In the past, I’ve reviewed Dave Ramsey‘s other books, The Total Money Makeover (which I really liked) and Financial Peace Revisited (which I felt was so-so). They both have a similar tack, however, in that they’re both all about Dave Ramsey’s personal finance philosophy – get out of debt before doing anything else.

More Than Enough is a bit different, however. From the back cover, “In More Than Enough, he gives us the keys to building wealth while also creating a successful, united family.” This is an interesting tack to take, one that has me interested as I’m watching both my family and finances bloom.

Does the book offer any interesting and concrete advice, or is it a mere repeat of Dave’s personal finance information? Let’s find out!

Looking Deeply At More Than Enough

Right off the bat, I get a slight negative vibe from the paperback version of the book – the typeface is enormous. This means that each page has maybe a third as many words on it as other books, which means that if this book were printed like other books, it would maybe be eighty pages long. His other books did this as well, but not as obviously as More Than Enough.

The book centers around ten principles that will change your financial destiny, as touted on the cover. The ten principles are rather psychological in nature, but Dave’s style is very clear-cut and grounded, so he does a good job of tying them to life experiences. These ten principles are addressed in chapters two through eleven in the book.

1 – More Than Enough What?
This chapter basically reveals the meaning of the title – it’s not more than enough stuff, but instead more than enough of a sense of fulfillment and purpose in life. The book uses a metaphor that a life is like a mansion with many rooms and some of them are locked, and it’s only through a journey of self-examination that we are unable to lock more rooms. Thus, he ends each chapter with a “key” or two to unlock rooms. It’s an interesting metaphor, at least.

2 – The Missing Link
The first principle is values. In other words, what’s the intrinsic right and wrong inside of you? What things do you do that seem right, and which things seem less so? He goes through a series of exercises and examples, but the real key part is his simple exercise of sitting down and thinking of those right things and those wrong things. Then, spend time minmizing the wrong things and maximizing the right ones.

3 – Victory Through Vision
The second principle is vision, which directly leads to goals. What do you imagine for your future? Can you describe it in detail? Spend some time trying to do just that, imagining what you would like to see at various points in your future and your family’s future. Then, take those visions and try to describe them in terms of concrete goals. What do you have to do in order to get there?

4 – The “You” In “Unity” Is Silent
The third principle is unity. Basically, it’s making sure that the goals you define for yourself are in sync with the goals that your spouse and other family members may hold. Especially your spouse. I found that sitting down with my wife a few times to talk about goals has been incredibly valuable in regards to putting us both on the same page and authentically feeling like we are really working together in many aspects of life.

5 – Hope: Balm For The Soul
The fourth principle is hope, which is basically the outgrowth of the meeting of goals and unity. A goal lets you envision the future, and unity gives you support as you move towards the goal. Together, they give you hope that you’ll get there, a true belief that things will get better.

6 – Accountability: How To Get An A In Conduct
The fifth principle is accountability. Once you have a goal in mind, support in getting there, and hope for accomplishing it, you’re much more capable of taking on responsibility and holding yourself accountable for the financial moves that you make. I find this to be powerfully true – it’s much easier to pass the buck on small mistakes if you’re not working towards a larger goal.

7 – Intensity: Feeling The Fervor
The sixth principle is intensity, and this is something I really, really agree with. Intensity is something that happens when you have goals and unity and accountability, a triumvirate that occurred inside of me after the birth of my first son. Reading this chapter rang a real bell inside of me because it reminded me of almost going bankrupt after his birth and feeling everything start to come together after that. It was intense – I finally felt like everything was in alignment and it was a real rush.

8 – Good, Better, Best: Work, Discipline, Diligence
The seventh principle is work, discipline, and diligence. Again, this struck home for me – once that rush of intensity happened, I began to see that there was a lot of work to be done and that I needed to be diligent about it. It’s not enough just to decide not to spend money for a day – you’ve got to stick with it over the long haul.

9 – Patience Is Golden
The eighth principle is patience. Once the routine of work and discipline and diligence becomes entrenched, it can often feel like a slog. Be patient. Realize that success won’t happen in one day – it takes time to eliminate all of those debts and put yourself in a better place. Something that requires work and diligence but that also has a timeframe in years absolutely requires patience – thankfully, you have that unity and support to rely on.

10 – Looking For Love In All The Wrong Places
The ninth principle is contentment. Mostly, it’s a discovery along the path of life of the things that really matter in life, much like the “center” idea I mentioned earlier. For me, it was my family. They bring me contentment – I feel much less of a need to spend frivolous money when my son is making faces at me out of the door of his cardboard castle.

11 – The Great Misunderstanding
The tenth and final principle is giving. What’s the titular “great misunderstanding”? It’s that the road to personal finance success is all about personal gain and wealth. In fact, it’s about giving you the tools to improve the world by giving to others and helping society out. Take the fruits of your success and give some of them to others so that many may benefit from your journey.

12 – The More Than Enough Road
So what’s at the end of this road? Wisdom. The life experiences along this path make you wise, and you also now have appropriate financial tools to make healthy choices with.

Buy or Don’t Buy?

This is a tough one to recommend, so let me put it to you very clearly: if you want to read a Dave Ramsey book, skip this one and just read The Total Money Makeover. That one is clearly his best book and very much worth reading – it’s definitely the one to read if you want to get a healthy dose of the Dave Ramsey personal finance philosophy.

More Than Enough is a very different sort of book. It focuses entirely on internal issues, tying together personal character development and personal finance. The problem is that Dave’s skill is in bringing across the more tangible parts of personal finance and this book focuses largely on more intangible issues.

More Than Enough is not a bad book, and it is definitely the second one you should read by Dave after The Total Money Makeover, particularly if you have a family. Just be aware that it’s much lighter on the personal finance aspects and heavier on the character aspects, making it an interesting companion to Ramsey’s other books but perhaps not particularly strong on its own.

More Than Enough is the forty-first of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.

This week, my morning roundups are going to focus exclusively on specific personal finance writers. I’ve searched around the blogosphere researching these writers and the takes that others have on them and found a number of good ones.

Today I’m taking a peek at Dave Ramsey, author of several personal finance books and the host of a popular radio show. His advice is very direct, simple, and easy to follow and it’s won him a ton of followers.

Dave Ramsey Resources And Links Want a plethora of stuff to read about Ramsey? This is an astounding collection of links about the man and his personal finance ideas. (@ getting finances done)

Dave Ramsey Is Bad At Math and Dave Ramsey Is Good At Psychology I actually agree with both; Dave’s plan works, but it’s not mathematically optimal. Why does it work? It has a lot of psychology hooks embedded in it. (@ five cent nickel)

Dave Ramsey’s Baby Steps A list of and discussion of Dave’s “baby steps” and how you can apply them to your own financial life. (@ it’s your money)

Dave Ramsey Retro: Extra Income… Should We Invest It? This is a perfect sample of the type of advice Dave dishes out. I wasn’t even actually aware until recently that he has an online column with extensive archives.

The Simple Dollar Retro: Review: The Total Money Makeover This book really surprised me – it laid out a very clear financial plan for getting out of debt and getting on the right path without too much filler and hubris. If you’re looking for a good basic personal finance book, this is an excellent one to start with.

Brad’s looking at his debt and wondering where to start:

My wife and I are trying to decide what to do with our “extra” income each month: pay down our home equity ($18K at 9.13%), pay down our other debt (student loans of $6K at 7.14% and $13K at 3.75%; car loan of $8K at 4.2%); or put the money into our savings account (at 5.05%).

First of all, let’s ask ourselves about tax deductibility. The only loans here likely to be tax deductible are the student loans (I’m assuming the home equity loan is a HELOC, not just a funny term for a mortgage). Also, you’ll have to pay taxes on the savings account. So, let’s figure you’re in the 28% tax bracket and re-figure the true percentages on each one:

$18K home equity loan – 9.13%
$6K student loan – 5.14% (after the tax benefit)
$8K car loan – 4.2%
savings account – 3.94% (after taxes)
$13K student loan – 2.7% (after the tax benefit)

Assuming that you are actually going to make strong contributions to your savings account, you should pay down the debts that are of a percentage higher than the savings account first. In this case, that means starting with the home equity loan, then following with the small student loan, then the car loan. At that point, you’re better off stocking up in the savings account – but the key is that you’re actually stocking up here and judging by the debt, it’s likely that you will find other uses for the money.

In that case, I recommend largely subscribing to Dave Ramsey’s “debt snowball” philosophy, except that instead of ranking the debts by the amount owed, you rank them by interest rate. That means you should do the following:

Get $1,000 in the savings account as an emergency fund. If you have children, you may want more than that, but have at least $1,000 in there for a car emergency, etc. This way, a bad situation won’t build additional debt.

Pay off the $18K home equity loan at 9.13%. That’s an imposing debt and you need to pay that one off as soon as possible. As long as you have $1,000 in the emergency fund, focus on paying this debt until it’s gone; if you have to tap the emergency fund, focus on replenishing that back to $1,000 before paying down this debt.

Pay off the $6K student loan at an adjusted 5.14%. This is the next debt to go. Again, if your emergency fund goes below $1,000, slow down the overpayments here and build that fund back up. Now that the home equity loan is gone, you should be able to make very big payments here and knock this debt off quickly.

Pay off the $8K car loan at 4.2%. Keep rolling the debt payments forward – you should pay this one off next, paying as much as you possibly can on the principal. Again, remember the emergency fund and replenish it if you use it.

Pay off the $13K student loan at 2.7%. Even though this is a very low interest loan, I’d still recommend paying it off before building more savings. This is mostly due to it being a debt, and any debt is simply a bet that your future self can take care of it. That’s not a bet that I like. There is an argument about not paying this one off immediately, but I would get myself debt free ASAP.

Then, build a 3-6 month emergency fund in that savings account. Shoot for building up six months’ worth of living expenses in that account so that, in the event of a major crisis or a job loss, you’re fine.

When you’re there, suddenly life becomes a lot less stressful.

In the past, I reviewed Dave Ramsey’s The Total Money Makeover and, surprisingly to me, I quite liked it. It laid out a simple, straightforward plan for getting people on a reasonably strong financial path, and it’s wonderfully constructed to give the person following the plan a lot of psychological reward for following through.

To follow up, I decided to go back and read the latest version of Dave’s earlier book, Financial Peace Revisited, to see if it is as good as The Total Money Makeover. Financial Peace Revisited, along with the radio show, really put Dave on the map as a personal finance guru. Let’s walk through the book and see what we can find.

37 Footsteps (Dave Calls Them “Peace Puppies”)

Most of the book revolves around a list of thirty seven basic principles that Dave refers to as “peace puppies.” What follows is a list of these principles, coupled with my thoughts on it codified into one sentence.

1. Avoid “stuffitis” – the worship of “stuff” In other words, don’t buy stuff you don’t need and soon you’ll find yourself breaking free of the desire to buy lots of unnecessary stuff.

2. Plant seeds – give money away to worthy causes Dave is very much into charity and it comes through strongly here; I find that I agree with his viewpoint on charitable giving, though.

3. Develop your own “power over purchase” Develop some willpower when you go shopping and simply don’t buy stuff that you don’t need or that you didn’t intend to buy when you went into the store.

4. Find where you are naturally gifted – enjoy your work and work hard I agree with this; even if your main job is not suited to your natural talents, find time to follow them and build them up into something you can enjoy while working hard at it – success always follows this.

5. Live substantially below your income This is the key to financial success summed up in five words.

6. Sacrifice now so you can have peace later The same sentiment is worded better by Dave when he says, “Live like no one else so you can live like no one else,” which basically means spend some time living as cheaply as possible so you can build a truly strong financial base.

7. You can always spend more than you make Spending on credit is extremely dangerous over the long haul.

8. The borrower is the servant to the lender, so beware! Debt is also extremely dangerous.

9. Check your credit report at least once every two years Doing this ensures that there aren’t any nasty surprises if you ever need to use your credit report to secure a loan, or even something as mundane as securing lower insurance rates.

10. Handle credit report corrections yourself If you find a mistake, call up the credit reporting bureau yourself and find out what you need to do to get it fixed; you’re the one with the interest in getting it right here, not anyone else.

11. Realized that the best way for delinquent debt to be paid is for you, not collectors, to control your financial destiny This means that if collectors are calling you, it’s time to get a backbone and get some debt paid, even if it means selling off a lot of your stuff and trimming things down to the bare minimum.

12. You must save money (the power of compound interest) Compound interest is an incredibly powerful thing, and you can easily harness that power by investing and saving money now rather than later.

13. Use the “keep it simple, stupid” rule of investing Don’t invest in anything complicated unless you have a serious amount of time to learn about it and maintain that investment.

14. Only people who like dog food don’t save for retirement Start saving for retirement as early as possible, because this lets the power of compound interest do most of the work.

15. Always save with pretax dollars – it is the best deal the government gives you For most people, this statement is the gospel truth – it reduces your tax bill now and gives you a steady income later.

16. Learn basic negotiating skills for great buys Don’t hesitate to make low offers, ask for add-ons, and so forth when buying anything of significant value.

17. Learn where to find great buys (the treasure hunt) Dave doesn’t directly list places; instead, he encourages comparison shopping and asking around for places to find good buys on specific items.

18. You must have patience to get great buys Comparison shopping takes time, but over the long run it can save you substantial money.

19. Singles get self-accountability from the written plan If you’re single, you likely don’t have anyone that you’re accountable to for your own money, so create a written plan and make yourself accountable to it.

20. Singles should look for a money mentor for advice and accountability This is often difficult for single people to do – in a way, this is why I started this site – but if you have someone that you can ask financial questions, don’t be afraid to tap that resource.

21. Singles beware of the impulse monster; he will eat you alive Impulse buying can quickly undo even the best-laid financial plans; instead, make shopping lists and stick to them, and don’t let yourself get caught up in a momentary desire.

22. Men and women view money differently, so be sensitive to differences When you’re in a couple, be aware that the other person likely has very different perspectives on finances.

23. Opposites attract in marriage, so work together for maximum wisdom When you have different money perspectives, use them in concert to maximize your gains – spend the time and talk about money and plan your finances together.

24. When you agree on spending, you will experience fabulous unity in your marriage Again, work together to determine your spending and saving goals.

25. Teach children to work, spend wisely, save, and give Dave seems to think an allowance directly tied to work tasks is a good idea.

26. The most powerful legacy you can leave is wise, competent children Spend time with your children – guide them and teach them all that you know.

27. Giving loved ones all the money they request may not be best for them Don’t mix adult relationships and money outside of marriage – all money does is damage relationships.

28. Making decisions based on fear of reprisal can be a sign of codependence Codependence is a very bad thing – if you feel that you can’t make a decision based on your worry of how someone else will act, there’s a fundamental relationship problem at work.

29. Be strong enough to help others and strong enough not to Help others by giving them advice and support – don’t help them by giving them money.

30. Listen to your spouse’s counsel (women’s intuition) When you don’t know what to do, talk to your spouse about it in detail – he/she will often have a perspective that never occurred to you.

31. There are few “old” fools – seek experienced counsel I agree with this very strongly; I often use parents and grandparents for advice on what to do.

32. You must keep your checkbook on a timely basis This shows the age of the book a bit, as many people do many financial transactions without a checkbook; however, the principle still stands – keep track of every red cent that comes in and goes out, no matter your system.

33. Lay out the written details of a cash management plan This means make a budget, in not so many words – it doesn’t have to dominate your life, but it needs to be done so you can see where you’re at and where you need to improve.

34. Commit to your plan for ninety days After ninety days, it will be clear which parts work and which ones don’t, so you can use your experience to rework the plan a bit and find that sweet spot in your life.

35. Take time to prioritize your life daily Every day, take a moment or two to figure out what you really need to do and what’s really important.

36. Keep your spiritual life healthy Dave is a devout Christian, but you don’t have to be – just spend some time regularly making sure that your life is in tune.

37. Take baby steps – prioritize your plan and move slowly At the very end of the book, he gives a rough outline of the plan described in The Total Money Makeover, a plan that most of these tips fall right into.

Buy Or Don’t Buy?

As I read Financial Peace Revisited, I couldn’t help but compare it to Dave’s later book, The Total Money Makeover. I kept realizing that specific points in Financial Peace Revisited were exactly the same as points in The Total Money Makeover, and I felt that the later book was more concise and plan-oriented than the earlier book.

By the end, I was able to put in a nutshell my feelings on this book: Financial Peace Revisited is basically a first draft of The Total Money Makeover. The books are very similar, but the thought process in this book is rougher and less cohesive than in the later book.

That’s not to say that Financial Peace Revisited isn’t worth reading; it is a pretty good book, especially for someone who is in dire financial straits and needs a plan to help them start to get their finances in shape. However, The Total Money Makeover is basically the same book, except written much better.

In a nutshell, don’t buy this book unless you’ve already read The Total Money Makeover and you want much of the same material told in a somewhat different fashion. The two books don’t completely overlap, but the meat of both is identical, and The Total Money Makeover is simply a better read with a more complete and concrete plan.

Financial Peace Revisited is the twenty-fifth of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.

I’ve heard many times that Dave Ramsey makes some very broad generalizations about the broad stock market when convincing listeners of his radio show to invest their money in a broad index fund. I never really paid much attention to this, mostly because if you don’t speak in some degree of generalization, it’s very difficult to actually make a point when it comes to financial data.

Today, I received this message from a reader:

Dave Ramsey often says on his show that the stock market is up over every ten year period. Do you have anything that validates if that is really true? I am skeptical of it, especially around the 1929 crash time frame.

Since I don’t have access to Dave’s show, I had to turn to one of his books to find out exactly what Dave is saying. I turned to page 148 of his book Financial Peace Revisited and found the following:

By leaving your investment alone in any possible ten year period in the last sixty nine years, you would have made money 97% of the time and would have averaged over 12 percent per year.

In the footnotes, I find that this sixty nine year time frame mentioned by Ramsey thus covers the years 1924 to 1993. This means that the first ten year range is from 1924 to 1933.

I took the raw Dow Jones data and did the calculations myself over this timeframe and found that indeed Ramsey’s statement is true. Using the year-end numbers of the Dow, there are only two ten year spans in the 1924 to 1993 timeframe that show a loss over that span, and both of those are related to the huge run-up in the stock market at the end of the 1920s. There were a few ranges in the 1970s that were very narrow gains. Even if you carry those numbers out through 2006, there are no new ten year spans of losses.

In short, Dave’s exact statement from his book is true. If you take that specific timespan of the market, then there is a 97% likelihood of gains over a ten year span. However, making an esoteric statement like that makes it very, very easy to generalize from that and make a broad statement that the stock market is up over every ten year period. That general statement is false, and demonstrably so.

Dave is walking a fine line here with such statements. If he prefaces them correctly, he is speaking the truth, but with only a slight bit of generalization, the statement becomes provably false.

So what’s the point? Broad-based index funds, on average, have returned over 12% annually over any given ten year period since the Depression. For example, the Vanguard 500 has returned 12.15% annually on average since its inception. However, it’s easy to find smaller periods where the gains aren’t nearly as good, and even where such investments see a loss (compare the close at the end of 1999 to the close at the end of 2002, for example). That’s because stocks, as an investment, involve risk – they are not a guaranteed gain.

Also, Dave likes to make things simple, and sometimes too much simplicity lets the heart of the message be right while the specifics aren’t quite as true. In print, however, he’s both accurate and precise.

Recently, AllFinancialMatters posed the following question: which method of getting out of debt works better, Suze Orman‘s or Dave Ramsey‘s? Here are the compared plans:

Here’s Dave Ramsey’s Snowball Method for paying off credit cards:

Step 1 – Make a list of all your credit cards, ranked in order from the highest balance to the smallest balance.

Step 2 – Beginning with the card with the smallest balance, pay as much as you can on that card while paying the minimums on the other cards.

Step 3 – Once the card with the smallest balance is paid off, take the amount you were paying towards that card and apply to the card with the next lowest balance.

Step 4 – Keep on keepin’ on until ALL the cards are paid off.

Now, contrast Dave’s Snowball Method with Suze Orman’s Method found in The Road to Wealth:

Step 1 – Figure out the largest possible amount you can afford to pay each month toward all your credit card balances together.

Step 2 – Add $10 to each minimum payment that your credit card company is asking you to pay.

Step 3 – Add up all your minimum payments plus $10 added for each card.

Step 4 – Hopefully the difference between the figure found in Step 1 is GREATER than the figure in found in Step 3. If so, apply the difference to the card with the HIGHEST interest rate.

Step 5 – Once that card is paid off, you continue the process (Steps 1 – 4) until ALL the cards are paid off.

Unsurprisingly, being a numbers junkie, I had to start doing some calculations. I created a pair of credit cards with different balances and interest rates and ran the numbers time and time again. What did I find? Most of the time, Suze’s method was better, but not always.

Let’s say you have two credit cards. Your first card has a balance of $5,000 on it, has an 18.9% interest rate on it, and has a minimum payment of $79 (which will take more than 25 years to pay off at that rate). Your second card is a bit better: $2,000 balance, a 10.9% interest rate, and a minimum payment of $19 (again, more than 25 years to pay it off). You’ve decided to commit $500 a month to eliminating this sick pile of debt.

If you use Dave’s method, you’ll make the minimum payment on the first card ($79) and then take the rest of the $500 and use that as payments on the second card ($421). In the fifth month, you’ll have a nice moral victory: that first card is paid off! You can then write a check for $500 a month to the first card, which will be paid off in the sixteenth month with a final payment of $361.69.

However, if you use Suze’s method, you’ll make the minimum payment plus $10 on the second card ($29), then pay the rest on the first card ($471). At the twelve month mark, the big card will be paid off, so you can then put the full payment of $500 towards the smaller card, which will also disappear at month sixteen. The only difference is that with Suze’s method, that last payment in the sixteenth month will be only $262.51. Her method saves you about $100 in this case.

However, if you reverse the interest rates (so that the low-balance card has the high rate), Dave’s plan wins, but only by about $75.

If you’re going to subscribe to a plan and don’t want to run a bunch of numbers in a complex Excel spreadsheet, Suze’s plan is better than Dave’s plan. However, there is a better plan than either Suze’s or Dave’s plan: pay off the highest interest credit card first.

In the first case, where the high interest credit card also has the highest balance, this plan is much like Suze’s, except that you only pay $19 towards the low interest card and $481 towards the high interest card at first. Just like with Suze’s plan, you pay off the high interest card in month 12, but in the sixteenth and final month, you only have to pay $257.56. This is just barely more optimal than Suze’s plan (by $5). In the second case, however, this plan was identical to Dave’s plan.

In short, the pay off the highest interest credit card first always beat or tied both Dave and Suze’s plans strictly by the numbers. Suze’s plan was never optimal, but it was close to optimal the majority of the time. Dave’s plan was either exactly optimal or else quite poor compared to both the “highest interest” plan and Suze’s plan.

However, I’m leaving out one important factor: the psychology factor. Dave’s plan is the best from a psychological standpont because it enables you to feel a level of success much quicker than Suze’s plan or the “highest interest” plan. Even Suze’s plan is better than the “highest interest” plan because you have the effect of doing “more than the minimum” on all fronts, which creates a sense of real progress.

Which plan is right for you? The truth is that it depends on how you’re wired.

Occasionally, I like to highlight comments about various articles on The Simple Dollar for several reasons. One, it lets me highlight some of my best readers and let them know that I really value their comments. Two, it lets everyone else know how integral comments are to The Simple Dollar. And three, after sifting through hundreds of comments, you quickly realize that there are some real gems in there.

On the post Deconstructing Dave Ramsey, Frank did a bit of extra research into Ramsey’s past:

Wikipedia has a nice summary:
“By enacting 26 U.S.C. S 469 (relating to limitations on deductions for passive activity losses and limitations on passive activity credits) to remove many tax shelters, especially for real estate investments, the Act significantly decreased the value of many such investments which had been held more for their tax-advantaged status than for their inherent profitability.”
http://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986

Ramsey was hurt badly by the Tax Reform Act of 1986, but I neglected to fully explain why this had such a detrimental effect on him. Obviously, Ramsey held a lot of investments that had some major tax advantages before the Tax Reform Act but were simply a much worse investment after the act passed. This caused his bankers to question the risky loans Ramsey had taken out to build his portfolio and they demanded payment on a lot of loans at once – which forced Dave into bankruptcy and eventually led him to become the pundit that he is.

On the post The FICO Battle: Ten Common Tactical Mistakes When Dealing With The Credit Score Blues, Wendell wrote:

On what evidence do you base the idea that negotiating with creditors is better than bankruptcy? Negotiation works where you have capital to make a deal immediately; not for stretched consumers who have to accumulate the payments. High-cost negotiation services have popped up that are as bad or worse than bad credit counselors — and they depend on this sort of advise to thrive. The reality is that if your credit score is shot already and you can’t pay the debt off within a couple years, a bankruptcy will rebuild your credit faster.

The advice I offered in the post was to use FTC guidelines when selecting a credit counseling service. A reputable service (like the Consumer Credit Counseling Service) is going to be better for your credit than a service of questionable repute. Also, turning to a credit counseling service should not be the first step in seeking help with your debt; you should call your creditors and discuss various options with them; it’s usually much better for them to reduce your interest rate a bit than dealing with someone who might declare bankruptcy. Remember, bankruptcy stays on your credit history for ten years, while missed payments only last for seven.

Also, on the digg thread higlighting the FICO score post, iamnos had this to say:

Where I am right now, housing is a great investment. If I were to sell my house right now for market value, pay off the existing mortgage, subtract the mortgage payments and property tax I’ve paid since we moved in, I’d be about even. That’s right, that means over the last 6 years, overall, housing for my family, has cost me $0.

Had I not taken out a mortgage, and decided to rent for the last 6 years, I wouldn’t even be close to zero. Around here, a decent two bedroom apartment would have cost at least $800/month. I’d be down somewhere around $57,600, and that’s not including any interest.

For those of you quoting Ramsey, you might want to pay more attention, as he does not consider a mortgage to be debt. Why? Because its secured, and generally, is expected to appreciate in value. While he does mention that the deduction for the interest on a mortgage is not enough to counteract the mortgage itself, you’re still better off in today’s market to invest that money, even in low risk, low return investments, than to try and pay off your mortgage faster. If you’re drowning in debt, this may not be the best idea, but if your debt is very manageable, than your better off planning long term, rather than short term.

This somewhat ties together the “Dave Ramsey philosophy” and methods of getting a good credit score – or even why you should get a good credit score at all. The biggest reason for having a good credit score is to buy a house, and a home loan is one of the few arguably “good” kinds of debt, because that kind of debt is secured (thus it’s not sold at a frightening interest rate) and the asset you buy builds value over time. In general, I’m opposed to debt, but there is a lot of merit to a home loan.

On the post Money Magazine – February 2007, in response to a reference to inexpensive prices when traveling to South America, Jim Lippard had this to say:

I was just in Buenos Aires last week (and had great summer weather)–it’s not just the exchange rate, it’s that most travel-related expenses themselves are much less expensive in South America than in Europe. In particular, eating out in Buenos Aires is quite inexpensive for very high quality meals. And even if you stay in a top-of-the-line hotel and eat in restaurants in touristy areas, the prices are still significantly less than the European equivalents.

My family and I have been quietly planning an international vacation in a couple years and we’re leaning more towards South America by the day.

As always, thank you guys so much for reading and commenting on The Simple Dollar. Not only do I get a lot of value out of your thoughts, so do the thousands of others who visit the site daily. Your input really helps make a difference in people’s financial lives.

This week, The Simple Dollar is deconstructing five top personal finance and investing pundits and asking the big questions about their track record and their message.

Quite often, I find myself listening to streaming audio of Dave Ramsey’s radio show on weekday afternoons (I usually listen via NewsTalk AM 1270). His message is very similar day in and day out, but it’s a message that is apparently not being followed by many Americans, based on the way many people live and throw their money about. Is his message worth listening to?

Background
In the 1980s, Ramsey was heavily involved in the foreclosure real estate market, and by the age of 26, he had a rental real estate portfolio worth more than four million dollars. However, he lost it all: the Tax Reform Act of 1986 brought about major changes in the real estate market and forced bankers to take a closer look at people they were lending money to – and Ramsey got burned. He lost everything and started over from scratch.

After that disaster, Ramsey became involved in personal finance advising, founding the Lampo Group (a financial advice group) in 1991 and starting a syndicated radio talk show in 1992. Books, media appearances, and seminars soon followed.

Message
Dave’s message is quite simple: avoid debt at all costs. His entire message revolves around escaping debt in all forms, including credit card debt, auto loans, and even home loans. If you can’t afford to buy it, you shouldn’t be buying it.

In order to provide a framework for getting started down this path, Dave offers a series of seven baby steps to follow:
1. Start a “beginner” emergency fund of $1,000
2. Start and complete a “debt snowball,” except for a house mortgage
3. Create a fully funded emergency fund equal to six months of salary
4. Invest 15% of your gross income in 401(k)s (up to the match), Roth IRAs, and then in mutual funds
5. Fund some portion of your child’s college education
6. Pay off the home mortgage
7. Build wealth by investing a significant amount of your income once you have no debt at all

Dave repeatedly preaches these seven steps in all of his various books, programs, and seminars.

One interesting aspect of Dave’s message that alienates some of his potential audience (but endears him to others) is his regular use of Christian themes and biblical quotes in his radio show, his books, and his other appearances. The references are not overwhelming, but for some they seem very anachronistic in an ever more secular society.

My Take
If you’re really lost and looking for someone to lead you to a better financial path, Dave Ramsey might be the best choice out there. However, if you’re already on the path to success, Dave can often seem trite and repetitive.

Dave has two major skills that work in his favor:
One, he has a strong evangelistic ability. His oratory skills are very strong and he has the ability to make you believe in his system. Scoff if you will, but that is a very powerful force.
Two, his plan is very simple – but fundamentally sound. Dave makes something that is very challenging for many people (if it wasn’t challenging, everyone would be in great financial shape) and breaks it down to the point where it seems much easier.

For me, Dave was a big help when I was completely lost; without him, I might not have been able to turn things around. Now that I’m headed down the path and focused on it, quite often Dave’s messages seem really simplistic. This, of course, is likely the result of my mind’s desire to overanalyze everything.

The bottom line: As long as you don’t have a deep aversion to Christianity, Dave’s ideas are fundamentally sound, though he pulls the belt pretty tight.