There’s no disputing that Dave Ramsey’s advice for getting
out of debt and saving money has rescued many a financially troubled
family. One could do much worse than
follow Dave Ramsey’s teaching on money matters.
But that doesn’t mean we should accept all his advice uncritically.
For example, he advises listeners to not contribute to their
retirement accounts until they eliminate their debts (though presumably not
their mortgage debt), devoting every spare dollar to that goal. However, that sacrifices an important long-term
goal in favor of a (admittedly very good) short-term goal. If
someone following that advice passes up the opportunity to invest in a 401(k)
plan in which the employer matches employee contributions, that person is
giving up a 100% return on their investment. And for what?
To save an 18% annual interest rate on that same amount of money? And that doesn’t even consider the time in
the market that is lost by not investing earlier, losing precious years of
compounding. Not starting early in one’s
career to save for retirement is one of the leading causes of the low balances
in retirement accounts that firms like Vanguard are reporting as they warn
about a retirement crisis for these under-savers.
In the very first post I made to this blog, “Follow the Money”, I warned readers to examine what others told them to do with their
money, looking for motivations that only served the interests of the person
giving the advice, not the recipient.
Bible-thumping evangelists of financial freedom should not escape this
scrutiny. Does Dave Ramsey pass the
test? Well, he refers callers to his show
or visitors to his website to ELP’s, endorsed local providers, who pay Ramsey
about $80 per lead. They are frequently
paid on commission and sell mutual funds with front-end load charges, meaning
that not all the money an investor hands over to be invested actually gets
invested; the investor might start off five or six percent behind, right out of
the gate. In an era when investing is
easier than ever without an advisor charging commissions; when low-cost funds
are widely available to the public; when low fees have been shown to be a
predictor of better overall return of an investment; and when mutual fund and
ETF choices allow easy diversification and relative safety, is Dave Ramsey’s
method really sound?
But put all that aside for a moment. When someone tells me he is a Christian, I hold
him to a higher standard of behavior, truthfulness, and treatment of
others. I will not call Ramsey’s
character and beliefs into question. God
is a very capable judge and much fairer than any human being since He sees and
knows all. I will, however, call Ramsey
out on his behavior and teachings.
Ramsey is no stranger to disputes with other financial
advisors. He once told a group of them
opposed to some of his investment advice that he had helped more people in ten
minutes than they had in their entire lives.
And I’ve heard his rants on the radio against these opponents. His tone lacks what I would call Christian charity.
Ramsey does not reserve his criticism only for professional
advisors either. He dishes it out to
listeners who have made bad decisions. Money cited one particularly intense
dressing down he administered to a hapless caller who was in despair about her
school loans. It was not an isolated
incident. Maybe some people can embrace
this harsh schoolmaster approach. To me
it seems indiscriminately administered and lacks the compassion I believe Jesus
would show these same people.
I would invite you to compare anything Ramsey does or says
(and how he says it) to other Christian financial teachers like Rob West,
Howard Dayton, or the late Larry Burkett.
I hear those men teaching the same principles of debt elimination but
doing it with grace and healing while espousing the use of lower-cost
investments and offering a corps of locally based volunteers to help those who
are struggling.
Maybe the world loves a showman, and Ramsey delivers
that. I’m just not convinced it’s what
the world needs.
Until next time,
Roger
“By insulting the
poor, you insult your Creator. You will
be punished if you make fun of someone in trouble.” Proverbs 17:5 CEV
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