid today… I was just kidding about all that, by the way. I’m going to Best Buy.
Not so sure I agree with you on the “red herring” thing with the credit card debt thing.
Basically, it’s like saying, “Myth: Adkins is a great way to lose weight. Fact: 70% of people on the Adkins diet don’t properly monitor their carb intake, and don’t plan well enough to get the proper vitamins and minerals they need.”
Did I change the subject? Not in my opinion… I said “If people were perfect, Adkins could be a good way, but since 70% of people who try that way fail, that means it only has a 30% success rate, and therefore is NOT a good method.” So just because you can shoot a basket from half court every time doesn’t mean anyone else should try and use that as their method for scoring points. Sure, it might work for some people, but since it only works for 30% of people, it can in no way be considered a “good” way.
So basically what he is saying (in too much of a concise manner maybe) is that only 30% of people can actually manage to maintain a zero balance, so obviously it isn’t a good way (it might be A way, it’s just not a GOOD way).
Also, he clearly states that credit scores are worthless if you follow his debt-free plan. Why would you need a credit score if you weren’t going to use credit?
The only valid reason I can think of for wanting a good credit score is because some potential employers look at that when making decisions on who to hire. According to Dave Ramsey, his credit score is ZERO. Wow. Talk about putting your money where your mouth is…
I really need to get back onto the Dave plan… We did too well on it so we got lazy and now are slipping back into debt. Arg! It’s like when you take antibiotics. They work too well, and you stop taking them before you are really better (even though you feel better) and then you just get sick all over again because you didn’t finish the meds.
I hear ya, and I remember in the book when he was saying if you don’t finish the plan you might as well have never started it, or something along those lines. That’s probably what I would do if I was on the plan. I’d get to about step 5 and then say to myself “well, that’s good enough – better than a lot of people, I think I’ll stop”.
But as we know, the “worst” is not the enemy of the “best” – “good enough” is. I like that saying, and it’s very true.
I remember another good saying from the book: “There are no shortcuts to any place that’s truly worth going.” I don’t believe he made those up, but whoever did is a wiser man than I.
Regarding the logic flaws, I disagree with you. You are focusing on the point that he seems to have distracted us with. I want to know about the first point. I want him to tell us where the 70% go wrong, and what the 30% do right.
The Atkins diet analogy is also false. In your analogy, everyone is on the Atkins diet, whereas in Dave’s myth, he’s referring to an America where not everyone is on his plan. So, the 70% who do not maintain the zero-balance may intentionally do so. He is assuming that every American opened up a credit card in college, tried to keep a zero balance in order to build credit, and 70% of them failed.
I also disagree with the broader logic you’ve presented. Just because not everyone can do something doesn’t mean it’s not the best solution. Here’s a similar situation:
What if the best way to get a job is to get a bachelor’s degree? Less than 30% of Americans (25 and older) have one, and a lot who do probably wasted a lot of money that they’ll never pay back. Does that mean they still shouldn’t have done it, or at least tried?
What if keeping a zero-balance is the best way to build credit? He never says it isn’t, he just debunks it by diverting our attention to the people who fail.
I don’t necessarily agree that a SMALL amount of debt is bad, i.e. ‘It takes money to make money.’ Example: Putting $250 on my credit card for Hannah Montana tickets to sell for $1150. Or paying a guy in Australia $75 to write me a Facebook App that I’ve made $300 off of this week.
Other than that, you’re pretty dead on with my thoughts. No false idols, save save save, and HAVE FUN. We set aside a good portion after savings and tithe to enjoy ourselves and vacation while we are young, etc.
I got paid today and Jen got paid yesterday. I want to go buy a 1TB external so bad, but we’re on target to save 25% a month through June so we can put a hefty downpayment on a house. It’s going to be tough, but it will make subsquent months much easier for, you know, 30 years or so.
Wow, the comments became like a whole new blog post(s).
I never knew people commented on blogs until I met The Gimcrack Miscellany.
I can’t tell if that’s a compliment or a burn.
I’ts a burnpliment.
Compliment all the way. What’s your comment/post ratio? Mine is 1.20 (233 comments on 194 posts).
My comment/post ratio including spam is an amazing 17.17. Beat that. [(3098 spam + 233)/194]
I love it. My friends are on the Dave plan. Ha. Awesome. Joel got me onto it when we lived in Carmel (a little too late to learn about saving money huh?), and now I want to do what he does, only do it for young couples and singles like me. I’ll tell you what though, B, if all of us got on these types of plans and stuck to them, by the time we’re older we’ll be able to build a stadium full of Shack O’Strohs huts, fried turkey vendors and pre-mixed Lambic/Lager vending machines while the masses watch us all play Roshambo. Then we can go worship. Because money isn’t just for fun. It’s for God’s Glory too. Dang it, I just spent $500 going to Vienna for three days… Crap.
Follow up comment: I am now saving $40 more a month ($10/week) by not having Brian at Butler encouraging frequent trips to Starbucks. My wife thanks you.
That was getting pretty expensive. I’m also saving a lot of money by making my own coffee in the mornings.
To answer your question, I have 346 comments on 65 posts, an average of 5.32 comments per post. I can’t touch you in the spam department though.