Dave Ramsey’s Advice for Getting, and Staying, Out of Debt

Are you broke? According to Dave Ramsey, the author of bestselling books like The Total Money Makeover, Financial Peace University, and More than Enough, you are not alone. His motto (Live like no one else so you can live like no one else) and methods (don’t spend money that you don’t have) are simple. In fact, his entire mantra is the equivalent of weight loss advice that starts and ends with, eat less and exercise. But can his plan work for you?

Ramsey, who has only increased his fame with recent appearances on 60 Minutes and the Oprah Winfrey show in August and September of 2005 respectively, dishes out his advice through his “I’ve been there” banter. He too, he tells the reader, was once living a life he couldn’t afford and with massive credit debt until he ended up completely bankrupt, subsequently using the plan he now endorses to rebuild his wealth.

Ramsey’s roadmap to what he calls financial freedom is simple enough, though he utilizes elements you might not expect in books about the benefits of financial planning. Testimonials abound, in part, one supposes, to make the reader feel like he isn’t as bad off as he might be, and also to cheerlead the reader into attacking the source of his money troubles with “gazelle intensity.” In other words, there is perhaps more motivation, than information, and be aware that you’ll have to go elsewhere to find really specific advice. For the Christian reader, there is also a fair amount of scripture sprinkled throughout his writings, though others will have little trouble passing over those biblical passages in search of real guidance.

The Total Money Makeover is a quick read, and skipping through all of the extras (and repetitive passages) will make it even quicker. The first, and critical, piece of advice he dispenses is this: do not use credit cards, which encourage you to overextend your resources. In other words, if you don’t have cash allocated for the purchase you wish to make, you’ll have to wait until you do. His system demands that you create a real and actual budget (note: this entire notion works less effectively if you have irregular income, though Ramsey attempts to address this), figuring out ahead of time how to spend each and every penny of your income. The rest of his system is broken down into a series of small and surmountable steps, each of which must be completed before moving on to the next. Only after you save $1000 in an emergency fund (to buffer your budget against unforeseeable disasters) are you to begin your “debt snowball,” in which you list all of your debts, putting all of your surplus financial resources into paying them off, beginning with the smallest debt and moving to the largest, excluding your mortgage. Once you are debt free – for this you are encouraged to call his radio program and scream “I’m debt free” out into the airwaves – you are supposed to finish your emergency fund so that you have three to six months’ expenses saved in a money-market account. After that, Ramsey offers some (occasionally slim) advice regarding saving for retirement (investing 15 percent of your gross income into IRAs, largely in mutual funds), saving for your children’s college funds, and paying off your mortgage.

For the Ramsey devotee, there are many resources available, and Ramsey has successfully turned his down-home advice into a full-blown industry. At his website, you can purchase not only his primary books, but also workbooks, audio CDs (if you’d rather listen than read), DVDs and VHS tapes (if you’d rather watch than listen), Financial Peace Jr., along with seven other books for children, gift packages for teachers, teens and newlyweds, and, if you need them, coffee mugs. Not up for a coffee mug? How about an “I see debt people” t-shirt? Of course, taking into account the marketing involved in the product that is Dave Ramsey, one might think that the best way to build wealth is to tell other people how to build wealth.

The website also provides information regarding live events and seminars, as well as access to podcasts of his popular radio show, though it primarily is intended to serve as a support system for those on the TMMO plan. Real access to its content costs $89.95 per year (registrants also receive a copy of The Total Money Makeover as well as 3 CDs). Not sure you are ready for such an investment, particularly when the first step is to pare down your spending? You can find Ramsey on your AM dial, as well as on XM and Sirius satellite radio. You’ll get the gist of Ramsey pretty quick, and then decide if you need to invest the time, and money, to follow his plan.