Dave Ramsey is Bad at Math

See also: Dave Ramsey is Good at Psychology

If you’re familiar with Dave Ramsey, then you’ve no doubt heard of his ‘snowball’ approach to paying down your debt. In short, Ramsey suggests that you make minimum payments on all but the debt with the lowest balance. Any additional money you have goes to that lowest balance debt. Once the low-balance debt is paid off, you add the dollars that had been going there to what you’ve been paying against the next lowest debt. And so on.

The idea is to pick up steam in paying down your debts by knocking them out one by one and piling up the payments that would have gone to each of the paid off debts in order to knock out the next one. Sounds enticing, but is it a good idea?

To my mind, what you should really be doing is paying down the debts with the highest interest rate, regardless of balance. It just makes intuitive sense to pay off the most costly debts first. Once the debt with the highest interest rate is paid off, add those dollars to what you’ve been paying on the debt with the next highest interest rate, and so on. So who’s right?

I was actually inspired to look into this in greater detail by a recent post over at the Wealthy Blogger (Update: That site, and thus the post, have gone missing). In that post, Mike introduces yet another approach. As outlined in The Automatic Millionaire, this approach is based on the ratio of the outstanding balance to the minimum amount due. Divide the latter into the former, and concentrate your payments on the debt with the lowest resulting value. Once that’s paid, add the dollars that had been going there to what you’ve been paying on the debt with the next lowest ratio. Lather, rinse, repeat. Again, sounds like it might be a good idea. So, let’s look deeper.

Consider a family with the following debts:

  • Visa ($7, 500 @ 13%, minimum payment = $150/month)
  • MasterCard ($10, 000 @ 19%, minimum payment = $250/month)
  • Car Loan ($5, 000 @ 8%, minimum payment = $275/month)

Note that I essentially picked these values out of thin air.

Now, let’s first consider what happens when you make only the minimum payments month after month. (We assume that the minimum payments don’t change, although for credit cards they go down as the balance goes down):

Months to pay in full: 72
Total amount paid: $10, 685.54
Total interest paid: $3, 185.54

Months to pay in full: 63
Total amount paid: $15, 544.23
Total interest paid: $5, 544.23

Car Loan:
Months to pay in full: 20
Total amount paid: $5, 310.14
Total interest paid: $310.14

So, it would take a grand total of 72 months and $31, 539.91 to pay off the initial $22, 500 in debt. Not too good.

Now, let’s assume our hypothetical couple can actually afford to pay $1, 000 per month toward their debts, rather than just making the minimum payments. What’s the best way to allocate these dollars? According to Ramsey, they should attack the car loan first, since it has the lowest balance. In other words, they’ll be paying $150/month toward their Visa bill, $250/month toward their MasterCard, and the balance ($600/month) toward the car loan. Using this approach, the car loan gets paid as follows:

Car Loan:
Months to pay in full: 9
Total amount paid: $5, 126.70
Total interest paid: $126.70

At that point, the next highest balance is the Visa, so they add the $600/month from the car loan to the $150/month they already been paying, and they finish off the Visa.

Months to pay in full: 19
Total amount paid: $8, 477.38
Total interest paid: $977.38

And from this point on, the entire $1, 000 gets poured into the MasterCard until it’s gone.

Months to pay in full: 27
Total amount paid: $13, 013.74
Total interest paid: $3, 013.74

So it’s all done in 27 months at a cost of $26, 617.82. That’s a net savings of 45 months and $4, 922.09 in interest payments. Not too shabby. But could they do better?

Let’s look at what would happen if they hit the highest interest rate first. In this case, they’d attack the MasterCard, Visa, and car loan, in that order. The result? The MasterCard ends up as follows:

Months to pay in full: 20
Total amount paid: $11, 572.27
Total interest paid: $1, 572.27

Coincidentally, due to the lower initial balance, the car loan ends up getting paid off during that same month, even though they’ve only been paying the minimum amount each month.

Car Loan:
Months to pay in full: 20
Total amount paid: $5, 310.14
Total interest paid: $310.14

So now the whole ball of wax gets applied to the Visa, wiping it out as follows.

Months to pay in full: 26
Total amount paid: $9, 093.73
Total interest paid: $1, 593.73

So they’re out of debt in 26 months at a total cost of $25, 976.14. That’s a month sooner, and they’ve saved an additional $641.68.

What about the approach advocated in The Automatic Millionaire? In this case, the car loan has the lowest initial ratio (and it turns out that it remains lower until it’s paid in full). Thus, as with Ramsey’s approach, our hypothetical couple starts out hitting the car loan the hardest, at $600/month.

Car Loan:
Months to pay in full: 9
Total amount paid: $5, 126.70
Total interest paid: $126.70

At that point, the MasterCard has the lowest ratio (and it remains lower than the Visa until it’s paid off). So, they switch to paying $850/month on their MasterCard and continue paying the minimum on their Visa.

Months to pay in full: 21
Total amount paid: $12, 052.55
Total interest paid: $2, 052.55

And now it’s time to kill off the Visa.

Months to pay in full: 27
Total amount paid: $9, 114.65
Total interest paid: $1, 614.65

Thus, in this case, the more convoluted, ratio-based approach takes the same length of time as Ramsey’s approach, although the remaining payments in that final month are slightly lower. This brings the total paid to $26, 293.90. This is a savings over Ramsey’s approach of $323.92, owing to the fact that the vagaries of the numbers that I picked to start with resulted in the high-interest MasterCard getting attacked before the Visa.

The bottom line…

Snowball: 27 months; $26, 617.82
High interest first: 26 months; $25, 976.14
Automatic: 27 months; $26, 293.90

If you work through the math, the best you can hope to do is to attack the highest interest rates first. That applies to this specific case, as well as in any other. In some cases, Ramsey’s approach will equal this approach (if lowest balances are on highest rate debts, then the two approaches are the same). However, his will never exceed it.

Similarly, the approach advocated in The Automatic Millionaire will, in some cases, equal the performance of the high-rate approach. But, this is only if the ratios work out such that the highest rate debts get paid first. Like the ‘debt snowball, ‘ this approach will never beat the high-rate strategy.

With regard to Ramsey’s approach vs. the Automatic approach, the relative performance for any given scenario will depend on the numbers. In some cases, Ramsey’s approach will do better, in others it won’t.

Calculator: You can compare the two approaches with this free debt snowball calculator.

I should note here that, although the numerical differences in this particular example aren’t that huge, they can work out to be pretty sizable. It all depends on the amount of debt involved and the structuring of the interest rates.

This isn’t to say that an approach such as Ramsey’s isn’t worthwhile. For example, under Ramsey’s scheme, the first debt gets knocked out very quickly, and some people may need that psychological boost to keep at it. In contrast, it took twenty months to knock out the first debt under the high-rate scenario, although two debts (MasterCard and car loan) ended up getting knocked out that same month.

But for people with sufficient self-control, you can do better by paying off debts from highest to lowest interest rate. Then again, maybe people with self-control don’t get into debt in the first place.

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698 Responses to “Dave Ramsey is Bad at Math”

  1. Stephanie Colestock

    That’s amazing, Emily! Congratulations on your amazing progress with that debt payoff. I can see how it would get exhausting, but wow — you’ve managed to clear 73% of your debt in less than two years. At this rate, you have mere months before you are completely out of debt. You’re in the home stretch, so do whatever it takes to regain your motivation. Make a list of how your life will benefit from being debt-free (improved credit, lower interest rates, less anxiety, higher cash flow, etc) and maybe even plan something exciting for when you finally reach that goal.

    Please come back and let us know when you make the final payment. We want to celebrate with you!

  2. emily

    I had 2 debts one for 27186.40 at 5.6% and another for 13685.32 @2.7%. I decided to follow the math. I paid off my higher interest one first in 17 months. Last month I paid it off and now I have 10951.56 left on my other loan. (This is after I debt snowballed for a month and a half) I would be in a lot worse shape if I’d followed Dave ramsey’s advice. I figure I’d probably owe 15or 16k still instead of 11. However I do have debt fatigue and I don’t see an end in site.

  3. Daniel Hillmer

    He got his huge net worth by aligning himself with churches an enormous market. He’s a brilliant businessman and salesman. That said I believe he is unethical. He exploits religion. His debt reduction advice is sound( except for prepaying a low interest mortgage) but his investment advice is horrible and self-serving. Yes he is very wealthy but I don’t trust him.

  4. Dave Ramsey says “if we were really going to follow the math we would never have gotten into debt” so if we are going to get out of debt we need to follow a plan that gives us the momentum we need emotionally. I think you hit it on the head at the end when you said that if we were disciplined, we wouldn’t? get into debt in he first place.

  5. Anonymous

    A thought I had to maybe help the math work for everyone…
    Suppose after 12 months, an unexpected expense occurs. Car breaks down, furnace goes out, etc. Let’s say it’s $1500 to fix it. Let’s assume either way you had $1000 in an emergency fund.
    If you’re paying off high interest first, you would take your emergency account, reduce your payments to minimum for the month (freeing up $325), you would then need to acquire an additional $175. All else equal, this would need to come from increasing credit card debt. After fixing the car, you continue minimum monthly payments while rebuilding your emergency fund (approx 3 months) and continue on your way.
    Suppose you used the snowball method. $1000 from emergency acct, minimum payments (now freeing up $600 since car is paid off, and $100 of that goes back to emergency acct. Acct is refilled after 1.5 months, no additional debt has accrued.

    Which method is now paid off sooner and saved you more money? I’m not a finance expert whatsoever, and I didn’t use a calculator for my numbers (feel free to correct them if needed) but it seems having the extra ‘disposable’ income sooner could really come in handy.

  6. Anonymous

    you need to learn basic math before correcting others. although I don’t agree with this article and am a dave follower, your comments are incorrect. you said:

    “But no matter how I divide (latter) $275 into (former) $5,000 I do not get the lowest ratio.

    Car: 275/5,000 = .055 (highest)
    Visa: 150/7,500 = .02 (lowest)
    MC: 250/10,000 = .025”

    dividing the 275 into 5000 looks like this:
    5000/275 = 18.18 (with the others being 50 and 40)

  7. Anonymous

    Ten years after the fact, this article is still being read. (I just now read it). I have not read all the comments, so this might have been covered. Dave Ramsey is NOT bad at math. He tells people in the book, on the radio and everywhere else, the high interest way will save you a nominal amount of money. He is all about getting you out of debt – period. If you do not have a program that works for YOU, you will not become debt free. The snowball works because it keeps you engaged. Nice article. Thanks.

  8. Anonymous

    I believe you have an error in your almost 10 year old post.

    You said:
    “As outlined in The Automatic Millionaire, this approach is based on the ratio of the outstanding balance to the minimum amount due. Divide the latter into the former, and concentrate your payments on the debt with the lowest resulting value. Once that’s paid, add the dollars that had been going there to what you’ve been paying on the debt with the next lowest ratio.”

    And then later you said:
    “… the car loan has the lowest initial ratio (and it turns out that it remains lower until it’s paid in full).”

    But no matter how I divide (latter) $275 into (former) $5,000 I do not get the lowest ratio.

    Car: 275/5,000 = .055 (highest)
    Visa: 150/7,500 = .02 (lowest)
    MC: 250/10,000 = .025

    Is this ironic, that you have had a post up for 10 years titled “Dave Ramsey is Bad at Math” and you have math errors in it? My guess is you either mixed up the words former and latter or you meant to say “highest resulting value”.

    Please correct me if I’m wrong here.

  9. Anonymous

    I think debt snowballing is a great tool, but I think a debt consolidation followed by paying the same amount you were paying with all your credit card payments will get you debt free the soonest plus you’ll pay the least amount of interest. Paying down fixed debt is much more effective than revolving debt.

  10. Anonymous

    Divide the latter into the former, and concentrate your payments on the debt with the lowest resulting value. Once thatâ??s paid, add the dollars that had been going there to what youâ??ve been paying on the debt with the next lowest ratio. Lather, rinse, repeat.

  11. Anonymous

    I’ve been doing the debt snowball for 18 months. I’ve paid off over 30k. I didn’t have 1000 to throw at my first of many debts. I did have 50 to 100 to throw at smaller debts. Your scenario does not take in consideration of many smaller debts that gives you the incentive to pay off the larger debts with gazelle like intensity. You need some quick wins to free up the cash to throw at higher interest payments first. If I only threw the 50 to 100 at my highest interest debt it would have taken me a while to build momentum. Soon after I paid off my first few debts that’s when all I had were higher interest rate loans. I had 20k in medical debts with several doctors, hospitals, and collection agencies. Now that I don’t get nickel and dimed to death with smaller payments on smaller amounts I can send 1000 do my higher interest debts. I will be debt free within a year from now.

    The fact is that which ever method you use is better than being in debt forever. Make a plan and stick to it. Maybe it is a hybrid of paying off smaller debt first to free up the extra funds then switch gears and work on paying off high interest rates. You may have to pay a little extra and a little longer but use that as a reminder, don’t go into debt any more.

  12. Anonymous

    This post has got me thinking, the analysis was excellent. Although I myself don’t have any debt a lot of people do ask me for advice, I’ll certainly be sending them this post. Thanks for sharing.

  13. Anonymous

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  14. Anonymous

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    Nonetheless, I’m certainly happy I came across it and I’ll be bookmarking it and checking back frequently!

  15. Anonymous

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    the other person’s blog link on your page at proper place and other person will also do similar in support of you.

  16. Anonymous

    Hi there fantastic blog! Does running a blog similar to this require a large amount of
    work? I’ve virtually no expertise in programming however I was hoping to start my own blog soon. Anyways, should you have any ideas or techniques for new blog owners please share. I understand this is off subject however I simply had to ask. Thanks!

  17. Anonymous

    When someone writes an article he/she retains the idea of a user in his/her brain that how a user can know
    it. So that’s why this post is perfect. Thanks!

  18. Anonymous

    dave gives his ‘listeners’ (koolaid drinking sheep) the impression that his insurance & investment “Endorsed Local Providers” are thoroughly vetted & screened to make sure they have ‘the heart of a teacher’. I was an insurance ELP for years & I can tell you there was only 1 criteria: Will you, the ELP, pay dave $1k/mo. in return for his ‘endorsement’?
    So all sorts of scam artists get to be ELPs, simply because they agree to pay dave big $$ in return for him selling out his naive listeners..
    If I run for office & pay you to vote for me, that’s a crime. If, as an insurance agent, I pay you to buy a policy from me, that’s fraud. If some company pays some other entity to endorse it’s products – & doesn’t disclose the payment – that’s sleazy.
    But if dave takes my $$ in return for ‘endorsing’ me, it’s all good?

  19. Anonymous

    WOW – it took me a really long time to read all these comments! Interesting perspectives. Hey – whatever works for you – just do it. Different strokes for different folks. All I can say is that I tried (for years) Nick’s approach – paying off my undergrad loans, wife’s law school, financing our kids’ college funds etc and we were just barely staying above all of it – and we made pretty good money. When our youngest graduated from college with several majors and having studied and travelled abroad and having obtained his private pilot’s license (sooooooooooo not cheap – which we also financed) we finally thought it was time for us to pay off our house and fully fund our retirement. Ramsey’s plan got us to do that. Don’t ask me why. We weren’t doing badly before then, but somehow those “baby” steps – even the ones we could skip – gave us a perspective we’d never really had before. And frankly, it was the first time we just truly went without any credit cards – I love that.

    So – do whatever works for you and best of luck. But for those of you who call Ramsey fans ignorant, lower class etc – you’re just deadass wrong about that.

  20. Anonymous

    Yes, while I agree that there optimal scheme that will net the least amount of dollars to retire the debt, I think for average Americans in debt The Ramsey approach is probably best for two reason:
    1) They see results earlier and as you mentioned the psychological aspect of that is huge and is likely to keep them going in the right direction rather than getting discouraged and
    2) It is simple and easy to understand.

    Great information offered here. Thanks for your analysis.

  21. Anonymous

    This is moderately interesting, but because you picked arbitrary values on the loans, you can make this work any way you want.

    I think it would be more interesting to set each debt to $10K, vary the interest rates realistically (which you did), and THEN look at the differences.

    My two cents!

  22. Anonymous

    Nick, debt is not a reality. There are many people that buy cars with cash and have rented while saving money to buy a house or put a large downpayment on a house. The only thing you probably should go into debt for is a house, but that doesn’t mean you need to buy the biggest house you can afford. I would say you should have a payment that is more like 15% of your income and not 25%. That gives more room to save for emergencies.

  23. Anonymous

    Bud, do you plan on keeping the rental house? You could sell it and pay off your main house. I guess it depend on if the rental house is making you more than 4%, but you would get a 4% return on your $150K, by paying off your house. You would still have 60K that is earning no interest. I would pay off your house if it makes you feel better.

  24. Anonymous

    hi dave read your book-thought it was great- got a question–i am 74 years old and good health, my wife is 68 and we have a debt at 4% on our house of $95,000 . it is worth about $250.000 and we also have a $100.000 rental house that is paid off. we have no other debt and we have about $150.000 cash that is not doing anything. we have about $3000 income and can live on less —do we take some of our cash and pay off the house, i worry about the economy and the value of the dollar —please advise thank you bud & myrtle roberts

  25. Anonymous

    I agree with those that believe everyone has their own philosophy of what works well for themselves. Some are big on the math, others just want to be rid of the debt no matter the interest rate or tax deduction, knocking them out low balance first will work. What I like about Dave’s philosophy is the human side of it – most will do what feels good, not what’s rational. Paying low balances first and generating some quick successes does fire you up and helps ensure you’ll keep at it.
    Enjoyed this article Nickel.

  26. Anonymous

    That quote by Dave Ramsey saying if we were doing math, we wouldn’t be in debt is a ridiculous statement. Debt is a reality to getting somewhere in this world. I can do math fine, I still had to take out student loans because I couldnt afford them, I still had to get a car loan because I didnt have the money upfront, and I still accrued some CC debt because I dedicated my time to my studies in my senior year of undergrad school. Now, that quote may ring true for someone who can’t stop with conspicuous consumption, spending money hand over fist on things they don’t need. But I have *never* had a problem with my spending, always pay off my debts, well ahead of the terms on the loan, and prefer to do it the way that makes mathematically the most sense. I’m not going to pay off a student loan that has a (TAX-DEDUCTIBLE!) interest rate of 2.1% over a CC that has 17.99% interest rate. That’s just mismanaging your money if you ask me.

  27. Anonymous

    This article is how I came across this blog actually.

    I think with all these plans, there is no one size fits all. There are elements of Dave’s plan that I live by and reading The Total Money Makeover literally changed my life, but it didn’t truly change it for the better until I realized I should take the parts I needed and leave the rest at the door. Adaptation was the key to success for me.

  28. Anonymous

    Dave Ramsey isn’t bad at math. He states repeatedly in his books and materials that the QUICKEST way to pay down a debt is to attack the one with the highest interest rate first. This will often pay off the debt a month or two faster.

    However, the most EFFECTIVE way to pay off debts that he has discovered while working with PEOPLE is to attack the smallest debt first. Paying off a debt by sending that last check does something mentally for a person in debt; it gives them hope. Debt repayment can be a long process, and hope is required for many people so they don’t get bogged down and quit in the middle.

    Dave’s not bad at math. He’s good at PEOPLE. Did the author even read the book or take the course where Dave explained the difference between the two?

  29. Anonymous

    It’s amazing how much emotion and anger Dave Ramsey’s name causes. Yes, his “math” is often not the quickest way out of debt. And yes his method ignores math by definition. But I’d rather spend a few extra bucks on a method that works best for me to get out of debt than to line everything up by interest rate and drop the ball halfway into it. His way is the only way for some people – not everyone. Poor Dave 🙂

  30. Anonymous

    I don’t think you “picked these values out of thin air” at all. I believe it was intentional to put the highest debt with the highest interest rate to prove a point.

    However, mathematically, of course what you’re saying makes sense. But the “snowball” method isn’t math, it’s psychology. And it’s psychology that usually gets people into debt in the first place. If they could do math, they wouldn’t be where they are. The tackling and resolving of a small debt appeals to their mind, they can then move onto the bigger ones. This obviously isn’t the approach other financial advisors, those with self-control, and accounting whiz-kids should take.

  31. Anonymous

    Can we be constructive here? The approach taken really has to fit the person and if the they need a quick payoff so be it. I like the lower total payout. What would be nice is for someone to develop a site that you could enter your loan information in to help determine the best approach for you. Howard Dayton has some of this and that is the only place I have found it. There are as many ways to attach this as there are to get into it. Dave offers a way out. Many need to build that hope. once you have it look at all the possible ways. balance transfers can be a good thing if used correctly. Plan Plan and get advise. I am using the highest interest direction until I find my next better step. You have to maintain a watch.

  32. Anonymous

    You obviously haven’t tried the plan nor read the book completely. If you had, you would know that Dave Ramsey doesn’t take this approach as the fastest, most money saving approach. He has people tackle the smallest debt first because it is an accomplishment, “quick wins”. Paying off those smaller debts are quicker and easier than the bigger ones and it fires people up and they are more likely to continue on to the next and bigger debt.

  33. Anonymous

    Personally I don’t see the point of this post, because if your read the book, or listened to the show you have already heard Dave address. He agrees with the math issue, but people are driven more by felling than intellect, which is why we ended up in debt to start with. So the debt snowball is a way to feed the feeling, and change the behavior so that you can gain some momentum, in paying off debt. You are more likely to sick to a plan you see working than one you don’t. If you don’t like Dave’s plan you can always stick to your own.

  34. Anonymous

    The smallest loan first approach worked for us. By the end of 2 months we paid off our first loan. We were ecstatic. By the end of 6 months we paid off 3 more loans. By the end of a year we had paid off 6 loans. We tried paying off the largest interest loan first, but it was so large it would take us over a year to pay off. We would fall into our old routine after a few months and be in the same financial situation.

    We paid off $15000 of debt listening to Ramsey. We struggled for four years prior to get debt free with no success. Since becoming debt free we have saved $15000 in savings. Talk about a big change in a four year period. The highest interest loan first approach would have only saved us $600 in interest and paid off in 23 months instead of the 24 months that it did take us. The psychology approach definitely helped us.

  35. Anonymous

    OK, I will clarify when I say “expert”, Dave doesn’t have a bunch of letters behind his name like CFP, CFA, CPA. Dave has a ton of knowlege, but he admits he is not a tax expert or an attorney when complicated questions come up. That was my main point.

  36. Anonymous

    Actually Dave does clam to be a financial expert, which is why he\\\’s written all those books on Finance. He does NOT ENDORSE any funds, but tell the buyer the general guidlines of how to pick fund (so that you will lean something). And Personal Finance is Personal…picking funds is based on individual needs…and your right in dept answer take longer than 2 minutes

  37. Anonymous

    Dave never claims to be a Financial Expert, thus he always give generic answers on what to invest in regarding mutual funds. He has never pimped a specific company, unlike Clark Howard, who pimps USAA and Vanguard. Two great companies, but still, Dave delegates to his ELPs who can give more in depth answers than 2 minutes on the phone. What does being Christian and making money have to be a bad thing? Do you think Christians shouldn’t be millionaires? You obviously chose to get out of being an ELP.

  38. Anonymous

    I was a Dave Ramsey Endorsed Local Provider (ELP) for 6 years. I felt sleazy being involved with this organization, because they put on a ‘Christian’ front, yet demand big bucks each month from ELPs in return for dave’s “endorsement”. Wouldn’t be so bad if they disclosed the cash for endorsement deal, but instead they give the impression ELPs are ‘chosen’ based on merit. It’s nothing more than a slick, profitable marketing scheme & also gets dave out of having to answer an intelligent question on the air. He just throws out the ‘you should call your ELP’ (cha-ching!) on that one… Approx 40% of my monthly fee went directly to some staff person with whom the only contact I had was a perky voicemail every 90 days..

  39. Anonymous

    I agree! do what works best for you… nine times out of ten, people will do what they think will end the torment.
    I really don’t understand the oposision to dave ramsey’s plan,,, if you have proven that you know better it would be nice to share with the ones who have not.
    In any case, if one is so successful, what in the world would someone spend time here? a dead giveaway that the success is not what is noted.

  40. Anonymous

    The author is correct about paying off debts with high interest rates firs, but herein lies the problem with that concept… most people are very short sighted and have to be accomplishing goals immediately, or will not follow through with them. So the idea behind Dave Ramsey’s approach is completley on a psychological level, not neccisarily common sense.

    Me personally, I would pick the high interest rate loans first, as the author stated. But again, a lot of people are very short sighted and need to feel that monthly accomplishment to stay on top.

    In short, I agree with the author of this post and Dave Ramsey. As far as which technique is best, it is subjective. It all depends on the individual.

  41. Anonymous

    Wow, who is being critical now. Where did I say I only wanted to concentrate on my own happiness or that I roll around in $100 bills? I think you are digging a little deeper into something that doesn’t really matter. All I said was I was debt free and that being out of debt allows me to save money and not be concerned about gas/food prices, yet you spun that into me being Donald Trump, having a boat and you thinking I have no family and I don’t manage to eat lunch and surf the web at the same time? I guess it is pointless to discuss how much money we donate to charity or does that cause you to go on another rant? Common sense went out the door in the 90’s when people had to have it now and forgot to learn to save for things. Maybe people read/follow Dave Ramsey to learn how to get common sense back.

  42. Anonymous

    Sorry! in the family portion of my responce I meant to say “content”… not comtempt…
    I am so very happy you are rich and want you to concentrate on your own happiness and bathe in your money.. 🙂 really I do

  43. Anonymous

    A critical responce is never helpful in my opinion.. if someone has a comment they should try to offer a solution as well. It’s hard to believe that someone so successful spends their time looking up DR online.
    Also, in an effort to be supportive of people needing guidance COMMON SENSE has to play a roll. People like the previous commenter forgets that one must use common sense to prevail through a tough finaical delima.
    No doubt there are cheaper ways to get to the same conclusion, but this way is certainly offered as an option… People are free to decide which way will work best for their own situation.
    Being negative and boasting about how rich you have become is not a bit helpful for some who are looking for new ideas. In conclusion, success is not measured by how much you have anyway. What kind of life must one have, if they are happy and secure and still want spend their valuable time being ugly and negative to others. No wife or kids I suspect, or their days would be filled with family and contemptment.
    At lunch, I would eat 🙂

  44. Anonymous

    I don’t waste my money on boats, but thanks for the suggestion. They don’t do it for me. Have you ever heard of a lunch break?

  45. Anonymous

    WOW!! fess up, you are Donald Trump…Right?
    what in the world are you doing in the middle of the day wasteing your precious time commenting on Dave Ramsey’s technique while you could be out on your boat fishing? You could be counting your blessings too! You are looking at this site because you too are in debt and need a way out… otherwise with you’re success you would not be wasting your time on us low lives trying to make it.
    I have to smile at people like you! you can say whatever you like.. but you are here reading for a reason. It’s not to help with better ideas because you obviously don’t have any.

  46. Anonymous

    Well let’s see, I have no car payments, no mortgage payment, no credit card payment, lots of money in the bank. I don’t know that I am MORE successful than Orman or DR because they make millions of more dollars than me, but I guarantee I have a net worth better than 85% of most Americans. I don’t have to worry about gas prices or food prices since none of my money goes to paying back banks.

  47. Anonymous

    Well, what is your approach to personal finance?
    if you are more sucsessful than Suzi Orman and Dave Ramsey… you should share that for thoes of us who are making this HUGE mistake. Waiting for your responce!

  48. Anonymous

    All of you supporting Dave Ramsay and his know-nothing approach to personal finance really deserve each other. I’m sure you think Suze Orman is a genuis as well.

  49. Anonymous

    It’s not about math, it’s about psychology. There is a psychological reaction to paying off debts, even if it was a small amount. For many people, this freeing sensation will motivate them to continue paying down their debt and help them to get debt-free faster. There are alternate strategies to the “debt snowball.” There is the “debt avalanche” and the “debt tsunami.” People should look at all three and decide what is best for them. The key is to stick to your plan and faithfully pay off your debts!!

  50. Anonymous

    this guy just can not stand that Dave is the best and wow is he right. I followed Dave’s plan and am debt free. All my kids took the class too and now are not only smart but debt free. The method he uses is spot on!!!!! Life is so much happier now and wow at the peace.

  51. Anonymous

    Like Dave Ramsey said, “If you were good at math then you wouldn’t be in this financial mess. It’s not about the number, but behavior modification.”

    The author should understand the intent of the Debt Snowball, before he/she tries to refute it.

  52. Anonymous

    Mr. Fraudlent Nickel,

    If you actually listened to Dave Ramsey for a day or so, or picked up his book, you would realize that he says to pay off the smallest debts first because you will feel like you are actually getting somewhere and be encouraged to keep paying off debts. You actually got it at the end of your article where you said

    “For example, under Ramsey’s scheme, the first debt gets knocked out very quickly, and some people may need that psychological boost to keep at it.”

    Dave Ramsey has never said, nor does he believe, that you will pay less money in interest charges by paying the smallest debts first. Your claim that he is bad at math is a deliberate lie.

    Your defamation of Dave Ramsey as being “bad at math” was a cheap attempt to get views on your article. You are pathetic. YOU HAVE LOST A LOT OF CREDIBILITY WITH THIS NONSENSE.

  53. Anonymous

    If you are so far into debt that you are going to save a few thousand dollars, do it the way that makes you feel good. In reality, I doubt anyone can really figure out the number unless all the debts are simple interest. The best thing to do is just get rid of all your debt. If you only have $10,000 in debt, you will probably save less than $100.00 doing the highest interest rate first, but again, it depends on the debt an if you can actual project out the interest costs. All I know is that I have paid ZERO interest in the last 3 years since paying off our mortgage. I have made more money in the market by investing that difference in the last 3 years with the market being up over the last two. Don’t try and get cute thinking you can arbitrage your debt. Just get it paid off as soon as you can.

  54. Anonymous

    Wow, 5 years later and 600 comments – you really touched a nerve.

    I’m sure this only restating what’s been said before but, Dave’s audience is a group (myself included) that is not or at least WAS not very logical with money.

    So trying to get a group of people that is illogical with money to do advanced math -as in: calculate compounding interest over multiple years – is a hard sale.

    Trying to get the same group of people to do simple math – as in: which one of these balances is the smallest – is a much easier sale.

    Completely goes along with his “baby steps” principle.

    I’ve been away from this blog for a while but just subscribed today. Thanks.

  55. Anonymous

    The point to Ramsey plan is to create pychological momentum for the borrower. The fact is if people had fiscal self control as the author suggest they wouldn’t be doing these plans to begin with. So hurray to Dave for trying to get people going and cutting up those credit cards and stop making the banks rich.

  56. Anonymous

    The author of this article missed the core of this approach. If you watch his video of dumping debt lessing in financial peace, he states ‘if you were good at math already you would have never got yourself in this mess in the first place!’. In other words, lets take a common sense approach to pay off your debts, one that generates momentum and increases your motivation since you have dug yourself into a huge whole. Mathmatically yes you can pay things off technically slightly earlier if you analyze interest rates…but there’s a reason your in debt in the first place.


  57. Anonymous

    Dave Ramsey himself admits that his method isn’t the best way to do it mathematically. Perhaps if you took the time to read it you would realize he has beaten you to the punch.

    He’s reason for attacking the lowest balance first is because it doesn’t take long to knock it out and you get a warm, fuzzy sense of accomplishment. You gain momentum, you start seeing results, and you therefore are encouraged to knock out the next one.

    If your highest balance is also the highest interest rate and you try to get that one done first, there’s a chance you become discouraged because it can take years before it is knocked out.

  58. Anonymous

    Ooops, I forgot the -H after Steve.

    ps: Also I agree with NDCNOON on post#635..

    The intent is to WIN.!!

    The extra interest I’m paying isn’t enough to worry about. Now if I was paying intetest on 75K, I might worry. But paying off the low balance debt first then the high balance debt is working for me.

  59. Anonymous

    Bad math did not get me into debt.
    It had to emotional as I didn’t even think about the math or would not have gotten myself so far in the hole.

    DR’s plan is working for me. Only been going for a short time but I have paid off 2 small CC bills that I would not have done before. Now those 2 payments combined with my other CC payment are going to knock out the 3rd card 7 months. Then auto payoffs will be next.

    Slowly BUT surely I have working the plan & now I’m beginning to see the light at the end of the tunnel.

  60. Anonymous

    The last paragraph says it all. This approach only works with HUGE self control.

    Dave’s approach assumes the $650 in extra interest is overshadowed by the lift of paying off 1/3 of your bills. I agree. It may cost a little more, but the intent is to get a win.

  61. Anonymous

    Since getting on the plan 3-12-09 I have paid off a Mustang with the balance of $7605.15. I have paid off 7 credit cards with balances of 82.54, 109.07, 354.94, 690.69, 806.16, 1237.63, 3431.85….I read the Bless Life by Robert Morris and then I read the Dave Ramsey Total Money Makeover. I have an Acura to pay off with a balance of about $8000 and I have one more credit card of about $4100.00. I recently had my first son and he is 5 months old. I also have 401K loans of about $5000 and student loans of about $9000 left. I am real close to my goal. I want to be debt free in less than 2 years from now. I have a home with a balance of 138,000 so that is the big one. But with God’s help I know I can change my future!!! God bless you guys and I hope you read that small book called a Bless Life. It will change your life also!

  62. Anonymous

    Debt has a lot of emotion attached to it, especially when trying to change spending habits and pay off debt. From my clients 90% success rate when staying on the plan of paying smallest to largest debt.

    We have to feel as though we are always winning to stay motivated to keep doing something. Paying off the smaller debts will secure that feeling within a person/couple which will enable them to gain more motivation and momentum to finish their debt elimination plan.

  63. Anonymous

    In our personal situation doing it Dave’s way vs. paying the highest interest first we end up being debt free at the exact same time. For me it is the best part is that I can see those small debts going away and the big debts getting smaller all at the same time that keeps me motivated.

  64. Anonymous

    I think the article leaves the math equation that with unsecured credit cards being paid off then ones credit score gets better and other cards or debt could become lower

  65. Anonymous

    Has the author considered the possibility that he is bad at psychology? I believe the point of Ramsey’s snowball approach is to focus on actually getting out of debt. It isn’t a math exercise. It’s a psychology exercise.

    Ramsey’s snowball approach gives people hope, which inspires them to continue, instead of giving up on the notion of getting out of debt – giving up is what most who focus on the mathematics do.

  66. Anonymous

    It amazes me that so many of the commenters have apparently not read the article that they are commenting on. If you commented saying that the Ramsey method is to psychologically boost the person(s) who are participating, you wasted your time. After all, the author acknowledged that point in the article!

    One person even threw it in the author’s face- “if you had read the book”, etc. Um, how are you going to cop that kind of attitude when you didn’t even read a 1,000 word article before commenting on it?

    The article is about the cheapest way to pay off debt; the author concedes that Ramsey’s method is better for motivating people who need results. No need to say that in your comments, then.

  67. Anonymous

    The title here is inaccurate an unfairly pejorative. I think Dave Ramsey understands this, and if you listen to him enough, I think you’ll agree he gets this. But the point he often makes is that CHANGING HABITS is as much a MENTAL problem, a PSYCHOLOGICAL problem as it is number crunching. He deals with people way over their head in debt, and he’s trying to get them the tools to stay the course and get out. Seeing one debt paid off and then another can be a huge emotional boost to someone who not long before feared the end was near. I think what we have here is a difference between being practical and being wise. The practical, financial advisor, mathematical answer is to hit the biggies first. As someone with the wisdom of counseling thousands of people out of debt, Ramsey knows the need some encouragement.

    I teach at an inner-city college, and my students are often easily discouraged and check out when things get tough. I tried something new this semester–front-loading the class with easy points that otherwise might have been distributed throughout the semester. It won’t make much difference in the end analysis, but when it comes to the quarter or midpoint of the semester and the student knows they’re struggling but sees that that early work is keeping them passing, well… something great happened–the student didn’t check out! That encouragement allowed the student to redouble his/her efforts, and I think I’m going to have the lowest failure rate of my tenure. Sometimes a little psychology goes a long way.

  68. Anonymous

    I agree with Lacey, Shannon. To me it looks like you are trying to maintain a particular “style” of living (Mustang, Acura) even though you now have more important priorities like financial stability for your newly one-income family. Sell the Mustang and the Acura on the private market (or just one if that’s too painful) and buy a slightly older but still mechanically excellent used car that doesn’t have a payment, again, from a private party if possible.

    Your mortgage pmt on $138K is, I’m guessing, about $1100 per month and you are taking home probably 50K (from the 70K net) after taxes–really you guys have enough of money for basic expenses, probably 26k after housing expense, as long as you watch your expenses. You could probably even keep the fancy cars but if it were me I’d downsize on them. Money for my family is more important than money for really cool cars, and having cash on hand is more important than a bigger house. No reason you can’t stay in the condo will one child, or even two children who are close to the same age. They can share the bedroom.

    Now if you can get a great deal and a great mortgage rate on a larger piece of real estate that might be another issue entirely.

  69. Anonymous

    Shannon – if you’re still looking for advice…in 2003 my husband and I were in a similar situation. We opted to pay down the condo and move to a larger home to fit the needs of our growing family. I have looked back more times than I can count knowing that we made the wrong decision. We could have made it with that 2 bdrm 2 bath condo with one child. We could have done it with two children! Had we sucked it up a bit, we would be so much better off financially without a second mortgage, without the cc debt – ugh! to go back in time and make better choices. Stay put and pay off the debt – you’ll be much happier there than in a larger home!

  70. Anonymous

    I am doing the Dave Ramsey system and its working. I have tried other systems and eventually stopped. Definitely its all psychological, you need that motivation and visual results to keep going. Its like what has been mentioned before – strict diets, radical weight loss programs, etc – don’t work in the long run.

  71. Anonymous

    Someone mentioned that Dave says to pay the lowest amount first — this is correct. Not only does it give people a feeling of accomplishment, it also allows the payment for the lowest balance to be “snowballed” — added to — the next lowest amount.

    As far as paying with highest vs. lowest rate and “snowballing”, I ran a program that calculated the highest interest rate vs. the lowest one, and for my case ($, the resulting difference was minor as far as total paid and there was only a couple of months difference for the final pay off.

    In any case, get started on paying off your consumer debts — no matter the method! Debt IS slavery.

  72. Anonymous

    If you want to use credit cards, then set a limit to your credit line that can only be raised by a written request. Credit cards are a convenience so you don’t have to carry around a lot of cash. They shouldn’t be viewed as a means to buy what you can’t otherwise afford. Pay off balances each month. If you can’t afford to pay off monthly balances, then you’re spending more than you should on credit. Reduce your credit line. Stop trying to look like you’re wealthy when you’re not. Use common sense (not in great supply these days). Buy a car that you can afford to own, drive and maintain. Buy a house that you need – not one that is larger and more expensive than needed. Start small and add on as necessary. Don’t move every 3 to 5 years to more expensive digs. Choose your neighborhood wisely and stay put for the long term. It ain’t rocket science, folks.

  73. Anonymous

    If dave ramsey is so bad at math I am sure you would have no problem going head to head with him and see who has more success. If your good at math you would not have debt in the first place.

  74. Anonymous

    it’s good to know what the higher interest rate debt is costing you, but at the beginnning if you have a couple of balances that are smaller and easier to knock off, knock those off first. The reason is that it gives you more sea room to navigate. Once those credit lines are cleared up it gives you more options to transfer existing balances at higher rates onto a lower rate deal. It also does give you that important psychological win and “knock out” blow that lets you see early success and helps you keep motivated to see more results later on.

  75. Anonymous

    Shannon, I agree with Rachelle, stay on the little balances first. You will see results faster and will give you encouragement to keep going. If you want to drop 50 pounds you have to do it a little at a time to see the end results. Good luck, it will work out.

  76. Anonymous

    I would sell the Acura and the Mustang and get a couple of cheap, but reliable vehicles. They are out there. Have a mechanic check it out before you purchase to ease any fears you may have. You may want to move the 401k loan to the front of the list but I would stay in the condo while you work on the cars, cc and 401 and student loans. Don’t worry about the mortgages yet. They are huge in comparison and not your real problem. You are driving cars you can not afford. There is no reason why you can’t stay in a 2 bedroom 2.5 bath condo with 3 or even 4 people. Work on paying off your smallest debts first, then you can reanalyze the condo when you get there. The market may be turned by then and you can sell to break even or you can sell for a loss at that time, knowing that the money you know have available from the snowball is ready to attack the condo debt. You don’t say how much the total amount that you have paid off is but your progress looks good for the first year and seven months. Stay on target, focus, and look for where you can cut back even deeper. That’s great that your wife is home with the baby, but you need to look at cutting back in areas like cable tv, internet, shopping, “nice” cars to make up for the loss of income. You can do it! Don’t give up hope and don’t loose focus. Make a chart to mark off progress as you go. Use consignment shops for the baby’s clothes and such. They really don’t need to cost a lot of money, and your wife is already giving the baby all the best of what she has – her time.

  77. Anonymous

    Shannon. Trust your instincts. I think you are right about your approach. You might think about repaying the 401K loan first. That is an accident waiting to happen. Good luck. The end result will be worth it.

  78. Anonymous

    Need advice….I started the Dave Ramsey plan in March of 2009. So it has been about a year and 7 months for us. We paid off 7 credt cards and a 2006 Mustang. I have to still pay off an Acura that I owe about 7500.00 on and a credit card I still owe for because of my taxes. It is about 3000.00. Okay I have about $9300 in student loans and $5000 in a 401K loan….I know the 401k loan was stupid! 3 months ago we had a baby boy. My wife is not working now and I will make about 70,000 a year gross with just me. I owe a first and second mortgage on my condo which is about 138,000. I am under water in the condo. They are going to about $100,000 new right now in my development. Mine is worth about 100,000 if it were to sell right now. I want to get out of the condo really bad because it is a 2 br and 2.5 ba and we will grow out of it rather quickly. Sold I start to pay off that second mortgage faster? Or should I continue to pay off the smallest debt first like Dave says. I am leaning toward sticking to the plan but that means I stay in the condo for a long time unless the market picks up soon so I am not underwater as much.

  79. Anonymous

    I just want to save Dave Ramsay is King!! We started his plan in 2/08. It took us till June 2008 to save 1000.00 in ER fund. My husband and I have paid off 48,000.00. Our home is now free and clear. (NO Worries about the housing market at my house) Free and clear autos etc. Our annual income is 40,000.00 we are now working on our fully funded ER fund. Granted there were a couple of deviations from the plan, but all in all, IT WORKS!! WE’RE DEBT FREEEEE!

  80. Anonymous

    Pass the rice and beans! Dave’s strategy involves cutting out all non-essentials. If you aren’t able to see short term benefits, it’s very difficult to stay motivated.

  81. Anonymous

    If we were talking about math only, then no one would find themselves in this mess in the first place.

    It was not math that got people into debt, therefore, it is not all math that will get them out. It is psychological. The point of the snowball is so that you can get some quick wins before you hit the mountains (the largest debts.) This gets motivation and momentum.

    If you were driving an 18 wheeler with a 70,000 lb load, its a lot easier to hit that large hill at the end after you have gained momentum from the previous one. If you started at 0 MPH right at the bottom, that would be quite a climb to get going.

    Try reading the book, then you will get it.

  82. Anonymous

    I see that you’ve already done a follow up Dave’s Good at Psychology post, but all the same I wanted to point out more of the math concepts that I feel were overlooked in this post to further the Dave’s concepts do work theories. What you are looking at is roughly $600 over the course of 26/27 months which is roughly $25 a month. That’s hardly worth the hassle of figuring which method works best. An additional $25 can easily be cut out of just about any budget. Don’t believe me? Look again. At your cigarettes, beer, dinners out, cable, internet, cell phones. I didn’t say that it would be easy or fun. But it Will. Be. Worth. It. Also not taken into account was the taking on of extra jobs and/or pay raises. When you focus on the right things like dedication, commitment, and perseverance over the math of interest rates I’m positive that Dave’s snowball approach wins every time. Drink the Kool-aid. And if that doesn’t get through to your keeping up with the Jones’ facade – Everyone’s doin’ it.

  83. Anonymous

    Speaking as someone who has worked DR’s debt reduction plan, it works. If you listen to his radio program at all, he will admit that his plan isn’t about the numbers. This plan is absolutely about psychology. Think of it in terms of weight loss. How many people give up after a week or two when they do not see any progress? Same thing applies to debt. If you see progress in a short amount of time, you are more likely to stick with it. Balloon payments and similar situations may dictate which one gets paid off first, but if we’re talking about debt with just regular monthly payments, this method absolutely works if you do it. And let’s face it. When you’re in over your head in debt, your life is RULED by the psychology of your situation. PS – Love how you describe his plan as a “scheme”. Dude, there are so many scheming debt reduction companies out there who steal thousands of dollars from people already in trouble. Dave Ramsey is not one of those people. We worked his plan by simply paying $20 for a book. I hardly describe that as a scheme.

  84. Anonymous

    I understand the point of paying off lower debt first. If that works, fine. I currently am paying off a loan just as soon as I can. It has a lower interest rate but a balloon payment if not payed off by a certain date. So I am sticking with paying that off. I am paying the higher interest payments at a slightly faster pace. It is working for me.

  85. Anonymous

    I have taken the Dave Ramsey’s course about 2 years ago. I also had a problem with paying based on lowest balance rather than the highest interest amount. My main thought would be to do what works for you that you really believe in. Just do it….. Nothing works if you do not do it. No easy out just make progress and if you want to chart your progress if that gives you a good feeling and encouragement to continue then that is the way to go.

  86. Anonymous

    Dave does not suggest that you pay lowest interest first. He says to pay off the account that you owe the least amount of money to first. If you owe the least amount of money to the account with the lowest interest well then you would be paying off the account with the lowest interest, however, you could owe the least amount to the highest interest rate also. Point being…pay off what you owe the least amount of money to. Example. Visa $5000 12% interest, MasterCard $2000 22% interest, American Express $500 6% interest. You would pay off American express first, then MasterCard, last Visa. This way you see yourself making progress and dont give up easily. It’s psychological and works! Try it.

  87. Anonymous

    I may not agree with Mr. Ramsey but this suggestion is more to do with psychology and realizing success than real math. Nothing motivates people more that seeing short term wins.

  88. Anonymous

    Gonna be short..as formentioned comments have stated…check out when site got established and when …this chris guy started personal financial counseling 2005…funny been at it myself 30 years mostly on recieving end and met over 500 advisors 10x’s that many in debt over their heads…not all loosely controlling money as chris inferred…sometimes life just sucks!! ask half of the fortune 500…this chris guy has 4 years exp…not a multilmillionare most of which have failed multiple number of times and do not BRAG they are rich…end state go pay off some bills and dont listen to chris’s plug for the book he mentioned….good luck join the largest movement in the history of the US to get out of debit and remember…quote from X-Files you are not alone….;)

  89. Anonymous

    The whole point of paying off the lowest debt and moving from one to the next is to marally bring the person up. they are in debt and probably morally down. seeing a debt being cut down can slowly bring a person down. Dave ramseys methods work. ive seen them work and people come out on top. what your saying makes sense, but dave ramseys way is better. hands down.

  90. Anonymous

    Paying off debt depends on ones financial income and types of loans. I think it is better to pay off the higher interest rate loans, if possible, first. But this isn’t always the case. The person or persons’ who are paying the debt off may have variable interest rates that have to be paid sooner than fixed interest rates, due to length of loan and maturity. In this case you may have to pay those off sooner or face a large payment at the end of your loan agreement. So each individual loan for each person or persons’ should be evaluated first. Highest to lowest may not always apply.

  91. Anonymous

    Either the writer made a mistake in their words, or they made a mathematical error on the Ramsey scenario. Once paying off the car, the indebted person would have 750 to put on the Visa card, not 600 as stated. Thus, rework the math and Ramsey may just be the winner on time (should shorten the visa payoff as well as the MasterCard) and money paid (less money paid on interest).

  92. Anonymous

    The point of paying off the lowest balance first is to keep momentum going. IF you had read his book, you would know this. The idea isn’t the perfect way, but it’s a way that gives you inspiration and the motivation to continue and succeed in paying off all of your debt. IF you have the motivation to keep going for a year or whatever it takes to keep paying down the major balances, good for you. However, most people won’t after a while.

  93. Anonymous

    I have read quite a few of these comments. I think the saying: “me think thou doest protest too much” (forgive me if it isn’t exact) certainly does apply to this Chris character. He contradicts himself and tries to convince us he is rich. I have never known a wealthy person that felt the need to say he/she was wealthy.

    Also, the arguments saying Mary’s way only saves $X are foolish. If her way saves money then it is the better way, plain and simple.

  94. Anonymous

    Hilarious to read so many ridiculous comments.

    Chris, the things you are saying in this forum are completely absurd.

    “If I had taken Dave Ramsey’s advice, I would not have been able to pursue my chosen career, and to be honest, I’m not good at anything else. So I would have probably ended up in a $50-100k job, if I was lucky.”

    Dave Ramsey doesn’t tell aspiring doctors or lawyers to choose another career if they can’t pay for school with cash. He has always made it very clear that if you are going to spend a lot of money on education you better be earning a high income after school.

    As for credit cards, the bottom line is that no one has ever gotten rich using credit cards. Rich people might use credit cards, but the cards didn’t make them rich. I love how people like you really think they have it figured out. Have fun with your little cashback bonuses and a free airline flight once every 2 years.

    “There was the story of a man who visited a tourist shop on a Caribbean island, and bought a t-shirt for his wife. The price in US$ was something like $15. He paid for it with a debit card. After he got home, he realized the charge came through with the local currency applied, which was around 2100 whatevers, and $2100 was withdrawn from his account. The man contacted the shop owner, the police where he lives, the police where the shop is, and his bank. He was unable to recover the funds, and his wife now owns a very expensive t-shirt! Now this story would have had a completely different ending had this man used a credit card.”

    I love that you dig up some wacky anecdote about someone getting shafted by their debit card with a $2000 tshirt purchase. Right, Chris. Screwing people over is one of the main drivers of the credit card business model. The fact that you try to argue that credit cards give you so much better protection is laughable.

    “When I am spending my money, I prefer to be the one with the power.”

    Our sophisticated financial hero Chris strikes again. Yes, borrowing money puts you in a position of “power”.

    Seriously, Chris. If you have no idea what you are talking about it’s better to just be quiet.

    What an idiot.

  95. Anonymous

    As long as you are moving down the path of getting debt free, the difference in interest is probably not enough to matter. Credit card interest is high, but having a low interest rate on $50,000 is probably worse than having a 29% rate on $5,000. Personally, I would rather pay off the smallest and get rid of it than to screw around with a bunch of bills.

  96. Anonymous

    Dave knows that it’s more about behavior than math, that the process is 90% mental. That’s why Dave’s teaching is effective and now very popular while you apparently are…not.

  97. Anonymous

    If you really listen to Dave Ramsey there is flexibility in his plan. I have heard Dave on his radio program discussing paying off the higher interest rate first if you want to. I am assuming thats why he calls is program an outline, you can deviate from it to suit you needs.

  98. Anonymous


  99. Anonymous

    If you are using a debit card and use credit vs debit, the ONLY advantage you might gain by float is the fact the the majority of credit transactions are batched out at the end of the day and sent to the bank. So if you use the debit card as a credit on a Friday, you might not see the charge show up until Monday or Tuesday, but if your balances are that low, you still run a risk of overdrawing the account because you won’t see the charge show up as pending. I see debit charges almost immediately.

  100. Anonymous

    I’m sure someone mentioned it in the hundreds of comments before, but Dave Ramsey admits that his math doesn’t pay it off the fastest or cheapest. But it’s not about the math to him (I think he says something like it’s only 5% math – maybe 20% – something small). But it’s about changing behavior and having small, motivational wins along the way.

    In the end, it’s “personal” finance. Do what will work for you. Sometimes trying to save 1/2% on $5,000 over the course of a year by listing them highest interest rate first derails you and you end up paying more overall because you don’t pay them as fast. Do what works for you. In the end, unless the differences in interest is huge (or the amounts can’t be paid within a few years) it’s only going to make a slight difference in time and money. Getting out of debt is the important part.

    No need to overthink it. If you need the motivation do smallest amount to largest. If not, maybe the highest interest rate is right for you.

  101. Anonymous

    If you was this smart to figure out all these ratios rates and which to pay first you wouldn’t have gone into debt in the first place. Stick to the smallest balance to the largest. I did it and it works just fine and very quick.

  102. Anonymous

    I believe the technical answer to your question is that Visa protects you at least as long as you don’t do a pin transaction, which seems to mean that if they ask “debit or credit” you say “credit” even if you are using a debit card – here is more info for you – http://usa.visa.com/personal/security/visa_security_program/zero_liability.html#anchor_2

    Accorind to Visa:
    Use your Visa credit or debit card to make purchases at millions of locations. Visa will always protect you from unauthorized use.

    But the mechanics of the “hold” and other debit card issues may be an issue. I would try to budget so that you’re never at the point where you’re only a few hundred dollars from disaster – hold or not.

  103. Anonymous

    I really dont understand how people like this chris guy up top ever come up with the ideas they have. If you spent as much time dealing with your own life maybe you would become something and not just a broke man with ideas that only the rest of the broke americans would go along with. On the whole debt card or credit card issue first off ANYONE will spend more if its on credit. And for the issue of the withdraw that guys bank must have been as dumb as you because i have never had a bank that would not call me if this amount had been requested for one transaction at a store

  104. Anonymous

    Technically your method is better . . . but if you are such a math genius then you would quickly analyze that getting into debt with credit cards is just plain stupid! Dave’s method involves knocking off small debts first to gain some momentum and then using that momentum to attack and knock off the big debts. It is a tried and proven method and has worked great for me.

  105. Anonymous

    How many people have you gotten motivated to get out of Debt using the method you speak of??? Small victories and baby steps is what I needed… I looking at the BIG PICTURE…

    I agree with Dave’s more because one small victory gives you more hope to climbing out of debt.

  106. Anonymous

    In the reference to the comment that Chris made on July 8th about not having the protection in the debt card as you would on a credit card. Go to Visa and Mastercard.com… you would see in both sites that the visa and mastercard debit cards offers the same protection as the reg. credit card offers. Credit cards however if you call the fraud department and report an over charge and or fraud, they treat you like your trying to steal from them. As far as a debit card from the bank lease my bank they have no problem refunding the money back into my account within 24 hours. I have deal with this in the pass. Also i travel all over the states and mexico and have far less problems with a debit card…Credit cards are like snakes, play with them enough you will get bitt

  107. Anonymous

    I see where the mathematics that this guy is writing about where pay off the high interest loans first is a good way on paying off debt but the Dave Ramesy affect works better due to the boost and excitement that a person gets when there paying off the smallest debt first. If we was all doing math in the first place we would not be geting into this debt mess…hmmm something to think about.

  108. Anonymous

    People get into debt because they adopt an innumerate, feel-good approach to spending. Dave Ramsey advocates an innumerate, feel-good approach to debt management. You can see it here in the comments: The Ramsey followers don’t see the value of paying off debt one month early, or saving $600 over the course of several years. They dismiss it in the face of the good feelings they get from knocking off smaller debts first. Their behavior may have changed, but their thinking is still pathological.

  109. Anonymous

    I agree with you financially speaking, but from a motivational standpoint, it is really hard to feel like you’re making a dent when your balance on your highest interest rate (7% private student loan) is $24000, and your balance on your lowest interest rate loan (4%) is $3700. Try feeling like you’re putting a dent in your debt when it’s $24000, and accruing $100 in interest every paycheck. It is much more intrinsically pleasing to slap $1000 at your little loan for 4 months, and then have a little celebration (and reinforcement) before tackling the big, takes-2-years-to-pay-off $24000 loan.

  110. Anonymous

    Don, contrary to what Dave Ramsey will say, no it is not. When using a debit card, you have given up all your power if you are not satisfied with the product/service you paid for. Also, if it’s stolen, the money is gone from your bank account until you can convince the bank that you’re not the one who withdrew the money.

    There was the story of a man who visited a tourist shop on a Caribbean island, and bought a t-shirt for his wife. The price in US$ was something like $15. He paid for it with a debit card. After he got home, he realized the charge came through with the local currency applied, which was around 2100 whatevers, and $2100 was withdrawn from his account. The man contacted the shop owner, the police where he lives, the police where the shop is, and his bank. He was unable to recover the funds, and his wife now owns a very expensive t-shirt! Now this story would have had a completely different ending had this man used a credit card.

    I don’t even have a debit card. It’s credit cards all the way for me!

  111. Anonymous

    Hey,…like comments but need to know if using debit card is as safe as credit cards? I keep a sizable amount in checking account to pay bills, ect.

  112. Anonymous

    Ever see that movie where Richard Pryor is about to inherit a huge amount of money? But he has to spend 30 million in 30 days and have nothing to show for it?

    Dave Ramsey’s method, while maybe costing a wee bit more “mathmatically” is working you through a debt removal discipline that makes you HATE debt. Makes you never want to have to do that process again. Provides the small victories first to make sure people can stick with it rather than fall under the spell of living on credit cards.

    As with all discipline – it doesn’t feel good, creating the new habits is a hard process… but the end result is very well worth the small amount of extra cash – a lesson well worth the money!

  113. Anonymous

    Great article that is very thorough and simple. In the end I still agree with Dave Ramsey.

    “Debt is the symptom, not the problem”

    Behavior is what you’re trying to save. Though in the case of paying the higher interest is mathematically better if you have 100% self control, those in extensive debt do not have 100% self control.

    The Ramsey method addresses the behavior better than than the higher interest approach.

  114. Anonymous

    The student loans were necessary to get me through college, med school, my internship, residency, and fellowship. During the latter years I earned a very small salary. If I had taken Dave Ramsey’s advice, I would not have been able to pursue my chosen career, and to be honest, I’m not good at anything else.
    Dave’s advice is for 95% of Americans. Let’s face it, medical school is very expensive and the person has to go through a lot. You had a large amount of debt that wasn’t getting paid but you managed to get through to the end goal. But there are plenty of doctors that don’t pay off the debt before buying the big house and stay in debt for years. Earning 700K puts you statistically in the upper 2% of Americans. I agree this isn’t Dave’s audience and I bet very few listen to the show. Many people end up dropping out of medical school with huge debt then have no way to pay it off. Dave really goes after the people that go to private school to earn a degree where you can’t get a decent job and come out with 100K worth of debt. Or the law school student that wants to do pro bono work making 40K a year with 120K in student loan debt. I would be easier to delay law schools and work while going to law school than medical school since residency and all of that consumes your life.
    Based on Dave’s callers, they are average to above average earners that get sucked into the consumer culture. Doctors and Lawyers have called in and are 400K in debt on school loans and go out and buy a house. Technically using a credit card is debt because you have to pay it back at a future time. Those that can pay off the balance every month are a small amount of the population and those are the same responsible people that get screwed by the irresponsible. You and I are part of the responsible crowd, but I know plenty of people in my income bracket that still don’t have a clue and lease cars and don’t have a financial plan.

  115. Anonymous

    Jeff, for those who can handle the responsibility of a credit card, no rationalization is necessary, because there’s no negative side to it. Another positive side, besides the convenience and $$ back is that it puts the buyer in the position of power. If I buy something that doesn’t work when it’s delivered, I can return it because I have all the power, not having paid for it yet. Once it’s paid for, the power goes to the seller. When I am spending my money, I prefer to be the one with the power.

    As for your question about my statement about financial suicide, I have posted earlier that I took out student loans to get through school – my goal was to become a specialist that earns $700k+/year. The student loans were necessary to get me through college, med school, my internship, residency, and fellowship. During the latter years I earned a very small salary. If I had taken Dave Ramsey’s advice, I would not have been able to pursue my chosen career, and to be honest, I’m not good at anything else. So I would have probably ended up in a $50-100k job, if I was lucky. But the debt is long gone now, and my earnings continue on.

    As for the demographic I was referring to as Dave Ramsey’s target audience, it’s obviously those with debt who are having a hard time paying it off with the income they have available. The rest of what you said are your thoughts, not mine. It doesn’t matter if the person’s income is $20k/year or $2M/year – if it’s insufficient to pay off the debt, there’s a problem (and perhaps a need for Dave Ramsey’s advice).

    Do I look up to ther person making $1M/year who has a negative net worth? No, I don’t look up to that person nor do I look down at that person.

    I have no debt of any kind, but still know what it’s like to have few resources to get by with. I’ve ‘been there, done that’. I feel empathy for folks in that position, and if Dave Ramsey’s ‘teachings’ helps them, that’s great! But the advice is not good for all. Some of Dave Ramsey’s black and white opinions of credit cards (and perhaps debt in general) are wrong for many, many folks. Just because a person uses credit cards does not mean they are in debt. It is only debt if the person is using the cards to delay payment.

  116. Anonymous

    Chris, which financial/career demographic are you inferring? Rich people that make millions declare bankruptcy all the time, people that worked as janitors have left millions to charity. How is it financial suicide to stay out of debt and to actually save money? You can make $1,000,000 a year and have a negative net worth. Is that the kind of person you look up to? Feel free to use credit cards. 50% of Americans are overweight. If someone was on the radio getting people to lose weight, you would probably eat a bag of oreos in front of someone trying to lose weight. Dave’s methods work for those willing to commit to the program. We don’t put our budget on paper, but we also don’t have any debt, paid off our house and bought a 2010 car for cash a few months ago. Why would I want to pay off a car over 60 months when I can purchase it now. I don’t have to worry about the car being repo’d if I lose my job. Yes, there are many people that have no financial clue, but most people stay in debt their whole lives and credit cards are just one tool that keeps them there. Nobody NEEDS a credit card. We rationalize the convenience aspect, but really, how much time does it save? A few minutes a week? Any bill can be auto debited or paid online.

  117. Anonymous

    Rick, you make a very good point, and I think we’ll see annual fees pop up more and more in the U.S. I’m an avid credit card user and have been all my life, and don’t have any intention of stopping the use of credit cards to pay my day-to-day expenses. Love the convenience and rewards $$! However, I am unwilling to pay even a penny in order to use credit cards, so when the banks start charging an annual fee, I will cancel the credit cards.

    Jim, if Dave Ramsey’s plan works for you, then you should certainly stay with him. Ramsey’s plan would not have worked for me in any sense of the word. If I had followed his advice my financial situation would be drastically different than it is today, and not for the better! He caters to a clientele with a certain financial/career demographic, and for those folks he gives great advice. For those outside his target demographic, his advice would be financial suicide.

  118. Anonymous


    I guess most of you guys live in America and I don’t know the entire story but in Australia, using Dave Ramsey’s method makes more sense mathematically. Most of the credit card companies charge an annual fee and a lot of unjustifiable amounts as long as you keep the credit card with you. So, it just makes sense to pay the ones with the lowest balances,close it as soon as possible and get rid of the annual fee once and forever and apply that money to the debt with the second least balance and so on. Dave Ramsey’s method is indeed very motivating and provides a good boost of morale.

  119. Anonymous

    It’s been over (5) years since the first post, and folks still feel very strongly about both sides of this. I love the nay sayers especially; why don’t you go away and use your liberty for something else! Gotta make a point, look brilliant, bla bla bla….. I have an uncle like that. We all hate him. Go Dave! And may God bless the United States of America!

  120. Anonymous

    If there is only 1 person, then self control it is, but when it is two people. the quick victories help get the other person on board and gain momentum.

  121. Anonymous

    I think Dave has seen his day. He has a very narrow offering, and it’s been exhausted. My guess is that he’ll do a lot more FPUs in churches, and of course he has his radio gig for as long as that lasts.

  122. Anonymous

    Good thing I didn’t upgrade and get Fox Business News to watch Dave. I think FBN will lose a ton of viewers. I guess the world is debt free now.

  123. Anonymous

    You do realize his system is INTENDED to be this way. If you have spent any time listening to his show you no doubt have heard a call from someone saying much the same of what you’re saying.

    The point of Dave’s system isn’t in the math, it’s in the personal momentum and drive to actually become debt free. He freely admits his system isn’t the most efficient use of money, but what it will do is let people see what is happening and drive them to continue, to see the progress.

  124. Anonymous

    Dave Ramsey markets to a financially unsophisticated audience, that needs that proverbial shepard. He has his niche of sheep, just like Bernie Madoff had his.
    Bernie Madoff was a crook who stole people’s money. Dave is showing people how to get out of debt. I will be one of those sheep any day. There is no advantage to going into debt except for the house, and even then tons of “sophisticated” people got adjustable rate mortgages and bought too much house. If credit cards are so great, why are there millions of people drowning in debt? I guess the whole country is unsophisticated according to you. If Dave has such an unsophisticated audience, why is he like the #5 talk show host? I am pretty knowledgeable and I learn something at least once a week from him.

    He knows how to get out of debt and buy with cash. What is so wrong about that? His job isn’t to give investment advice. He isn’t a lawyer or an accountant. All he says is to investigate good mutual funds with a track record. There are plenty of people that don’t have to have 24 mutual funds. Many people can get by with about 6 funds.

    There are plenty of overweight people and if there was a person on the radio that helped people lose weight by telling them not to eat more than expend, is that a bad deal? Same with money. You can’t spend more than you make.

  125. Anonymous

    The bottom line is how many people has your plan gotten out of debt and how many has Dave gotten out? Also, most people fall off the wagon in a matter of weeks, like people stop dieting. You show me how many people you have gotten out of debt and it will pale in comparison to Dave’s.

    Living like no one else, so later I will live like no one else.

  126. Anonymous

    To the post left by Don:
    I went to go see Dave Ramsey in person today at the Deltaplex in Grand Rapids MI. What a rip off. They over sold tickets, people were sitting on the floor with no chairs. There was not enough parking in the parking lot of the Deltaplex so there were hundreds of cars parked in area business parking lots for blocks. When we took our first break they announced that anybody parked in an area business parking lot would be towed if they didn’t move their cars. We asked workers and even a local police officer where we can park and we were told that there wasn’t any place to park in the area that you wouldn’t be towed from. We asked for refunds and they only said that they don’t refund ticket sales. So there were hundreds of people that had to leave after hearing just 1 hour of Dave. Any good Christian person would have made sure that there was ample parking and seats at a location before holding an event there. This leaves a very bad taste in my mouth and I am sure that I am not the only one that feels they were conned out of the price of admission.

    My question is did you call the Dave Ramsey show about this problem? I am not saying it didn’t happen but what steps did you take to get your money back from the people at the show? I bet they didn’t even know about the issue. One thing I take issue with is the fact that you state that good Christian people will not hold events with no parking. Christian people make mistakes just like everyone else. The key is not to be a complainer but someone who says I know that they made this mistake but I will contact someone so at least they may not make the same mistake next event with the parking.

  127. Anonymous

    Dave Ramsey markets to a financially unsophisticated audience, that needs that proverbial shepard. He has his niche of sheep, just like Bernie Madoff had his. I don’t take as much issue with his debt advice only his investment advice.

    His demonization of credit cards simply shows how base and myopic his advice is. Credit cards are not bad; irresponsible use of credit cards is bad. I receive more consumption based benefits from credit cards than I ever could with cash.

  128. Anonymous

    Personally I have taken a slightly morphed approach to my debt. I too have done Ramsey’s Financial Peace University and loved it. I am a nerd, so when I looked at the debt snowball from a mathematical point of view it did not make sense. However, when I took Nickel’s approach I became so frustrated (because debts were not being paid off quickly) that I stopped all together. Ironic, isn’t it that the psychological effect can be so strong that you would step away from the very thing that would solve your emotional woes.

    What I did instead was to take the few smallest debts I had and paid them off starting with the one with the highest interest. Once those were paid off I grabbed the next smallest set, and so on. That way I was still doing things mathematically, which appeased the logical part of my brain, but I had those small victories too, which appeased the emotional part of me.

    Ironically I am good at math and it was always one of my favorite subjects yet I failed to apply it to my life. Instead I took the Tim Taylor (Home Improvement – perhaps I’m dating myself mentioning that) approach to life where I learned life lessons by doing ALL the wrong things first. Oh well. Thankfully I can say that I am not far from being completely debt free, which is a wonderful comfort.

    Hey Nickel, I’m curious if when you posted this article 5 years ago you thought it would produce so many responses, especially so many from people who do not seem to read the whole article. This was a good article, thank you for showing your point of view but not discounting the other side. And BTW, I do appreciate the tongue-in-cheek title.

  129. Anonymous

    @Chris, the majority of parents/students don’t do any kind of research into the job the kid wants to have with the cost of college. Many people pay way too much for school for a job they could have gotten from a cheaper school. It isn’t the school that makes a person smarter. That person already has the traits to become successful. I know plenty of people that are wealthy without going to a private college or spending 100K to go to school. You did well probably based on who you are, not the school you went to. Going to TCU or SMU or University of Texas for the same degree will probably result in the same career path with minor exceptions of how well a person networks while in school. There are thousands that graduate from state schools that go onto be successful as well as those from private colleges. The reality is, why saddle yourself with an extra 50K in debt if you don’t have to.

  130. Anonymous

    Just read Mary’s comment of March 15th. If you happen to read this Mary, I’m sorry that I put you on the defensive, it was not my intent. I was speaking in generalities, not about you in particular. But it’s obvious you are not able to have a discussion of differeng views without feeling slighted in some way.

    It all boils down to common sense and the self-esteem to not feel the need to face outward with a financial picture that doesn’t exist.

    And Mary, I am not on my way to being a millionaire, I’ve been there for quite awhile. I used credit cards all along the way, and still do. If I had followed Dave Ramsey’s advice, particularly the ‘state school / no student loans’ advice, I would probably be making 10% of the income I now make. His advice is not good for everyone, not by a long shot.

  131. Anonymous

    Your lead in is very misleading, Mr. Ramsey’s plan seems to me to be right on, and your last line in your article says it best,

    “But for people with sufficient self-control, you can do better by paying off debts from highest to lowest interest rate. Then again, maybe people with self control don’t get into debt in the first place…”

    I have just started reading and applying Mr. Ramsey’s theories and I find if I had followed his simple clear-thinking plan years ago I would not have been reading your article, I would be enjoying life instead of looking at another ten years of working, while am now at the age of 63. :(:(:(
    Buddy Clark, esquire

  132. Anonymous

    Shannon, if you are going to sell the condo, why pay down? Why not just save the money in a separate account? Even if you are underwater, you will still need to come up with the cash? How long until you sell the condo? I guess if it is more than a year, paying down the 2nd is fine.

  133. Anonymous

    Well I love the comments. As of now a little over a year later I have paid off a total of $21,000. I have all of my credit cards paid off (6) and I paid my wife’s Mustang off. Her payment alone was $386.00 a month. It felt so good walking into the bank to make the last payment……..Now I am going a little off the path of Dave Ramsey and I will start to pay off my 2nd mortgage to my house early. To me it makes the most sense because I want to sell my condo as soon as possible because I have a baby on the way. I owe 26,500 on it and the interest rate is high at 9.5%…..But it is still paying off debt….Amen

  134. Anonymous

    So the overall differene is less than $1,000. The bottom line is the debt is gone and now that $1,000 can be invested. 72 months is a steep price to pay for going that far into debt. It didn’t just happen overnight so the debt won’t go away overnight.

  135. Anonymous

    It’s not a math thing, it is a getting rid of a whole debt company thing. People are overwhelemed with 20 different payments. Getting rid of a debt helps relieve the stress. Dave admits it isn’t the best way math wise, but if you are committed to getting out of debt, it won’t cost that much more. If you are getting out of debt, use whatever method you want. Just get out of debt.

  136. Anonymous

    first- I don’t drink coffee
    second- I don’t have any debt
    third- so glad you are out of debt, no home mortgage, and on your way to becoming a millionaire.
    fourth – interesting that you would ask me how credit card companies had a role in any of this, accuse me of not acknowledging greed, then state mortgage companies (same banks who own the credit cards) as the ones still at fault, and acknowledge that ccc’s were at fault as well.
    fifth – do you just want to be right, even though you may be wrong?

  137. Anonymous

    Interesting perspective, Mary. But it addresses the situation after-the-fact. What got us in to this financial mess to begin with was banks offering mortgages to people who couldn’t afford them, and of course we had to have those people who were taking out those mortgages, knowing they didn’t have the means to make the payments. The banks didn’t care that the mortgages were bad because they sold them to Wall Street, which then bundled them in to securities. The homeowners didn’t care because they were either 1) very bad at math, or 2) just looking to live the ‘high life’ for as long as it lasted.

    Then there’s the credit card usage. Yes, as people charged up balances that they couldn’t pay, the credit card companies (banks) boosted the interest rates. But it was the cardholders who ran up those balances, not the banks. The interest rates on my 3 credit card were bumped from app. 12% to 18%, and finally to 23%. It meant nothing to me because I didn’t owe them a dime.

    What you don’t seem to be acknowledging is the cultural influence of hedonism and greed that fueled this whole mess, and it was on the part of the consumers just as much as the bank execs and mortgage brokers.

    The lesson learned for all of us is that if you can’t afford it, don’t buy it. Use those math skills when contemplating a purchase, be it a home or a Starbucks latte. Culturally we needed to be brought back to basics, or at least brought back to what we can afford.

  138. Anonymous

    And furthermore Chris, BAILOUT!!! Repeat after me BAILOUT! Money the government used (that they did not have that you now get to give, not loan, the government) to helped them get Credit Card companies out of their HUGE debt. Sounds pretty financially smart and savy of those Credit Card companies and the government. But lets see if they pay it off by starting with the one with the highest interest rate first, they might save a couple hundred bucks. Look how better off they will be by using good math skills.

  139. Anonymous

    Gee Chris,
    Have you read the fine print on your Credit Card? They are owned and distributed by some of those big banks that offered sketchy mortgages that needed bailout money. Chase, Citibank, Bank of America, JP Morgan, just to name a few. But they must be so much better at their handling of their Credit Card distribution which is why the government had to put regulations on their interest change abilities and who they can even offer a credit card to. Maybe my dog can help them get out of debt with his credit card offer to borrow money at 23% interest rate that he received in the mail just last week!

  140. Anonymous

    Mary, banks contributed heavily to the market plunge via their sketchy mortgages, but I’m curious as to the role credit card companies had in this?

  141. Anonymous

    Seriously people! Have you missed the last few years of the economy plunge due to banks and credit card companies? I repeat banks and credit card companies have screwed you all! So who gives a flip on how you should get out of debt, why the heck did you borrow from these thieves in the first place?

  142. Anonymous

    I gotta tell you that being married to an accountant, I let her handle the finances while my “job” has been to earn for the last 20+ years. One thing the Ramsey book did for me is to get me more active in our finances. I was the “free spirit” in the marriage and am learning how much stress I’ve put on her over the years with my poor spending habits. As someone said in an earlier post, debt is an addiction and I’m using the Dave Ramsey method to break that addiction. By the way I’m an electrical engr and an mba, so I’m not dumb. But I’ve know addictive personalities (drugs, alcohol, gambling) throughout my life and I certainly have some similar traits. Time to cure my “stuffitus”.

  143. Anonymous

    Great article. Very concise and indepth. Actually helps those of us who can’t be bothered or don’t have the intellect to do the math. Very helpful. Honestly before reading this article I would have automatically gone for paying off the higher interest rate debt where possible. But I understand the behavior concept. Makes sense and would probably help quite a few.

  144. Anonymous

    I paid all 7 credit cards off with Dave Ramsey plan. My next debt was the Mustang. I am almost done paying that off as well. All the credit card payments added together was $167 a month. Since I paid them off months ago I don’t have to go through the higher min payments and interest rates adjustments. I am happy I found out about this plan back in March of 2009. God Bless guys on your journey

  145. Anonymous

    I’ve just started following Dave’s plan to pay off over $50,000 in debt. I’m going to snowball the highest interest cards first as it makes sense and saves me thousands of dollars.
    I think Daves plan is good for some people, but it wouldn’t suit everyone. But it’s better than just feeling overwhelmed with trying to sort out the mess and not taking any action, which is how I have been feeling.

  146. Anonymous

    I forgot to mention that for some of us future employment could be an issue. With everything happening now we should try like hell to do what we can while we can. If you choose the higher debt to pay off then you could be setting yourself up for not getting enough done in the event something happens with your job. The primary reason I feel the snowball is the best for me…. for every debt I pay I feel I will have less to lose should something happen with my job. Just a thought.

  147. Anonymous

    This month I went ahead and tried the snowball as mentioned above….But I paid a little extra on the highest credit card as well. Not too much but more than required. I am determined to live debt free. Who really cares who is right or wrong… Just do something.

  148. Anonymous


  149. Anonymous

    Tito, I have listened to the whole picture – watched many of his TV shows and read his book.

    “If the person who was in debt was actually doing math, they wouldn’t have gotten themselves into that mess of debt that this is talking about.”

    Read the sentence you wrote again (and I realize it’s a Dave Ramsey quote), and read it carefully. When you do, you will understand the ridiculousness of the statement. If a person wasn’t ‘doing the math’ when they got themselves in debt, does that mean they should continue to not ‘do the math’ while getting out of debt? In other words, the person should continue the bad behavior that got them in debt to begin with? Probably not the best strategy!

  150. Anonymous

    This article is ridiculous to critisize Dave Ramsey for one reason and one reason alone. If the person who was in debt was actually doing math, they wouldn’t have gotten themselves into that mess of debt that this is talking about. You took a small portion of what Dave talks about and twisted it. Dave’s Financial Planning is 13 solid life lessons, steps, & goals on how to excel. I find that most people have something to say about D.R. when they haven’t taken the time to listen to the whole picture. Stick to the issue: Most are in debt and never learn how to handle money. BTW; THANX DAVE, I’M DEBT FREE NOW!!!!!!!!!!!!!!!!

  151. Anonymous

    Rebecca, you may want to pay closer attention to what Dave Ramsey says before you accuse others of not listening. He says on his show that finances are 80% behavior, not 99%.

    If I were in debt, I’d choose to pay less overall than to pay more just for the illusion that I was making more progress by paying off the smaller balance cards first. I prefer to deal with the reality of the situation than to try to trick myself in to a false sense of accomplishment.

  152. Anonymous

    Dave Ramsey isn’t bad at math, you are bad at listening. Unless you don’t listen to his show, in which case you really don’t know enough about his system to pass judgment on it.

    I’m sure someone else has already mentioned this, but Dave Ramsey has said before that his way makes less mathematical sense. He says that finances are 99% behavior, and that his method works because it allows people to see small gains almost immediately. They continue because they see these gains. Seriously, call up to his show and ask him about this yourself before making a snarkily-titled blog on it. 😉

  153. Anonymous

    Interesting subject!

    I will post later in the year with any/all (if any) progress on the snowball!

    I don’t want to master math, I want to be the master of my income…

    I wish more people would engage in this type of discussion. We have let banks and credit card companies manage us for far too long. I think the basic problem is “wants”, not needs… we have all gotten too greedy.


  154. Anonymous

    Interesting subject!

    I will post later in the year with any/all (if any) progress on the snowball!

    I don’t want to master math, I want to be the master of my income…

    I wish more people would ingage in this type of discussion. We have let banks and credit card companies manage us for far too long. I think the basic problem is “wants”, not needs… we have all gotten to greedy.


  155. Anonymous

    Dave says (and I agree) that you attack the debt smallest to largest (balance) to get some early successes and help stay motivated. If you try going after the largest debt first because the interest is higher, it will take you longer to pay it off and see some results for your efforts, and you will likely give up. Dave’s plan does work, but it’s not an easy button. It takes loads of time and effort.

  156. Anonymous

    A lot of great comments here; it looks like we can all agree that if we don’t take care of Today’s financial concerns (debt, spending habits, savings) we wont have a “Financial tomorrow” or Retirement.

    There is a time to be “unbalanced” in order to correct a behavior and/or attack the debt, then re-adjust to bring balance into our financial picture, setting aside savings for immediate needs while simultaneously savings for tomorrow (401(k) et al.)

  157. Anonymous

    Phil, I agree. Taking care of one’s present life situation is more important than preparing for the future, if there’s considerable risk of losing the necessities. However, it’s also risky business to let this go on too long. Too many folks ignore retirement savings until they are in their 40s to 50s and panic sets in.

    Dave’s saying “100% of home foreclosures had mortgages” is another of his fallacies. Homes without mortgages can be and are foreclosed on for non-payment of property taxes. They can also be foreclosed on by home owner’s associations if the home owner doesn’t comply with the contract. We had one home foreclosed on in our town because the owners refused the association’s request to paint the chimney. They had a very sick child and the association’s request just wasn’t on their radar at the time. But I digress…

  158. Anonymous

    Regarding the idea of hitting the ‘pause button’ on your 401k while doing the debt snowball – I have come around to appreciate that risk needs to be factored into the equation; with a large mortgage, a hefty HELOC, and a car payment my whole financial world is at risk. If I get laid off, I could lose the house. So, my top priority is to IGNORE the 401k (for now) and FOCUS on paying off that car (did that this week), then attacking that HELOC (should vanish in less than a year), BUILD up that baby emergency fund into something really stout, and THEN shovel cash into retirement while paying down the mortgage. As Dave is fond of saying, “100% of home foreclosures had mortgages”. When I get all fancy dancy with the math, I start believing I can afford to be in debt. Thanks Dave for waking us up!

  159. Anonymous

    #527 Wes) One other thing: you can listen to his radio show for free, probably broadcast in your area. If not you can listen to it online:


    On that page is the ‘Find a Station’ link to find a radio station near you carrying the show.

    You might be better served by calling into his radio program and get free advice from the man directly. His radio program is solely about taking calls from listeners…

  160. Anonymous

    #527 Wes) Being on a fixed income does not preclude you from following Daves plan. Look at the skills you do possess, and can do from home. Perhaps you might start your own blog about your life and thoughts, while earning advertising money (GoogleAds) on the side. I would not be the least bit surprised if this blog (fivecentnickel) is pulling in a few thousand a month in ad revenue. If you are a mechanic, you could start a blog teaching people how to fix stuff (carburetors, etc). Look for things that you think the middle class ‘wastes’ money on and figure out how to get that money instead of some big-box retailer.

    Obviously you have learned the skills to go through life on a fixed income, and I can assure you, that the middle-class are looking for ideas on how to cut expenses — you can make money with that information.

    #528) My 13-year old daily-driver ‘clunker’, that I’ve owned 11 years, with 120k miles is worth $1,300 blue-book. Last year I spent $900 on repairs for the braking system, and another $50 for a new IAC. I haven’t spent any money on repairs before that (just maintenance that all cars have). Even if I have to spend $2,000 a year in repairs (not maintenance), that is still better than $3,600 a year in car payments ($300/month).

    CraigsList is full of listing for cheap/reliable cars and trucks that people can downgrade into until they are more financially fit.

    Anyway you slice it, it is better financially to own a cheaper car, than an expensive one. FYI: a friend of mine paid a dealer $6k to take his one year old BMW that he was upside down on — he traded down to a (new) truck worth a fraction of that BMW. Though he did partially finance the new truck, he still ended of freeing $700 a month in cashflow for paying down other debts.

  161. Anonymous

    #525 BG – Ok, your point is taken, but only to an extent. In your example, the person (who is presumably in pretty deep debt) who sells the car is now supposed to get an unsecured loan for $5k to cover the shortfall in the sale. That might be easier said than done. Also, once they’ve bought this $4k clunker, it’s pretty reasonable to expect there are going to be some serious repair and upkeep expenses coming down the pike soon. Is that $1k emergency fund supposed to cover that? I drive a very down-to-earth (non-luxury) car and I spend about $1.5-2k/year on upkeep – I can’t imagine what it costs to keep a clunker on the road!

  162. Anonymous


    1) I’m glad you had $3,000 to put into your emergency fund. But if I wait until next week, I might be able to start with $100, and with a great deal of luck, I might have $1,000 in ten months.

    I agree that it’s sound advice to stop using credit cards. I don’t have any and never did, so it’s not an issue with me.

    2) Telling people to generate more income is not teaching people how to save. Telling people what to do is not teaching people how to do it. It’s also not new.

    Although I will admit I have not listened to Ramsey’s radio show or watched his program, one reason being I don’t have TV and haven’t for the last 3 years. I’ll admit that my biggest problem is that I’m discouraged with his first step being “save $1,000”. That is far more than I can start out with.

    3) Dave Ramsey’s FPU class has taken the place of my Wednesday Night Bible Study. So now I’ll have to choose between going or just staying home.

    4) As I’ve already said, his teachings are aimed at the middle class. I’m not middle class. After paying bills, I have almost nothing left. I can see no way for me to generate extra income. I have no car, my furniture is in poor condition (and if I sell it, I won’t have anything for me to use). I’m also on disability, and have no way of getting even one job, let alone two.

    5) So considering everything, I think that Dave Ramsey’s teachings have no value or worth to me. It seems to me that I simply have no way of gaining financial peace.

  163. Anonymous

    Dave’s Program is NOT about Math…
    as he would say if was really about math you would not (necessarily) be in the Mess your in.

    His program is about BEHAVIOR MODIFICATION, and humans are driven more by their passions than their brains (sad but true). It’s our passions we need to modify

    Learning to live within our means not within our wants.
    Learning to live on less than you make
    Leaning to no go into debt (if you can’t buy it (with cash) you can’t afford it.

    You have two options with Dave’s Plan

    1) Work the Plan as he stated
    2) Go with your own plan (hope it works for ya)

    PepperEyes.com is a debt free company..because of Dave’s teaching…we don’t borrow money.

  164. Anonymous

    #523 Chris) I disagree completely. If someone can’t afford their car, then their best financial move is to sell it, period. Even if they have to have a personal loan for the ‘loss’, they will still be better off financially.

    If someone earns $40k a year, and drives a current value $30k car (and has a $35k loan on the car). They can immediately cut their debt on this one item from $35k to $5k if they just sell the car at a loss. Granted, they will need to purchase another car (easily for $4k or less) — so they are now at $9k in debt if they couldn’t purchase the ‘clunker’ in cash.

    If their total debt was $80k, they can easily cut it down to $54k buy no longer ‘driving in style’.

    As for the depreciating asset part of this, that actually strengthens the argument _to_ sell the car. Assume all vehicles depreciate 20% every year. Would you rather own a $30,000 vehicle that depreciates $6,000 in the next year, or a $4,000 car that depreciates $800 in the next year….

  165. Anonymous

    #519 Wes) Great list of point, if I may address each one.

    1) The first baby step (accumulate $1,000) is debatable. For us, we thought the amount too small, and went with $3,000. Basically you need enough money saved up in cash, to prevent you from using a credit card in the case of any emergencies that Murphy throws at you. If you think $500 is the largest short-term emergency amount, then go with that. Either way, the goal is to have a budget, have a small savings, and stop using the credit cards / going further into debt — and the only way to do that is to make all purchases with cash (you must have an emergency fund).

    2) I disagree — have you read his book (Total Money Makeover), or listened to his talk radio show, or watched his TV program on the FoxBusiness network? He is giving people ideas all the time. The best advice, is to figure out ways to increase your income — if that requires you to work two jobs, and sell ‘stuff’, then do that. Nobody send the road to debt freedom is easy (but I think is worth all the effort).

    3) Attending the financial peace university is not required. Even purchasing the $14.95 book is not required (you can probably find it in a public library, or have it ordered from another library). Also, churches are always hosting his classes, and I’m sure they’d help you out as well if the costs for the class is too much. I never took the class, but I have purchased many copies of his books for friends.

    4) His plan is aimed at anyone who is in debt up-to-their-eyeballs (vast majority of the US population). Most of his recommendations are based on percentages of your income (or percentages of your debt). But, as you pointed out, you think the $1,000 (BS1) is too steep. This step is really painful for a lot of people, who are drowning in debt. If you can’t amass $1k, then you need to sell assets, furniture, tools, cars, whatever — and look for ways to earn additional income. For example, the third baby step (after paying off non-mortgage debt), is to amass 3-6 months of living expenses — which is different for everyone depending on their income and cashflows.

    5) I agree, if you don’t have debt, then you don’t need to read Dave Ramsey’s book, or listen to him (or even be reading what I’m typing right now). Some of Dave’s later steps discuss investing, etc, and you might be able to find better advice elsewhere if in that stage of your life. But, if you are drowning in debt, Dave does offer a clear path with achievable goals and ways to meet those goals.

    Good luck.

  166. Anonymous

    Abraham, this is one of the many fallacies of Ramsey’s thinking. He talks about how a car is a very quickly depreciating asset, then tells people to sell their higher priced car for a clunker. So he’s essentially telling people to take that huge loss on the higher priced vehicle, then buy someone else’s already-depreciated asset.

  167. Anonymous

    I didn’t read every post. As a Dave Ramsey Show radio listener for over 5 years, I’d like to point out that Dave Ramsey would actually have told this couple in the article to sell the car and buy one they could actually afford until their debts are paid off. This would get them to the debt-free stage 9 months earlier. He believes in changing your habits–spending less than you make is “living like no one else so that later you can LIVE like no one else”. Also, if they felt they really needed to have a better car, then they should save up the money and pay cash for it, “the old fashioned way, like your grandmother would tell you to do,” (except he keeps his teeth in) 😉

  168. Anonymous

    By the way, I also wanted to add, that it seems like those who are saying Dave Ramsey are wrong, and can show that they can go against what Dave says and do it, don’t need what Dave Ramsey teaches. Individuals who can use their credit cards properly (like debit cards) and reap the benefits of them, likely wouldn’t be in the place that Dave addresses.

  169. Anonymous

    Human nature, with all its flaws, and poor self-discipline will override any attempts at being optimal in one’s math. I personally I know from experience that is is real easy to cheat and rationalize, and attempt to do things optimally mathwise but not acting on it.

    In regards to recommended methods, Harv Eker, for example, says that people should implement their lifestyle spending percentages while in debt, and if it means you have high interest riding awhile, so bit it.

  170. Anonymous

    I have five problems with Dave Ramsey’s approach.

    1) Dave Ramsey does not start out small. He starts out big, by telling people to save $1,000 right off the bat.

    2) For a program that supposedly teaches people how to save, it doesn’t do that at all. It just says what to do and does not teach how.

    3) Dave Ramsey charges $199 for what many others (including the author of this article) offer for free.

    4) Dave Ramsey’s plan seems aimed for the middle class, people earning at least $20 an hour.

    His Gazelle Budget Lite budget planner suggests 5% of one’s income goes toward Utilities. For me with low income, that is only $34.70 a month, which is literally impossible.

    5) Dave Ramsey’s approach only works for those who have lots of money tied up in debt (credit cards, mortgages, loans, and so forth). If you don’t have any money tied up in those things, his plan will not help.

  171. Anonymous

    #516) I understand the math. If I buy a lottery ticket, with a jackpot higher than my odds, I actually have a positive expected return on my dollar (according to the math) — even though I have a near 0-percent chance of actually winning. This is an example of improper use of mathematics.

    The same goes for this debate. You have a higher-expected return with the high-interest first debt payoff plan, though your odds of success / completing the plan is not as good as with the DR plan.

    I don’t know a single person who has successfully gotten out of debt using the high-interest first approach, though I know of many, many people who have successfully gotten out of debt using the DR plan (many of which who tried the high-interest first approach and failed).

  172. Anonymous

    Hey Jerry great job paying off your debt early. We are going to have a baby soon in 7 months and I am so glad that I paid off all 7 of my credit cards. I am now working on my wife’s car and then it is on to my car. I hope to have no credit card or car payments by the end of this year. Then I will only have student loans and 401K loans to go. After that I am going to attack the house payment…..It is funny that my friends make fun of me for enjoying paying extra on the car. I tell them all the time about DR

  173. Anonymous

    BG, I think you’re confused between the notion of momentum and motivation. Ramsey’s advice of paying the smallest balance cards off first is meant to motivate the debtor by letting them see that the number of creditors they have is decreasing. However, to gain more momentum in paying off (total) debt faster, paying off the debts with the higher interest rate is the way to go. Think of 2 individuals that have the same balances on the same number of credit cards with the same interest rates, perhaps ranging from 8% to 30%. Assume that the balances don’t happen to be such that the smallest balance is on the highest rate card and so forth down the line. If these two people make the same dollar amount payment spread between the cards each month, the one who pays the highest interest rate cards first will gain more momentum in paying off the total debt, and will consequently pay off the total debt before the person who chose to pay on the smallest balances first. At some point in this example, the person who paid on the smaller balances first may have paid off more of the credit cards than the other person, but will have more total debt to pay off.

    Hopefully this helps you understand the different between momentum and motivation.

  174. Anonymous

    #513) Where does DR’s numbers ‘lie’? The DR quote is:

    “You should pay off the smallest debt first to create the greatest momentum in your debt snowball.”

    where is the lie in there? Obviously you do not understand what the term ‘momentum’ means. Good job misrepresenting what DR is trying to say.

    Here is a hint: momentum means “to increase strength / energy / force / drive”. When you pay off the smallest balance debt first, using the snowball, you have increased your momentum. Making larger payments on a loan that will take years to payoff doesn’t affect your momentum — eliminating debts increases the momentum.

  175. Anonymous

    Shannon, thanks for your comments. I agree w/ you that Dave’s techniques should apply to anybody with a debt problem. But Chris is right too, everyone has a unique situation that may require some deviations from Dave’s philosophies. However, the common thread is behavior modification as everyone knows. We are in the early stages of paying off our debt, but our spending behavior has changed drastically. It is a very difficult time for us right now but we are determined to be debt-free. We will never use credit cards again!!

  176. Anonymous

    Jerry I am sorry about the tone of my email and I read what I wrote and I was rude so please forgive me. Chris you are right that everyone and every situation deserves a one size fits all approach. But I still believe in the system and he preaches in my opinion to the masses. Of course some people have to have student loans. No one is saying do not go to school. I think the point of what he is saying is if you do go to school make sure you are not just going over there and living it up. What I mean is if I live close to USF in Tampa I should go there and commute and keep my expenses to a minimum. I should not go to Florida and have to also pay for room and board. I think being smart with your money should be the deciding factor. I think people should read this book and apply everything they can and they will come out ahead of most people. Jerry and Chris seem like college educated guys and they are already one step ahead of the rest. Then throw in a Master’s degree and maybe a Doctorate and they are now way a head of the curve. The same point can be made with finances. Some people who are so smart end up making dumb moves with money. If someone is making $100,000 a year but they live in a $300,000 house drive two $30,000 cars that are financed, have student loans and furniture loans they are not smart about there money. But if people apply Dave Ramsey’s techniques that same person making $100,000 a year with a $300,000 house with no other payments would be alot better off. I think if you take most of what Dave says you will come out better than most.

  177. Anonymous

    Shannon, I have read the whole book and watched Ramsey’s TV show many times, but never listened to him on the radio. He does have some good advice for people that it fits, but his advice is not one-size-fits-all by any means. For those folks that it doesn’t fit, it’s bad advice. One of my earlier posts illustrates this – the advice Ramsey gives about not taking out student loans is not good for all, and would not have been good for me.

  178. Anonymous

    Geez Shannon, take a deep breath and chill out. You completely misunderstood the point I was trying to make. I agree with everything Dave proposes about paying down debt except his attitude criticizing DM cos. Sorry, but that is a bit of BAD ADVICE. I don’t know what your debt situation is/was and it’s none of my business. All I can say is the DM co we are using has made all the difference to us. They are not the be-all/end-all of debt management for sure, and I would have preferred not to use one. Unfortunately not everyone is in the situation you are in to be able to pay down debt w/o outside help. Congratulations to you on your accomplishments. Sorry, but I will not return the favor and insult you. I will offer you some contructivie advice though: you may want to consider taking a refresher course on reading comprehension.

  179. Anonymous

    The comment by Jerry on Jan 3rd 2010 could not be more dumb. Jerry talks about the comments going back to 2005 and he admits in the article that he in fact has not read the whole book and he probably does not watch the TV show. He does not give us any examples of the debt level he is in and good examples of why he is not doing the snowball. Did he not try to take down the 29% interest rate with the credit card companies he uses? I will tell you that Dave Ramsey works for me and I paid off 7 credita cards since March 2009. I am almost done paying off one of my cars. But according to Jerry he Dave Ramsey gives bad advice. I suggest he reads the whole book and listen to the TV show. He may see the light.

  180. Anonymous

    I just stumbled upon this article. Wow, I can’t believe the comments on snowballing go all the way back to 2005!! I would think after 5yrs of quibbling on the math, everybody here can agree the main focus is on changing one’s attitude/behavior and taking control of one’s spending habits. Ok, next topic.

    I am reading Ramsey’s “Total Money Makeover” book and on pages 63,64 he strongly advises against using debt-management companies to help pay down debt mainly b/c doing so “destroys” your credit rating similar to a Chapter 13 filing (it goes away after 7 yrs). He also says that spending behavior will not change by using a DM co. I think his advice here is VERY BAD, very shallow, misleading and unfortunate. After the banking meltdown, many people are underwater in debt due to job losses or pay cuts. No matter what snowball approach is used, they will never get out of debt b/c today CC co’s are ruthlessly cranking up rates to 29% or higher b/c they can do it legally. Dave doesn’t mention this, at least not so far, and I’m 1/2way thru the book.

    My wife and I are using a nonprofit DM co to help pay down our huge credit card debt and it has been a Godsend!! For a small monthly fee, they have renegotiated ALL of our rates down to reasonable levels (8-9%) such that we can realistically get out of debt. Even rates that were accelerated up to 29% have been reduced.

    As a contingency to working with them, we had to close all of our CC accounts in the process and pay cash going fwd AND do their money course, which is favorably looked at by credit rating agencies. One monthly payment has GREATLY reduced the stress of making multiple payments each mo. They also work out a budget with us, send us a monthly report, and they contact us each month to see how we’re doing.

    These co’s can’t help everyone. If your debt is too great, there is nothing a DM can do to help you but to advise filing for bankruptcy. We were lucky enough to have a debt level that could be helped by a DM co.

    Bottom line is, Dave does not speak Gospel, Christian that he is. If you are in serious debt trouble, I highly advise seeking out a reputable DM co, in spite of Dave’s BAD advice to the contray, BEFORE IT’S TOO LATE!!!!!

  181. Anonymous

    The point of Ramsey’s plan is to allow small victories often,to keep the person on track with emotional awards. If they had the will power to just do the math,they probably would not have gotten into so much debt in the first place.

  182. Anonymous


    I understand this… the “suppose a family” part, I just didn’t feel like taking the time to phrase that in my post.

    I guess it backfired, as I’m taking time to explain now.

    Sorry to offend you…

  183. Anonymous

    Ummm… Trey, you may want to read the article again. Nickel is not saying he’s $17,500 in credit card debt, he was using those figures to illustrate his point. I don’t mean to make you look like a fool, but I don’t take kindly to anyone trying to make someone else look foolish based on their own lack of understanding.

  184. Anonymous


    This is SO FUNNY!!!!

    Saying “Dave Ramsey is bad at MATH” is like saying the author “Nickle” is “GOOD with Credit Cards”…

    Oh my gosh, best laugh of my life!!! Let’s see, I have $0.00 in CCs, so that puts me $17,500 ahead of you, Nickle! I may be bad at MATH as well, but I’m going to say that $0 is better that $17,500 in 13%+ credit. Yeah, I may need to punch that in the calculator.

    You sound proud to have spent $17,500 on plastic… well, that just lost you all creditability, and I will follow Dave not you. Sorry if you really thought you had something going on upstairs.

  185. Anonymous

    I would be inclined to say that his method isn’t at all “bad” to use. In fact for the average person I would see it being pretty effective. The “snowball” effect works the way it does because it appeals to the sense of accomplishment people need to feel in order to see the goal of their sacrifices being made. It’s a self motivating strategy, simply to help you stay on track and see it through.. There’s nothing about it that doesn’t make sense.

  186. Anonymous

    To the other Chris: If you think about this statement:

    ”If we were doing math we wouldn’t have credit card debt in the first place.”

    you’ll realize that it makes no sense at all. Essentially it’s saying “You weren’t doing math when you got in to debt, so why use math to get out of it? Just continue the same bad behavior of not considering math in your finances.”

    Ramsey has a lot of these inane little catch phrases, and for a person who’s using his motivation to get out of debt, it’s best not to anaylyze his statements, as he/she will realize they make no sense at all.

  187. Anonymous

    I think that the idea of chasing the highest interest rate has nothing to do with Dave Ramsey being bad at math. Considering his idea is about behavior modification. NOT math. Like he said. ” If we were doing math we wouldn’t have credit card debt in the first place.”

  188. Anonymous

    Wrong JC. Ramsey did not suggest this young man get a part time job or sell anything. The man is going in to marketing, which I’m sure you know is a grueling schedule for those just starting out. There’d be no time for a second job if this man intends to succeed at his career. I’m assuming that, as a student with student loans, he has little if anything of value to sell. So it’s not so much ‘thinking inside the box’ that will keep this man paying his student loan longer than 2 years, but rather the discipline and focus he’ll need to turn his $40k job in to a healthy 6 figure income in years to come.

    Sometimes slow and steady is the way to go. It took me 15 years post high school to get where I am today, all the while racking up the debt. But I didn’t let myself be diverted by part time jobs and little home businesses to distract me from my goal. The payoff for me has been huge. It’s often the way to go for many people, as it is for this young man.

  189. Anonymous


    No, Dave is not bad at math. It’s called being inventive and industrious – the same principles that made the USA a prosperous nation.

    You’re thinking inside the box. The solution is getting a second or third job, selling his non-essential STUFF, or starting a part-time business (and yes, there are many part-time home-based businesses that can be started for less than $500)

    Why? Do the math on the investing side. Those payments, which could be invested, are instead COSTING money (interest PLUS inflation). The sooner those dollars can begin working for this man, the sooner he can begin wealth building and planning for his future.

    Thinking inside the box is what keeps millions of people in slavery to their lenders (Proverbs 22:7.)

  190. Anonymous

    After listening to Dave Ramsey’s show a few nights ago, I’m convinced the man is bad at math. A recent college grad called in. He has $70k in student loan debt, and just got a job that pays $40k per year and provides a car. Dave told this young man he expects him to have the student loan paid off in 2 years.

    Ok, let’s just say that taxes, social security, health insurance premiums, etc. eat up 25% of the man’s salary each year. That leaves him with $30k per year. Even if he got a 10% raise in a year, he’d be paying back a $70k loan with $63k in take home pay over the two years. Great math skill Ramsey!

  191. Anonymous

    If you can do the math, you don’ need to listen to Dave. Most people can’t unfortunately, and need someone to tell them what to do. In this case, it’s more motivating for them to see progress instead of chipping away at all debt. Not the best deal financially but it’s the best for them if it means they’ll stick to paying off the debt.

  192. Anonymous

    Good for you for paying off your debt! Great feeling of independence, isn’t it?

    The interest rate didn’t concern me as much as the overall cost of each debt. It’s a more complicated analysis but the actual costs involved is what I focused on. I paid my debt off from highest daily cost to lowest and it worked for me.

    Several ways to skin a cat and having no or minimal debt is best IMHO. Rock on.

  193. Anonymous

    Daves method really works better than nickels, if you simply don’t have the cash to pay extra.
    For example, my smallest debt had a min. payment of $50.00 a month. I was able to pay an extra $50 on top of that, and got it paid off quickly.
    If, on the other hand, I tried paying off my largest interest rate debt first, I’d be paying the min. payments plus $50, and I’d still be paying it to this day trying to pay it off, even the occasional extra cash.
    Doing it DR’s way, I may be paying a little bit more interest in the long haul, but I’m going to everything off faster than if I started with the highest interest first in the long haul. It really does work out this way.

  194. Anonymous

    I’m thankful I didn’t hear of Dave Ramsey until I was out of school and solidly in my career. Had I listened to his advice, I wouldn’t have taken out all the student loans. I finished my fellowship about 5 years ago, with $420k in student loan debt. I now make a little over $700k per year, and my wife, who is also a specialized physician, makes around $320k per year. We paid off the last of my student loans 2 years ago, she had none. I went to an ivy league school that I clearly couldn’t afford, and am so glad I did. It’s not realistic to live life with no debt, and some debt is worth the risk.

  195. Anonymous

    I like Victor’s points regarding emotions versus a mathematical mind. It was unhealthy beliefs (i.e. credit limit equals buying power!) that generally brings people to the point of indebtedness, further supported by the reality of paying upwards of 19% (29% for some today) for gasoline,groceries and electronics.

    It is not the mathematical mind that got them into that situation, it will not be the mathematical mind to get them out.

    I believe it was Einstein who said, “To solve a problem, it will require a higher level of thinking than that which created the problem” (paraphrased).

    Great comments from the past 4 years! Incredible

  196. Anonymous

    This has been some of my most interesting morning coffee reading in a while.

    Dave, in general, has it right….it’s about psychology, not mathematics, for the majority of people. If you got into debt because you “needed” to have something, you will likely need an emotional tug to get out of debt.

    Further, it all begins with discipline, and that discipline is defined in a budget. If you don’t adopt a disciplined approach to spending, you will “need” something else somewhere out in the future.

    It’s like AA…..you cannot take a drink. PERIOD! Dave was and is a crediholic. His seven steps are similar to the twelve. So, NO DRINKS – NO CREDIT. EVER!

    But Dave simplifies things and offers an overly optimistic approach to things. He conveniently minimizes taxes and tax implications. He doesn’t address the fact that you will always have a car payment (you either pay it in advance to a savings plan or you pay it to the guy who made you the loan, but you will always have a car payment in some way).

    Other than those two issues, the guy is pretty straightforward in his approach. He harnessed the psychology of debt, and that is a necessary component to getting out of debt and getting ahead financially.

    One final note – I’ve used debt in the past and will do so in the future. But the items purchased with debt will be well thought out and not simply wants. I’ve put three children through private universities, with one attaining a Ph.D. The other two are doing very well financially, mostly due to hard work and the idea that you can survive by living simply. The premium I paid for the private school education has more than been repaid by their current life situation.

    My retirement is secure….my home and vacation home are paid for (I still have car payments – one into savings and one to “the man”). And I enjoy life, knowing that I have made a difference in the lives of my children.

  197. Anonymous

    I guess I chose a hybrid system when I started paying off my debt. My first target after I started my job 3 years ago was a personal loan from my parents that I used to move to a new town. This was paid off with my first paycheck. I then attacked a credit card that was costing me over 12% interest. After that I paid off my truck which was at 9%. Next was a student loan that was only 5%, however it was a small debt remaining and I wanted to be rid of the hassle. Each time I reached a goal I rewarded myself with a purchase that was needed or badly wanted. a new bed, a trip to Indonesia, a used motorcycle, and a new computer were all purchased as rewards for paying off and closing an account.

  198. Anonymous

    Wow! Still getting beat up after all this time!
    Another one here, not as brutal perhaps, but just as successful. Have gone from step -0- (-$15,000 in CC’s) to a combination of steps 4 & 5 in less than a year. (401k/403b automatic w/ wife’s hospital job, & I am just now putting a full $2k into an ESA for oldest daughter TONITE as I type this). I agree you made your point regarding highest interest rates first, but a quick look at the testimonials here should lead you to never, Ever, give advice to digress from the snowball. It’s not the math…..join the gang!

  199. Anonymous

    If you listened to Dave long enough, he acknowledges the math. But humans are driven by their passions not they logic. This is how we got into debt in the first place. Think about if it was a matter of math…we wouldn’t have gone in to debt, it was our feeling that got us into the situation, therefore Dave is using our emotions to get us out.

  200. Anonymous

    The Dave Ramsey system of paying off debts fits into the bigger picture of his system that changes the way you think about money. It may not be the quickest way to pay off your debt; but that is not the goal. His plan, if followed correctly, starts the ball rolling in other areas while paying off debt. For example, he recoomends having an emergency fund built up to pay thos unexpected bills. Also, he does not reccomend paying the minimum balance on debt. He reccomends paying as much as your are comfortable paying after you take care of your basics (food, clothing, shelter).
    So your article kind of missed the point.

  201. Anonymous

    I am the DavidM in post #165 from a couple of years ago. A couple of years ago? Man, that has been a while! Since selling my new truck, we have continued on with Dave’s “simplistic, 6th-grade-level-math” program. The wife and I are doing pretty well at it. Let’s see…we have not used a credit card in over two years, and we paid the house off eight years early. Pretty good for simpleton ways.

    And, FCN, love the post. Four years old and people are still commenting. Says something about the passion your readers have, whether they be for or against the issue.

  202. Anonymous

    When I was in debt, I selected a system of paying down my debts from highest daily cost to lowest daily cost. It took some analysis to determine the daily cost of each debt but I was most comfortable with this “daily cost approach.” I should apply for a patent and write a book! haha

    I can see paying the smaller balances first for maximum positive psychological effect though. Pick a system that you like and stick to it.

    Thanks for the opportunity to chime in.

    I forgot to say that I don’t really care what the interest rate was, I’m more concerned about the cost of the debt and its effect on my personal finances.

  203. Anonymous

    You are correct you don’t have to be a Christian, it is meant to help everyone. Dave Ramsey uses biblical principles and that is where I was coming from, but he wants everyone to be debt free.

    I am happy that you are on your way to being debt free too! We have 2 paid off cars, but it will be awesome when we can walk in and pay cash for a car we saved for!! Way to go Hols and may God bless you!!

  204. Anonymous

    Ok I just wanted to put this out there. You do not have to be a christian or religious in any manner to get involved with this program. I’m a spiritual person who believes in several faiths. Here’s the thing, you don’t have to be religious to benefit from this program.

    If you are thats great. If you’re not thats great too. A christian, buddhist, jew, or athiest can all get into debt and need help.

    I just didn’t want non-christians to think this program isn’t for them.

    PS I’ve paid off 3 of my 4 snoball debts in the first month of working it. I sold my precious jeep and am driving my paid for E250 van around till the debt is gone. Later I plan on buying another jeep with cash.

  205. Anonymous

    Hey Charity. I think most people do not get the big picture. It is important to be debt free for a number of reasons. What if you have to move to another place? Well I started to think about if I was debt free moving would be a bit easier. Of course Christians could give more if they are debt free. Churches would be in a better state with property and building programs. We could help more inner city programs and missionaries

  206. Anonymous

    Hey Shannon,

    God speed on your road to becoming debt free! I think Dave Ramsey is great. It helped us put our financial lives back into perspective and helped us see the light at the end of the tunnel! It is exciting and almost becomes addictive! We are the same way we have been so excited every time we pay off a debt! Keep strong and don’t let your friends put too much pressure on you! They don’t understand and sometimes we can look a little crazy in the worlds eyes which is fine with me, I’d rather be a fool for Christ!!

  207. Anonymous

    Hey Charity you are right. God wants us debt free and in fact when you read Total Money Makeover Henry Ford who owned Ford Motor Company said that debt is folly. He only started to let customers finance cars and trucks after 2 other car companies did it. Debt puts us all into slavery. I want to be free so in order to do that I have to sacrifice a little today to enjoy my life in the future. I now have no more credit cards after starting the debt snow ball. Now I am working on paying off the next smallest debt which is my wife’s 2006 Ford Mustang which would be a great feeling to have one of the two cars paid off. Next we will work on my car and then my student loans. The 401K loan will be after that then the all mighty house!!!! I am super excited to pay extra on the Mustang and my friends think I am crazy for having this much fun. I see the prize at the end though and that reminds me of my Christian walk. Many people do not undestand our walk of faith!

  208. Anonymous

    Absolutely it is psychological! That is why Dave Ramsey says to pay the smallest off first that way you have that immediate gratification which is basically a psychological boost! And we don’t have ANY credit cards! We have only a checking account bank card. I agree SAY NO to credit cards. If you don’t have the money you don’t need to buy it. We have purchased a flat screen tv, blue ray player, surround sound system, a washer, an LG refrigerator, an LG range, an LG dishwasher, and a new microwave in the past 2 years, all with cold hard CASH!! And boy did it feel good! We are also paying extra on our mortgage to get rid of that too! The bible says to be debt free and that is what we are striving for, to be good stewards with all that God has given to us.

  209. Anonymous

    this might have already been said, but Dave says no more credit cards. In these other plans that is nowhere to be seen. So you are fighting against yourself. Debt is as much a psychological thing as it is monetary.

  210. Anonymous

    Dave Ramsey’s method absolutely works! The idea is that you pay down the smallest balance to give yourself a pat on the back to show yourself you can do it. If you pay the highest interest rates first you will be paying longer to get your first bill paid off, most people don’t make it to the end of that bill. Dave Ramsey’s idea is to get the almost instant gratification of paying one of your bills off quicker and then the next and the next until it becomes somewhat compulsive to get it done. We had around $20,000 worth of debt and paid it off in two years using his plan. We now are debt free accept for our mortgage which we are still working on, have 2 paid off cars and a growing savings account!

    And most people have many more than three bills like in your example and most of them are credit cards or personal loans, like 5 to 10 credit cards, a couple of personal loans, student loans, car payments and a mortgage. Sure paying the highest interest rates seems the smartest, however you have to have be extremely patient, have high self control, and be very self disciplined.

    Also we tithe 10% of our income to our church. You try it and I promise if you do, God will come through every time! He makes ways where there seem to be no ways!!

  211. Anonymous

    Replying to Debora above:

    Thank you! I wasn’t sure how debt management plans were viewed on here, and was hoping my comment would be well received. 🙂 It worked really well for us.

    You are absolutely correct, and that is one thing I neglected to mention. Saving is essential, and we did do it (and do now). We just made so little at the time, that we could save just a little each month, in spite of the fact that we did very little “extra” stuff like going out to eat or to the movies.

    So in spite of the fact that we were saving what we could, when my husband had emergency surgery, the bill for that looked at our savings account and laughed at it. As we tried to pay on the medical bill (which I believe stopped our saving), our car needed transmission work. We did most car repairs ourselves, to save money, but we couldn’t do transmission. So we had to charge it, because they don’t do $50/month payment plans like the hospital did.

    We did make a mistake in starting up a little ministry without saving for it first. That was an unnecessary, voluntary debt which we look back on with wiser eyes.

    We kept an expense diary, and I frequently wrote out our bills and such to keep track of our money. We could have done some things to improve (like wait for the startup money for that ministry), but we only made about $800 per month at the time, and you can do only so much saving on that, though we could have done better.

    Thank you for pointing out that aspect, because I did neglect it. 🙂

  212. Anonymous

    To comment on the above comment:

    Good for you working out your debt through a Debt Management Plan! I think those are great ways to help people get debts paid off, and at usually lower interest than the credit card companies are willing to offer.

    A note about debts being involuntary: I agree, to a certain extent. The reason: you should be saving/budgeting for these expenses. The number one reason why most people get into debt: they have little to no savings! The recommended amount of savings for this type of economy is 3-6 months of your monthly living expenses. And, when we talk expenses, we arent just talking mortgage, utilities, food, car payment, clothing, and isurance. There is also: car repairs to plan for ( I save $75/month for this specific expenses) medical expenses ( I can pay up to $1500 out of ocket per year, and so save $125/month), savings (this is OUTSIDE other expenses, and for me, is an additional $100/month), etc etc. So, in a way, if you start a savings now to plan for expenses in the future, you can STAY OUT OF DEBT.

    Which brings me to the point to say…. most debt IS voluntary! is you cannot afford to save for your expenses that can arise each month, then you need to rework your budget so you can. Obviously, there are terrible things that you sometimes do not have enough saved for (i.e. a house fire that happened to me 10 years ago. I should have insured myself better, but instead, had to dish out an addl $15,000 for repairs not covered by insurance, but only had $10,000 in savings).

    DO A MONTHLY BUDGET PLANNING FOR YOUR EXPENSES. If you can do this and still have alittle money left over, you are in a fairly good financial shape.

  213. Anonymous

    I don’t know anything about Dave Ramsey except what I have read here (I ended up here after a search trying to find out who he was), but I wanted to add my $.02. Some years ago, my husband and I ended up in quite a bit of debt, some of which was credit card debt, yes, but a lot of which was also medical. Also, some of what was on the credit cards was auto repairs. Anyway, we signed up on a debt management plan. At the time it was Genus, then it got bought out by AFS, then that was bought by CareOne.

    The idea is a lot like Dave Ramsey’s, paying off the smallest bill first, then rolling that over onto the next smallest. In addition, though, they negotiated with the credit card companies and got our interest rates dropped to 6% and 6.5%, and our monthly payments reduced to something we could handle. With the hospital bill, we couldn’t handle it all anymore.

    We sent Genus the total amount for all the bills each month, and they disbursed it. We had to send two payments the first time, and that was extremely difficult, but we did it. We stuck with the plan, and, even with the comparatively small amount we paid each month because of how little we made, we paid off all those bills in less than seven years.

    We certainly paid more in interest than we could have, but we could not make much in payments, so, for us, paying off from smallest to largest was what we could do. It was such a satisfying day when the last one was paid off.

    Since our experience, my brother and my mother both used their debt management program, and paid their debt off even faster than we did. It worked well for us all, though you could certainly do it on your own.

    It is good to remember when dealing with others that not all debt is voluntary. Medical and auto repair are two good examples. I mention that only because I saw a number of people talking about those in debt as being bad at math… it isn’t always that way.

  214. Anonymous

    I think it’s ironic that you have Dave’s book pictured, because it’s obvious that you didn’t read it. Dave agrees with you; however, he’s trying to get people to change their behavior. He explains it in the book that you didn’t read.

  215. Anonymous

    @ J C

    Sounds like we don’t really disagree that much at all.

    And as to the first paragraph of your first post,

    ” The thing you need to ask is, “What if it all falls apart?” What’s your back up plan when, let’s say, the housing market rebounds, congress offers $15k to new home buyers and your vacancy rate doubles? What happens if an earthquake (even if it hasn’t happened in your area in 100 years) cracks a foundation making a house uninhabitable and un-covered by insurance.
    …being open minded and listening to others with experience can be extremely valuable.”

    I absolutely agree that this is true. If you are going to decide to take a risk, take it with as clear vision as possible and also learn from the experience of those who have gone before you and may know some of the pitfalls. Knowing the pitfalls might not mean that you stop with your plans, but might mean that you plan differently for different contingencies or are at least aware of them.

    But now we are far far off the topic of the debt snowball !

    Best wishes 🙂

    Best wishes 🙂

  216. Anonymous

    To Steve in W MA (i’m in E MA) you may be correct about the housing rebound. The fact that it was a classic “bubble” market makes me agree. However, as Greenspan recently stated, as long as people remain greedy and optimistic that things continue to get better, we will again face another bubble market and financial crisis (paraphrased)

    I’ve made mistakes – not with zeroes on the end – and now have a family. Can you make a killing with risks? Yes. Are there varying levels of risk? Yes. Risk is inherent to any worthwhile venture and those who live by the sword die by the sword. The foundation cracking example was a true story and the investor, had he not over-leveraged his investment, would’ve been in a much better position to ride out the storm. Climates change. Congress passes another 1986 Tax Act (which even tripped up RE guru Robert Allen) and the proverbial bottom falls out.

    In short – to each their own. Security is an illusion, but ignorance is bliss. Risk without accountability caused this mess and, “As a dog returns to its vomit, so a fool repeats his folly.” Proverbs 26:11 (ie – we’ll see this all happen again unless people take personal responsibility for their financial health.)

    Let’s agree to disagree ever so slightly. 🙂

  217. Anonymous

    I will add to my previous comment that I know several successful real estate investors who stopped the leveraging and got very conservative once they had made their nut.

    In particular, one guy calculated exactly how much he wanted to make, then stopped at that figure (this was during the 80s real estate boom). Another guy I know in town owns one commercial building and stopped there because that’s all he needed. He does other stuff with his time now.

    If you don’t have a set goal in mind then you don’t know where to stop.

    How I do it is figure out how much I would need in order to take living expenses out for 40 years. Take the amount you need to have in today’s dollars every year and divide by 0.03 and that is the amount you will need (in today’s dollars).

    Deciding on a goal and then meeting it, then switching to a conservative low-to-no debt profile (conservation of assets) makes a lot of sense.

  218. Anonymous

    Matt, if DR had a “less narrow” plan and talked about doing what you are doing, your competition to buy those run down houses would be a lot stiffer.

    Personal finance writers do well to focus on the largest demographic: those who work at a job for a living and are in credit card debt, usually for silly, unnecessary, and nonremunerative things. For them, truly, debt is not a tool.

    For someone with a solid business plan and successes behind them, debt and leverage can have a role to play and each business owner would do well to look at the level of debt and risk they are taking.

    Offtopic in response to JC: I think you are right in the outline, as it is true you can’t predict the future and having debt in your business is inherently riskier than not having debt, but as you yourself write, that’s the gamble you take when you’re young and trying to build up some scratch on your own.

    As to the housing market getting a rebound to anything like the levels that existed in 2008, not in our lifetime. And the time for Congress to be handing money out is long past, I doubt that will happen again as (a) the money is not there and (b) people have adjusted to the crisis and the crisis is the new normal, so there is not enough political pressure to make such a move worthwhile.

    I don’t disagree with your comment at all in its essence, because it is true that many have crashed and burned in business due to debt, but then again others have succeeded. I think posters like Matt, after they have considered the risk/reward profile, are just as justified to keep doing what they are doing as in stopping just for the sake of not having debt. Business debt and personal debt have the same risk profile, but the upside for business debt can be high while there is no upside for personal debt.

  219. Anonymous

    To Matt: Ah, to be young and naive again. Kudos to your ambition and risk taking. Most people only dream of doing what you’re doing. The thing you need to ask is, “What if it all falls apart?” What’s your back up plan when, let’s say, the housing market rebounds, congress offers $15k to new home buyers and your vacancy rate doubles? What happens if an earthquake (even if it hasn’t happened in your area in 100 years) cracks a foundation making a house uninhabitable and un-covered by insurance.

    I’m not going to say all debt is dumb and I understand the Kiosaki model. But being open minded and listening to others with experience can be extremely valuable.

    The tendency for people in your situation, psychologically, is to think things will remain status-quo or improve. My own company, which has leveraged it’s cash-flow responsibly, has been very conservative in it’s growth model. We could not have predicted the worst economic decline since the 1930s and are seeing our partners and bank covenants dictate our course of action instead of having the flexibility to act as we wish. This is a major downfall to having leveraged debt – it can limit you. Essentially, this kind of thinking caused this downturn.

    I wish you continued success, but DR did what you are doing. He did very well and made thousands of RE transactions. I think it would be prudent to consider his complete perspective before dimissing it (ie – get his book from the library and actually reading it)

  220. Anonymous

    “Debt can be a tool” from Matt on Sept 23 rd 2009. It is obvious that people comment on this without reading the Total Money Makeover. No reason why DR tells people to get out of debt is for freedom. When you are in debt to another you are a slave to that person. We don’t like to look at it that way but it is true. Again I had a problem with spending and once on the DR plan I paid off 7 credit cards and now I am working on paying off my wife’s car. I didn’t get motivated reading the Automatic Millionaire or any other book by others. It was Dave Ramsey who finally broke through. I read his book and some parts of it twice. I watched alot of his shows on the Fox Business Network and I got it. But the snowball is just one small part out of 7. Remember $1000 emergency fund, then debt snowball and then it is on to step 3. So the highest interest rate compared to the lowest balance is really peanuts compared to the big picture. I hope to one day not have any debt including the house and debt is never a tool Matt!

  221. Anonymous

    I think my biggest beef with DR is that he has such a narrow plan. It works well for his target audience, but for the listeners who don’t come from the box that he has in mind he makes no adjustments to really give good economic guidance. He tells fat people and physically fit people to lose weight. In America today if you held a radio program on diet and nutrition you could help nearly everyone by simply telling them to lose weight. Just skip the step of analyzing whether or not they actually need to lose weight and keep it simple stupid. It would be help to most, death to a few.
    Accomplishing goals does give increased motivation. Increased discretionary income does reduce risk in emergency situations. However, what advice does Dave give to callers who are on the right track? People who have large investments, small debts, and ample cash flow? Pay off your debts! Even if you don’t lack motivation, self control, and you’re not in a risky debt/equity position he has only one sentence as advice. Pay off your debts.
    If I called in I am sure he would tell me to pay off my debts. I owe a little over 300k in real estate loans. I have 0 credit card or any other type of consumer debt.
    I am 26 years old. I have never made more than 28K in a year except for the last 3 years (apart from investments) I have over 550K worth of real estate. No gifts from parents, no lottery tickets, no major wins in stocks. I’ve been in real estate 7 yrs. I get 1200 per mo extra from rents now that I save and re-invest. I am motivated by my small wins as I buy cheap houses fix and rent them out. Don’t get dumb debt with credit cards. Get rid of personal debt. Get rid of 90 percent leveraged properties. Use debt responsibly. Dave’s answers don’t fit all. Know yourself. I agree with Dave to attack debt…if you attack the debts that don’t pay you every month.

    Ramsey’s method does keep you motivated, but it will require a lot of motivation to work with blunted tools. Hope you have motivation to spare. Keep your axe, I’ll keep the chainsaw. Debt can be a tool, and I realize that chainsaw accidents happen everyday. Play it smart and safe, but use good tools.

  222. Anonymous

    As far as Warren Buffet goes, his saying “if you expect more than 9% your nuts”

    Well if you listen to Warren he was telling everyone to get out of the market nack in the fall of 2008.

    But as usual, Warren never follows his owns words. He then went on a buying spree. He spent some 5 plus Billion buying into the “9%” market. Do you suppose that Warren forgot to mention that when the market for the last 10X in a row, recovers, it does it at an average of 36% the first year, 25% plus the second and 20% the third year? Or do you supposed, he as he always does, gives bad advice and then does the opposite? You don’t suppose he wanted you fools to sell out cheap so he could buy and get rich off your mistakes of selling?

    Warren is quoted for saying many times, when the Market is doing well you get make lots of money. When the market crashes, you get wealthy!
    Dave is right, right now stocks are on sale. By the way, I have many stock which were back by April 2009. Back to where they were before they fell. But since then 7 funds have had 31%+ gains and 2 have done 42% range….2 which I got out of, GNMA’s are doing 2% or less.

    By the way, Warren when he said 9% lied. It is a fact the market has averaged 11.84% since it started, those are facts. It does not matter who says what, the numbers say 11.84% average.

    Daves plan does work better than anything, it is 95% behavior, 5% math. If math is your answer, then why are you in debt?

  223. Anonymous

    As a geek, I also calculated that it would be better (fiscally) to pay off the high interest rate debts first. But when I began reading Ramsey’s Total Money Makeover, I decided to follow his plan without asking questions. The psychological boost of paying off the first debt was huge! I still listen to Dave Ramsey now that I’m out of debt and he just doesn’t do things for the heck of it or because he has a hunch. He backs up his plan with psychological studies showing what works in keeping people motivated.

  224. Anonymous

    Fridge #462) Great progress on knocking out a bunch of debt already. Once you feel your cashflow is in good enough shape by removing bills — it might be a good idea to switch over to the “high-interest first” method to save some money on the interest. You’ve already gotten the psychological boosts from taking out 4 debts, so if you think you can stay on the “debt-payoff bandwagon”, go ahead and switch.

    I do highly recommend the DR (snowball) at the beginning until people have things under control and have seen the light.

  225. Anonymous

    Unfortunate title. Quite critical when the article is a misinformed splitting of hairs.

    Unfortunate that the author didn’t read or listen to Dave, who freely admits that the Snowball is not the best mathematically.

    The author also doesn’t acknowledge that most people can actually pay off that little one quite quickly. Most people can scratch together $500-$1000 to pay off their little Kohl’s card or something like that. Then, boom, one down. Another little victory.

    What the author also misses is that people got in debt typically because they are undisciplined (along with all of the other factors that lead to out of control debt). It’s the DISCIPLINE that matters, not the MATH.

    I’ve been working my snowball for 5 months – the way Dave suggests. I know I’ll end up paying $632 more spread out over an extra 3 months by not going with the high interest first. But guess what – I’ve got 2 of the 5 credit cards paid off! I’ve also paid off my medical bills and a small personal loan. So, there. Take that you mathematical nerds! They’re called Baby Steps for a reason.

  226. Anonymous

    I’m just starting with my debt, so this post & comments is helpful. I like the snowball approach, I think it will help me stay motivated but I’m paying of a high interest balance transfer first.
    I’m ashamed to say I thought I’d paid it already due to my shoddy record keeping!

  227. Anonymous

    I’ve been working my snowball for just over a year, and I think it has one advantage people often overlook. I had 7 cards that were almost maxed after my divorce. One thing about these cards is that if I were to lose my job or be unable to pay, each and every card would charge me a monthly late fee until I was able to pay it in full. This fee is not dependant on the amount on the card, therefore the faster I reduce the number of cards I have balances on, the further that risk is reduced.

    I know the snowball has also helped me keep from getting depressed about the amount I owe as it spaces out some small wins so I dont have to wait years for my first payoff. Thats important when you are looking at 3-4 years to pay off.

  228. Anonymous

    Wow, the title of this post is slick advertising. Nickel, did you actually read DR’s book? He states in the book that he advocates the snowball method not because it’s the most mathematically sound, but because money management, and esp debt reduction are all about behavioral psychology. Whatever will get you to actually get with the program is the best plan for you. Small victories in the beginning, for someone who’s drowning in debt (his target audience), are more likely to get the person to continue with the debt reduction program. It doesn’t matter how mathematically sound the strategy if the debtor doesn’t actually follow it.

  229. Anonymous

    Katie #457) I agree completely. It’s like comparing two diets: the first one says you will lose 30 pounds in a year, but not a single pound until the year is up. The second diet says you will lose two pounds a month (every month).

    The first diet is like the “High-Interest” payoff plan – it will payoff big (in the end), but only if you can stick with it all the way to the end.

    The second diet is like the DR plan – doesn’t payoff as big, but has nearly immediate positive feedback, which helps people stick with it…

    In Nickel’s example, you have a solid gain with the DR plan in 9 months (paid off car), whereas with the “high-interest” first plan, you haven’t changed anything financially until month 20 (though it is a big payoff at month 20 with two debts eliminated simultaneously).

  230. Anonymous

    I concur with those who have said that Dave Ramsey’s plan may not make the most sense financially, but emotionally, gives me the energy and motivation I need to stick through it. When you look at it that way, then, it DOES make more financial sense…because I’m not sure I’d stick with it otherwise.

    But for those who can stick with it, more power to you. Good luck!

  231. Anonymous

    I hear what you’re saying regarding the math. But does the Millionaire program address the emotional side of money? Emotional side? Thats right! Without the motivation of emotion (anger, sadness or fear) we’d just be content spinning our wheels.

    For me, the Dave Ramsey method gave me a light at the end of the tunnel. Before I was just standing in the dark.

    I’m not a heavily religious person or a cult person. Just a small business owner who got stuck in the same credit crunch as many others. I don’t want to ruin my good name by filing bankrupcy or not paying my bills. This method gave me a road map out. Any map when you’re lost is better than none.

    So could I save some money tring another plan? Probably. Would I stick to it? Maybe?

  232. Anonymous

    #454) You can’t ignore math — ever. Math is the only never changing thing in this universe.

    The problems at GSCs, and the big banks where failures in their risk models — it was not a failure in math, but in how they chose to employ it.

    The DR plan (actually the “automatic millionaire” plan) is superior in increasing cashflow and reducing risk in the shortest amount of time for people with debt up-to-their-eyeballs. So, if that is the goal then go with it.

    If the goal is to get out of debt while spending the absolute minimal amount of money to do it (without regards to risk, cashflow, and psychology), then use the “highest-interest” first method.

    The extra “cost” of the DR/AM plan is that you will pay extra money in interest, but for the value of reducing risk and increasing (monthly) cashflow, as well as the psychology boost you get when you eliminate small debts. This actually helps people stick to the plan.

    Perhaps the best strategy is to use both plans: use the DR (AM) plan at the beginning until cashflow and risk are at better levels (so you can sleep at night), then switch to the “highest-interest” plan later into the debt-payoff journey (to save some extra money).

    You need to pick the goal first, then employ the strategy (math) that optimizes the goal you pick. Neither plan is ‘correct’ or ‘better’ than the other, except in the view of the goal it is trying to accomplish.

    Given that dept-payoff is only one step (baby step #2) in the total DR plan (after saving $1k in an emergency fund), you need to understand everything he is talking about to see that his plan is truly attacking the risk-reduction and cashflow problems that people have with severe amounts of debt. So his baby step #2 is superior for what he is trying to get people to accomplish. DR absolutely understands the math here, but he specifically designed his plan after hearing about how many of his listeners were failing to reach goals while employing the “higher interest” plan (which he used to trumpet).

  233. Anonymous

    All you math minded people are so far off the mark. If reducing your debt was about math, and you claim to be so good at math. How did you get here?

    Simple put, Interest rates are not what has made you broke, or kept you broke. Pay the smallest debt first, forget the interest. Do as Dave recommends. Each time you pay off a debt you see the end of the tunnel brighter.

    If you think interest rates are the problem, you will always be a slave to you debt. Your bad habits and math are what makes you broke and keeps you broke.

    Math is math, but when math runs head long into life. Math falls apart every time. Can you say, Fannie Mae, Freddie Mac, AIG, Enron, Wachovia, Washington Mutual? The list is endless. They had lot’s of math people. Every one of them was wrong as can be.

    Look at it this way, you have tried everything you can think of and are still paying on debt.

    Now try doing Dave’s method. Hey after you do his plan and are debt free. If you don’t like it, you can go right back into debt in 20 minutes!

    Even deeper as you have paid off your debts and the credit industry is waiting to give you more and more Pain, I mean debt! You can be a slave again in no time!

    It is your choice, but interest rates have NOTHING to do with your debt! It is you willingness to be in DEBT!

  234. LOL: Correct, these calculations don’t take into account perceived risk, cashflow, psychological benefits, etc. They focus solely on total cost, which is what Elizabeth was talking about, and what I was responding to. I was simply pointing out that her statement was incorrect. Ramsey method can never outperform “highest interest first” in terms of total cost.

  235. Anonymous

    Nickel) It depends on what you mean by “coming out ahead”. If you mean total dollars in interest, you are correct — the other plans can only hope to match (never beat) the “highest interest” first plan.

    But, if the goal is to reduce risk and increase cashflow the fastest — the other plans win. You can see this in your example where the first debt (car loan) is knocked out in 9 months instead of 20. That is 11 months of reduced risk ($275 increase in cashflow per month and car can’t get repo’d).

    It just depends on what the goal is, then picking the plan that meets it the best…

  236. Elizabeth: The best that Ramsey’s approach can do is to match the highest interest first approach, and that is only when the smallest debt has the highest rate and the largest debt has the lowest rate (with everything else in between following the rule of smaller = higher and larger = lower). In this case, the two strategies wind up being identical. There is no scenario in which you come out ahead with Ramsey’s method.

    I do, however, agree that people should follow whichever one makes the most sense to them, as they’re more likely to stick to it if it resonates with them.

  237. Anonymous

    As a mathamatician, I disagree that Dave’s method will never do better than paying the highest interest first. It can do better when the smaller debt is much smaller than the larger one. If the first debt can be paid off quick enough, you can then pay a lot more on the next debt early on to quickly lower its principle too. It all depends on the actual balances and interest rates. That being said, most people will not or cannot do those calculations so whichever method makes sense to them and they can follow will be best at beating their debt.

    I disagree with many of Ramsey’s theories, but did want to dispell the myth that either rule of thumb is always better to reduce ones debt.

  238. Anonymous

    Tina #448) It’s a simple concept that Dave has: pay minimums on everything, then with whatever you have left over, add it to the payment on the debt that you can pay off in the shortest amount of time. This (normally) means you pay extra on the debt with the lowest balance. Once you’ve paid off a debt, apply it’s payment to the next on the list (snowball), rinse and repeat.

    The value in Dave’s approach (mathematically), is that it reduces risk by increasing cashflow the fastest of all methods.

    The other method of paying highest interest debt first will result in less total dollars spent in interest, but it does not decrease risk and increase cashflow as fast as Dave’s plan.

    If you don’t have cashflow problems, then go with the “Highest Interest” plan, if you have debt up-to-your-eyeballs, use Dave’s plan.

  239. Anonymous

    wanted to know if he has a free debt reduction scheduler where we can enter our own information like quicken does. at least the snowball effect reduction quicken is payinf off highest intrest first. i hope he does and if he does where can i get one

  240. Anonymous

    Part of the strength of the Dave Ramsey approach to credit cards is that when commit to it, you’re also stopping the mental cycle of analyzing interest-rate “benefits” such as the difference between a 7% rate and a 12% rate, which is tied up with all the marketing that gets you into this debt, and you’re quitting whole game of trying to game the rates. You’re signing on for a new system thought, where the approach to purchases is simple: ” Do I have the cash? OK, then I can buy it. No? then I won’t buy it.”

    And your approach to debt is just as simple:
    *stop using the cards and pay them down one by one, lowest balance to highest balance first.”

    You’ve stepped out of the credit card mind-meld into your own reality, where money is what you have in the bank and has a green color, and anything else (credit lines, the ability to buy now and pay later–and later and later–becomes “the old way and the wrong way.”

  241. Anonymous

    We have “drank to Kool-aid and got the hair cut” on to the Dave Ramsey Total Money Makeover. We have gotten so excited about it, we are blogging our results at http://www.notlivinghere.blogspot.com.

    We have tried so many methods to get out of debt..and the benefit of Dave’s straight talk and emotion-based approach is so helpful! We finally got the courage to sell our 2004 Lincoln Navigator and buy a 1999 Jeep Cherokee for $3600 just to jump start our snowball.

    All we keep saying is “We’re not living here” meaning..we aren’t going to be broke forever!

  242. Anonymous

    The first comment hit it spot on – as did #5… There’s something about the debt snowball that just works. I listen to Dave Ramsey sometimes and don’t always care for the political/religious commentary he throws in, but he definitely delivers a system that helps people out of debt.

    Sure in the long run people may not be saving a ton of money, but the point is that without the debt snowball and total money makeover plan, a lot of those people would still be in debt… likely forever.

    Paying off debt is exciting! It’s a rush. It makes them want to do it more often! It makes them want to stay debt free once they begin to taste financial freedom. IMO this is worth more than the cash you would save from paying off the highest interest bill first.

  243. Anonymous

    This article is right on. While my husband and I are right-on with paying off our debts (Ramsey’s basic concept), we are doing the “debt snowball” in the manner you describe here — we’re paying off our highest interest debts first (credit cards), and then as those go away, we’ll tackle the lower interest debts (student loans).

  244. Anonymous

    Hi Nickel, I enjoy your blog but I actually just finished listening to Dave Ramsey’s Lesson 4: Paying Down Your Debt (I’m listening on CD), and he actually addresses this exact comment.

    (Dave says, in sophisticated voice) “But Dave, isn’t it mathmatically correct to pay down the debt with the highest interest rate?”
    (Dave replies, in normal voice) “Well yes it is, but if you were good at math you wouldn’t be in debt. I want you to pay down your lowest debt … for instant gratification so you can keep the momentum and gazelle like intensity to attack the rest of your debt.”

    So I think we can all be friends, he’s not disagreeing with you or asserting his method is the most mathmatically sound, its more about motivation.

  245. Anonymous

    Dave Ramsey’s plan involves 7 baby steps, not just debt payment. The other steps beside debt snowball include strict budgeting and creating a higher income to throw at debt. He goes so far as to have people sell cars and drive clunkers to have more money to throw at debt. He also advocates that people have not debt, except for mortgage and then only 15 year mortgages. His is definately an extreme financial plan. His plan resonated with me after years of being a Suze Orman devote. Getting completely out of debt was never part of her plan. It seemed like an eggshell game. I will have paid off 45K in debt in 2 years using his plan and will never acquire debt again. The best plan would have been never to incur the debt and thus all those years of interest. But his plan, for me, was the next best thing.

  246. Anonymous

    There is a difference between effectiveness and efficiency. Effectiveness is getting the job done to specification and on time, using and husbanding all necessary resources to the task. Efficiency is how many resources you use to get the job done. You can be very efficient at a task yet take years to finish it because of that. And you can be very effective at something, pulling out all the stops, if what is important is to get it done–now not later!.

    Dave’s plan is not the most efficient, but it is efficient enough. His plan is an *effective* way of paying off your debt, and effectiveness, not extreme efficiency per se, is what matters most on pressing tasks.

  247. Anonymous

    @ “He tells you to stop your 401k because when you are debt free you can invest MORE into your 401k. He says this only works if you are aggressive at paying off debt, if you plan on taking 5-10 years to pay it off then don’t stop your 401k but if it’s taking 2-3 years then stop so you can start throwing big chunks of money at it.”

    Not only that, but taking a stone cold sober look at your finances and deciding to stop your investments until your debt is paid off is very sobering and focusing. It gets you out of the “la la land” of “someday, someday” I will have money and my debts will be paid off.

    Instead, stopping your investment activity in order to apply all that money to your debt brinngs you Into the reality of ” I have no inventments and am not investing. I am putting a serious chunk of cash every paycheck into this debt until it is gone in x months” mode. Which is very very beneficial. And will also dissuade you from adding more debt out of laziness.

  248. Anonymous

    He tells you to stop your 401k because when you are debt free you can invest MORE into your 401k. He says this only works if you are aggressive at paying off debt, if you plan on taking 5-10 years to pay it off then don’t stop your 401k but if it’s taking 2-3 years then stop so you can start throwing big chunks of money at it.

    Now that I’m debt free I’m able to invest much more than I previously thought possible.

    The money I missed out on for the 28 months I didn’t contribute will be made up in less than 28 months…

    Think of it this way, if I have a 15% credit card by paying it off first I’m saving 15%, 100% of the time.
    If I’m investing the money I won’t make 15% 100% of the time because I’m taking the risk of the investment.

    If you are in debt you shouldn’t be investing, you are not ready to invest until you are debt free.

    Remember RISK!

  249. Anonymous

    Can you imagine a debate that has raged for over 4 years, with both sides essentially claiming victory!

    It seems like THIS is the way to look at this (and many other problems): forget the intricacies and details of the chosen method. Focus on the objective: How to get out of debt. Success is measured simply by whether the objective was achieved, not how it was achieved.

    Dave’s “snowball” method clearly is the winner simply because it produces the desired result more often than any other method. That’s all he has really ever claimed for it.

  250. Anonymous

    John Commuta plan is just as good as Dave Ramsey, but a little bit better in my opinion. Mainly because he says to keep contributing to your 401k. Dave Ramsey is against it. Compound interest favors John Commuta’s plan hands down. Same snowball method, but his software will show you the different scenarios like smallest payment, highest interest. etc to see when the debts will be paid off. Either way both programs are excellent advice for debt elimination, saving and wealth building.

  251. Anonymous

    Prior to having a total money makeover, I played the “balance transfer game.” As a result, the smallest balance may often have the highest interest rate, because the large balances have been transferred to lower rate cards. If this is the case, Dave’s snowball approach will be paying your cards off in order of highest interest to lowest interest. At least that was my experience.

  252. Anonymous

    I used Dave’s approach and agree with starting with the lowest amount owed and then attacking the higher amounts, while paying minimum amount with the debt you are not working on. Watching the items balance out to zero is motivating and this keeps you going and going, before you know it, it is all paid off. I am preparing for retirement using his recommendations and I am pleased with the returns. I plan to retire within 10 years. I like Dave’s approach and it worked for me, may lack math in your opinion, but he sure put zeros in my monthly dues. Thank you DAVE!!!

  253. Anonymous

    If you are so good at Math, why in the hell are you so deep in debt?????
    Dave’s plan is about your behavior and how to change it with positive steps. Lots of people don’t understand this and I quess you are one of them.

  254. Anonymous

    If debt, credit, etc. were just math, then no one would be in debt. (Especially at 11, 15 or even 29% interest!) Credit cards, banks etc. don’t sell us their product on the logic (nearly 80% of those airline miles go unused according to Consumer Report), but emotion. Just look at the commercials.

    Sorry for the outburst, but my wife and I paid on the highest % for years and saw little results because the bank changed the terms more than a few times, messing up our goals (banks have the right to do this we found out).

    Years after being introduced to Dave Ramsey’s approach, we finally decided to give him a try. Within 14 months we paid off over $35k of debt making around $70k per year.

    We were very focused on our spending behaviors, since it was our spending behavior that got us into debt.

  255. Anonymous

    While I agree with the premise of this article (paying off high-interest debt first make better sense), Dave Ramsey himself admits that his form of the debt snowball is not the most “efficient” at clearing debt. But he recommends it for a reason.

    And with millions of people reporting success with his program… well, it’s hard to argue with the results.

    Ramsey believes that the “motivation” behind debt elimination is just as crucial as the math. As one commenter has already mentioned, he wants people to achieve immediate “small victories” so that they can become energized about eliminating their debt.

    The problem with paying high interest debt first is that it is often a long time before one sees any significant progress — a fact that is both depressing and that creates the temptation to go back to the old way of living on credit.

    When it comes to living wisely in regard to finances, the human psychological factor can be just as important as the math.

  256. Anonymous


    You go! That’s an awesome story, I like the plastic surgery joke.
    In my life it also turned out that “I” was the problem, it wasn’t some interest rate, airline miles or other outside force, I was the one who got myself into debt, thinking I was beating the “System” and getting stuff for free. What a fool I was.

    I can tell that you really understand the concept and I know you will never go back. The words you are using when you are talking about your new plan make this very clear and very decisive. Isn’t it great to have such a clear and solid goal to shoot at?

    You are changing your life forever, finishing baby step 2 wasn’t easy for my Wife and I, but now being debt free we know 100% that it was and is worth it!

    I’m so proud of you. Your story strikes a cord because it sounds so much like my own, reading it sends chills down my spine because it reminds me of our sacrifices that we had to make to win. With your new attitude I know you are going to win!

    Stick with it through the tough times, we fell off the wagon a few times in the 28 Months it took us to get debt free, the key is to get right back on and never give up!
    Once you are debt free and have your 3-6 month emergency fund it will change your perspective even more than it already has.

    For example, my wife’s Grandpa lives in Mexico City, he fell ill last month and called us, he was pretty much saying his goodbyes thinking he will die.
    We got online and purchased a plane ticket for her that same evening, not cheap being last minute, but hey it was a real Emergency! She went to Mexico for 2 weeks, she took him to doctors and just her being there lifted his spirits, the good news is he’s much better now!
    If she wouldn’t have gone I think he would have let go emotionally and probably wouldn’t be with us today.

    3 years ago when we were living with Credit we couldn’t have afforded to do this, and if we did we would have a big Credit Card bill haunting us for months.
    Now with no debt and an Emergency fund we did it without even skipping a beat, we didn’t even notice the hit financially, we still have most of our emergency fund and it will be built back up to full strength in no time.

    Now that is Financial Peace, turns out it’s not just about money and Math, but about emotions. Dave says that’s why they call it “Personal” Finance.

  257. Anonymous

    Hi, I just took the first step. I opened a savings account and put $1000 into it. Haven’t paid off any debt yet (okay I just paid of my least used CC that I owed $72 on ). BUT, I feel GREAT having that little cushion in savings (i.e. emergency fund). Why do I feel great? Because I have ‘stepped away’ from the credit cards. That is, I still owe money, but I have commited to not using them anymore. This is HUGE. I have resisted this move for years. My sister has often told me I should put money into savings and I thought that idea was lunacy because I had credit cards to pay off. Well, the lunacy is to continue to keep balances on the cards. Now I’m commited to using cash and saying ‘no’ to credit. That’s the key. Saying ‘no’ and actually backing that up, not just with will power, but with a tangible plan. It’s not just about will power, it’s about waking up to the possibility that I can get out of debt – even my 30 year mortgage that I started four years ago at age 49. Until hearing Dave, I just assumed I would never pay off my mortgage (especially because it is a very low rate). Well, now I have gotten the wake up call – to move agressively NOW to decimate debt. Did I start with the lowest one first? Yes. The $78 credit card. I paid it off, called Citicorp and asked them to close the account. Very politely they asked why. I said I am doing some plastic surgery. The rep said “Oh” and handed me off to his supervisor (or uber salesman or some such). That rep offered his condolences, having heard that I had just had surgery. He hoped I was “feeling better soon”. I told him “Actually, I’m feeling much better already!” When I explained that the plastic surgery was in fact the act of cutting up my credit card and closing the account, he actually came out of character and began roaring with laughter. I told him I couldn’t take credit for the line, but that I really do feel better. He regained his composure rather quickly and asked what would I do in an emergency with no credit card to rely upon? I told him I would use my emergency fund. Then he asked what would I do when I rent a car or stay at a hotel, with the ‘holds’ they put on your account – I said that If I rent a car or a room I expect the hold and therefore will have that money in the account so it won’t be a problem. Now we come to part two in my new attitude towards debt. I have come to rely upon my emergency fund rather than credit cards for unexpected events. Obviously, $1,000 may not go very far! My adrenalene is going because now I am awake and alert! Is a credit card a wise fallback? No! I want to pay off my debts PRONTO so I can build up that emergency fund! All these years I have assumed that my job is secure, that credit will be available. That is STUPID! Dave Ramsey is a VERY savy guy. He is NOT relying on the banks, nor on the government, and he is telling us to WAKE UP and take control of our financial destiny. Okay, I am one of those out of control spenders, with no self-discipline … sort of. Actually, I had never really been taught how to deal with money intelligently. I will be the first to admit that Dave is right when he says the problem is YOU (that’s me); the guy looking at you in the mirror. So yeah, the head knowledge recedes to the back burner in terms of importance – the big thing is to wake up and stop throwing away money

  258. Anonymous

    This entry has been around a while, and has quite a bit of Google love. Numbers tell us that ignoring the interest is a bad idea. But, Ramsey’s plan isn’t so much about numbers as psychology. The thing is, if you take on a $10K credit card when there’s a $1K you can eliminate in a few months you won’t enjoy the psychological success of eliminating the $1K debt and removing the revolving minimal payment. Plus, you’re not accounting for the leverage you gain with few total debts.

    I think Ramsey would encourage people to aggressively negotiate their debts down when they can obtain better terms. Removing the number of debts frees you to do that.

  259. Anonymous

    On the upside, yes, I agree, there is potential to save money. I just don’t think it’s worth the increased risk.
    Do you really think their plan is to let you use this money for 15 months without 0 cost to you? If that was the plan they wouldn’t be in business.

    When I look at the downside to this it overshadows any cost savings by a very large margin, it dwarfs any savings by comparison. You are ignoring a big, important part of the equation, “Risk”. You are increasing your risk exponentially by doing this. You are relying on several circumstances beyond your direct control for this to work out in your favor.

    1. If you miss or are even a day late on any one of the payments during the 15 months you will be charged all the interest on the entire balance, retroactively to the beginning of your term, at a rate that will most likely be 3-4x higher than your mortgage would have been. So there is potential for this to cost 3-4 times more than your potential cost savings. (Sounds like gambling, quadruple or nothing anyone?)
    For example, if you are saving $1000 of interest payments over the life of the loan but it doesn’t go as planned and your rate quadruples, then you will pay about $4000 in interest, BIG difference!
    To me it is not worth to risk $3000 in order to try and save $1000
    (I’m not a big fan of Tax deductions but on another note you will find that if you do end up having to pay interest on the Card then you can’t tax deduct the credit card interest from your taxes, while you can deduct your home mortgage. You are effectively loosing one of the very few, if not the only useful tax deduction out there)

    2. If they make a mistake and fail to post your payment on time the same will apply. (Don’t think it happens? Listen to the Congressional meetings that were held several months ago when they interviewed Major Card Company CEO’s, they are human also and will make mistakes) If they are in error and you can prove it then you can probably fight it and get them to credit you, but now you are stressed and with a huge bill and ridiculous charges while on the phone trying to reason with someone in a cubicle on the other side of the globe, good luck.

    3. The Universal Default policy gives them the power to do what they want and raise your rate because THEY find you are now a greater risk. For example you maxed out the card and now you are a higher risk so they change your rate. Usually introductory rates are safe from Universal Default but most likely the contract you sign says different and I’m not taking their “Promise” to not raise it on a 4:1 Gamble. (Don’t think they ever use Universal Default? Again, listen to the Congressional meetings)
    This is what I’m so amazed about, why would anyone in their right mind sign up for a contract that gives the other party near limitless power regarding the rate they choose to charge you on your balance?

    So you say you have never missed a payment, you always pay on time and never have an issue. If that’s you then you are very disciplined and fall into the minority group of Credit Card users, congratulations. But keep in mind even if you are the most disciplined person out there “Life” still happens to you, the last thing you need is to get sick, loose a job or get into an accident and not be able to make your payment on time. Now you are stuck with several times the cost in interest payments, exactly at a time when you don’t need anymore bills!

    Risk, while not always perceived or considered is always present and real, even if you choose to ignore it.

    I don’t use credit cards and consequently I live a much less stressful live, I don’t have to call and argue with them, EVER. I don’t have to remember to send in a payment or I’m screwed. I don’t have to check my statement every month and make sure they didn’t change the rate on me. And I have much less risk in my life due to this, I sleep better and I have more time to spend on things that really matter instead of trying to beat a system with their rules. Take my word for it, I have tried it with a lot of credit cards and now I’m without even one card, I like it better without them.

  260. Anonymous

    Hey, Sam Sausage / / /
    The key is the 15 month ZERO % interest on the entire balance. Pay it all off with free equal payments, and don’t use it – – period!
    Not in the past ten years have I known of a CC company to go back on the special term guarantee.
    This is solid, snakes or no \ \ \

  261. Anonymous

    Paying your mortgage with a credit card isn’t just stupid, it’s insane.
    Keep in mind all credit card contracts include a “Universal Default Provision”. This means they reserve the right to change your rate at any time, for any reason, they don’t even need to give you prior notice. If they feel you now owe too much money on your Card and you are a greater risk to them they can bump your rate, if you are late one time even if they fail to record your payment they can bump your rate. It happens every day.
    The last thing you need is them bumping you up to 25% on money that used to be part of your mortgage… The risk isn’t worth the few bucks you will save.

    This is why I don’t even own a credit card, the contracts are so far in their favor it isn’t fair. I don’t do deals with companies that act like this.

    Don’t play with snakes you will get bit. You really think you can outsmart a multi-billion dollar industry?

  262. Anonymous

    Chase recently offered a ZERO % cash advance for a maximum fee of $299. Using the entire limit to pay against the mortgage and paying equal monthly payments to satisfy the loan in the 13 month period saves a bundle of interest on the mortgage.
    Warning: You have to cut up the card and cancel any recurring charges – – otherwise you pay credit card interest of the entire balance.
    Warning #2: If you borrow the entire limimt be sure to deduct the fee. Otherwise you will also pay an over-limit fee.

  263. Anonymous

    I don’t know why people are so harsh on the writer of this article. Sure, the title takes a shot at Dave Ramsey, but I think he knows that Dave knows the math… and just promotes a different and arguably more successful approach. The article seemed balanced to me and the responses all address the issues.
    I personally love the work Dave does, and find no fault in his KISS way of doing things. One thing that does annoy me is how companies advertise garbage during his show. He OBVIOUSLY has no control over this since I’ve even heard ads saying “paying off your debt, YEAH RIGHT, you need someone aggressive to get your debt eliminated, or handle your bankruptcy the right way.” etc… Dave rarely if ever advocates BKs, so this has to be the station selling the ads if you ask me. But you’re not, so take my opinion for what it cost you. 🙂

  264. Anonymous

    You’re good at 6th grade level math. Congratulations! Problem is that if people interested in your article had self control they wouldn’t have the debt problems in the first place. The psycological benefits of Ramsey’s approach far outway any marginal savings from your approach. Let’s face it, the root problem with people who have accumulated too much debt is self control. So this is really a debate about how to manage poor self control as a means of getting out of debt. With that said how much of a factor is saving a few hundred or even a few thousand dollars over a few years if that course of action could reduce the likelyhood of success? I recommend finding the program that quickly rewards self control and once those positive behaviors are established and reinforced with personal achievement stick to it and don’t change a thing. Follow through to the finish line and be proud of having the self control to stay the course and to resist the temptation to try and save a buck or two along the way.

  265. Anonymous

    1. It’s not about math, if it was you would not have debt to start with.
    2. Interest Rates are not your problem when you are in debt. Being in debt is.
    3. Getting out of debt is 10% math – 90% bad habits and bad thinking.
    4, All thinking about the interest is doing is side tracking your focus.
    5. If it cost you more interest, just chalk that up to STUPID TAX! Then get mad at the person in the mirror and focus on that. Get the snowball rolling!
    The more it hurts to get out of debt, the better it feels when you get out. Remember that and never go back!

  266. Anonymous

    Heather, Don’t drop your collision insurance unless you have enough ‘free and avaliable’ cash to replace the car. Insurance is a cheep emergency fund for special situations. Even if you are not at fault consider that more and more people are now uninsured.

  267. Anonymous

    I have coached folks for several years and have used the Ramsey approach. Some of the folks I’ve coached were finance people, some had PhD’s, some were professors, doctors, etc. Most understood math very well, but they were deep in debt.

    If debt was about math, no one who understands math would be in debt. Ramsey’s snowball allows for the victories early on and for most people deep in debt, that is much more important than the math.

  268. Anonymous

    Hello, I read alot of the comments. I read the article also. To me Dave Ramsey is more than the debt snowball. Dave goes into alot of principles of finance. First one being the $1000 emergency fund. That in it self is a God send. You have to read the entire book to get this. He goes into the debt snowball as the second step or baby step as he calls it. Dave Ramsey is teaching you to use cash instead of credit. Baby steps 3-7 can be found in the book. Go read it yourself. let me tell you where my wife and I are at right now. I got this book in early March and read it in about 3-4 days. I was shocked about my misconceptions of money. I had 7 credit cards totaling $6728.88. It has been almost 3 months and I am down to one credit card left to pay off. I got red hot mad and I did it. Here are the balances of those seven credit cards with the minimum payment a month in (….): $82.54 (10.00), $105.07(7.00), $354.94(15.00), $690.69(13.00), $806.16(20.00), $1237.63(21.00), and $3431.85(75.00). I now only owe on one credit card with a balance of $2534.69…….I am doing it the right way and I thank God for Dave Ramsey’s plan.

  269. Anonymous

    Um – if you really wanted to go by the math, then you wouldn’t be using credit cards in the first place!

    Getting out of debt is 80% behavior and only 20% head knowledge.

    Dave’s plan works because it helps you re-evaluate your behaviors while providing a great path to follow in your debt-free journey.

  270. Anonymous

    most people don’t declare bancruptcy because of their interest rate, they go bancrupt because of cash flow. Dave’s plan is the best method to increase cash flow the quickest and that is what matters in the long run. why do i care what my interest rate is if i can’t pay my bills?

  271. Anonymous

    I’m sure I’m just repeating what others here have said, but here goes. Dave Ramsey is not bad at math. Actually, he’s very good at it. His snowball plan is not “bad at math”, as it is not intended to appeal to a theoretical “best way” of eliminating debt in the most efficient manner. It IS intended to motivate those who feel self-defeated for getting into debt (especially massive amounts of debt) to begin with. Without this motivation, these people (who may HAVE been bad at math) may not be able to make as much headway in eliminating debt as if they had attempted paying off high-interest debt first.

    If someone intends to use a “mathematically sound” method of getting rid of debt and are easily able to stick to it, they don’t need Dave Ramsey. However, most people that fit that profile wouldn’t be in debt to begin with.

  272. Anonymous

    I think if a person requires Dave Ramsey to make a plan and execute it, it proves that they are Physiologically deficient in the financial department and the person requires immediate gratification.. that said, Dave Ramsey’s methods are tried and tested and they work.. forget the math.. you need to see results and you need them now…pay OFF whatever is easiest.

  273. Anonymous

    I know that I just posted. But I just realized how terrible the title “Dave Ramsey is Bad at Math” is. If you had done any homework before writing this then you would know that he never claimed that his snowball is the “best” way of paying off the debt.

  274. Anonymous

    I recently listened to Dave Ramsey’s audio book “The Total Money Makeover” and recall him actually saying that the snowball is NOT the financially best way to pay off debt. He does say that getting a view victories is good for moral and therefore more important. He also says that after working with getting thousands of people to get out of debt that it is more likely for the people to continue on a “get rid of debt” plan when they can see that debt list shorten.

  275. Anonymous

    I have not taken the time to read every comment made here, but I glanced over some to see if this point had already been made. If you attacked your car loan first, you would also save money by dropping your collison insurance as soon as the car was paid off. Then you could take the savings in insurance premiums and add that amount to your debt snowball.

    I love Dave’s approach.

  276. Anonymous

    I like Dave Ramsey’s snowball method because it is the only thing that is doable for my wife and I. We can only afford minimum payments on all of the debt we have. But now, we are getting close to paying one off and we can use that to start our snowball. The only way we could start paying off our largest interest debts would be if we had plenty of extra cash to do so… well if we did, we wouldn’t be in such a tight corner!
    Problems with pride are all over this page. Probably the same people that would try to explain away the BIBLE. But for all you Ramsey fans, God bless you. (Ok, God bless all of you.)

  277. Anonymous

    27 months vs 26 months; hairsplitting in terms of the big picture.

    Getting out of debt should be done in the way the person chooses that is best for him or her, but should be done whether it takes an extra 30 days or not.

  278. Anonymous

    to paul clampitt.
    the 7 baby steps are in the order theyre are becausE.
    you should build up a buffert så you DONT need a creditcard for ANYTHING! you pay in cash and you have the money on your saving account!!

  279. Anonymous


    I’m not sure where to start.

    I think you should stick to accounting and leave professional criticism of another’s techniques to the big boys cause you’re making a fool of yourself with this article. The article has proven beyond a doubt that you are the guilty party. You are guilty of doing that which you accuse Dave Ramsey of doing: not only misunderstanding the facts but distorting them.

    This point is most clearly made by the fact your article has no reason for existence because you attack his method without understanding the WHY behind the WHAT: Dave Ramsey tells his audience that his method (not “scheme” as you so poorly put it) is not intended to keep them from paying the least amount to their creditors but, rather, it is intended to give them a sense of accomplishment by getting rid of small debts. So YOU HAVE NO REAL ARGUMENT WITH HIM. You even recognize the psychological aid this gives people who are in crisis mode, but it is an after-thought that is truly the only statement you make in your article that comes close to addressing the crux of it all. You, sir, are comparing Apples to Oranges, and doing a poor job of it

    The people who come to Dave Ramsey are not people who have “sufficient self-control” as you put it in the last paragraph of your article…it is their lack of self-control that got them in to debt in the first place.

    Your Achilles heal is your ignorance of the subject matter, which is really not money…it’s PEOPLE.

  280. Anonymous

    If a person or a family wants to get out of debt; why does it matter how they do it? Or in what order they decide wich debt they tackle first? The end result is the same. some methods are faster than others.

  281. Anonymous

    I might add that in addition to the psychological boost it gives to pay off even a small debt, one can also avoid possible late/other fees if a lot of smaller debts are paid off first. If we’re talking about credit cards, late fees are always outrageous, whether the debt on that card is small or large. So if you have a lot of cards with balances on them, it can be difficult to keep track of what bill is due when. The fewer cards you have balances on the faster …. the better.

  282. Anonymous

    I would just like to point out that Dave Ramsey’s “Snowball” approach is nothing new to us in the financial counseling world… we have been preaching this method for at least 20 years…

    And as many people have pointed out, there are a few different ways to pay off debt as fast as possible and with the least amount of interest paid. With all the different options and ideas out there, I’, sure we could all agree on one thing…

    staying out of debt is the easiest way to “get” out of debt 🙂

  283. Anonymous

    The debate between the two broad approaches to debt reduction discussed in this article is at the heart of our discussions on finances at DebtGoal. Too often this debate focuses on the seeming dichotomy between the two options. But choosing one of the two approaches against the other does not kill one’s debt elimination efforts. What can kill it, however, is inaction or “falling off the wagon” with one’s actions and strategy. So, it is much more important for someone with debt to at least choose from amongst the viable strategies — of which the snowball method is — and to get things done. After all, someone dedicated to fulfilling the necessary debt payments using snowball will emerge from debt, just as someone who uses the other viable approaches will as well.

  284. Anonymous

    hope you build up enough points to make up for the 12%-18% extra that your spending by using a credit card. these credit card companies are not giving you these points to be nice to you, they are doing it to take your money while you stand there and enjoy it.

  285. Anonymous

    I have recently listened to dave ramsey and find it very appealing. My wife and I luckily have been very good with our money so it won’t take but 4 months to get out of debt including vehicles. The only thing i have an issue with was his no credit ever. I use a best buy rewards zone card and saved over 700 dollars on my washer and dryer because i use it every day like a debit card. I pay off the balance every month and i am sure that i do spend a bit more with it than if i carried around cash everywhere, but the points do add up quickly and they can get you some pretty nice things if your patient.

  286. Anonymous

    Dave’s approach has some psychology behind it. He wants you to pay off the smallest first so you can get that sense of freedom you get from being released from the bondage of debt. With your plan, although you save a few hundred dollars, you will have to work it more than twice as long to get that “reward” or the “high” that you get from paying off a debt. That feeling is a great motivator to keep you on track. If you have to wait the full 20 months to pay off your first debt, that’s almost 2 years before you are going to get that “high” (and paying off a long-maintained debt is a high) and he is concerned that some folks will lose their momentum before the 20th month. But, if you can keep it up for 9 months, you’re more likely to stick with it after you’ve experienced that first pay-off. You won’t be saving anything if you give up in frustration too soon.

  287. Anonymous

    i tried for years to get out of debt using a financial calcultor and rationalizing interest rates and my debt only got higher. then i tried dave ramsey’s plan and got on a budget and i have been busting it for 5 years to knock out a $215,000 debt (not including my house). i have the cash in my pocket to pay off my last debt (family loan) and after i get off of work, i am going to pay it off and be debt free (but the house). if you want to know if it works, ask someone who has done it, IT WORKS!!!

  288. Anonymous

    I do not understand why people find it so hard to believe that Dave Ramsey’s plans work. If you think he is teaching you the same thing your grandmother taught you then maybe you need to learn how to listen and apply since the basic of any budget is to not buy something you don’t have money for! Yes, emergencies happen but if you didn’t buy a new car, a house with an extra room, a house with a carport so your precious car doesn’t get rained on, brand name food, new clothes…then you wouldn’t have credit card bills, car loans, student loans…-It is called not living beyond your means!! Forget about what your neighbor has, what your parents had-it is about what you absolutely need then build your savings then buy luxuries (wants). For those that confuse a need with a want: a need is something that your body requires you to have and/or the government requires you to have. Internet is not a necessity so if you are one of the people that are complaining you can barely pay your bills then maybe cut your internet bill! If you have a house phone– then a cell phone is Not a necessity.
    Either method works. You just have to put in the effort and do it. You can cut expenses as long as you can grow up from being the “little kid in the candy store”.

  289. Anonymous


    Your math is a little off; your total yearly espenses minus the 38K annual salary, leaves you with $388 dollars per month. Now adjusting for a general tax liability and, most likely the deductions from your Husbands salary for medical/dental/vision….your monthly cash flow (based on the numbers you provided) are about $265 month.

    It’s not much money, but you do have money at the end of the month instead of month at the end of the money.

    Do you actually have a budget? A Real budget? If you do and you do have money at the end of the month…you’ve got the start of a savings/debt payoff plan. It’s not easy, won’t be easy for a year or two (maybe longer if your spending habits and/or debt is large), but it can be done.

    ….and Dave’s materials are available for free or next to free if you look. the Financial Peace University (FPU) course is offered at Church location all over the USA. The classes tend to be free of charge, tho you might need to purchase some materials at a reduced cost.
    Dave’s radio show is free of charge, as is his TV show, and if you go thru his website, you will find many resources, some costly and some free.

    Stephanie….. All Financial planners and Advisors will tell you how easy it is to get into money trouble and how difficult it can be to get out of it. Dave happens to have a plan that is basic, one that most people can follow. True; there are some who will need something more drastic that isn’t covered in Dave’s plan…..but, if you are one of those people, there is a plan for you.

    Now, I’ve been there.. at the bottom with money problems Big money problems. I declared Bancruptcy to just “save the house” . The Court Ordered “restructuring” had me pay $210 more per month than my spouse and I made. That’s the good old Government for you. We ended up selling the house, anyway, sold some other things as well. We paid off our Bancruptcy more than a year early. However, it was devastating; trashed out credit, reduced our choices of places to live for a few years…etc, etc…And it didn’t really help us in any way. It took another 10 years to work out of the bancruptcy quagmire to be able to get to where we are today…..and it’s a decent place to be. I’m using Dave Ramsey’s Total Money Makeover, will attend a FPU class at a local church soon…..I have a to Debts to pay off, a Mortgage that is just a few years away from being paid (and I’ve only had the mortgage for 2 years) have an emergency fund, and will soom have a much better retirement plan in place…..

    Stephanie it can be done; not easy but it can be done. Dave is not the only game out there. He is, however, one that is easy to use and easy to access.

  290. Anonymous


    Have you read the total money makeover? Are you aware of all the charitable contributions he makes? Why are you so upset because Dave Ramsey provides a service and makes money? Does that make him evil to you?

    In your community, I would venture to guess there are classes that are offered at churches to help you get a handle on your budget. You could attend community college at night to find a job you love where you can get your income up within a few years. Maybe you or your hubby could work a second job?

    I didn’t pay a dime for Dave Ramsey’s teachings because 1. They are free on the radio. 2. You can rent the book from your local library. He puts many of his callers through his program free of charge.

    But if it makes you feel better to demonize someone who is changing lives for the better, so be it.

    Your examples of monthly expenses are ridiculous to say the least. No one said Dave Ramsey’s plans are easy, they are not. The responsibility lies within you to change your financial situation. Dave Ramsey wont do it for you. Dave’s plan works, but its obvious you need to figure out a way to cut down on your expenses or make a little more money.

    And I bet you have 101 reasons why you can’t.

    You gotta chin up and not fall into a pity party. I wish you the strength and hope to change your situation. I really do.

  291. Anonymous

    Make no mistake Ramsey is not bad at Math he knows math well he has tricked how many poor folks into paying how much for his so called system that teaches the basics that we all learned from Grandma if we were listening back then. It is sorta a no brainer that if you make more than you spend you can save some. DuH! YOU THINK. The math that is bad is that housing in america , food and medical is out of preportion with what most folks earn. Ramsey is raking in the cash maybe he should set up a fund to help some of these poor folks who are working two and three jobs and still can not climb out of debt due to our “living wage” of just over $7.00 per hour. If you really want eye opening read Nickeled and dimed. Understand this Ramsey is taking more than nickles and dimes from all these good hard working christian folks. Just how much did you pay for his book, teachings, Peace Univ ??????????

  292. Anonymous

    Yes, Dave is very Bad Math he preaches to be a good steward of your money to folks who earn mid $30K per year raising several kids. Housing, Utilities, Food, Transportation and Clothing just add the numbers folks even the bare bones basics don’t cut it I didn’t even mention taxes or things like entertainment , gifts, vacations, why would I the money is not there for the basics. Take the average family of four Dad works making around $38 Mom works making around 17k now we have childcare due to Mom working and that is for two children so much of what Mom makes is eatten in transportation and child care. So let’s look at Dad’s salary shall we. Housing average is about $1400 per month if you can find it that cheap, utilities if you can keep them low are about $300, next we have food even cooking from scratch growing some yourself etc the bill for four for one month will be around $450 transportation this can vary widley but let’s be conservative and say they have one car that needs oil and filter changes and gas and it is paid for but they are saving for when it wears out insurance now we are up to at least $6,000 for the year that does not include tolls and parking, Clothing let’s say we buy mostly used we need things for the kids due to size changes and Mom and Dad need a few things once and awhile and then Dad needs work clothes so lets see $600 for the year is a very low number we will try to stick with this budget. Now we have to pay taxes and since Dad makes $38K per year takes fall around $800 to $1,000 depending on tax credits etc. Let’s go back and do the math folks. $16,800 Housing,$3,600 utilities $5,400 per month food, $6,000 for the car $600 for clothes and we will say $800 for taxes note we did not mention medical etc…. and we all know there are tons more etc in life. Just the bare bones basics we are up to $33,200 no amount of juggling, cutting back or creating emergency funds change these bottom line numbers the best most can do is hope a rich realitve dies and leaves them some, or they get some government money for going back to school or the Food stamps program or something like that.

  293. Anonymous

    …about student loans…..
    Not paying off student loans can have more repercussions than one might casually assume. While not as horrific as credit card debt, student loan delinquency affects the FICO score, which means you get to pay more interest on any loan you might want to take. Some Government jobs *require* student loans to either be paid off and/or paid thru payroll deduction. Wage garnishment is a real possibility; and even if you lose a job, go into forbearance….once you get a new job; the accrued interest becomes capitalized; meaning that your principal balance will be more than it was before it went into forbearance.
    And…. “The rate on a student loan is lower than many CDs and INGs money market rates so you have a risk free (up to FDIC limits) investment that will make you more money”….if you are using investment money to reduce your “debt penalties” without actually removing the debt, you’re just wasting your money as you’re making money just to hedge against a debt, that if you just paid off, would go into your pocket.
    Get out of Debt…..Get out of Debt…..Get out of Debt.

  294. Anonymous

    Additionally, Ben, suggesting that someone is able to arbitrage the difference in interest between a student loan and a CD or savings account is pure fantasy.

    Why not just pay the stupid loan off and put the money into your 401(k)? You attack Dave Ramsey’s advice but fail to deliver anything worthwhile yourself

  295. Anonymous

    Hey Ben,

    What bad investment advice are you referring to? Dave does recommend most folks put 15% of their income into growth stock mutual funds with a 10 year (or better)track record once they are out of debt. While that advice is a bit thin, its pretty sound in principle. He also recommends that folks never put money into something they don’t understand. I would say that’s sound advice.

    Your advice, on the other hand, really doesn’t make sense. Do you have an ING savings account right now? They aren’t earning anything worthwhile. Student loans, on the other hand, are charging at least 6% interest. Forbearance is not the same as forgiveness. Morally speaking, if you get a loan, you should pay it back. When you carry debt, it limits your options. That is the message here.

    It is impossible to quantify how many people are in a great place because they followed Dave Ramsey’s advice. Some do, some don’t, so what. You have to evaluate Dave’s teachings not on how many are successful, but on the merit of the advice itself. Personally, I paid off my high interest debt FIRST. The important thing is I got out of debt and got my wife, friends and family on board with the idea through Dave Ramsey’s teachings.

    Ultimately, success is up to the individual. I don’t know anyone who is in a better place because they put a student loan into forbearance. What brought you to those conclusions?

  296. Anonymous

    @384, Do you have any numbers to support your claim at that DR has all of this success? Do you have any idea how many fail? More importantly does anyone know how many are going to struggle in retirement because of his very bad investment advice.

    @385, people with emotional problems need to have the problem addressed. What DR does is no better then cutting off a drunk. Without addressing why they drink, you are making dry dunks who just find new ways to fill the emptiness. You are also not addressing the other issue and that is how ignorant financially the listeners are.

    @386, paying off a student loan is the dumbest mistake a person can make. What can happen? If you lose your job then it goes in forbearance and subsidized loans don’t accrue interest. If it is not subsidized the rate is still tiny and not required to be paid until it comes out of forbearance. The rate on a student loan is lower than many CDs and INGs money market rates so you have a risk free (up to FDIC limits) investment that will make you more money. That is why so many of us hate to hear DR’s idiocy spouted by listeners.

  297. Anonymous

    ..wow, so much time posting about the debt snowball. Very Interesting.
    The lowest debt owed versus the highest interest rate charged. The immediate issues with interest rates are the terms, length of payment, and penalties. Paying a longer term on a lower interest rate will cost more than a shorter term higher interest rate…blah, blah, blah, math, math, math.
    The POINT is to get out of debt as quickly and prudently as possible. So, to “balance out” the argument… say you have 3 outstanding debts; all at $5,000 (that is the “pay off” amount) but due to each debt having a different interest rate you have 3 different monthly minimum payments…. pick the lowest MONTHLY PAYMENT debt; pay it off first, since logically it will be the easiest to pay. Now when it comes to a $5,000 credit debt and a $50,000 student loan; regardless of the interest rate (typically the student loan interest rate will be less than the credit card; after all, if you needing debt elimination – your not paying low interest on credit cards; you are paying maximun) It will be easier to pay off the smaller debt first. And remember; once you begin to pay tens or hundreds of dollars above mimimum; you have the ability to pay directly to principal balances, which reduces interest liability.

    …oh and since I read a thread about PMI on a Mortgage; if you are paying PMI you are only legally required to pay for 5 years…..mark 5 years to the day from when you began paying your mortgage. On that day, convert the money you have going toward PMI and apply it to Principal…..you’ll be able to knock a few years off the Mortgage. If you’ve already made it past the 5 year mark and are still paying PMI…STOP IT… and have it applied to Principal.

    …as far as all of the posturing going on by the Financial people who have posted….Is Dave Ramsey hurting you business that much? If so; maybe you should re-evaulate your personal bottom line since most of the financial advisors I’ve come across in 20+ years are in debt and upsell the “power of leveraging “.. maybe your math is in the way of your financial freedom????

  298. Anonymous

    I followed Dave’s plan purely by accident. When I started paying off my non-mortgage debts before I learned of Dave’s plan, I needed to increase my cash flow ASAP. Even though I had a small cash reserve, my debts were causing a cash flow problem. The quickest way to do that was pay off the smallest debt first. For me it wasn’t an emotional decision, it was a common sense decision. Emotional spending was what got me into this mess in the first place.

  299. Anonymous

    First, I must agree with all those that replied with Dave’s psychology behind the debt snowball starting with lowest balances first. Dave states that this is simply an emotional boost and I have to say that it has completely changed my life.

    I have always been a fairly disciplined person, but I bought into the idea of buy now, pay later (as most Americans do). As a result, I was in debt to the tune of about $62,000 including student loans. I had tried for about a year and a half to pay the most on the highest interest rate cards first. It did not work!

    What worked was following Dave’s plan to the letter and changing my behavior. His financial plan may not make sense based on simple mathematics, but it makes sense when I have simple victories along the way that keep me committed to changing my lifestyle. I paid off another credit card today and have paid off $9,000 in the last 2 months on a take home salary of approximately $11,000 (during the 2 months). This is all thanks to Dave Ramsey’s plan. I just couldn’t do it before, but his budgeting tools and no nonsense views helped me accomplish an incredible feat!

    Dave Ramsey is the man, bad math or not, because at the rate I was paying things off before, it would have taken me 15 years instead of the 3 it will now take me. There’s no contest on those interest savings!

  300. Anonymous

    if we are going to look at this from a mathmatical approach, why did we get into debt to begin with? you can’t emotionally get into debt and mathmatically get out.

    your calculations are correct but someone who is pissed off at their debt will always get out faster than someone who is trying to use math, and you can’t show this on paper.

  301. Anonymous

    You don’t get it. Of course financial people say to pay off the debt with the highest interest rate but they are FOGETTING ONE THING. Getting out of debt is 80% behavior and just 20% head knowledge. When people start seeing small successs (paying off those small debts) and then snowballing that money saved to decrease the next smallest debt (and so on) they get a psychological boost. Dave has the greatest success rate of all finanical advisors and his plan works.We paid off $18,000 in one year and have just our $824 house pmt on a $94,000 salary (when I begin working we can add $36,000 to that number). Unless you’ve read all of Dave’s books or tried his FP University program, you have no way to know what works and what doesn’t work. Doing what you’ve always done is obviously NOT working. Dave’s proven way works. And adding the Christian element and the personal responsiblity element to his teachings is a HUGE plus for many! I am a Dave Ramsey FP University volunteer vacilitator and I swear by Dave’s program. Try it. For $100 it can change your life!

  302. Anonymous

    It’s also worth while to note that in the example provided, the higher the interest rate of the loan, the higher the outstanding ballance is. If you reverse your suposedly ‘numbers grabbed from thin air’ (lowest interest rate on highest ballance) you’ll find Dave’s plan works out the exact same as paying the highest interest loan first. Your numbers shed Dave’s plan in the worst possible light.

    I understand the point of the article, but I would say that if your determined and structured enough to stick with getting out of debt without the small victories and can always see the final outcome, your probably smart enough to do the math and pay off the highest interest rate loans first, and work your way down from there.

    For the rest of America, stick with Dave’s plan, it will work if you focus on it.

  303. Anonymous

    This has been a great education, and my thanks to the kind gentleman named Nickel who started this post.

    I think it’s a rare person these days who doesn’t owe a dime, or even just owes, say, on their house mortgage.

    The two problems we face as consumers is our tendency to become addicted to spending and the ease with which we can do it–all the while beguiled into thinking we can get away with it.

    For myself, prior to my decision to 1. not create more debt and 2. tackle the debt I own, I believe there was an absolute decision on my part to remain ignorant–if not actually blind–about the ratio between the money coming in and what went out. This was evidenced by my refusal to budget and my claim that I had a “good enough” idea of what went in and out and these two justifications: I paid those mininum payments faithfully, didn’t I? And didn’t I also not bounce checks?

    These were actually just smoke and mirrors.

    To sustain this habit of spending more than what I earned required a kind of mental denial system…much like the alcoholic or food addict.

    Mind you, while I am totally accountable for my overspending, I just have to acknowledge here what is too often not talked about: this evergrowing mass consumer culture and media that we and our kids face, enticing us to spend spend spend…if this isn’t a recipe for a bankcrupt nation in the truest sense of the word, I don’t know what is.

    The solution to digging yourself out is to recognize that you’re in a hole, gratefully take hold of the shovel being offered you (and it is being offered), and then do whatever the hell it takes.

    So we don’t find ourselves back down there again, well, if we haven’t changed the habits that got us there in the first place, then aren’t we doomed to repeat? Won’t those pounds (dollars) come back? And well, you know, we really didn’t notice it happening, it was so gradual and innocuous!

    Last thing: I found a really great addition to paying down the snowball: my decision to work a few extra hours a week and apply that money to my debt. I guarantee you will pay less interest this way and pay that debt off sooner than high interest, etc, alone.

  304. Anonymous

    Certainly, Dave’s method isn’t the most cost effective method of debt reduction from a purely analytical perspective. It’s all about attitudes toward money. Many people lack the understanding or the discipline to manage their finances the way they should. Dave gives them an easy to understand way to achieve some peace of mind.

  305. Anonymous

    I’ll be trying Dave Ramsey’s course with my wife in the near future. I’ve had control problems but not on large amounts. Just a little here & there adds up & before I knew it, we were living way outside of our capabilities. Multiply that by two because the wife is the same way. Sometimes it makes you feel better to spend some money.

    Next month, this will be a program at our church & I’m looking forward to learning more about family finance & getting out of debt with my wife.

  306. Anonymous

    I had try almost everything to get out of debt and always failed until I receive the greatest gift, The Total Make Over. I’m a Certify Public Accountant and even though I have high experience and good mathematical skills I didn’t have the self control needed to manage my financial life. The snowball is certainly help me because every month I have little wins. I just pay off all credit cards and personal loans. Now I’m focusing on my car loans that will disapear in one year.

    I didn’t need a financial guy to tell me what was the mathematical calculation, I know how to do it. I needed a Psycologist that help me to change my behaviors little by little. So thank you Dave, you help me to see better my potential and what I was doing wrong. I have self control and will be totally debt free is 7 years (6 more years to go- and It will be a reality).

  307. Anonymous

    Dave Ramsey is not bad at Math. He has explained a million times that the highest interest first method is mathematically faster. He just factors in human behavior to arrive at his method. His method also mathematically improves your monthly cash flow faster. Cleaning up your monthly cash flow is extremely important because it enables you to absorb more bumps in the road along the way – in the couple years or so it will take the average person to clean up all their debt they are going to have some bumps so in real life I garauntee that Dave’s method is the fastest. My only caveat is that if you have debts that have close to the same balance but signicantly different interest rates. i.e. Student Loan of $20,500 at 3.5% and a Credit Card balance of $22,000 at 18% – I think Dave wouldn’t be too upset if you took on the Credit Card first.

  308. Anonymous

    We love the Dave Ramsey Program. We have Paid off our Credit Card( only 1) then paid off a Home Equity Loan for a Srceened in Porch and now are scheduled to pay of a New Saturn in less than a year in the mean time we have our emergency fund pluse a Money market account with $7000. We have money go in each month to pay for taxes, pet care, auto repair, collage,HOA dues, etc. It has worked great for us and have been in our house for 3 yrs and are scheduled to pay off in 11ys,if not sooner! I’m looking for a weekend job!! We are better than we deserve! Thank you Dave Ramsey! We have changed our behavior and It has changed our lives. We live on a budget now. It is great!

  309. jonathan: No, you’ll always come out ahead paying off the highest rate first*. However, as Ramsey has argued, paying off lowest balance first might be best for some people from a psychological standpoint.

    * Technically, the Ramsey approach can tie highest interest first if the smallest to largest debts have the highest to lowest interest rates.

  310. Anonymous

    Setting the psychology aside and looking at the math, wouldn’t it be best to pay off the highest interest AMOUNT first, and not the highest interest rate? Take the following situation: Let’s say I have two mortgages to pay, both rental properties. The lower interest rate property is at 5.375 % and I owe $417K on it, 30 year fixed, matures in 30 years (brand new loan). The higher interest property is at 6.375 %, I owe 195K on it, 30 year fixed, matures in 25 years. According to the amortization schedules, if I were to pay 70K toward the higher interest rate property, I’d save $148K in interest. But if I pay 70K towards the lower interest rate property (with the larger loan amount and therefore larger interest payment) first, I save more: $198K in interest. So in a situation where the interest rates are pretty similar but the loan amounts are much different, I say pay the loan with the HIGHER INTEREST AMOUNT off first. Am I right or wrong?

  311. Anonymous

    After stumbling on this post when searching about Dave Ramsey, I am struck at how many comments this has generated. While I have listened to DR off and on for a year or so and have some thoughts about this analysis, they all been discussed and critiqued at great length, so no need to beat a dead horse. Rather, I will post a few thoughts I haven’t seen in the comments.

    I can attest that people from all walks of life call in with debt stories and stories about becoming debt-free. So, it really can work for anyone, but doesn’t have to be the only way to get out of debt.

    However, one thing I have learned from listening to DR, is that becoming debt-free is only a small part of the puzzle. What he hopes to change is our whole approach to money and what role money plays in our life.

    This post is a great example of how a clever, provocative (and yes, even a little disingenuous title) can really drive up the traffic and spur a lot of interest. So kudos to Nickel, who is good at math and drumming up hits!

  312. Anonymous

    The Value in Daves plan is definetly the Psychological factor and really the difference in savings between any of the plans is insignificant compared to the change in ones life after successfully paying off all their debt.

    Only in a case where the high interest debt is significantly larger and substantially more would it make a very big difference at all. Even in this case I would probably go Half on biggest interest and half on smallest debt just for the psycological aspect. One other thing those 0% interest debts often have a clause that if they are not paid in full by the time the grace period is up all back interest is added and the interest rate goes up. This is true of Best Buy Credit cards and other big purchase zero down programs. Be Careful.

  313. Anonymous

    I’m a math person and for 10 years I tried to convince my husband to help us get debt free. We’d start… I’d put the extra payments toward the highest interest debts. After a few months he’d get discouraged and start spending again. Finally I agreed to try it his way, and we paid off the smallest debts first. I cringed – that meant paying off the 0% debt first. But he was able to see our bills decrease, debts go away. Guess what? He kept at it this time and we have managed to pay off all but our car and house – $55,000. I feel sooo much better without the debt hanging over us that the fact I paid off a 0% loan first doesn’t matter!

  314. Anonymous

    It is kind of tricky and arrogant to title an article “Ramsey is Bad at Math” and then explain why his plan is good. Out of all the nice comparisons you have taken out the emotion factor. It is emotionally driven when creditors are calling you night in and night out. Your not losing a ton of interest by going smallest to largest and in some cases he changes the plan on dead beat debt. If you have a 300 dollar debt that is written off and dead in the water, your going to pay one that is active first. The article is good, the title is ridiculous. FPU isn’t about Math, its about Freedom. The less people calling you the more Freedom you have.

  315. Anonymous

    I think your comparisons are very good and what I am about to say if someone else has pionted it out great because I did not read all the comments.

    If the high interest example paid off the debts in the 26 months while the other two paid off in the 27 months. Would not there be a $1,000 that was not spent on debt because it was paid off in 26 months therefore making the high interest example a really good way to go. Does that make sense? What do you think?

  316. Anonymous

    To quote Dave….”If your such a freaking math whiz why are you so far in debit in the first place.”

    It is all about the small victories….about 18 months until I am completely debit free including mortgage.

    If more people learned to follow Dave’s advice years ago our nation wouldn’t be in as big of fix as it is now.

  317. Anonymous

    Dave Ramsey himself points out in his materials that mathematically, this is not the most effective strategy. But the people he is helping are not looking for the most mathematical strategy. He points out that getting rid of the smaller debts first provides a psychological benefit. This is especially important considering that getting into AND out of debt is mostly behaviour. People who want to get out of debt most need that little boost of seeing one of many debt piles disappear.

  318. Anonymous

    The best laid plans often get waylaid by emergencies. Each minimum balance is a past tense commitment that must be routinely met. In a month when an emergency occurs, you may need to set aside your snowball (or other) plan for a while and simply pay the minimums, while meeting that emergency.

    The beauty of Ramsey’s plan is that it serves to quickly decrease the number and amount of these minimums, (one small debt at a time), so that one is prepared for life’s inevitable emergencies earlier than he would otherwise be. This capacity to meet one’s emergencies creates a financial gain as they are more likely to be met with real dollars than with additional borrowed ones.

    Besides, most people’s anxiety over their debt stems mostly from being unable to set ANY priorities while meeting emergencies and the other frictions of daily living. Showing people how to quickly clear a path of sunlight through their commitments is a very good thing and Dave Ramsey should to be lauded for it.

    Bill Churchill

  319. Anonymous

    Dave Ramsey’s approach is not intended to be the “best by the numbers” approach; it acknowledges that money and debt come with a heavy dose of emotion, and that to conquer debt takes a strategy that keeps you on course, thus first tackling the debt closest to being paid off. It’s a psychological/motivation/confidence thing. I think you hit it exactly when you said “…Then again, maybe people with self control don’t get into debt in the first place…” If humans were computers or robots I agree with your analytical approach.

  320. Anonymous

    Well the numbers are simple for me. I make a six figure income and was over $60K in credit card debt and car. I was living waaay beyond my means. I have follwed D.R. plan to a tee with “gazelle intensity”. Sold the car, paid off the loan and paid cash for a junker. Then sold all the crap laying around the house. 23 months later I am debt free except my mortgage and my bank account very simply is HUGE!

  321. Anonymous

    you mention with a little disipline people could pay off their debt with what ever method, but you failed to realize that if they had self disipline they wouldn’t be in the situation they are currently in….so therefore dave ramsey is right and all others who think different are just defending their”stupidity” because its warm and its theirs like a child with a bad diaper so to speak.

  322. Anonymous

    Dave has said the best method is to pay largest interest rate first, but for motivational purposes to pay the smallest debt off to give you something to see progress. Most people need to see they are making progress, and if you have 47,000.00 in debt and are making minimum payments, you can feel a little discouraged. I know, I paid of that amount in 18 months. Thanks Dave.

  323. Anonymous

    I don’t know about Dave Ramsey, but his staff that takes questions and screens calls, are just that, “Screeners” and nothing more. I called Dave Ramsey’s number, hoping to catch him and ask him a question. Capital One, with who I had a $200 (Two Hundred) limit credit card jacked up interest rates, added penalty etc. to finally bill me for $2,000 – (I called Dave’s show since a caller with a Capital One Credit card of $800 limit was being pursued for $8000 by Capital One.)

    My specific question related to the legality of the Creditor, Capital One, to re-age my account. In the Credit Report I received from Equifax in June 2008, the date of 1st delinquency reported by Capital One to Equifax was Jan 2002. When I checked my Equifax Credit Report in Jan 2009, I was horrified to notice that Capital One had, around Dec 2008, updated, by providing another date to Equifax, had caused the date of 1st delinquency in the Equifax Credit Report to change to July 2002.

    To the best of my understanding, as per the FCRA, the Creditor is not allowed to re-age the account, ie., the clock starts ticking from the date of the first delinquency, and this date cannot be changed by the Creditor.

    When I called Dave Ramsey, I was shocked to hear the lady on the line state that “since I had not paid the debt, Capital One was at liberty to change the date of 1st delinquency to anything they wanted, and that this would continue till I paid off the debt.” I explained to her that the debt was no longer owed since it was over the 6 year period and that the Statute of Limitations governed this debt. The lady would not even listen, and like a broken record, continued to repeat what she had already told me, and then hung up. I felt like I had just got off the phone with a Collection Agency, and not a team-member of a person who is acclaimed as a Champion of the masses!!!

    I called again, and got a lady on the phone and explained the situation to her, and told her that the advice provided by the earlier person was not correct, and this lady (maybe it was the same lady-I couldn’t tell, since I was driving) repeated the exact same advice, quoting that per the FCRA, it is not illegal for the Creditor to re-age my account. When I tried reasoning with her, a guy (I am guessing he is the guy who heads Dave Ramsey’s call center) came on the line, interrupting my conversation and says:” Sir, you called earlier and we have been told to tell you what you just heard, and please do not call again”

    So much for Dave Ramsey and his team. It’s a pity. With a self-important and pompous voice, Dave Ramsey goes about his business as usual, selling his FPU, touting his books and audio material and tooting his horn to the unsuspecting, uninformed public! He and his team are indeed, a rare commodity!

    I emailed a link (http://www.ftc.gov/opa/2004/05/ncogroup.shtm) on a case that FTC and DoJ had filed – I found this on the FTC site, as soon as I got home that day, to an email ID I found on Dave’s site – am yet to hear anything from him or his team.

  324. Anonymous

    Simple question: If bad math and lots of emotion got you into debt in the first place…. why would you rely on them to get you out?

    Emotion + Bad Math + Finances = disaster

    How’s that for math? Try this:

    Good Math + Emotional Detachment = Wherever your plan leads

    The real way to stay out of debt is to CALMLY realize what it is, and address it as such.

    I keep hearing these over the top theories, like: “Beans and Rice is not a meal, It’s a lifestyle.”
    News Flash: Most people won’t do this.

    This invalidates what many people are saying. In fact, I think that this guy’s theory only works for a minority of people who are willing to jump to the extreme.

    Yet most people will avoid the extreme. Which in many cases makes his ideas unattractive.

    Which is why the majority of Americans will still be in debt a decade from now… No one suggest good-sense mathematical solutions, only a ridiculous extreme.

    I don’t think the snowball is evil. I’m sure it can help SOME people. But it isn’t good math; it isn’t logical, and it is combined with an approach of extremism which makes it unpalatable.

    Now, it’s doubtful anyone will read all the way down here; but my solution is such: promote good math, so no one can claim that they got in debt through bad math. At least we can limit the cause of debt to emotion then.

  325. Anonymous

    Unfortunately, if you have fallen into multiple accounts of debt, then you also fall into the category of ‘You didn’t get into this mess by doing good math and you won’t get out of it by doing it either’.

    Hundreds of Thousands of families have used this basic plan of the Baby Steps and with it the debt snowball to pay off debt and start building wealth for over a decade. It is ludicrous to look at such a history and try to accuse it of not being an effective way to pay down debt. Really, you should do your research with more than just a calculator.

    Let’s take a look at your hypothetical situation for another minute:

    If you picked up an extra job to bring in that $1000 extra a month to pay down your debt, do you really think that you could keep up all those extra hours for 20 months without seeing any kind of victory? We NEED victories. This isn’t a want and that is why it works.

    By starting with the smallest, you pay off the first one in 9 months. After that small victory (and by the way, in your scenario you are also applying a larger minimum payment towards the second debt by starting with the car payment…nice), you will be encouraged to the point where you will likely pick up more hours or the other spouse will start their second job to speed up the process. Now you are done with your second one in 10 months because you are ramping up your efforts instead of loosing steam. See where I am going with this?

    The $641 if you end up actually paying it? It’s well worth it if you are able to stick to the plan and get out of debt. In the second scenario you end up loosing steam after 12 months of plugging away with no reward and giving up.

    The other matter you aren’t taking into account is the ‘God Effect’. Handle money God’s way and be generous with HIS money and you will find that the calculator lies and you DO get out of debt faster.

    Read Dave’s book and work his plan…really work his plan…America can be a debt free nation! We CAN stop the abuse from the creditors and we CAN put these badly run companies out of business who enslave our citizens and are causing this to become a society of the rich who lend to (and enslave) the poor.

    Want more info? Go to http://www.daveramsey.com and get started!

  326. Anonymous

    “After going through Dave’s class and reading your thoughts. I’d like to say your an idiot.”
    Comment by Phil Points — Jan 23rd 2009 @ 11:09 am

    Perhaps you should have learned the difference between “your” and “you’re” when you were in college? Then we might take you seriously when you strive to insult some one.

  327. Anonymous

    After going through Dave’s class and reading your thoughts. I’d like to say your an idiot. Dave’s class does not just speak to those with issues with money., It is a class EVERY person should listen to in college. HIs debt snowball,cleared my debt completely in 6 months, Your way would take me years. You are obviously in love with your fico score. You need to take a good responsible look at your debt and spending habits.

  328. Anonymous

    Obviously most people who are in deep financial trouble are not there because they are willing to do the above computations. They have an emotional problem and when they begin their road to financial peace, they have to work through a series of learning processes and need the feeling of success that comes quickly and simply. Like you said, if they were so adept at numbers and applied themselves to controling their finances, they wouldn’t have become so indebted in the first place.

  329. Anonymous

    Just a note to say congrats to you Nickel for this post which I note has been running for over two years. I am a maths geek and I do agree with your maths. Practically, I go with Dave’s methods for reasons that have been articulated by so many before me over the years. Great job!!!!

  330. Anonymous

    It really isn’t about the math. It is about victory. If you have 5k at 20% and 3k @ 5%, it would certainly be mathematically better to pay of the 20% first. But it may be 6 months to pay it off and during that time you lose hope. However you may be able to pay off the other in 3 months and it will feel so wonderful to call that company and close that account. So technically you are right and Dave isn’t bad at math it is an emotional and psychological issue.

  331. Anonymous

    @D Spor, comment 351 just above:

    this argument reminds me of the distinction that Admiral Rickover drew between efficiency and *effectiveness*. They are different.

    Effectiveness is getting the job done to specs, regardless of effort or method.

    Efficiency only relates to the resources applied to the effort.

    In many cases, effectiveness is more important than efficiency, and if Dave Ramsey’s method is effective in motivating people to reach their goals, than I say it is *better* than a more theoretically efficient way.

    There is a book about Rickover whose subtitle is “A Man who Made a Diffence”. Which he was. He provided almost all of the initiative that created the US Nuclear Submarine–created an entire industry, forced his views into the military and the congress, and in general–MADE IT HAPPEN. He gained access to expended massive resources to redefine and meet his (and the US’s) military readiness goals.

    It is a great example of someone making a difference. If we can tap the same drive and wellspring of energy that someone like Rickover did, we could also be much more successful.

    Effectiveness is different, and more primary, than efficiency, and when it comes to achieving goals, it is much more important to be effective than it is to be efficient.

  332. Anonymous

    Wow, what a thread! I found myself taking a very critical attitude toward Mr. Ramsey’s method at first, but seeing the sheer number of posts favoring it helped me to realize that getting out of debt really can be more of a motivational than a mathematical game for a lot of people. For them it makes sense to start small in order to build up a solid habit.

    It’s kind of like losing weight. Yeah, you don’t need to pay money for gym or Weight Watchers memberships to lose pounds. You can just count your calories and walk around the block a few times every day. However, some of us need the motivational boost that comes from joining a club or a gym in order to succeed. What makes sense mathematically is useless if it fails you morally. Better to take the approach that works, even if it is a bit more expensive in the narrow sense, than the one that doesn’t.

    That being said, for those in debt who don’t need the psychological boost, obviously it’s a numbers game.

  333. Anonymous

    Hey, Brian, I don’t think anyone understands why you are even here. The point, I thought, of discussion is for people to help each other with ideas about debt. All your doing is attacking “Dave Ramsey followers” and telling everyone how wonderful you are. I would venture to geuss that most people here (and I’m no “mathmagician”) beleive you to be a self centered, egotistical idot….and yes……that would include myself. If you have nothing to offer to anyone here……try getting lost. As smart as you are, I’m sure you could find somewhere more useless to be. Don’t you have a gameboy you’d rather be playing with? Yes, I lowered myself to name calling, but you have to admit, sometimes it really is the only way to get the truth accross.

  334. Anonymous

    One more thing. You don’t pay off your debt to increase your credit score. HAVING DEBT IS THE ONLY WAY TO INCREASE YOUR CREDIT SCORE!!!!! The whole purpose of paying off your debt is so that someday you’ll be able to pay with cash………AND NOT NEED CREDIT!! FORGET THE CREDIT SCORE ALREADY!!!
    Listen to Dave, and he’ll show you the light. You can go to his website everyday and listen to his archived shows for the last several days, so there’s no excuse not to get your lives together. 🙂

  335. Anonymous

    Yes. Dave is a motivational speaker on top of being a financial guy. Let’s face it, 98% of people couldn’t fix their life without some motivation. I’m one of those people. I’ve paid off thousands thanks to Dave Ramsey, and so have thousands of other people. Dave has NEVER said that paying off you debt starting with the highest interest rate is wrong. What he says is to pay off debt starting with you smallest amount regardless of the rate. His reasoning is that since your smallest amount would be paid off the fastest, this would give you a sense of accomplishment. Thereby keeping your interest and motivation headed in the right direction. Any idiot knows that you save more money by paying off the high interest (and some have said so here). But that may not be the best way to keep people motivated to become debt free. Get it?
    I NEVER needed Dave’s “MATH” to get out of debt….it is the motivation that’s helping me get on track to win in life.
    You people are getting too caught up with the math. You’re wasting time. Start paying your debt off and you’ll be able to save like you can’t imagine.

  336. Anonymous

    I agree with the post and Ramsey. Of course paying off the highest-interest accounts first will have the most effect and cost the least in the long run.

    But I can see how completely paying off an account would motivate many people to keep going. Does that help better with your credit score? I don’t know.

    Maybe the best idea would be pay off the lowest balance account first ONLY if the balance is low enough to completely pay off in 1-2 months. That would get you the moral victory fast.

    I also agree with calling the companies and asking for lower rates- if not, many cards offer low rates on balance transfers. Just read the fine print and you can save some money.

    The most important thing of all is to make sure you are paying debt off faster than you are adding more debt- if you are paying off $1000 a month but putting $2000 a month in new spending on your cards, you will never get it all paid off.

  337. Anonymous

    Dave says in his own class that the debt snowball is not a lesson about math. In fact, he addresses it himself by saying that if we were really dealing with math problems, then we wouldn’t have the big debt issue in the first place. Do SOMETHING is his point and with GIZELLE INTENSITY!

  338. Anonymous

    The only thing I can see that MAY be wrong with the Snowball approach is this — check to see if the car loan payoff (or other installment contract) is calculated with a “Rule of 78’s” or a straight percentage APR calculation. A “rule of 78’s” contract hits you with 12/78 of the interest the first month, 11/78 the second, and so on, until the last month which is 1/78 of the total interest calculated on the total up-front contract price. Thus, a payoff two or three months early will not save very much interest. Take a look at your original loan papers. Hey, for all I know, they may not use that calculation recently. It has been a long time since I even looked at an installment contract, let alone sign one. Just be aware of the early payoff terms.

  339. Anonymous

    This has been an entertaining read. I am an engineer and prefer the analytical approach. My wife on the other hand is less analyitical and tends to be more emotional. We currently have on active credit card account which we use for every expence we can and pay off the balance each month for the airline miles. However, it hasn’t been long ago that we had a sizeable creidt card debt. I used 0% balance transfers to pay-down that debt while minimizing the interest rates. Please not that 0% is not free. There are balance transfer fees (usually 3%).

    Another piece of the equation that I had not seen mentioned (I didn’t read all the comments) is the tax savings on mortgage interest. I read a recent article that recommended paying of your mortgage only after paying off all other (unsecured) debts, maximizing contributions to tax defered retirement accounts, establishing an emergency cash fund and a protfolio of stocks bonds and cash.

    The math will depend on the yields and interest earned, but this seems to me to be a wise approach.

  340. Anonymous

    It has all been said many times here. Dave’s method specifically details the steps to stay motivated and does not try to pretend to be the ‘most efficient’ way to pay off debt.

    As a matter of fact, as Dave says, if we were so worried about the math side of the problem, we would not be where we are.

  341. Anonymous

    Your approach is very scientific and has some merit. Ramsey’s approach, though, gets to the root of the problem: it’s not the borrowed money–rather the narcissism and selfishness that led to overextension. His approach helps the undiscipline become disciplined by experiencing some victories and accomplishments quickly. With those you become hungry for more.

  342. Anonymous

    RE: “If you want to argue that there is a psychological advantage to ridding yourself of those small debts early on, then you have a valid point. But the math is solid.”

    One key piece that most of “math” proponents skip is the idea of reduced risk, which is very much solid math. As you pay down and then off debts your overall risk during a given month continues to be reduced. By paying the smallest amount, should you have less income for some reason, having paid OFF debts means you may be able to survive the downfall with no issues. If you only pay the highest interest that may not be the case. Example:
    Mortgage = 5.4%, $1000/month,
    Loan = 2.5%, $200/month
    I paid off the student loan first such that I only owe $1000/month minumim and not $1,200 for significantly longer.

    As for me, I speak as a former “financial idiot” that had a credit score of 530 (is that even possible?) and $100k in debt (not for any mortgage) by the time I was 25. I paid it off using the snowball plan. When issues came up such that I could not pay extra on anything I did have enough funds to cover the fewer remaining debts minimum payments. Yesterday my credit score hit 732! Woo Hoo!

  343. Anonymous

    I don’t need to say much because everyone else has said it for me. Dave would agree with you 100% that your math is better on paper. But he’s having a better job helping people by targeting their humanity more than their mathematical minds. I think he’s doing a great job that way.

  344. Anonymous

    I rather just do the smaller balances first and start going up the latter, even if it costs a little more. Just the emotional that goes through the person that the amount of bills is decreasing is just power to continue.

  345. Anonymous

    Hi Nickel- I have never actually carried revolving credit card debt unless I had a good reason. For example, my wife and I were spending $40/month at the coin-op laundry early in our marriage. We purchased a washer and dryer on credit for $800 with a monthly payment of $24. We saved $16/month and had the washer dryer paid off in less than 3 years. We were in college and didn’t have a great deal of excess cash flow to save for the washer/dryer. I recently got a 0% credit card cash advance for 16 months and put it in my money market account (no fees involved). As long as I pay off the balance before 16 months I get free money to use for interest. I’ll net about $1000 for this idea. Credit cards are not always bad, as Dave pushes that they are. If you are responsible with your money credit cards can help you out. We now pay off (most of) our credit cards every month and get 1 – 5% CASH from the credit card companies for using their money. The problem lies with most people who are not good with their money and end up paying upwards toward 30% on credit cards. Dave’s advice is best for most people, and I have recommended him to my friends who are struggling financially. However, there are ways that credit and even credit cards can help if used properly. 0 debt is not always the answer.

  346. No,it’s a simple mathematical fact that paying of the debt’s from highest to lowest interest rate will minimize your total interest. You will be paying multiple interest payments, but the total amount of interest paid over the life of all debts will be less. If you want to argue that there is a psychological advantage to ridding yourself of those small debts early on, then you have a valid point. But the math is solid.

  347. Anonymous

    You are wrong. Paying off the debt with the highest interest rate while keeping the debts with lower interest rates will cause you to spend more money because you will be paying multiple interest payments. If you pay off the smallest debt to the largest you may be paying a couple of dollars more to the interest of the higher interest debt, but you will be saving by avoiding the interest payments on the lingering debts.

  348. Anonymous

    @ Hugo, who wrote : fixed is always better than revolving, so it would make sens to pay of later because you balance wont increase because it’s FIXED.”

    Actually, while it’s good to keep in mind which loans are fixed and which are variable rate, whichever one charges the highest rate on a given month, whether it’s fixed or variable, is the optimal one to pay off first, from the point of view of interest paid over the life of the loan. That is, as long as there is no penalty for prepaying (paying more than the required payment) on either loan.

    If this doesn’t make sense to you right now, it’s worth while wrapping your head around it for a while until you do as it is a fundamental fact of interest and loans.

  349. Anonymous

    @”HOWEVER, ALL OF THIS DISCUSSION IS WRONG because people who are in debt need to see progress and they need to see it FAST. ”

    This is absolutely correct. The reason many people get into debt is they don’t have the means to perceive that it is happening. They don’t review their finances on a monthly basis, they don’t budget, and they don’t track their income and expenses. So they have no means to really monitor whether they are going into debt and often the only thing that stops them is they get to the point that they can’t *pay* any more on their monthy credit card bills and either turn it around at that point, or begin to default and go into freefall because of the hikes in the interest rates and penalties for late payments.

    If you *do* set up a system to know what’s going on in your finances and you stay in touch with it, you are unlikely to get into debt unless that debt is for a good reason.

    The answer to “most people don’t do the math” is not to ignore the math, but to start doing the math.

    Otherwise, use Dave’s advice and you will turn out 2000% better than if you just kept going ignorantly on.

    But if you do have the capacity to make up your own program and follow the math, that is the superior way. It’s just not a way that everyone can follow. If you can’t follow the “best” way (paying the highest interest debt off first) then use the *best way for you*, which in many cases would be following a program like Dave’s.

    My 2 Cents

  350. Anonymous

    In a perfect world you could leave emotion out of every
    equation. But people who are in deep debt are feeling
    the effects of their situation financially and emotionally and since your young and have never been in deep debt there is no way you can understand the depth of emotion involved here. In fact I doubt many of the posters leaving all of their mathematically correct scenarios have ever had oppressive debt in their lives and even the author of the original article admitted he has stayed debt free. Good for him but that disqualifies him from giving advice on getting out of debt, I will listen to someone who has been there done that.

  351. Anonymous

    It is super easy.

    Use common sense.
    Leave emotion out of the equation.

    I am 25. I have a comfortable emergency fund. I have no debt other than a mortgage which I am paying off at an accelerated rate. I have a comfortable emergency fund.

    I have no great plans of accumulating millions of dollars. My main goal is retire and pay off my house within the next 10 years. I am doing this with no help from family and without the benefit of any degree.

  352. Anonymous

    The comments on this post tell a lot about the type of people that worship Dave Ramsey. I stopped reading at around the 200th comment, but in those comments Ramsey’s followers felt the need to bring to Nickel’s attention things he already stated in his original post. Instead of being outraged and feeling the need to defend Ramsey against some perceived insult. Take a second and read the original post.

    If the point is to pay down debt as quickly as possible, then paying down the one with the highest interest rate first is obviously the best method. I am no mathemagician. All it takes is common sense.

    Dave Ramsey’s followers have claimed several times in these comments that Ramsey advocates attacking your debt with everything you can muster, but then turn around and talk about how their “feelings” are a factor and that having a lesser number of debts is helpful to make them feel better. If you can’t look at your debt repayment without feeling, then you’re doing it wrong.

    Things that can be assumed about Dave Ramsey’s followers:
    -poor reading comprehension
    -lack of common sense
    -are not 100% serious about debt repayment

  353. Anonymous

    long time, first time…
    5-cent, I agree with the math. But the one thing that Dave inspires is not math, but success. His major ideal is to get rid of “something” and move on to the next thing.
    Quite often the smallest balance is not the highest interest. But it is the easiest to pay off. Therefore, we gain a victory by paying off the smallest debt. And we then realize that it’s not that hard to do.
    The biggest kick is the budget. Without a budget, baby steps, or any other plan, will not work.
    Baby steps worked for me!

  354. Anonymous

    I think what Matt S. said with regard to Dave Ramsey’s target demographic is not very well put, even though he is right about a few things.

    Dave Ramsey’s Total Money Makeover is not very sophisticated. It is simple and it works. It works if you make 36K a year or if you make 200K a year.

    People in financial trouble need hope, inspiration and a reality check if they have been overspending. Dave doesn’t wear his faith on his sleeve or preach. He reminds people that hope comes from many places, including faith.

    Each great journey starts with a small step. Dave Ramsey provides the financial “training wheels” that have helped thousands of people get out and stay out of debt. What he does is admirable.

    People like Matt S might not think that saving a $1000 dollars is a big accomplishment, but in light of the companies who’s “sophisticated” schemes of lending 100 dollars for every dollar they had led us to the abyss, the bailout and the chaos in our financial system today.

    It is very presumptuous to think that because something is not very sophisticated means that it’s easy. I know plenty of really smart people who live paycheck to paycheck making a household income of 200K a year. They are a couple of paychecks away from having their house of cards tumble.

    Dave Ramsey’s methods are not just for simpletons.

  355. Anonymous

    Matt S. . . and I suppose you are debt free? Probably not. The fact is there is nothing wrong with what he teachers. Many Americans today don’t even come close to living within their budget let alone saving money for their retirement or anything else. Although his system (which he readily admits) is not the most mathematically efficient it does produce results. The fact is, if you are debt free, own your own house and have money saved for your future, you are less likely to be effected by these tough economic times.

  356. Anonymous

    I agree with those saying that Dave Ramsey gives poor financial advice, but you have to look at his target audience. His target demographic doesn’t have much money to begin with, so any achievement they make (i.e. paying off a credit card, saving $1000, etc.) is going to seem like a huge accomplishment to them. So I suppose from that (otherwise completely erroneous) perspective, paying off the smallest amounts first makes sense.

    From my perspective, he seems to have really found his niche among those who are in debt, have poor financial/mathematical skills, and/or Christian evangelicals (who seem to go crazy over anyone who repeatedly proclaims their faith). It’s quite obvious that he knows this and targets this audience with advice. If you don’t fall within any of those categories, then he will likely be of no help or interest to you.

  357. Anonymous

    I’ve heard Dave actually say that he KNOWS it doesn’t make sense mathematically! He knows it! But he does it, just like some of the other readers said, so you get those little victories that get you all “fired up!”

  358. Anonymous

    I didn’t read all the comments yet but I am sure Dave would tell you that once that car is paid off you could get really fired up. It is gone and this gives you more hope to continue and not quit. Plus, this motivation could help you find extra money to pay off even quicker.

    The main thing is PAY THEM OFF. Whichever way you decide is best, as long as you finish. Dave has been doing this for a long time and I would follow his plan on track record.

  359. Anonymous

    The problem with your article is your poorly worded title.

    Your title implies that Dave believes his approach is the mathmatically superior approach. He doesn’t – nor does he claim that – as a simple matter of math – that it is superior to anything.

  360. JOY: Yes, I understand it perfectly well. If you had taken the time to read the article, you would’ve seen that I mentioned this advantage explicitly. I’ve also written a followup article (linked above) called “Dave Ramsey is Good at Psychology.”

  361. Anonymous

    Did you understand the part in his book Total Money makeover? The part about small wins is what psychologically keeps putting wind in your sail so to speak to keep going .. Id sooner plunk off 3 small credit cards off 5,000 or less at any dollar amount than struggle to the end to pay off the higher one first.
    then take the three monthly payments and plunk it down on the bigger one without worrying about 3 of the 4 cards Psychologically I can steam roll through one and if a MURPHY come up I can still make that payment and refund my EMERGENCY CASH FUND….
    IF Dave reads this blog. THANKS we needed your inspiration simple easy to follow kick in the butt to help us get straight and stay that way

  362. Anonymous

    The article would be interesting if Dave Ramsey claimed something different than he does. It seems like the writer mentions his name only to generate comments.

    There are obviously other ways to pay off debt as Ramsey mentions frequently. (sell a high priced car to pay off other debts, sell electronics and pay off debts, etc).

    Dave’s approach is constructed and used as a motivating factor for folks that lack motivation and feel they have little (or no) hope. People don’t call Dave Ramsey because they have just a little bitty amount of debt. They call him because they feel hopeless and in deep trouble. They don’t need a math major on the other end of the line. They don’t want one. That is the reason for his approach. If they needed a math major, I am sure Dave would answer their questions in the manner that the writer of this artcle has attempted to do. After all, even with the math – this clearly isn’t rocket science.

    This article reminds me of a doctor suggesting saline eye drops to a near sighted kid The eye drops may be great, but they have nothing to do with helping the kid see.

  363. Anonymous

    I used a non-profit organization to begin with getting ride of my debt. I did see small bills paid quickly and it went that those extra dollars would go up the list. At the time, I was not looking at interest rates.
    I think about a year and a half after I started doung that paydown with the help of the organization, my mother died and I was immediately able to cash a cd which was great as I paid the debt off, got tired of driving a car that was getting close to it’s last legs. The big thing about that was, lack of heat in winter. So, I saw what I was intrerested in while driving to work, had heard of just car place that sold what had been fleet vehicles, so the one I purchased was 3 years old and had 40,000 miles on it. Because of the money from the cd, I paid for the car with cash!!!
    That was going along ok, I was still working, money was no longer such a big problem and I was also waiting for my mother’s estate to be settled. Took forever, which I understood very well. I had had a personal appraisal done, matched what the executor of the estate got from a different appraiser. However, one individual who had decided to buy my 1/3, did want to pay all of that! Ok, this has gone on long enough and OH! I missed one bit of important info on a paper I signed. But it was all resolve.
    Since that time, I have withdrawn from the investment accound funds to by some acreage with plans to building on it — again, paid cash. Later discovered cost to build house appeared to have double in 4 years. So, we looked at houses, found the perfect house, and I put down 50% for my estate funds.
    We don’t list house where we were moving from as friends planned to buy it until one of them discovered someone had drained their accounts. So, put the house on the market at the end of July. Budget messed up — had been taking care of all normal bills for both houses, no problem. Then spouse retires and suddenly, his pension check and Social Security checks won’t arrive in time to make certain payments!! Then turns out because of date of birthday, both SS and pension checks will both be coming at end of month. Mess again, hopefully, this month wil get it squared a way. And if Dave Ramsey budget does work for us, I can pay last credit card off really fast!!! Just knocked one off last month!!!
    But I devised these plans with out reading to much. And was really seeing good returns on investments, one have not check since first week of the DOW’S collapse. But small stock account down to less than intial investment. On the other hand, I will have both long and short term losses on both accounts, so two states may owe us money and the fed may also!!!

  364. Anonymous

    This 3 examples are great, except that they don’t tell the whole story. 1. Dave Ramsey is trying to get people that don’t have a dicipline to pay off their bills to do so, the way to do this is by taking “baby steps” like he says. 2. usually car loans have FIXED interest rates, credit cards have revolving interest rates there for this example is entirely correct, you have to account for the type of insterest you are paying. fixed is always better than revolving, so it would make sence to pay of later because you balance wont increase because it’s FIXED. 3. As we all know every person has different needs and goals. so if you ask me, I’d say the three examples are perfect depending on the person going through the steps.

  365. Anonymous

    Dave Ramsey Rocks…. for the common people who know they will never become millionaires, his advice is key to survival. Because of Daves commonality with average folks, his advice seems more credible to many. I for one, would follow his advice to pits of fire because he makes sense that, again, average people can follow. I now have NO credit card debt and am funneling all of my funds to one four-wheeled luxury payment per month. Thanks to Dave, I will never own another credit card! Yes, I had to file bankruptcy, but that was before I knew about Mr. Ramsey. Never again will I be in that position…My lesson after listening to the “financial master” is to avoid tempting offers! If I can’t pay for it with green, I don’t buy it!
    The economy may be in a slumber now, but it will come back. Learn to invest and spend wisely!

  366. Anonymous

    JD says: “why would anyone take advice from a radio blabbermouth who has gone bankrupt and even in his old age still can’t do simple math? The blind leading the blind. “…”if you’re looking for financial advice look to someone who can do some simple math”.

    Here is a financial rule I live by:
    Don’t take financial advice from someone who is broke

    Dave Ramsey is NOT broke (if you want to know a good way to determine whether someone is broke or wealthy, read the book The Millionaire Next Door)

  367. Anonymous

    I am impressed with the number of people who have written in to say that they became debt free through simply getting motivated enough to care. Maybe it was nickel’s blog that inspired you, maybe it was the Total Money Makeover. I admire both Nickel and Dave Ramsey for taking the time to put other people’s best interests first.

    Pay off the high interest first, low interest first. It really doesn’t matter. YOU did it! Dave Ramsey didn’t do it for you.

    Living without debt makes all too much sense, especially today! The people who work hard to reach the goal of living without debt will help others do the same. That is the power of a good message, no matter where it comes from.

    Talk about a “debt snowball!”

    Kudos to Five Cent Nickel.

  368. Anonymous

    True, can save a few nickels by paying down highest interest rate first or using various other strategies.

    Of course whatever strategy is used does no good if it is not followed through to the end.

    The snowball is easiest to describe and, taking human nature into account, the most likely for most folks to follow through on.

    In addition to immediate encouragement by actually paying something off, as the snowball progresses there are fewer accounts to keep track of.

  369. Anonymous

    Just a clarification on the mathmatical method; In the strictest of terms it is not the highest interest rate that should determine which debt to pay off first but rather the most “expensive” debt that should be paid first.

    Many debts have considerations beyond the interest rate. Some debt is tax deductible other debt has service charges and fees still other debt has strange terms like paying off a zero interest balance transfer before getting to the interest bearing debt while requiring periodic purchaces and all this on the same card. In some cases, such as a very small, long, drawn out debt can be considered more expensive due to the postage required to send in the payments.

    This may sound trivial but in some cases, where there is very little money left over after the minimum payments, these considerations can become important in the long run.

    For me the easiest way to sort this out is to convert the cost of each debt into the “effective interest rate” for that particular debt and then pay off the highest one first.


  370. Anonymous

    In Nickel’s example, the math approach only beats Dave’s
    psychological plan by ONE MONTH. Not much of a pay-off
    for such a “sophisticated” attack. Stay with the guy
    who has a real track record, one who’s company has helped tens of thousands of people get out–
    and stay out– of debt. If you want sophisticated, go talk
    to the luminaries over at Bear Stearns or Lehman…no, wait.

  371. Anonymous

    “We’ve paid off 32K in 10 months using Dave’s plan and THAT is the math that matters. :)”

    Has it ever occurred to you that, by exercising willpower and ignoring his plan, and instead choosing the higher interest debt first, you might have paid off 32k in 8 months, or 6 months?

    But congratulations, in any case. Debt repayment is a good thing, whether or not it’s as fast as it could have been.

  372. Anonymous

    Nickel, you’re absolutely correct. I’d NEVER follow D.R.’s advice. Unfortunately, though, there are lots of unsophisticated folks out there for whom D.R.’s inferior advice has the superior advantage of being something they can grasp and actually follow. So it wins the “better than nothing” award.

    For me, though– as for you, I see– math trumps psychology.

    And let’s be frank: there is one thing and ONLY one thing wrong with transferring balances: that behavior doesn’t address underlying causes of debt, and some unsophisticated folks think they’re making progress when they aren’t. But for folks who understand and have willpower, transferring balances can be a very useful tool.

  373. Anonymous

    The math approach only works if you finish the project.
    I’ve helped many families through their “snowball”
    debt plans and the psychological approach of “small
    victories” has, by far, the highest success rate. Most of the
    mathematicians give up because they hit the inevitable wall of frustration. Dave said it best: “If they had any discipline,
    they wouldn’t be 20 grand in credit card debt.”

  374. Anonymous

    I wonder how many people who have lost their houses due to bad mortgages would not have lost their homes if they followed Dave Ramsey’s ideas about buying a house. Mathematically, it does make sense to make the bigger interest issues first, but I’ll take the moral victory any day. I look forward to the day when my FICO score is zero!!!

  375. Anonymous

    We are debt free because of Dave Ramsey. We payed off the smallest to the largest and it was very motivating to finally see the 1st then the 2nd, etc. paid off. We now have financial peace and it was because of Dave’s plan. He was and is a blessing from the Lord in our lives.

  376. Anonymous

    Dave Ramsey is an idiot. Have you ever listened to his show? The typical caller sounds like they barely graduated high school. They make crappy wages and are complete idiots when it comes not only to finances but to their lives. Dave Ramsey is no different, why would anyone take advice from a radio blabbermouth who has gone bankrupt and even in his old age still can’t do simple math? The blind leading the blind.

    Here’s a tip – if you’re looking for financial advice look to someone who can do some simple math and is in the large majority of the population that has never had to file bankruptcy.

  377. Anonymous

    I found the article very interesting. I have debated the best way to pay my down my debt and common sense would say that by paying down the debts with the highest interest rates you will pay down your debt much quicker with less cost to you. On the flip side of this though is the fact that most of us that are way over our heads in debt and struggling to get out are going to stay on track better when you see that you are making alot of progress. Crossing the smaller debts off first is a great motivator. If we were good at managing our debts and staying on track we would not be in this position to start with. I say if you have trouble managing finances and feel like there is no light at the end of the tunnel then go for the snowball effect. You will keep going rather than feeling like, why bother? In the end you may pay out a little more but at least you stand a better chance of following through and being debt free.

  378. tngirl: Actually, the point of this thread makes perfect sense in a mathematical sense. There is not a single scenario under which the Ramsey approach will outperform the lowest rate first approach. The best Ramsey can hope to do is match it. Of course, as I myself pointed out in the article, that ignores the psychological benefit of Ramsey’s approach. But that’s another article for another day (which I’ve actually written – here it is: link).

  379. Anonymous

    Dave’s plan DOES work. With his plan, you’re not worrying about interest rates, because you’re paying more than you owe each month on the lowest debt. Therefore, the fixed interest rate (for the lowest debt) eventually becomes non-existent–and not as often– once you’ve paid it off sooner than scheduled.
    So, you’re point doesn’t make much sense.

  380. Anonymous

    I’ve often thought the same thing about hitting the higher rate loans first but also about the motivation factor. It was great to see both points of view in the comments. I wonder how a hybrid plan would work. Start with the lowest balance to get some motivation and then hit the high rate and then the next lowest balance when you start losing motivation. It would probably depend on too many factors to test.

  381. Anonymous

    I think the difference between Dave and the others is how he motivates people into having “gazelle intensity” (look it up if you don’t know what it is). That is, deliver pizzas, have a garage sale, sell so much stuff the kids get scared, don’t see the inside of a restaurant unless you’re working there, no cable, etc. until you are out of debt. The sooner you are out of debt, the sooner you can begin building wealth. Simply crunching numbers to save a couple of hundred dollars in interest won’t have the effect of going all out to free yourself from debt.

  382. Anonymous

    I, like many others my age(twenties now), got into debt at 16-18 years old, with my first credit card. Had nothing to do with health insurance, kids being sick, or the dog eating my homework. Luckily I learned early on that paying off the CC each month makes a lot more sense then carrying a balance and paying interest.

    I will say the example is a worst case senario, where the highest debt has the highest interest, the middle debt has the middle interest, and smallest debt has the lowest interest rate. If you reversed the #’s in the ‘example’ your advice would provide the exact same result as Daves advice.

    I’m a ‘ramsey fan’ if that’s what you want to call it, however I don’t follow 100% of his advice. my wife and I use a CC for all our purchases and bills that we can, and it is paid off EVERY month, no exceptions. My wife and I also fund our IRA’s, and we pay off our debts concurently (two vehicles paid off, one truck with 9K left, our RV with 12K left, our 2nd mortgage with 11K left) The only thing we make minimum payments towards is our 1st mortgage. The truck and the RV have nearly identical interest rates, so it’s a wash paying one off before the other.

    I also only use USAA’s credit card, since they allow a 60 day grace period before jumping the interest, or charging late fees, so I’d have to miss two payments in a row, and since I never carry a balance, the interest rate is really of no concern.

    If you follow Dave’s advice, you’d know this goes against some of what he teaches. But it’s my life, I’m responsible enough to use a Credit card, even if it means I spend more than with cash. I also like the safety of a Credit card over a debit card. Nobody can clean out my checking account via my credit card, but they sure can thru a debit card.

  383. Anonymous

    Steve; I like your comments. Dave appeals to the masses and has found a niche in our society. I say – “Go Dave Go” because the “masses” out there need to hear this stuff. If Dave doesn’t give them a wake up call, who will? Obviously his advice won’t fit everyone and every situation, but it’s a start toward making a dent in our credit-laden society. (And I always enjoy hearing what he has to say!)

  384. Anonymous

    @ Stac

    I have read The Total Money Makeover and I have listened to Dave’s show for about 2 years. I am no stranger to the financial message. Although anytime I talk about any of Dave’s financial advice that is diametrically opposed to my financial views, I somehow “don’t get his message.” Trust me, I do get his message, and I still disagree with the “If we were good at math, we wouldn’t be in debt” phrase, and I still find it oversimplified and somewhat arrogant.

    Even with all the medical insurance in the world, you still have a lifetime coverage and a maximum coverage per year in many instances. Furthermore, if you have coverage through a business and your child is sick, this can pose problems when you change jobs (whether or not by choice). If the new company that employs you has a different insurance carrier (which is highly likely), you cannot use the insurance for a pre-existing condition in many cases. Where does that leave the family with a child that has leukemia or Down’s Syndrome? These are LONG term costs that neither medical insurance nor an emergency fund are going to cover. So you are left with two alternatives:

    1. Debt
    2. –not really an option…you know what it is.

    Is this debt caused by “poor math?” Obviously not. This is simply a bad circumstance.

    Is this an exception rather than the rule? In our society, yeah, it is. Most people get into problems with money management and debt because of lack of education and the thoughts of “free money” that comes with irresponsible credit card use and the purchasing of things that are not affordable. But to lump everyone together as into one, giant “evil debt ball”, again, oversimplifies the situation.

    That seems to creep into the hard-core Ramseyans that seem to feel that the Dave way is the only true way to financial freedom. There are many paths, and some of those paths do include smart use of credit/debt, not paying off the mortgage early, not stopping the 401(k), utilizing bond funds and short term CDs, and many other financial tid-bits that go against Daves’ blanket statements I hear from him and his loyal bastion of followers.

    My point is that many people get into financial difficulty for many different reasons, whether it be from “addictive spending”, financial ignorance, or from unfortunate circumstances. Each reason has a different root cause, and sometimes there are a combination of causes. Finding the root causes should be the primary goal of any financial adviser, and this is something that Dave, in my opinion, seems to miss.

    But then again, finding all the root causes for each person doesn’t make for a very entertaining radio show. 🙂

  385. Anonymous

    Love the question of the turtle or the hare….

    Keeping Steve’s post from June 20th, 2008 alive…a couple hundred thousand dollars is not the emergency fund Dave talks about. 3-6 month expenses is not the same as long term care or medical insurance. Dave would tell you to have insurance to cover medical expenses. Medical emergencies will be covered by the emergency fund, but if you are dealing with a long term health condition in which you would need large sums of money he would have coached you to have insurance in place before something like that happened.

    Steve, I’d encourage you to listen to Dave’s entire message, not just the debt snowball conversation. He is not as heartless or arrogant as you depict him to be in your posts.

    Thanks for being so passionate about your position though. It has been very entertaining!

  386. Anonymous

    Dave Ramsey’s method is based on real life habbits.

    The problem with people is not the interest rate or the math, if it was, they wouldnt be in debt in the first place.

    To fix the problem you have to fix the habbits of the people. These people need motivation more than math courses.

    Dave’s plan gets you out of one credit card as fast as you can so that you can enjoy closing that account, destroy that card and go on to the next card. If you commit yourself to doing this, it will take no time to reach your highest balance card.

    Do other plans get you out od debt faster? yes. But Dave’s plan motivates you to not get back in debt as you slowly enjoy the freedom of having less and less debt.

    It’s like driving a car and getting flats, you can fix the flats over and over again or you can get the nails off the road and enjoy not having to fix flats again. Both will work but only one makes perfect sense.

    By the way, did the turtle or the hare win the race?

  387. Anonymous

    And a comment about post 284 – Steve. Eric missed your point. All you were doing was pointing out the “If people were good at math, then they wouldn’t be in debt in the first place.” is simplifying the matter. Yes, Dave Ramsey does say this often, but you must listen to him to get the full effect of his message, it is so much more than that simple statement and he knows and deals with people every day that have all sorts of reasons they are in debt.

    I agree with you Steve. Taking a more logical unemotional approach would solve it. Bad math and stupid decisions do not always contribute to why a person is in debt. But, having a good plan each month, and handling things responsibly using Dave’s plan can help even if a catastrophic event does occur. I would much rather have 3-6 mos savings in the bank and NO DEBT if such an event did occur.

    And I bet the majority of people are in debt to their eyeballs because of lack of planning, an obsessively materialistic society (keeping up with the Joneses), too much available credit and poor money management skills, not because of large medical bills. I do not have statistics to back this up, but it is WAY to easy to get into debt now, and nobody puts up obstacles until you are in trouble with debt, or have that medical emergency or job loss that causes you to get behind on your mortgage or credit cards.

    I think it is easy to listen to Dave or hear some of his comments or see these quotes and take them out of context – but Dave does not call people stupid, and is always respectful to the callers, while admonishing the bad behaviors, not the person. I think he shows incredible restraint with some callers too.

  388. Anonymous

    I, as another stated, wanted to see if there was much negative stuff about Dave Ramsey out there, and I agree, if this is it (1st site I found), then this is great!

    Here is what I feel the key to being successful with debt reduction/elimination is:

    For years, I proclaimed: I am going to pay off my debt in x years (say 5 for example). I would work out an Excel spreadsheet, then do a pseudo “best case” budget and I would make the math work. I thought I could do it by stating the goal and writing the budget once.

    Trouble was – five years later, my debt was still about the same. And I track EVERY dime in Quicken!

    Why? Lack of discipline. Lack of a written budget each month. All the math to pay off the highest interest cards first did not stop me from buying a too expensive car and having payments, purchasing electronic devices I didn’t “need” and even spending too much at the grocery store each week. None of these things have anything to do with MATH, they are psychological.

    Then, I found Dave Ramsey in July 07 and really listened to him and continue to. I cut up my credit cards, I write out a budget EVERY month, I name each dollar before the month begins. I work the snowball, totally antithetical to my common sense math, but now I am down to TWO debts, one with 4K at 2.9% and the other 20K at 5%. I am paying the lower interest one FIRST. It will be gone by December 08.

    What else? In having the daily reinforcement of Dave Ramsey on the radio telling me not to play with the snakes (credit card companies-just get behind and see what Dave means, or wait till they don’t post your one year no interest payment in time and refuse to reverse the 12 mos interest), I am devising ways to pay off my debt faster. I am spending less in ALL aspects of my life because I am acutely aware of where my money WILL go next month! Plan plan plan. Things like, Put away auto expenses each month, not wait till the car breaks. Common sense, but if you don’t do it EVERY month, and rely on credits cards to float you, then they get out of control.

    So, it is SO much more than doing math. Math and a general plan didn’t help me. If you listen to Dave day in and day out, he also has so many pearls of wisdom – and one of the best is “You will be different in five years only by the people you meet and the books you read” (not an exact quote.) So, this is a way of living and thinking totally different than some mathematical plan that most people won’t or can’t stick with.

    In your example, if I failed at paying the highest interest rate plan, then how much more would I pay in interest trying to get back on track? But if I succeeded due to the PLANNING and application of smallest to largest plan, and getting the psychological kudos along the way, then likely I would save a lot more money because I might just stick with it and actually pay off all the debt.

    So, I agree with your math and I agree it can work for a totally analytical person. I am one of the most analytical people I know, and without a comprehensive attack, I could not be disciplined enough to do it on my own. Human behavior is definitely the key.

  389. Anonymous

    it sounds like you had nothing better to do than too critisize Dave’s method of doing things, he is very right about the snowball affect and has alot ok key points. Quit hating on the guy and fing your own idea to come up with if you don’t like his.

  390. Anonymous

    @Ishmael – I am glad to hear that Dave’s program is working for you; however, your comments point out exactly the issues that I have with “die-hard” Ramsey fans. They are almost cultish in their speech, and even when I quote a refutation to “If we were doing math, we wouldn’t be in debt” in 284, you still quoted the Ramsey math quote.

    Again, I point out that people get into debt that know the math but are presented with circumstances that are not math related. Does a parent that supports a child with Leukemia and is forced to go into debt simply to keep the child alive necessarily lack math skills? And while emergency funds are great for temporary hardship, does anyone really keep a few hundred grand as an emergency fund? 8-10 years of hospital bills add up fast.

    While the whole math quote by Ramsey may be cute, it makes a very gray situation seem black and white. Sometimes bad things happen to good people, and to simply label them as “Stoopid” or “bad at math” is at the least uncaring and at the worst mean spirited and divisive.

  391. Anonymous

    Dave actually brings up this issue in his Financial Peace University program in the debt lesson. He says that it IS mathematically smarter to pay off higher interest rate balances first, but “if we were doing math, we wouldn’t be in debt.”

    He calls it the “debt snowball” because once smaller things are payed off, and those funds move over to other balances, you make bigger payments on other things. It makes you feel good, mostly, lol.

    If it aint broke, don’t fix it, is what I say. If you’re broke and looking for help to get out of debt, you’re probably too “stoopid” (as he likes to say) to make these decisions for yourself.

    Sure, if you just wanna know which payments to pay off first, then there’s no need to ask Dave about just that. If you’ve followed his stuff, though, you’d have an emergency fund + investments to handle unexpected stuff and prevent yourself from getting into debt.

  392. Anonymous

    What people are missing are the assumptions behind the snowball vs. lowest interest rate theories.

    The snowball theory emphasizes giving encouragement so that he debtor will continue to pay down the debt. The lowest interest rate theory assumes that the debtor will pay down the debt, no matter what, and thus saves about 3% of payments in the example.

    So if a debtor suddenly sees the light and is 97% certain to pay down the debt as fast as possible, then he should use the lowest interest rate theory.

    For those not at least 97% certain to methodically pay down the debt, use the snowball theory.

  393. Anonymous

    Interesting that this is still getting comments! 🙂 One theme that seems to be played out by the pro Ramsey crowd is the “If people were good at math, then they wouldn’t be in debt in the first place.”

    Really? You mean that every medical emergency that happens is because people aren’t good with math? People that are good at math can still make good choices financially and still have things that cause them to go into debt. To suggest that every person that goes into debt was due to bad behavior is quite an assumption.

    I would never dismiss the idea that people make poor choices that cause debt, but that doesn’t mean that they can’t figure out the best way from a math perspective to get out of debt and overcome those circumstances.

    If the root of the problem is behavioral, then wouldn’t correcting the behavior by taking a more logical and unemotional approach to money make more sense in the long run?

  394. Anonymous

    Dave Ramsey’s way of the snowball is better even if you have to pay more for MOST people. Why??? Well the average person in debt feels hopeless and has no idea that their life can change. They need some inspiration. Well if they focus on the lowest amount the smallest goal then they will accomplish something in a shorter time…

    In the sense I like Dave Ramsey’s approach.

  395. Anonymous

    Dave Ramsey is an idiot, I can’t believe anyone would actually take his financial advice when he is so off-base so many times. This is a guy that will criticizes and pokes fun at people who have good jobs and work hard, but if you’re trailer trash who is in tons of credit card debt he puts you on a pedestal and calls the credit card companies the villains. What a loser. In his world people aren’t responsible for their own actions.

  396. Anonymous


    I don’t know if you are still monitoring this but I would like to say WAY TO GO. You calmly and thoroughly explained there methods of payment without being vicious and out of hand. Bravo.

    I guess I am a Dave fan. I am a numbers guy but what I was doing was getting too wrapped up in the details to see a clear plan or steps to the end. Do I IRA, no-load, load, or stocks. He gives very clear and straight forward steps to get “somewhere”. It may not be the best or the richest method but you will get to a better place.

    Thanks for you review and insight, it is always a pleasure to read supported research.

    Very Respectfully,

  397. Anonymous

    Thanks, this was a great article.

    But you made one fatal error…you dared to question a celebrity. Now you’ve got the wrath of hundreds of celebrity worshipers who are pissing themselves because you wanted to point out a simple discrepancy.


  398. Anonymous

    We are talking about a difference of $641 between these 3 plans. $641 doesn’t make you broke…you do. I would imagine all of the financial planners on the planet would agree that the method that gets you to PAY ATTENTION to your money is the best plan for you.

    If we were paying enough attention to our money to even notice that 1 plan would save us $641, we wouldn’t have debt in the first place. Find the plan that keeps you motivated and keep up the good work!

  399. Anonymous

    I think the snowball method with balance transfer at 0% would be the best option.

    Pay down the smallest card first, transfer the highest balance at 0% to that card, pay down the next smallest amount that your’e paying interest on, and balance transfer to that once it’s free, and repeat till everything is on 0% interest rates.. then pay down the smallest one first, and so on

  400. Anonymous

    With debt as in this example, you could take the higher interest credit card debt and put it into a new low initial rate card and then do the Ramsey snowball and that should make a significant difference. The Master card that had the higher interest accumulating while paying off the other debt would now accumulate at a much lower rate.

  401. Anonymous

    ..success not in which debt to tackle based on interest rate, but instead tackling the lowest amount of debt, than applying that monthly amount to the next debt. You get the quickest satisfaction of seeing one debt disappear…and the next one decreasing more rapidly.

  402. Anonymous

    Has anyone every quantified the success rate between doing it small to largest debt vs highest interest to smallest interest?

    It’s easy to say one is better than the other, but the truth is really in the results.

    My guess is there is a high attrition rate no matter which way you do it. The success comes from simply having the will to do it. Those who have it will….those who don’t won’t. Simple as that.

  403. Anonymous

    Dave Ramsey would likely say that he knows plenty of guys (and gals) who are smart at math but broke. The problem with math people is they don’t factor in risk. The Dave Ramsey Total Money Makeover does factor in risk.

  404. Anonymous

    I observed something about the math-professing crowd, vs. the emotion profession crowd.

    Those that promote the math approach (logically pay high interest debt first) seem very arrogant in their advice.

    People who prefer the “money is emotional” approach (Dave Ramsey doctrine), exhibit a lot of humility in what they say/claim/declare.


  405. Anonymous

    If you’d look more into Dave Ramsey’s teachings, you’d know that debt isn’t a mathematical problem – it’s a behavioral problem or else all of us “mathematical geniuses” wouldn’t be in debt in the first place. (I say us because I am working my debt snowball now).

    Mathematically, it WOULD make more sense to pay the highest interest rate, but by paying off the lowest balance, you get some “quick victories” to boost your confidence (kinda like dropping the first 5 lbs on a diet. it makes you want to keep going)

    2 things to leave you with:

    “Those convinced against their will are of the same opinion still”
    – author unknown (quoted by dave ramsey)
    “I like the way I’ve made money better than the way you haven’t.”
    – Dave Ramsey

  406. Anonymous

    I don’t know a whole lot about Dave Ramsey though I have heard a little about him recently so I decided to study up on him. First let me say that I agree 100% with you that it makes more sense to attack higher interest debt first than it does to attack the lowest balance. However DR’s approach does make a whole lot more sense than to just pay the minimum payment across the board and be trapped in the debt for a very long period of time without making much headway. I do like DR’s approach but yours is obviously a more financially savvy approach. I started out not really liking Dave Ramsey because I had a gentleman call me citing things that he said which were entirely untrue for this guys circumstances and I ended up losing the business because of it. I was 100% honest with the guy but Dave Ramsey tends to generalize a whole lot. Some people just hear what they want to hear and so upon further inspection I am coming to like Dave Ramsey… Even if he does generalize everything (after all he does have a huge audience and he needs to Keep It Simple Silly)

  407. Anonymous

    I guess it doesn’t matter one way or the other if you are paying off the “highest interest rate first” or “smallest to largest” as long as you’re paying off debt. I believe in Dave Ramsey because he cares, he teaches real methods and he understands people. Compare him to some like that Suze Orman who’s only concern seems to be making her credit card company sponsors rich.

    Dave Ramsey is for real.

    By listening to Dave and applying grandma’s good sense, my wife and I are no longer on the brink of divorce, in fact, on the same sheet of music. We are debt free INCLUDING our home and teaching our son the right way to do it.

    Thanks Dave!!!!!!!!!!!!!!!!!!

  408. Anonymous

    I believe that Dave Ramsey’s approach is an excellent way to pay off debt especially for those who hate math and will not spend time trying to figure out how many months or the amount of interest they will pay on their debt. Believe me, there are plenty of people out there. The math that I read above, made me a little uninterested. I believe in keeping it simple, and I love math. I do not believe there is a good math or a bad math when it comes to paying off debt.

    I am not saying the one approach is better than the other. People have to find what works for them. Even if you paid more one way than the other, you win both ways. Some people win when they pay the high interest, others win when they feel they have accomplished a goal like paying lowest to highest.

    I have to admit that I thought it was a good idea to pay off high interest debt first, but I could not stick to my plan (just like a diet) because it seemed as if I was not getting very far.

    When I gave Dave a shot, I found out why it is so important to leave the math alone. I still paid more interest on high interest rates because I was not sticking to the plan. I paid less overall when paying lowest to highest because I was motivated. I felt a sense of accomplishment when I knew that I had something paid off. For instance my lowest bill was $214, the next was $474 and then $782 and so on but my highest was $2700, so I felt like I accomplished more because I had a few bills paid off rather than paying on $2700 for months on end because it had the highest interest rate.

    Way to go Dave. I created new habits and that is more important to me than math.

  409. Anonymous

    For you to say that credit is not evil tells me that you are not a good financial anything!

    We have been on Dave’s plan since October and he has changed our lives. In less than 2 years we will have everything including our house paid off. Have you checked to see how many people are debt free because of Dave? We have paid off over $20,000 in less than 6 months. Who can knock that?

    Remember, don’t try to keep up with the Jones family because they are BROKE!

    Dave ROCKS!

    #1 Dave Ramsey fan

  410. Anonymous

    I believe David Ramsey is providing, individuals with an achievable goal. Hopefully, the smallest debt, can be paid off quickly, providing individuals, a boost of confidence.
    It always feels good to accomplish a step towards a goal!! Paying off the smallest debt, does this. It is a step that builds confidence. Which in most cases can be worth more than dollars in the pocket!

  411. Anonymous

    I found this article interesting to read, but disagreed with a few of the statements. First, I don’t think Dave Ramsey is running any kind of “scheme.” I think it would have been better to reference his “idea” or “theory”, but not “scheme.”
    And lastly, you said, “But for people with sufficient self-control, you can do better by paying off debts from highest to lowest interest rate. Then again, maybe people with self control don’t get into debt in the first place…” I would say that is the whole problem to begin with. That is why Dave Ramsey recommends the plan that he does. He is trying to help people break their bad spending habits! Not show them how to get in debt and then out of debt so they can bet back in debt and back out again and on and on. I know of a number of people he has been able to break out of that vicious cycle with his financial advice.
    Thank you for the side by side comparision of three different methods though. That was interesting and neat to see!

  412. Anonymous

    Way to go Liz .
    Yeh !!! ( Big Shout from Dallas )
    We’re not there yet but we’re so close.
    We started in Oct 06 and 3 more paychecks we’ll be done. ( unless I can’t wait and sell more stuff. )

  413. Anonymous

    I’m debt freeeeeeeeeeeeeee!!!!!


    Thanks to Dave Ramsey!!!

    I think he’s great at math. Owing ZERO is a great number. LOL

  414. Anonymous

    Kai – Sam,

    I’m not an accountant, I try understanding it yet it doesn’t make sense many times or if it does is rather fuzzy so I have an accountant for that purpose.

    I would use other people’s money if I have to and if it is in my interest. Will I risk… yes I would, if it is in my interest. You started in your friend’s garage, you could have rented a workshop yet you decided not to… did you pay rent to your friend? And how much the difference between the workshop and friends garage would have been? What if you didn’t have the friend? Or your business needed a bigger space to begin with?

    I do talk from both sides of my mouth all the time; there is more then one view point to the argument. I try to see some of the views and make a decision for myself, as that is what would work in my case. It may work in yours… but I will prefer to stay away from advising as that may lead to legal problems I wish not to be involved. As it may not work in your case.

    Some assets are not such by common sense, but I’m not a common sense guy. I pointed why shirt and refrigerator I consider as an asset, it is not their value laterally speaking, as much as the value they bring to your household obtaining them and having them in possession. No shirt in the winter freeze equals visit to the doctor, which will cost you more then the price of the shirt, same goes with the fridge, don’t buy one and tell me how fast your food will remain in eatable condition, another visit to the doctor, even more medical bills, as well as the local food store. Drain your cars oil, and drive it because oil is not an “asset”… you are not going to have a car for a long. So asset or not, “sound judgment” is a key, and that you will not find in any accounting or economic text book. Some freebees in the break room will make your employees having better attitude and work better, the freebees are plain expense, yet they bring something that is unappraisalable to your business the good working attitude.

    Example with the car is wrong, I borrow form reputable lenders. Banks are one such, I wish I can borrow from the federal government yet they don’t lend to the public, the public lend them for set yearly percentage. You put your saving in a bank I borrow it from the bank, the bank gives me your money. Whether I would succeed depend on how well I did my math, what type of credit I use, interest rates… and so on and on. Risks are taken all the time. Being insomniac problem is not in the sleep. Yet I do have problems… my biggest problem is the human unreliability. You as a business owner have that problem as well, I would assume.

    “Factors that are out of you control”… there is nothing in my control, but the decisions I make, they are under my control. The rest will be history after 24 hours.

    The approaches we take in life are different as we are different to, you play safe, I play by the rules, if there is no rules I go by the most optimal course that there is. Is there risk…? I suppose there is.

    Pay as you go is great, I do the same thing yet I project and try to see further down the line. That way I get ready for what is there to come. Instead to deal with it, at the point of breakage with my arms twisted. Fast is good, yet I would ad, as fast as the optimal conditions allow, I would not go faster if it is against my interest. Think of it as a big truck that can go with 10 and 100 MPH. in 1 hour you’ll consume certain amount of fuel and could be only 10 miles away, the point is to go as fast as you can, with as less fuel possible to the point that is further away in the optimal time. And if I have to borrow money to accomplish that, so be it. But I have the filling you already know that.

    Thank you for the comments

  415. Anonymous


    Some of your comments make a lot of sense, they do in fact work and apply to the marketplace.

    Yet I must disagree with you on many comments as they are twisting generally accepted accounting principals. (most of these principals apply even if you choose to ignore them)
    When you use other peoples money to build wealth you are increasing Risk.
    I built my business slowly and started with less than $5,000, in my friends garage. I don’t regret it one bit and I don’t plan on borrowing money and paying someone else for my hard work.

    As defined in your very own example, a bullion isn’t an asset. It’s worth only what someone is willing to pay for it just like in your “House” Example. So you are speaking out of both sides of your mouth there.

    A Shirt adds value to your life but it isn’t an “Asset” Try selling your used shirt to pay some bills and then tell me that was a great Asset.
    The same goes for your Refrigerator, it may add value to your life or how your operate your household, but it will sharply decline in value and therefore should not be considered an Asset in general accounting terms.

    If you borrow money on your car so you can use that money in your business to make a profit, odds are you can probably make it work, but what if you can’t make your business more profitable because of various factors effecting the marketplace? Factors that are out of your control. Then you will still owe the money on the car and your income has gone down. What you did was increase your Risk.

    Since I don’t borrow money and leverage myself even when bad things happen I’ll still survive, my plan will work even when things go wrong. Yours will work if everything goes right, if one big thing goes wrong you have loans to worry about, while I won’t loose much sleep over it since I don’t owe anybody.

    If I can’t pay as I go, then I’m going too fast.


  416. Anonymous

    I’m honestly feed up of this…

    DRE…Asset is anything that can bring money to me, is the plus on my balance sheet; liability is everything that takes them away, the minus. As simple as that. There is a braking point in which you may not own the object yet you can resale it for profit and then the liability becomes asset, as it builds wealth for you, as well as the asset have a time to live and its value vanishes after certain amount of time, your 20years old Toyota is a pile of rusty rubbish that cost you money to repair. Good luck whit that asset.

    A House is a liability even if it is payed as you still have to pay taxes and other maintenance costs. So it doesn’t bring money in your pocket dose it. The value of the house depends on the market (and time as the Toyota above). My friend in Nevada pays 25% more 2 years ago, then his house worth at the moment. The market dictates, whether you like it or not. You may ask certain price but if you have no buyer then, you stuck with the product. This is demand driven world. Unless that house is an apartment building that you rent to your customers… it is not an asset. And the government sure will cut its fair share. Don’t get me started on US Housing and Construction reality as it is the most pitiful thing in existence.

    Perfect example of asset would be bullion bought 5-7 years ago at price 2-4 times under the current price, sold now. Yet if you wait another 4-5 years and the price drops to the point you bought the bullion. Then it is the equivalent of money in a jar. Yes you do have an asset.

    About the fridge…. A little thought. If it is cheaper to buy bulk (perishable goods), you need to store it in a way that will preserve food for longer period of time, or you will end up throwing it as it will rot. Logically then you lose money. So my view on the fridge/freezer is… that even if it is not fitting in definition of an asset. It brings value to the household saving money and therefore it is an asset.

    Shirt, jacket, sweatshirt… that makes you warn and healthy I would consider as an asset too, very good example. If you walk out on the cold without it you’ll end up at the doctors office, paying way more then the price of the clothing you wear, don’t you? I think you ought to reevaluate your value system. “Not everything that counts can be counted, not everything that can be counted counts.”

    My best asset is the head on my shoulders, (as loony it may sound). I’m happy whit the accomplishment in the last couple of years thanks to the choice made by my own head. I did some mistakes too, I’ll never stop learning. And Ryan… sorry for ruining your blog.

  417. Anonymous

    Tommy: Got to the library and get DR complete money make-over, it has all the information that the class has to offer.

    Nick: Obviously, you have not listened to DR alot. Almost every day he give away ticket to his live events to callers, copies of his book and even free registrations for “Financial Peace University”. So he does care about his listeners and whenever needed he puts his money where his mouth is.

    I people had the will-power to follow the pay the highest first plan, they would not be in debt in the first place. Most people in debt are because they refuse to live within there means. They buy cars and houses they cannot afford, the best stereo’s, TV’s etc. DR’s program not only helps the get out of debt by letting them see immediate progress, but also gives them a plan for their future after becoming debt free (college for kids, retirement, etc).

    Plus, Dave was broke and used the plan he preaches to get to where he is today. He is proof that his plan works. Plus, whether you like it or not, being debt free is a Biblical principle and my hat is off to Dave for not hiding his faith.

  418. Anonymous

    When it comes down ti it, it doesn’t really matter which way one goes as long as the end goal is reached, which is to say that the debt is paid off in way that will reinfoce good habits that will help keep that person out of debt when all is said and done. All three approaches will do that, but as so many before me have said, Ramsey’s approach works because those first few wins are big ones, they are psychological motivation on a big scale and they will allow the person looking to get out of debt to have those wins and feel like they are making progress.

  419. Anonymous

    I just wanted to add my two cents. I have recently taken the Financial Peace course at church with about 50 other families and we have all had many changes in our financial lives and all for the better. By doing Dave Ramsey’s approach many families have paid off and cut up at least two credit cards and are officially working on the bigger ones and making much bigger payments to have those quickly paid off. I highly recommend Dave Ramsey’s course. It is very easy to understand and it makes so much sense. At the time we started the course my husband had been out of work for 4 months and we were living on our savings. He got a job just a month ago, and had been out for a total of 7 months and we, because of this course, were able to make our money stretch and have hardly fallen behind. One family in our class was able to pay off close to $14,000 in debt. I understand that this method isn’t for everyone but I also wanted to put out there that you need to check out his website for yourself before letting someone else make the decision for you. Definitely get all the information about the class form the website itself. He basis a lot of his teachings on the things that Larry Burkett taught and it has helped so many people get their finances back on track by using simple, common sense approaches. Just check it out before taking this one webistes OPINION.

  420. Anonymous

    I’m working from the 5+ years to replacement definition of asset. It’s definitely not a semi liquid, or even sometimes salable asset, but it is an asset from the perspective that it retains it’s use for 5+ years.

    I didn’t even bring up the refrigerator ;). Someone else brought it up as a method to discount the concepts I linked to in my original post.

    The fact that if I take a loan for $5K @ 0% and invest it @ 4% I can make a little bit of dough. Not a ton, but a little.

    For long term wealth building, there’s lots of little itty bitty things you can do. Some are more traditional and powerful (Investing in an IRA, for instance), while others are little tricks that can be utilized, have a lot of risk, but can be a lot of fun for those of us who like to push boundaries.

    I will agree that you cannot get wealthy by paying exorbitant amounts of interest.

    Consider mortgages. No one in their right mind would say mortgages are a useless debt form. The concept behind them is you buy a piece of property on borrowed money, and eventually pay it off. As the property increases in value, the money you’re paying into the mortgage is eventually returned as equity. Leveraging 0% interest loans is the same basic concept over a shorter period of time.

  421. Anonymous

    Nick and Zach,

    FYI, a refrigerator is NOT an asset. It might be in the strictest of definitions (ie: it has a monetary value) but that’s about it. If you applied for a bank loan and told them you wanted to use your refrigerator as collateral, you would certainly be laughed out of the bank.

    Secondly, the financial definition of “asset” is something has *economic value* and can be converted to cash (and preferably is going UP in value over time). Your refrigerator does not fit this definition.

    That does not mean that it isn’t “useful” to you and that it doesn’t keep your food from going bad. Just because you find it useful doesn’t make it an “asset” from a financial perspective.

    Using your definition, my shirt is an asset because it keeps me warm. In fact every physical item in the world is an asset because it has *some* economic value. Somebody somewhere will pay something (1 penny?) for it. While technically true, the fact that you base an entire argument on this is pretty silly.

    The primary discussion on this thread is *how to build wealth*. Nothing you have posted really has much to do with that.

    Just thought I’d clear that up.

    ps – Ryan is pretty much on the money (no pun intended) with his comments.

  422. Anonymous


    If I have to tell you what you wish to hear “intelligently” what is the point of me speaking to you? Or having this conversation? Follow your “Messiah” to the promise land, and have a prosperous life, chanting yes, yes, yes. Is that your view of debating?

    Refrigerator… I would consider as an asset too, if you cannot preserve your food, how would you build that wealth of yours? Do you live on fast food diet? I guess in your household someone else is building the wealth you just enjoy the ride. And give “intelligent” advises to people to follow. Think of the meaning of things that surround you and what they bring in your life.

    What I try to do is make your brain work, take decisions and think over problems and solver it for the specific situation you are in. Not listen to a Messiah, (what the hell I’m talking). There are more churches in my nationhood then schools, and I expect a creative argument… Follow your leader to show the world how it ought to be run. Meanwhile the US Debt-clock is running of numbers. I am flattered to be called “tool” thank you. read definition of “tool” for yourself.

  423. Anonymous

    Hi Zach,

    I took the time to read some of your blog entries on finances. You have some rather interesting perspectives on debt and “debt classes.” I found your analysis of a refrigerator as an “asset class debt” particularly amusing. I really admire your enthusiasm and you seem to have a genuine interest in finances, but your logic has some serious holes in it, the first being that you can use debt to build wealth. The examples you used in one blog were based on acquiring bonus points by using your credit card for purchases and paying off the entire amounts in full every month.

    Where does the wealth part come into play here?

    And Nick, I do not know why you chose to ruin this post with your cavalier and condescending comments. The majority of the posts are positive and designed to help people, why not add something positive to the debate. Its apparent that you don’t listen to Dave Ramsey and you have never read his books; therefore you really have nothing to add to the debate because you have no real knowledge to base your assumptions on! It seems as if you just want to have the last condescending and spiteful word. To me, thats just plain rude. Get off your high horse and let others debate intelligently.

    Or you can follow up by telling everyone they don’t get it, missed your point and how absolutely WONDERFUL your debt tool is. The truth is…the only tool here is you.

  424. Anonymous


    If I buy a car (Toyota) with that money your example is plausible… as the car would be liability, yet you have no knowledge as how that money would be used, do you? I may have a business and that money could be used in a very good way. That is if and when I have the 0% loan hypothetically speaking. You have no knowledge of mine or, that money potential, do you? I can slap a big sign “Rent-a-car” and rent it for 8.99 an hour, gas included. What is the car now? Is it still liability? Or is money making machine?

    Is it “tool”, yes…, I see it as such, that “tool” works for me, and I gladly use it as it gives me the freedom to do what I need, when I need to do it.

    You need money to build wealth, it is the “tool”, the “lubricant”, the “fuel” if you wish, that makes your machine work and builds wealth for you. “THEM” borrow money to sell you that car, “THEM” don’t print money (that is considered crime) and the 0% that you get is because the value of that car is much less then its worth. Material, labor, etc. you have no way of knowing the deal between the dealer and the manufacturer. And the real value of that car rolling of the conveyor. Neither does the dealer who sells it to you. Yet he gets a good share and is happy, generously giving you 0% for the car.

    And after I explained… you my view, I would ask you to step in “THEM’s” shoes and think again is the debt/tool, good or not. You have to look at the problem from more then just one prospective. If that sound naive to you…, then I wasted my time writing this.

    Bottom line… none existing, “You can bring the horse to the water, you cannot make it drink” my grandpa’s quote. (Duh!!!)

    Zachary… you are on the right track. Well done.

  425. Anonymous

    You can borrow your way to wealth, but only if you reinvest the borrowed money in a way that has a higher net return than the interest you are paying. FiveCentNickel itself has a great list of 0% interest balance transfer cards. Most of which can be used for fee free cash advances.

    For a little bit more information, read my post “Thoughts on Leveraging 0% interest cash advances to earn interest”

    Of course borrowing $5K at 0% interest, putting it into a depreciating asset (such as an automobile) will not make you wealthy. Borrowing $5K @ 0% instead of $5K @ 13% is a wise choice though.

  426. Anonymous

    I just wanted to make a couple of quick points. Firstly, debt is absolutely NOT a tool in the way that banks use your savings as a tool. The banks are not “borrowing” your money. They are insured by the federal government and are holding it for you and can return it in full at your request. You cannot do the same for the debt you carry … which is why you needed payments in the first place. The idea that the two are equal is extremely naive and shows a lack of maturity concerning finance.

    Debt is a liability it’s a negative statement in your portfolio that counts against your total net worth. It also adds risk to your portfolio. Debt and interest are not necessarily related. Sure nobody wants to pay interest, and lower rates are preferable to higher rates; but even at 0% interest, you are still a debtor and owe somebody money that you must pay in installments.

    Buying a car for $20,000 with 0% interest lowers your net worth by $20,000. Regardless of whether it is “interest free” or not, you still have to pay it back. This point seems to elude you. It is not “free money”. You make it sound like you won the lottery or received an inheritance.

    By taking on a debt of $20,000 for a car loan (36 months) means you are obligated to pay $555 a month every month. That is money that is not available for you to use for investments and other activities. It’s a liability on your balance sheet. Furthermore, due to the fact that the car is a depreciating asset, you will owe more than the car is worth for quite a while. Thus if you need to sell the car, you will do so at a loss.

    Debt is not a tool for wealth building. In fact, it’s definition is the exact opposite of a tool. Debt is the item that is keeping you from acquiring wealth. Debt is a TOOL of the lender in order to get you to part with your future earnings. In the example of the car, the finance company enticed you to pledge $550 a month of your future earnings for the car. Thus it’s a tool for THEM to make money from you. (Duh!)

    I am completely failing to understand how you are coming out ahead in this transaction or how this “tool” of yours has advanced your financial position. Feel free to explain this as I’d love to hear it.


  427. Anonymous

    Firs to Ryan (first come first served).

    If you don’t wish to use 0% loan, is your preference. And yes I see debt as a tool, the same way banks see your savings…, as tool. A question is how susceptible to risk you are. In your case, not as much, fair enough.

    About dealerships and 0% interest, I have my own theory, and I’ll keep it for myself. As I never seen someone who will drive his brand new car off the lot and sell it to me for discounted price. I have been told many times that would be the case; yet I never met the person who would do it in practice.

    Even if I knew someone who gives 0% loans, what would be my motive to tell you? That was a hypothetical question on a first place; I would too keep the answer for myself. I try to use the system if and when I can, so can you and anybody else. After all if the system can use me, why wouldn’t I take the advantage?


    Yes I’m one of those people (be afraid), that are never satisfied, and I see the need to improve what I can. I see that as a good thing. Otherwise you would still drive model “T”, watch B&W TV, and use LP’s, if even that.

    As I already mentioned this blog is my first exposure to DR. So…, No…, there is no way of me having knowledge of DR’s actions in past or present times (I don’t foresee future). And yes, if, I had that “miracle” power to see what I asked for, it would defeat the whole purpose. Yet that was not my point. Your logic is correct, as I would know. (That reminds me about the hen and the egg rhetoric) Yet many celebrities do that, Oprah gave one bunch of cars free to the public, how would to I look at that, donation, or car commercial (I’d go with the second)? You asked for example.

    By the way, charities and foundations have names…. “The Park Foundation” after Roy Hampton Park, Sr. and many others. So…, No, if you wish to do something you can leave your name, and do it in a humble way. Yet even without reading his book/s I bet that there is a chapter advising you to donate to charity with the idea to claim that money in your tax return (Taxation has changed, be very careful). So… No, I don’t see him as a saint, and definitely not as a Good Samaritan. This is my personal view point, (you don’t have to follow my views). You can give and let the world know, it’s what you do after… claim or not. If after all that you still don’t get my point… I have nothing more to say.

    Good night.

  428. Anonymous

    Nick said:

    “I will take my words back if/when I see DR donating his money (personal after tax dollars) to charity without claming it in his tax return, or making publicity out of it or any other action that would benefit him in that matter.”

    When has Dave ever given to a charitable organization and gained publicity from it? Can you name one time?

    Also, if you were allowed to see his tax return or see him give a portion of his post-tax income to a charitable organization, wouldn’t that kind of defeat the purpose of giving privately so as to avoid the fanfare and publicity?

    Some people are never satisfied. I fear our friend Nick is one of those people.

    And yes, I work for Dave. And yes, I know that Dave gives a lot of money to a handful of charitable organizations that he and his wife choose to support together. And no, I can’t prove it. And yes, THAT’S THE WAY IT’S SUPPOSED TO BE! You’re not supposed to give money to help others and have the whole freaking world know about it. If you are then something is wrong.

  429. Anonymous

    And about the debt free. I’ll give you some thought to think over. What is better… having a debt that is covered by 0% interest loan? Or having to struggle paying multiple accounts to get rid out of debt? “The devil is in details”.

    Hi Nick,

    To be true, the devil is in the details. I don’t have a 1% loan, a 3% loan or a 0% loan. I have exactly ZERO loans. I have cash that earns interest. From my perspective, I would rather live a worry-free, modest existence without any encumbrances in the form of a loan. I respect that some folks like risk and enjoy the money game. I played it, got burned and found a different way.

    A zero percent “loan” is not cash. Its not free money. I like paying for items, such as my two year old Acura, with cash.

    You could make the argument that if you were somehow making interest and investing that “0% loan money” that its a smart move. Do you know anyone who lends money on those terms? (let me know if you do, seriously) The only place that I know that lends money on those terms are auto dealerships. If you buy a new car and it loses 40% of its value in two years, is a 0% loan still such a good deal?

    Debt is not a tool for me. Debt adds risk even at 0%. Personally, I am just not into loans as a form of risk. If you feel good with a loan at zero percent and that you are beating the banker at their own game, thats your choice and its not wrong, its just not mine.

    Have a good one!

  430. Anonymous


    You don’t get it, do you? Those are not DR patented wisdoms. And if he makes you motivated, be my guest “tune in”. I never new who he is until I read Nickel’s post. Yet I came to same conclusion on my own more then a year ago and it worked for me perfectly, while sitting at home and playing with pen, piece of paper and some numbers.

    I guess you missed the point. You helped your friends, not DR. as you said, you don’t follow exactly what he says. Which is why you succeeded, so did your friends, compare to many others who didn’t. And that is what this post is all about. To make your own mind and reconsider “words of wisdom” as they may be misleading.

    I will take my words back if/when I see DR donating his money (personal after tax dollars) to charity without claming it in his tax return, or making publicity out of it or any other action that would benefit him in that matter. Just drop percent from his income in unmarked envelope in a charity box. I’m sorry if it looks like a grunge, yet I have seen few good Samaritans in the truth meaning of those words.

    For you to understand my point of being unhappy with “the service” provided, is the quality of that same service. If it is misleading and having gaps (intentional or not, now that is presumptuous) is unfair to the customer, who doesn’t have you as a friend to help him out. There are many mistreated people out there.

    And about the debt free. I’ll give you some thought to think over. What is better… having a debt that is covered by 0% interest loan? Or having to struggle paying multiple accounts to get rid out of debt? “The devil is in details”.

  431. Anonymous


    While you make a valid point regarding the math involved in paying down a higher debt with a higher interest rate first, I think you have ignored what DR is actually doing for those who could use his help. As someone who got turned on to his show and followed his plan, I understand this. Did I do exactly what he mentioned? No! Did it still work for me? You bet!

    Just by tuning into his show and hearing the hope and inspiration he provides kept me motivated. I have a mind of my own. I paid my high interest crap first. Many people will, too. Did Dave do it for me or any other listener? No. Do I credit Dave for my zero debt status? No!

    I think its rather presumptuous of you to make claims about Dave Ramsey only caring about himself. He is not a non-profit organization. He provides a service which is worth the fee he obtains from his advertisers and listenership who buys his products. I get most of my Dave Ramsey fix for free by tuning in. The ripple effect of those people who have lent his book, rented it from the library for free or simply shared his advice is mind blowing. I have helped three friends and my Mom get their crap together with DR’s teachings.

    There is room for differnt opinions and I really can’t understand the logic behind holding a grudge against DR for making money. Why fault him for that? If you dont think its worth it, dont buy it. You can get most of his teachings for free, anyway. I’d be willing to bet he wouldnt fault someone for it.

  432. Anonymous

    I agree he is not bad at math (not entirely), Nickel is correct in his suggestion, attack the highest rate first. On the long run it saves you more money, as the time works against you.

    Now why the DR suggests to attack the smallest amount first… is obvious, Motivating you to pay fast, small amounts, you feel great, you are doing something, you are succeeding, you have 3-4-5 cards less HOORAY…, and he DR is the reason, Isn’t he great…?

    What DR doesn’t tell you, is that meanwhile you other account that may have 20 % rates more or less, added some extra to your debt, don’t forget they are the big amounts so the charges will be big too. Several months later you realize the catch, yet it is too late. You boasted how great DR is, how great you are doing, how motivated you are… but you are ashamed to admit it didn’t work for you. There are many people who are in that position. I’m sorry guys. DR cares about himself, not you. Otherwise he would be head of a charity, which he is not. His books are to make him reach not you. So please be considerate. You can learn every day something new. Fancy looking guy promising you panacea, may actually be just another scam artist. Think of it this way… do you know how many copies of his books are in print and for sale. He is a money making (money taking) machine. Most of the things he say (that may not be entirely correct and in your favor) you can learn from a friend or online, do you have to really buy his book? NO, you don’t. You just saved yourself 15-20 dollars. Now think what you can do with them. I’ll tell you a story… “A boy had that money (15-20 $) and bought some apples, sold them and double the money, and so on and on, until his relative passed away and left him a fortune.”

    I will just add, respect and listen to your parents and friends. They have seen a bit more then you are. And it comes for free.

  433. Anonymous

    In the example above, depending on how much the car was worth, Dave would tell you to sell the car and buy a beater. So the whole debate about highest to lowest is great, but that isn’t the whole story in the Ramsey plan.

  434. Anonymous

    Please don’t assume someone is bad at math or has problems managing money because he or she has debt. I ran into debt after a contentous divorce, having to return home out-of-state to attend two funerals, and other life situations. Sometimes life throws you several curve balls all at once. Granted I could have planned some things better but please don’t be so judgemental about people having debt that they can’t manage money. This may be true in some cases but not all of them. Ramsey’s approach definetly involves the motivational and emotional factor that is left out of the mathematical factor. I think this point has been well-stated by now. Besides, any approach to get rid of debt,that is within reason, is a good approach. Its just a matter of personal choice.

  435. Anonymous

    I just wanted to jump on here and mention that I have been following this post for a long time. I have to say I am impressed with the relative levelheadedness of the posts and opinions. (I know that is subject to change!)

    I look at Dave Ramsey as “training wheels” for those who really need a wake up call. Dave offers hope and inspiration and a tremendous service to his listeners. God speed to all of you who are building wealth, reducing debt and building financial literacy. Its a subject they simply don’t teach in school.

    Rest assured I will be reading more of this blog.


  436. Anonymous

    Good luck Sarah… I hope you have a pre-nupt. And keep your finances separately. That was my mistake.

    If you end up needing divorce advice, send me a note… It is interesting field to observe, and has many tricks and traps.

    My divorce thought me that Love and Marriage are two different thinks and ought to be examined as such… two different things.

  437. Anonymous


    Strings will be always attached. That I why I have two types of credit accounts, one is “Line of credit” the other is “CC”, One start charging me % from the day I start using the money and has no time limit. Other gives me 30 + 20-30days time to pay for free. That would be the CC. Yes US have many good choices that others don’t. With that comes the self discipline that some people lack.

    As for the CC industry as well as the banks “loan sharking”, I am disgusted by the bank and financial system. That will haunt them, and will have a negative effect, in the future of this industry. I recently read that banks considered ending the practice of raising your % if you default on any account. That remains to be seen. The post lower is a link to a movie made by PBS about the Credit card industry. I will recommend any one who has spear time to watch it. My admiration for NY Governor Spitzer.



    I have nothing to say but… 3 posts, I’m flattered, You don’t have to defend yourself as I did not attacked you. I shared some suggestive thoughts and comments which may disturb you, my apologies. Yet I still cannot understand the style in your comments. As they were written by different person.

    Apparently you are not married, if you were you would know how the sheared account works, whose responsibilities it is as well as the credit repercussions to ones history that would bring. In case of divorce that could be the eventual outcome, Family, Financial, and Tax law collide. If one states one, the other does not, so you are in pretty big mess. Including the fact that Family law sees male and female differently, it’s a set stereotype hard to break.

    I would suggest sit and write one well thought post, ditch “CAPITAL LETTERS”, “ANYWAY’s” and the attitude.

  438. Anonymous


  439. Anonymous

    to defend myself Nick, i’ve never had a co-signer, my credit is my own… i paid cash for my first 2 cars and built my credit with a low balance credit card (in witch the rate didnt matter because it was paid off each month)… no one taught me, believe it or not some people learn from other peoples mistakes thank you!! and i can understand marriage and credit, but its still your credit- and thats all financial institutions care about!

  440. Anonymous


    I wouldn’t say that 6.9% is better or worse than 0%. It really depends on the situation. I too have had those “0% for life” credit card deals. The problem is that those rates can be adjusted at will by the CC company. It’s more like a “0% until we feel like changing it.”

    Also, if you’re ever late, or your late on an unrelated account or your payment is mysteriously “delayed in the mail”, your “0% for life” shoots up to 25% . Some companies will deliberately mail you your statement late so that you won’t be able to get it back to them in time.

    If it were me, I’d rather have a car payment at 6.9% forever than for 0% with several strings attached. It’s all about the risk. But that’s just me.

    Sorry to hear about your situation. “Bad Luck” is another way to get into financial problems and it sounds like you got a bad deal. The thing about America is that people have opportunities that aren’t available in other places. Someone like you can start all over tomorrow and be a huge success if they choose to.

    As far as the personal issues. Not carrying debt and living well below your means is probably the best approach. My wife and I live on 50% of our monthly income and are almost debt free. If we were to separate, we’d be dividing wealth, not debt. I’d also be able to support myself on my check and she on hers. We don’t make a lot of money we just live substantially below our means. Bad luck can happen to anyone … we just try to be in a position that will minimize it’s negative effects should the unfortunate occur.

    You seem like a hard working person who has the potential to win with money in the long run. Good luck.

  441. Anonymous


    I agree it is personal choice. And I did what I had to do. How and why did I end in that position…, well, I would say it was thanks to person who, like “Sarah” used allots of “ANYWAY’s” and the same self-centered attitude.

    How she gets the rates she mentioned, is none of my business, I have no knowledge whether she manage her account herself, or someone does that for her, or she is “daddy’s girl” with a great amount on her collateral account securing her secured CC. I have no knowledge of it and I don’t really care to be honest.

    The reason people sigh for rates like that could be out of your horizon to foresee. So I would suggest not calling them “stupid”. You may end up in the same position, thanks to someone else. I hope you have a good Attorney.

    I would like to ask you, what would happened if you would to divorce your spouse…, which was my case, (I had to fix everything with my two hands and little help from my friends). For a guy, who came in US 7 years ago and had NO idea of how the system operates. I have done miracles, I’m proud of myself. I beat the system. I have seen Americans literally crying on foreign airports asking for any available ticket back to US. And here I am, the foreigner, no, no the “Alien” to be precise, did what most of American men are afraid of, Divorced. I fought, where as others swallow their pride and take the slap. No thanks.

    For your info…, 0% balance transfer CC for the life of the transfer. How that sounds? Is it better then hers 6.9%.

    And last…, why was I pissed…? For no apparent reason…, I came to this country with a good savings in my accounts, to find myself broke, kicked out of my home… thanks to a “Sarah”– alike. I didn’t come here crossing a river to work for pennies, with only the clothes on my back. I came with an overseas flight, two suitcases and enough money to buy a brand new car, leaving family & friends, perusing the American dream and the girl I loved.

    My conclusion is that, either you did not read my post carefully, to give me the suggestion at the end, or you are illiterate. Thank you for the advice thou, did it already, long time ago.

  442. Anonymous

    The whole point of Dave Ramsey’s methods is to change behavior. He constantly says, “Getting out of debt is 10% about the money/math and 90% behavior.” To say he is “bad at math” is a bit harsh. He never claimed that this was the mathematical equation to getting out of debt. Of course he knows the math… but his principles are about changing one’s behavior; hence, you knock out the small ones… small victories… changed behavior. It’s what sets him apart from other “financial gurus.”

  443. Anonymous

    Woah Nick, you really need to chill out. You make it sound like “poor, broke, unfortunate, weak” etc. HAVE to pay 19% for their loans. I have to call BS on you.

    Nobody HAS to borrow money under poor terms. If the terms you are offered aren’t very good, it’s probably because you have performed poorly with money in the past. Thus you are a higher risk than someone like Sarah who gets *good* rates because she handles her finances more responsibly.

    Secondly, nobody HAS to borrow money, PERIOD. If the only way I could get a loan for a car was at 20%, I’d simply not purchase the car. I’d be happy to walk, take the bus, get a bike, carpool or buy a cheap “beater” car for a $1000 while I saved up cash to buy something better.

    The fact that people _sign_up_ for those sucker rates is simply due to the fact that they’re either financially incompetent (ie: stupid) or lacking restraint and self-discipline. Either way, they get what they have coming to them.

    Personal finance is about personal responsibility. It’s not the “bad credit card companies” or “the man” or whatever. Everyone who wants to get somewhere with money has to grow up and make grown up decisions. Your life is your own and it is the way it is because that’s how you’ve made it. Time to own up to your past decisions, make a change to do things differently, and step off the Waaaaaaambulance.

    Having said that, if I (somehow) had a crappy 20% rate on a car, I probably would put it on a lower rate credit card. Debt is debt. You might as well pay less while you’re paying it down.

  444. Anonymous

    Well… Sarah…

    I fell in love and get married to the girl of my life. To find myself few years later, almost broke.

    Now I’m divorced, my score is 200 points higher then it was back then. I pay 0% right now and am a happy bachelor and a charity organization for my son’s mother.

    Now if your daddy is your coo-signer, and down payment payee, I have no one to stick for me, my parents are 9 time zones away and have 60$ pension a month. Soo… get that “ANYWAY” and shove it you know where. The poor, broke, unfortunate, weak, used, mistreated… people do pay those percentages for your information. That was one of the best lessons in my life. I learned how to stand up on my own. You on the other hand, apparently did miss that lesson. I’m sorry for ya.

  445. Anonymous

    Just to add.

    Had a car loan with 18% for 2 years left to pay. Option 1 refinancing… 10% used car. Instead… Option 2, I transferred on 0% CC, lower my car insurance (as I do own the car ones paid) with partial coverage, and am 1/3 paid off, have 8 months 0% to go, and saved close to 1K in interest payments, otherwise I ought to pay as well. You do the math. I’m getting motivated when I see money in my account. I have saved enough to pay the whole amount right now yet I’ll wait until the last moment. 0% is free money for me. The bank gave me from your savings account, Thank you.

    Ok not exactly free… but 50$ one time fee is a joke. It was less then 2 % spread over the amount of the transfer.

    In conclusion… MATH matters. Motivation is bi-product of that same math. So please, please put your money in CD’s, savings, and other type of long term deposits. I love using them. And listen very carefully to people like D. Ramsey. He loves your money too.

  446. Anonymous

    Highest to lowest with 0% balance transfer. If you can pay all in the 0% time frame, or low rate on balance transfer for the life of the transfer. Love those CC’s

    Consolidating would be nice yet it depends on your abilities to pay and the bank predisposition towards you as well as your FICO. Ones done close the card or twist their hand and ask for something… another free balance transfer. It is not going to be free as you would have to pay fee or a sum. Yet it is much better then 19% on a loan or CC.

    Good article. Thanks

    PS. I have the motivation I lack the “math” (understand pure mathematical signs on green paper). And he…, DR. is all about making more “math” for himself not for you. So buy his books and get motivated, I’ll stick with this blog, and “math” that makes money in my pocket.

  447. Anonymous

    I am an avid Dave Ramsey listener and reader and agree will all of you who mention that Dave’s approach is not all about the math, it is about the motivation as well. It is nice to see that the individual you posted this article agrees with that aspect of the Dave Ramsey plan, I am dissappointed though that the article heading says “Dave Ramsey is Bad at Math” since we have concluded that the math isn’t his complete point.

  448. Anonymous

    Your argument is mathematically irefutable, but Ramsey points out frequently that money is not all about numbers. “Winning at money is 80 percent behavior and 20 percent head knowledge. Most of us know what to do, but we just don’t do it.” You do mention this in your post. Maybe your title is just to get more views, but I think it goes a little too far.

  449. Anonymous

    This is a rather old article, but I echo the last comment by John. The point is to “feel” like your getting somewhere with your debt, like you’re making progress.

    When you get rid of a debt completely, you feel like you’re getting somewhere. By starting out with the small debts, you knock ’em off faster.

    Face it, if we all lived by the math, few would have debt. The method works well for those who require the satisfaction of making progress.

  450. Anonymous

    You sure spent a long time proving a point that Dave himself makes clear on his show. The effect is psychological. It encourages people to start knocking of debtors and keep at it, not to save the most amount of money. You’ve really uncovered quite a controversy, pal. No, really.

  451. Anonymous

    So many people keep trying to build a credit score.
    It’s not a credit score. It’s a debt score, and the only way to have one is to get in debt and stay in debt.
    There are mortgage companies that do manual underwriting. They look at how promptly you paid your utilities and your rent for the past 2 years instead of your FICO.
    If you have cash, you don’t need credit. If you don’t have payments you have cash.
    Imagine getting your paycheck, pay taxes, insurance, and utilities.What’s left? CASH.
    Even if you had rent or mortgage payments there would still be money left.
    If you keep spending the future paychecks ( borrowing against them )How will you ever get ahead?
    If you don’t have the money, you just can’t buy it. If you think you will have enough for the payments, put the payments aside until you have enough to pay cash. You’ll save thousands of dollars a year in finance charges.

  452. Anonymous

    i have to say! im one of the lucky ones that my lower balance happens to be the highest rate. i only have a cc with a balance of 1885 and a car at 23k. and in the last 3 months have paid down over 4500 in debt making only 3200 a month.. and yes i have normal bills too..

    we did start with DR’s plan but with alteration. i didnt put back the 1000 baby fund 1st, i wanted to get that cc knocked out! yes we have run some “life happens” but after learning the self control we did not resort back to the cc, we simply paid the next 2 payments toward the doctor bills that came up (witch did not throw us off on our cc payment because we pay on it weekly, there is no way we would ever miss the payment due date) and after the cc is paid we will be putting back our baby efund and saving for vacation and then moving onto the car payment…
    and i will not be closing my cc’s now. i want that relationship to show on my credit report! and hey the rewards are nice too as long as its paid off within a week!

    getting out of debt- is getting out of debt, however you choose to do it… just do it!! it feels great!

  453. Anonymous

    How do so many of us get into financial trouble?

    The catch-22 with credit cards, is that they are needed in order to establish a credit rating. How the credit card is handled determines your credit rating, and you need a good credit rating in order to purchase a house or a car or get a loan.

    Where do things go wrong? We get the credit card with good intentions. But the concept of paying the balance off every month is a concept we may have trouble with. Financially it makes perfect sense to pay off the monthly balance owed. Psychologically we may ask ourself what is the use of the credit card if I’m going to pay the balance off immediately. This is where the IDEA of proving to the bank that we can handle the credit (and increased credit in other forms), thereby establishing a great credit rating, can be lost.

    Obviously using credit for big ticket items (appliances) or emergencies (expensive car repair) may be a good idea, but it requires discipline to pay it off as quickly as possible. It’s also easy to submit to the impulse to charge holiday or trip expenses, gas, incidentals, etc.

    Psychologically the credit card debt can be rationalized in such a way that it doesn’t seem real, it’s not real money, it’ll keep til I pay it off, there’s no penalty in just paying the minimum amount due, and there is no sense of urgency. And so it goes.

    Credit companies are quick as lightning to offer a fresh new face credit. And as quick as lightning, even with the best intentions, another person gets burned.

    How do so many people make mistakes with credit? Because we are humans, not machines. Education and prevention at a much younger age should be taught in school (elementary and high school levels) how to handle money, plan, budget, etc.

    As for those who say they’d never have a credit card again (and I’ve said those very words), is it possible to live the rest of your life without an established credit rating via a credit card?

  454. Anonymous

    Daves will tell us again and again.
    If you are in debt, broke or don’t have at least 3 to 6 months of expenses in an emergancy fund, you’re not ready to buy a house at all.
    Rent is not a total loss if it helps you get to where you can afford a home.
    When you rent and the hot water heater goes out, you don’t have to replace it. Homeowners insurance is many times more expensive than renters insurance. Property taxes belong to homeowners.
    Rent as cheap as you can until you can Afford a home.When you do buy a home and you have an emergancy, you will have a fund for that.
    Live for today but plan for tommorrow.
    2 or 3 years of paying what would be taxes, and homeowners insurance, repairs etc. into a savings account will give you a nice downpayment and the security of knowing you CAN pay those things.
    Learning to live on less than you make is PRICELESS.
    Our home repair budget is only $150.00 a month. But we’ve only needed it every 14.5 months. ( Avg. repair $580.00. So we now ( After 12 years )have enough to repaint, and re- floor, Leaving $1000.00 alone for deductable just in case.

  455. Anonymous

    Casey (comment 216), your argument doesn’t make complete sense. Homes are not income producing investments and don’t produce any liquidity for the reasons you mention. However, if people want to buy a home (or a car) they still need to be paid for and paying cash is the cheapest way to acquire a home by far. People who buy a house will pay for it regardless. Paying cash will cost less than a mortgage (see comment 218).

    Now, on to your second point. A $200k paid-for house offers substantially more security than $200k in mutual funds. It’s not “in the bank” as you say. It’s in the stock market which is not secure in the least. There’s a huge difference between FDIC insured money (which doesn’t pay much interest) and higher risk/reward vehicles such as the stock market.

    Furthermore, you’re advocating taking out a 6% mortgage so you can make 8% to 10% in mutual funds. The problem is that you have to pay TAXES on those gains. Thus 10% – 25% income taxes leaves you with about 7.5% gross profits. Thus, at best, you’re only gaining 1.5% over the paid-off mortgage. That doesn’t even account for the RISK inherent to the market.

    I don’t know what the formulas for calculating risk are but I can guarantee that it’s more than 1.5%. Anyone who fully mortgages a paid-for $200k house so they can put it all in the stock market and *possibly* make a 1.5% return ($3000 ??!) on their money is an idiot.

    There’s NO WAY it’s worth the risk. I wouldn’t even risk it for a 3% gain … which is double your estimates and doesn’t even mathematically factor in the risk.

  456. Anonymous

    Paying cash for your home? When paying payments for a home the final cast is more than twice the price of the initial mortgage.$200,000.00 $1199.10 a month X 360 payments = 431676.00 vs.
    1199.00 a month available to save, or invest, or spend in an emergancy, and the appreciation of the home is actual.
    Dave doesn’t say pay off your house and be broke. He says pay everything off and use your freed up paycheck to build wealth, so you have both the paid for house and the MONEY.
    Saving the amount of the payment even with low yield I would have the money back in less than 10 years, and you’d still be making payments, most of which has been interest so far.
    When I had an emergancy I wouldn’t be using up my savings to make payments.
    The secutity of knowing my home is actually mine can’t be replaced by anything.

  457. Anonymous

    I think what people need to realize it that Dave Ramsey is a motivator, but does not give total truths and not always the best financial advice. For instance, I just read an article where a reader asked if he should take out a home mortgage or pay cash. Dave replied, “pay cash!” I was in shock. Homes only make money for you if (1) you sell them or (2) you are leasing out a room. Therefore, this gentleman’s money would be tied up in his home and unavailable if he should need it for say unexpected medical reasons, job loss, etc. Dave mentioned that a $200,000 mortgage at 6% would mean $12,000 would to the bank in interest but would give a tax write-off of $4,200. What he did NOT address was the fact that the $200,000 cash could be invested in mutual funds and most likely gain an 8-10% return. So, doing the math (not Dave Ramsey’s strong point), it would actually cost the gentleman more money to pay cash since he would be losing his tax write-off, investment return, and security of knowing there was plenty of cash in the bank. I know of too many people who have not been able to sell their home or have had to invests thousands of dollars in foundation repairs in order to sell it. A home is not a smart place to sink your money. But more and more people are persuaded by Dave and trust him because he plays the “I’m a Christian” card. I’m sure he’s laughing all the way to the bank!

  458. Anonymous

    “But for people with sufficient self-control, you can do better by paying off debts from highest to lowest interest rate. Then again, maybe people with self control don’t get into debt in the first place…”

    People with self control would not have gotten into debt in the 1st place. Dave never says that paying the snowball way is faster but no one can ignore their emotions. Smallest to largest gets you fired up and you can start to see your way through. If I started with the biggest (happens to be my highest rate), I would probably feel defeated about 6 months into it.

  459. Anonymous

    I think may people are missing a big point with the Ramsey method. While paying the high interest off first saves money in the long run, it creates nothing extra in the short term. Most people starting out with a program do good but hit a bump in the road, car breaks, medical bills and so forth. Freeing up a few debts quickly not only is a emotional victory, but it can also give you some breathing room so that little setbacks can be paid in cash instead of adding to the debt machine.

  460. Anonymous

    If you followed the numbers (math), you wouldn’t have borrowed the money in the first place. Thats the point of Dave Ramsey. His values and ideas changed our life. Its common sense, but sometimes it just takes an outside voice echoing what we all know inside.

  461. Anonymous

    I think many of you are missing how the emotional impact of the small victories in the debt snowball translates into numbers. You key assumption is not interest rates, but that the payments remains fixed at $1,000 per month.

    I’m a professional engineer and have an MBA, so I assure you that I can make spreadsheets with the best of them. Like many such individuals my wife is the opposite. When I first ran the spreadsheet it was going to take 60 months for us to get out of debt. I translated that into how old our son would be and as a couple we BOTH got the message. We sold stuff big and small. We knocked down 6 low interest debts and got the ball rolling. That encouraged us to live more frugally, look for extra work and sell more stuff. Now my wife and I doubled the amount we pay each month and will be debt free by the end of the year, just 15 months.

    The “small victories” impacts BOTH spouses which sets up hope and faith that this time will work, with hope most people are willing to make more sacrifices to meet the goal. With the sacrifices comes extra income from second and third jobs, as well as more frugal living. This is another key aspect of the debt snowball.

    I know a few marathoners and they don’t run from just their head, same with bicyclists that can finish a century (100 miles). Being committed from the heart first is what makes the difference when times are tough.

  462. Anonymous

    I read a post where someone was asking if Dave FPU was worth the money.
    My opinion is that if you are broke and deeply in debt, you can’t afford anything. Dave’s motivation is entertaining and helpfull. The book ” The Total Money Makeover ” is the best start. He has radio shows every week day and is on Fox Business News Channel, you can listen from your computer. Listen/watch and just be so tight about spending money on anything but debt until you can breathe. Once you actually have a thousand dollars in cash for baby emergancy fund ( which looks impossible in the beginning )Something MAGIC happens. You relize in your GUT that there is hope.
    I had been cashing checks at the grocery store and depositing the cash to keep from bouncing checks. What a Nightmare.I set up a coffee can. I skipped lunch and put the 3 bucks in, skipped lotto and the 6 bucks a week went in. Change, every extra dime went to the can. I took a stack of books to Half Price books and sold them. I sold all the clothes I couldn’t wear anymore. As soon as there was a hundred I got the $100.00 bill. and kept on. It took 3 months to get $500.00.That was a turning point. We had not had a hhundred dollars after bills in years. If we could do that we could do anything.
    What could we buy with that? All the stuff we had could be replaced once we got the payments gone. When I mowed my lawn I mowed my nieghbor’s too. I didn’t make much but it was more than zero, add it to the can.
    We didn’t even have a VCR anymore why did we need all the tapes.
    Our whole life Dynamic changed. We eat better than we had in years. I was cooking instead of fast food.I’m sorry fabric softener is optional, or you can go online and get free samples.
    When were able to buy big quantities of toilet paper, laundry soap, etc we were cutting costs.
    The BIGGEST thing is to spend your money ” ON Paper ” ” On Purpose ” before it gets there.
    Look at the BIG Picture instead of the one paycheck at a time.Put on paper the next 3 months.
    90 DAYS. Don’t buy anything but NEEDS. Min. on everything, EVERY DIME goes to the Can ( The Emergancy Fund )
    We couldn’t save $1000.00, but we could save $1.00 a thousand times.
    As Dave says ” Grow Up ” No you don’t deserve unless you can pay for it. ” It’s Your Fault ”
    Buy Nothing for 90 days that isn’t on the paper. No candy bar, or Coke. ( I have a case of water for $3.99 )
    Food first ( Eat to fight another day )
    Utilities ( keep your lights on )
    Transportation ( get to work )
    Rent or House payment.
    Credit cards don’t get a dime until you have those things. Don’t answer the phone or just cut it off. We’ll pay them but in order of priority.
    Get a grip. Get prospective.
    This is new beginning.
    Sleep well tonight because now there’s HOPE.
    Keep doing what you’ve been doing and you’ll get the same results everytime. If you need a change. CHANGE!
    The Can is the first step.( You’ll even surprise yourself. )

  463. Anonymous

    Here are my two bits about this subject. I am up to my eyeballs in debt and looking for a plan out of debt. I finally came to my senses, that what ever I was doing was not working. So here I am on the internet seeking info from intelligent people and I have found most of you here. Thank you for great input I now feel like I can make an educated decision on what plan to follow. For the ones worried that Dave Ramsey is making a profit for your debt stupidity than you should go to the public Library and check his book Total Money Make Over for free. It did however take two months to get the book in hand so that I could read it. I had seen his FPU web site and wondered if it was worth the money or if it was another load of worthless info on how the rich become rich or something like that. Me I don’t care to be rich just out of debt for the rest of my life and if the not worrying about money is part of that then I am in.
    Thanks to you all

  464. Anonymous

    I support the Dave Ramsey method completely. I used the same process, (pay the smallest debt first then apply that payment money to the next smallest debt) before I ever heard of Dave Ramsey. I paid off EVERY DEBT. that I owed, including my house, and I know the method works. The problem of to much debt is a product of ‘human nature’. We buy it because we want it, not because we can afford it. Then we pay interest to someone to ‘let us have it now’. This issue is a problem for people of all income, and educational levels. We create grand schemes, and excuses to justify our purchases knowing all along that we do not need, and either cannot afford or should not be buying at this time. If we were as smart as we claim, we would have done as Dave says, paid cash only. You can’t fix stupidity with more stupidity.

  465. Anonymous

    It is possible for each of you to be correct depending upon the type of person.

    Although, if math rules your money behavior, you’re not likely to be in debt up to your eye balls. Your should have been able to determine the size of the hole you dug before you dug it. You should have known better. 🙂 Working in the positive numbers with savings works better than in the negative area.

    For those that don’t know better and are following the Jones(ego) and just find themselves there, I figure Dave Ramsey’s “Money Snowball” example works better than any that I know, since once the small loan is paid off, you will have more money (larger hammer)to tackles the next loan, which builds confidence (mostly emotional) and speed.

    I’m “mostly” a math person, although it helps to have people like Dave Ramsey around to keep the emotion/ego in control when math fails. 🙂

    I’m just good enough at math to know that most pay about three(3) times the amount of the morgage to a bank before they own their house. Why do we do that?

    As for grammer, don’t check mine.


    PS – I figure Dave is worth talking about since what he recommends works for those that stay with it and it complexes those that seem to know better.

  466. Anonymous

    Dave wants people to see success early on. He isn’t going for max gain but for a plan people can see results.
    If I put you on a diet and said you can either loose 47 pounds over 12 months or 50 over 11 months, if you choose the 50 you won’t see results for 4 months. If you choose the 47 you will see results in 1 month. I think most folks would choose the 47 pounds so the know they are getting something accomplished.

  467. Anonymous

    I’m for the Ramsey way. The idea of paying off debt from smallest to largest, gives us a pat on the back. As the debts begin to fall, we become more convinced that we can become debt free – and we become more motivated to continue on our debt free journey. Finally, who cares about interest rates if $1000 a month (or more) is going to pay off a student loan – the interest then becomes a non-issue.

  468. Anonymous

    You are right and you are wrong.

    You are right in saying that you are paying more if you do not pay off the largest interest rate first.

    You are wrong in the fact that people need an emotional payoff to keep motivated. That is why Dave Ramsey teaches that method.

    I hope that shed some light on it. I’m not trying to start a flame war, I just wanted to add my two cents. Thank you for that!

  469. Anonymous

    No matter how much money you make, if you spend it all, you’re still broke.
    You can’t BORROW your way out of debt.You just move the debt from one place to another. The only way to pay off debt is to pay off debt. Payments are what eats away at your biggest wealth building tool ” Your Income ”
    Making money with other people’s money, makes money for other people. Money IS “The Product ” not the Widget that wields it. Let it be MY MONEY that makes money.
    With no payments, I get a paycheck, Pay Taxes, Insurance, utilities, and eat. The rest of the money is MINE. to save, spend, give, and turn widgets of some sort to profit.
    I don’t need a credit card for emergencies, I have cash. ( I know I’ll have an emergancy.We all do. )I’m ready.
    I paid ahead, instead of behind.
    It’s not YOUR Flat screen TV, if you still make payments. It’s whoever put the money up and charged you the fees. You couldn’t sell it and give the money back. You can’t get that much for it after Fees. They will come get it if you quit paying. IT”S NOT YOURS!
    If you want to dig your way out of a hole, QUIT DIGGING. If you’re neck deep in payments. Start Climbing instead of bringing in more dirt.
    If you can’t pay cash, you can’t have it. If you NEED IT. Sell off some of the CRAP you didn’t need and bought anyway.
    Food is always first. Eat to fight another day. ( that doesn’t mean $25.00 for pizza.) ( it also doesn’t mean Ramen soup that is full of health risking chemicals and sodium )
    GROW UP, Be Smart. Live Long and Prosper.

  470. Anonymous

    Don’t forget, that in addition to the “motivational factor”, paying off the smallest debt first is more likely to reduce or prevent you from going into further debt! If you are cash-strapped, then freeing up cash as fast as possible is not only motivating, it gives one the ability to save for unexpected expenses AND if something changes in one’s income – you could just go back to paying the minimum payments which are now smaller (2 instead of 3 payments…). Try to remember how you got all that debt in the first place – spending more than you had!

  471. Anonymous

    David- Your commented “I will remember this call and make as many posts as I can regarding your behavior.”
    This comment suggests that you already had a bad expectation when you contacted them, so it looks like you found exactly what you where looking for.

    When you go out looking for bad things you will usually find bad things. Doesn’t matter what company you contact.

    Google would probably help you find the information you are looking for, all US laws are available online for review on the appropriate .gov websites. I would browse these sites or search Google with your specific inquiry.

  472. Anonymous

    Upon calling Mr Ramsey’s multi-million dollar organization, I spoke with a person named Christy who was very very unhelpful and only seemed to want to sell me a book or a program. All I wanted was information on charge card laws. A web site maybe. The lady gave me an interruptive speech and prepared to hang up on me. At which point I said, ”so you aren’t going to give me any information. I will remember this call and make as many posts as I can regarding your behavior.”

  473. Anonymous

    Nickel, I agree with you in Post 190 – it’s about personal responsibility. We have been living the debt free lifestyle (except for mortgage, which will be paid off early) for years because we lived on less than we made, a key tenet in Dave’s teachings.

    We also have and use credit cards for convenience (paid off every month), and also have the afore-mentioned emergency fund in case, as Dave put’s it, “Mr. Murphy and his 3 cousins move in with you”.

    I am starting finance counseling ministry at our church, primarily targeted towards families in crisis (death, divorce, etc.) and from my experience in these situations I can tell you that it is meaningless to talk about math until the behavioral side of personal finance is dealt with. Once the behavioral side of the issue is under control, i.e. living on less than one makes, then optimizing the math side of the issue can cause you to actually “win with money”.

    I listen to Dave for entertainment value, and occasionally will pick up a new idea. His “tough love” approach is exactly what most of the callers need to address the behavioral issues around spending, saving, and personal finance.

  474. Yeah, the stupidity of “automatic” plan is actually what first inspired this article. The other approaches (high interest first or Ramsey debt snowball) both actually have their advantages. The Bach method sounds like it was kind of made up at random.

  475. Anonymous

    ok i hope i did it right. considering the 0% for 3 months in my last post

    High interest first: 21 months; $1483 int
    Snowball: 22 months; $1565 int
    Automatic: 22 months; $1652 int

    automaic makes no sence, any way i look at it.
    and the extra $82 that i pay doing the snowball over high rate, is well worth it to get on a plan that i am more likely to stick too and save me even more than i would if fell off the wagon a time or two!

  476. Anonymous

    Beans and Rice; It’s not a meal, IT’S a LYFESTYLE.
    Take the avg. Car loan, $502.00 a month. Invest that $500.00 a month in a good mutual fund from age 20 to 60 you would have 6.4 million dollars.Dave says ” HOPE YOU LIKE THE CAR!”
    It’s not as much about getting out of debt as it is living on your paycheck with NO PAYMENTS.
    I get my paycheck, Pay Taxes, Insurance, and utlities.Period.
    The rest is mine to save, give, and spend.
    It’s an attitude. ” The borrower is slave to the lender.” ( Proverbs)
    With cash we are less likely to spend. If you budgeted $100.00 for groceries and you have no card, guess what Walmart won’t let you slide for the $5.07 you go over when paying in cash.
    It’s a plan that requires you spend your money on paper, on purpose, before the money gets here.
    “Every dollar has a name. and you tell your money what to do instead of wondering where it went.”
    After you have enough for a small emergency, pay min. on EVERYTHING. Every other DIME goes to accumulated debt. Dave does smallest total to largest as the momentum builds more quickly.
    It’s the momentum that gets the Snowball rolling faster.
    It’s more than that. It’s the attack attitude that helps us find deals, ( I try not to pay full price for anyhing. )I’m a much more frugal shopper. If I wait for that I’ll pay less. Often if I flash cash I get a better price.
    I learned how unimportant my STUFF was, and I was able to part with lots of things for cash. I got side jobs, doing this and that, here and there. Not much money at a time but it added up.
    I NEEDED to get to the point where I didn’t owe anyone. PERIOD. My PAYCHECK was my OWN.
    With NO PAYMENTS, How much money would you have, to save, spend, and give.
    DRAW a LINE in the SAND. I will not borrow ever again. {Pay off what you already borrowed ) and BE FREE. Save enough Money that it earns more than you do at your job.
    Credit Card Rewards can’t buy that FREEDOM.
    Credit Score = Debt Score. you don’t want one.
    When you get in the cash world, life changes.
    “Tell your money what to do, intead of wondering where it went.”Pay ahead instead of getting behind.
    Pay for a great meal with credit, it’s down the crapper before you pay for it. I’m not paying this month for what I did last month. I’m paying as I go and investing the rest.
    Pay forward, doesn’t that make sense.

  477. Anonymous

    one more thing!
    i can understand the high rate low rate approach, and i can understand DR’s psycological approach.

    i’ve not read much about Bach’s approach.. but if its not the best mathmaticaly, and its not psycologial… then whats the point of doing it his way? pay down the low value first… if you are going to do any math (even if it is only division) you may as well be smart and pay the high rate first (you dont even have to do math, just look at the accts) , really if you are going to be paying down 600mo on a Car Loan ($5,000 @ 8%, minimum payment = $275/month) a MasterCard ($10,000 @ 19%, minimum payment = $250/month), and a Visa ($7,500 @ 13%, minimum payment = $150/month)and paying them off in that order to leave the middle balance middle rate hanging around you are not getting that psycological boost (well maybe you do innitially in this example), but you may as well go all the way with the math! seriously if you are going to do any math at all, just pay off the high rate first…

    and if math is not the point or just too difficult, then DR makes getting out of dept really easy

    like i said i guess i am one of the lucky ones that the “snowball” and the high rate low rate came out to be the same equation only having a mastercard at $3000 @ 9% (witch will be paid off in FEB), and car loan 24000 @ 6.49%. even though I am going with DR’s baby steps

    so Bach huh? i dont get it, sounds like he is just wanting to get noticed, so he put his theory right there in the middle. i’ll have to read more on him.

    in my case would he end up costing me more? because my min payment on my cc is the intrest plus 1% (about $53)3000/53 = 56.6, and min payment on car is 430. 24000/430= 55.8 making the car the lower value. meaning that i would pay off my car first carrying the 3000 balance on my cc for like 2 yrs at a higher rate… i cant find the sence in that. unless at some point you switch it up with some sort of calculation

    someone please help me out here,
    if i am paying an EXTRA $900 mo on debt, what would the totals be?

    Snowball: 22 months; $1565 int
    High interest first: 22 months; $1565 int
    Automatic: 22 months; $1652 int

    these are approximate totals i used an online calculator…please correct me if its wrong!!

    and if for example i had 0% intro rate thru feb- in witch it would be paid off,should they pay extra on the car until the 0% is over? how does that work i would imagine you switch it up when the intro rate is over. but talk about headache !! geeze!

  478. Anonymous

    oh boy! i guess i started another topic here lol!

    Nickel i know you weren’t trying to “bash” DR.

    for those of you who are reading each post..(like me) can understand that nickel is just pointing out the facts! never said dont do it this way or that way, just giving you numbers! as long as people are getting out of debt thats all that matters!

    i was just wondering why someone would use credit when they dont need to. and my question was answered! thanks nickel! I’m one who deff needs to remove that temptation! (well its more because of my hubby)

    oh and check out the other post on ‘Dave Ramsey is Good at Psychology’ before you post here! we all know what Dave is good at!

  479. Anonymous

    While this differers from person to person statistically we spend more when using credit cards than when paying with cash.

    According to the Wall Street Journal reviewing a fast food study, comparing fast food purchased made with Cash VS Plastic they found:

    “A Visa U.S.A. study released this month showed that the average fast-food transaction with credit cards was 20% to 30% higher than cash. Subway says the average credit transaction has doubled to $9 since the chain started to roll out cards three years ago.”

    Personally I’m a bargain hunter, so I use Cash as a tool to get me better deals. One of my most recent purchases was a Camera purchased at Best Buy, I flashed $200 at the clerk and offered it for a $250 Camera.
    He looked at me like I was crazy and told me he can’t do that. But he was flustered and told me he could give me 20% off. I smiled and said, “Looks like that’s $200, we got a deal.” I got a brand new Sony DSC-W80 for $200 and all I had to do is ask.

    I would have never gotten that deal if I used Credit.

    I’m not really shy so I use this strategy any time I can, I would say 6 out of 10 times I get 10-20% off or some other incentive. The other 4 times people tell me “No”. (Not all stores are flexible, but do it for a while and you will find the stores that are)

    All I had to do is ask, takes me less than 30 seconds usually. So I can guarantee you I spend less with Cash than Credit.

  480. Something that I didn’t mention before, and which plays heavily in this dicussion, is that we keep as little money as possible in our local checking account, preferring to keep the bulk of our cash on hand in a high yield savings account. If we were to (micro)manage our daily finances as you suggest, we’d either have to greatly increase the headache factor, or we’d have to give up a substantial amount of interest on our savings.

    While this is certainly do-able, it’s both inconvenient and costly. Given that we don’t have a problem keeping our spending under control, why should we intentionally inconvenience ourselves (and cost ourselves money) just because some radio personality says that we should? As far as I’m concerned, that would be fiscally irresponsible.

    Note that I’m not saying that everyone should do this. But to steal your analogy, if we don’t have a “boo boo,” then why should we break out the Band-Aid and Neosporin?

    As for credit card rewards, we don’t change our spending habits in return for the rewards. We just go through spending and saving as we otherwise would. But consider this… Just yesterday we bought a new washer and dryer. We have the money on hand, and could’ve easily walked in and paid cash. But we didn’t. Instead, we ran the transaction through our American Express card. Why? Because they double the manufacturer’s warranty. Should we have missed out on this just because some dude with a radio show says that credit is evil? No.

    Anyway, thanks for stopping by!

    (And I’m impressed that you read all of the comments as carefully as you did!)

  481. Anonymous

    IT WAS IN POST #96
    “As far as credit cards go, I’ve never had a problem with them. In fact, I think it’s probably more likely that I’d lose track of a transaction (or two or three) with a debit card and end up with an overdraft fee.”

    “Ramsey’s system is very rigid and (in my opinion) doesn’t leave room for personal responsibility or any sort maturity. I understand why he does this — after all, if you were responsible/mature with money, you wouldn’t be in debt — but…”






  482. Sarah, where did I say that we can’t handle our bank accounts and are afraid we’ll overdraw? We use credit cards as a matter of convenience, and we also earn a good bit in the way of rewards. We never carry a balance, and I view milking credit card companies for rewards as something of a game.

    We don’t have trouble controlling our spending even with a ton of credit at our disposal, so it’s not an issue for us. But I understand that some do have problems with this, and in such cases they’d do well to avoid the temptation.

    Ramsey’s system is very rigid and (in my opinion) doesn’t leave room for personal responsibility or any sort maturity. I understand why he does this — after all, if you were responsible/mature with money, you wouldn’t be in debt — but…

    There’s nothing inherently evil about credit. Like I said above, it’s just a tool, and it can be used well or it can be used poorly… Kinda like a hammer that can be used to either drive nails or break windows.

  483. Anonymous

    nickel, this goes off to the side a little from the original post but you mentioned back there thet you still use a credit card… another part of Daves teachings is to get out of debt and never use credit again.. because in the plan you have savings to handle emergencies and gain the diceplin to never buy anything if you dont have the cash right then… so what would be the point if you have cash to use a cc? even if you do pay it off each month, its still debt. I guess if you are trying to build credt… but there again if you are never going to use credit again.. you dont have to worry about building credit, and even in the plan as you are attacking your debt you are rebuilding your credit (to an extent). i guess my question is to you, if you cant handle your bank account afraid that you may over draw, how do you expect people to listen to you? i know it was not the main topic. mathmatically you are absolutly right, but its a TOTAL MONEY MAKEOVER not just paying off debt!! i really did enjoy reading the posts! you are a smart guy (except for the cc thing) and i guess i am one of the lucky ones that the “snowball” and the “high rate to low rate” came out to be the same equation only having a mastercard at $3000 @ 9% (witch will be paid off by FEB), and car loan 24000 @ 6%. please respond i am very curious about your reason for still using a credit card!

    please excuse my spelling im not too bad at math but spelling deff is not my thing!!

  484. Anonymous

    And those saying I pay my credit card off every month think “I’m beating a Billion Dollar industry at their own game, I’m so smart” You have got to be kidding yourself… Just wait till you have an emergency and don’t have the money to pay it off that month. Or the Card company doesn’t post your payment properly and charges you a $40 late fee. The time and money you spend fixing it will make the benefits look silly. (ANY time you borrow you increase RISK)

    With a Debit card I get all the same protection and convenience, but I NEVER accidentally spend more than I have and get myself into debt.

    Credit Card companies are crooked, they purposely don’t post payments on time, they adjust your interest rate at will, without notifying you. Personally I don’t do business with people like that, I don’t agree with their practices.

    Now that I have closed all my CC accounts I’m finally FREE! I don’t have to worry about sending in a payment, I don’t have to worry about how much I charged, I don’t have to worry about them changing their policy without notifying me. I don’t have to worry PERIOD.
    Now that’s what I call Financial Peace.

  485. Anonymous

    The reason Dave recommends paying off the lowest balance first is because Personal Finance is 80% Behavior and only 20% Head Knowledge. If we where doing math to begin with we wouldn’t be in debt.

    When attacking debt people need a quick victory so they stick with the plan, paying off the lowest balance first will give you this victory and make you motivated to stick with it.

    All you concerned with the “Math” didn’t do any “Math” when you got into debt. If you did the math you wouldn’t have borrowed to begin with. So it’s not about the Math, it’s about Behavior.

  486. Anonymous

    It floors me that people miss the key compenent of Ramsey’s philosophy– its about behavior and motivation.

    If you make people do the high interest first method most people will NOT do it- the Ramsey snowball is the best way to communicate and keep track of something very very tough to do.

  487. Hi Al,

    Thanks for your comment. The short answer is “No.” At worst, paying off the highest interest rate first ties the Ramsey method (this happens when the interest rates and balances are in reverse order, such that the lowest balance has the highest rate). In all other scenarios, paying off the highest interest rate first wins (albeit not by very much in some cases).

    Cheers, nickel

  488. Anonymous

    I just found this thread by accident. As someone without much debt currently, I can only comment on the feeling of hope that Dave Ramsey gives daily (although some of it can begin to sound hokey).
    The point as has been stated here of paying off small debts first is the sense of accomplishment gained.
    I’m not great with math but another side of the argument for paying off small debt at any interst rate is that once the small debt is gone so is the interest payment from that debt.
    If you were to concentrate on high interest debt first, would the savings be lost since the smaller debts with similar interest rates (1-5% off the highest) be adding up and increasing debt?

  489. Anonymous

    The point of paying off small debts first is not that it will perhaps be the best financial way to do it, but it gets your motivation up to keep working towards eliminating debt.

  490. Anonymous

    The reason Dave suggests paying off the smallest balance is to provide people with a sense of victory. If you pay a small amount on a large debt, people tend to get discouraged, and most will stop, and go back to charging. while financially I can understand paying off the high interest, the success of paying of the smallest balance has long term rewards. When people see success, even if it is small they get excited. Worked wonders for me and a few of my friends that followed this advice. Just my 2 cents

  491. Anonymous

    Wow, lots of Dave Ramsey love out there. I agree with Nickel, I like the less money approach. Granted, I have been very good / lucky with my money and haven’t been in many of the situations that he helps people out of. So I do understand why he promotes that. But I usually look at the math when I make a decision. I also disagree with Dave Ramsey on several other issues, such as not using credit cards. We charge $4,000 a month and pay it off in full every month and enjoy lots of rewards by doing that.

    I also wanted to say that I just found this blog and love it.

  492. Anonymous

    Have never heard of Dave Ramsey in the U.K. until reading an ebay member’s advertisement where the seller described themselves adding they were on his Financial Plan. It’s been fascinating to read ALL your articles. In the past year there’s been some half-hour “budget” programmes usually focusing on one family situations at a time. I assume Dave Ramsey’s programmes are of the evangelical variety which the British aren’t used to, but power to his elbow and all of you for bringing your thoughts into the open. A trouble shared and all that…

    p.s. Has the B.B.C. (British Broadcasting Company financed by Licence money from every household owning a T.V. set in Britain) been approached to broadcast Dave Ramsey to the Brits? Whoops, silly me, they’re currently having severe money problems themselves!

  493. Tom: You’ve apparently sipped the Ramsey Kool-Aid to the point that you can’t even read straight. I understand the debt snowball perfectly, and the math is done properly. When one debt is paid off, that payment is added to the amount that has been going to the next debt in line (and so on down the line). It’s not a complex concept, and the math isn’t complex either.

    Like it or not, it’s a mathematical truism that the worst the “highest interest first” approach can ever do is to tie Ramsey’s method (this happens when the highest interest is also the lowest balance, the second highest interest rate has the second lowest balance, etc.). What I’ve listed above is simply an illustrative example, but it’s mathematically impossible for Ramsey’s method to outperform the highest interest first (in fact, Dave himself admits this).

    Of course, as I pointed out in the article (which you clearly didn’t read carefully), and as dozens and dozens of respondents have pointed out on their own, this ignores the psychological advantages of Ramsey’s approach which very well might tip the scales in favor of the Debt Snowball – after all, quitting midway through the process is the worst approach of all.

  494. Anonymous

    The boy doesn’t understand the “debt snowball” concept. In his example he never adds the 275 dollars from the paid off car loan and the 150 dollars from the paid off VISA. Do the math then. Dave wins!!!

  495. Anonymous

    Just came across this and boy there are some long-winded answers. I’ll be brief. First of all if you were good with math and well motivated you wouldn’t be in debt for $31,539.91 in the first place. Thus it’s same to assume that the person in your senario needs a psycological boost to jump-start and continue their motivation which is Dave Ramsey’s point.

    Secondly, while the high interest approach makes more sense mathmatically it is taking place in a vacuum which makes it unrealistic. In this approach nothing is paid off in full for 20 months as opposed to 9 months in Ramsey’s approach. A lot can happen in 20 months to derail debt repayment! Ramsey’s approach is not simply psychology, it’s reality. A debt paid off quickly is gone forever.

  496. Anonymous


    I too would like to see a clip. FoxBiz is on another tier and I’m not about to go spending more money just for a 1 hour show. Fox Biz hasn’t event posted his video in his section.

    And yes, when you are busy you do save money. I have had to take up reading books to occupy my time and not spend money. I sometimes feel like I’m back in school studying for an exam.

  497. Anonymous

    Slight change of subject:

    While promoting the Fox Business Channel, I am pretty sure Dave had mentioned he would make the debut show available for those that do not have access.

    To my knowlege, there is no broadcast Service here in Colordao Springs to view this news channel. I have not been able to find any video clips.

    To add to previous comments:

    It is behavior, and not money. Anyone can get a job, and add income, not spending is harder. Maybe we all have too much free time. When your busy, you save money. (anyone agree?)

  498. Ryan: Speaking of dead horses, I acknowledged the psychological benefits right there in my article, and about 150 other people have chimed in to say the same thing that you just did.

  499. Anonymous

    Oh look, a dead horse…

    He’s addressed this issue time and again on his show. You’re exactly right mathematically, however the callers on his show and the people who purchase his program have problems related to SPENDING HABITS! Thus the idea is to give the borrower small victories as they conquer each debt, giving them a psychological reward. Yes, they’re spending more money, but it’s the achievement that’s important. If they tried to tackle the big, high interest debts first, they’d be in over their head and would eventually give up. try listening to the show once in a while…

  500. Anonymous

    The problem with the article is that it only has 3 debts. If I had 3 debts I could pay off the car in 3 months. Then, put that effort into the VISA and be debt free in 9 months.
    You can do anything you want, if you try. But, you can’t come up with a formula for desire. And this is what makes us human, what makes us free and what builds our character!
    I can see those, here, that understand that and those who don’t.


  501. Anonymous

    Dave says : It’s not about MATH.” ” If we were doing MATH we wouldn’t be in the MESS ”
    Finance is 80% behavior. When we pay off the little debt first we get emotional. and get EXCITED.
    The Dave Plan is about changing the way we veiw MONEY. The way we spend MONEY.
    Beans and Rice is not a meal, It’s a lifestyle.
    The persentage of interest makes little differance if you get intense and eliminate all of the debt quickly. The $300.00 extra you pay towards your smallest debt gets bigger not because of eliminated small debt but the excitement caused by seeing progress of anykind.
    I was in serious trouble, but when I got to scratch the first one off I had hope. When I scratched off the third one I got busy. I found small ways to make money. I dollared it to death. It started happening quickly. Not because of MATH, because I got excited. It’s not about math it’s about getting focused.Eliminating a few small totals gets under your skin. It becomes a lifestyle.It changes everything.
    The armband reminded me not impulse buy. The stupid sayings that Dave says over and over become a mantra. If you can’t pay cash you can’t afford it. Debt is dumb cash is king. You don’t need credit if you have cash.The borrower is slave to the lender. Live on less than you make.
    Dave is there for us on Radio, tapes, books.
    ” If you’re broke IT”S YOUR FAULT ”
    ” You’re not a VICTIM ” unless ou choose to be.
    It’s not about MONEY. It’s about attitude.
    He changes that for millions.
    One debt over another isn’t the issue. DEBT is the issue.
    The Lesson is not how to get out of DEBT. It’s about living DEBT FREE.
    When Dave hits the TV on Mon Oct. 15th.on The New Fox News Channel ( FNC ) you’ll see his following is more than just about MONEY. IT’S ABOUT LIFESTYLE. Doing the right thing.
    ” Tell your money where to go or wonder where it went. ”
    It’s not about money it’s about behavior.
    If your plan can change behavior then kudos to you. Dave is doing it.
    P.S. Follow up your prospective with tools we can use. Sayings we can rememeber,tapes I can use to remind me what the goal is, stickers for my tool box that proclaim my attitude change.Books that I get at a deal to pass out to others that I hope good things for.
    I have a PLAN. Dave helped lay it out. I have quotes and support everystep of the way.

  502. Anonymous

    Seem to be some great comments already, so the only thing I’ll add about Dave Ramsey’s plan is that he is often talking to married couples — where one person may be motivated by math, but this plan is one designed for both the “nerds” and the “free-spenders” (and you always have both in a relationship).

  503. Anonymous

    A payoff plan is much like a diet. And paying high interest debts first is much like adopting a strict, no frills meal plan. It is the smart way to go, and those that are disciplined enough to adhere to them, see quicker results and better health. But many people need a plan that allows them to shuffle points around so they can eat a cheeseburger once in a while. It might take a little longer, and may not be as nutritionally sound, but they are likely to stick with it. And really, that is all that matters.

    Most of us know the smart thing to do. But that doesn’t stop us from over eating, under exercising, and over spending. I say a person should do what best suits them. Whether it is money, health, or education, I’m sure we all have areas in life that require different levels of motivation.

    We shouldn’t fault people for what motivates them. We should congratulate them for sticking with it. And Dave is helping people stick with it.

  504. Anonymous

    Well, I guess I am about the only person on the planet who hasn’t posted here, so I’ll take a stab at it.

    Yep, half of you are right. The math doesn’t work on paper. And, yep, the other half of you are right, too. It is about behavior. But I think the latter of the two is more important. Let me preach on.

    After listening to Dave for a while, I had an epiphnay. I came home and told my wife I was selling my truck. My beautiful, PAID FOR, low mileage, sweet F150 4X4. She thought I had went crazy until I explained the deal: I would trade for a slightly older model, take the cash we receive from the sell and pay her car off. She then warmed up to the idea.
    It’s that passion, that drive, that desire to “come to your senses”, as the prodigal son did, that so many of us are missing. Now my wife is bascially on board with the program and we are teaching it to our youth at church. We are using the Larry Burkett method, only because there are workbooks readily available for the 15-18 year olds.

    Is Dave Ramsey too simplistic? That depends. Some of us need simplicity. I hear Dave repeating the same thing over and over and I think, “When are these people going to get it?”. Then I realize they are people like me, maybe as thick-headed as me. It takes a while. Those that don’t need the simplistic approach already have their money mapped out on a spreadsheet (nothing against spreadsheets..I like them, too). It just depends on where you are emotionally.

    Can you charge on credit every single month and pay it off every single month? Maybe, but that doesn’t make it a good idea. Cash speaks volumes for BOTH parties when purchasing consumer goods. Cash will allow the store manager to cut you a deal, and YOU will feel a twinge as you see those hundred dollar bills leave your possession. That makes you think about about needs vs. wants.

    Just my two cents worth.

  505. Anonymous

    Dave Ramsey clearly says it is NOT ABOUT THE MATH, it is about the emotion. People who find themselves in debt are not having the “math” work for them.

    But I suspect the math may actually come out okay in the end if the emotional victories of the snowball create an intesity that makes the person ACTUALLY pay of the debts.

    Now, why not write an article about obese people not understanding the “math” of calories in versus calories out.

    These are human beings we are talking about, not emotionless calculators.

  506. Anonymous

    Thanks, Denton, and a great point by you: reducing the number of creditors earlier would make debt management easier and more efficient.

    I wonder if having a few “paid in full” entries on your credit report would increase your FICO score?

  507. Anonymous

    Great point Paul G! That’s one I’ve mentioned before but haven’t seen on this thread yet.

    “Smallest Debt First” free’s up the most money the most quickly. Having extra cash on hand allows you to pay more towards the snowball OR it can give you breathing room if you have minor unexpected expenses.

    Additionally, by reducing the number of creditors, you have more negotiating power and easier debt management. It’s easier to keep track of bills (read: no late fees) when there’s fewer of them every month. Plus, if you’re behind, it’s easier to negotiate with 2 or 3 creditors than 10.

  508. Anonymous

    Many people have mentioned the emotional benefit of Ramsey’s “debt snowball”. While that matters, the reason I use and recommend the “smallest balance first” approach is risk reduction through earlier financial freedom.

    In the real world, your available income for debt reduction isn’t constant. Your car or furnace breaks down or you have to take a child to the emergency room. If you have no wiggle room in your monthly budget, one of these unexpected and necessary expenses can push you into the financial emergency room.

    Paying off the smallest balance first takes you the amount of that monthly payment farther away from the edge of financial crisis.

    It is theoretically possible that the “highest interest first” approach could leave you with the same monthly debt load right up until your debt is paid off.

    “Smallest balance first” is the fastest way for someone to start backing their necks out of the noose.

  509. Anonymous

    Dave’s point is that is that it isn’t about the math. Everybody knows the math of it but it didn’t keep people from doing stupid things with their money or money they borrowed. It takes emotion to really knock it out and by seeing some smaller victories it helps you to achieve the bigger victories.

    No one is disputing the math and even Dave says that the math of the debt problem bothers him but it’s the emotion in the battle that allows a person to work harder and get free from the debt monster.

  510. Anonymous

    Dave admits that this is not the FASTEST way mathematically to get rid of debt. But, if we were strong in math and will, debt would not be a problem for us, would it? What Dave is concentrating on in his approach is encouragement. Seeing major progress being made, such as the elimination of a debt to a creditor, is an incredible motivator. When this happens, people tend to come up with “extra” money they normally wouldn’t put towards debt, just because they become more excited about seeing progress. What you failed to touch on in your analysis is that the snowball is an emotional one. If you can pay bills and feel excited about it, you’re more likely to pay things down faster and less likely to backslide. Dave understands the importance of motivation, and that paying off a debt with the highest balance may make sense mathematically, but it doesn’t make sense emotionally. One less bill to look after each month does wonders, even if in reality you are still paying out the same amount.