Book review: “The Total Money Makeover,” by Dave Ramsey
June 25th, 2007
From my perspective, it seems that financial guru Dave Ramsey has an almost cult-like following among a lot of people. I’ve known about Ramsey for a long time, but it wasn’t until a few weeks ago on a trip to Louisiana that I actually had a chance to listen to his radio program.
A couple of weeks ago on my trip to San Antonio, I was able to listen to some of his program again.
From my limited exposure to Ramsey, I considered his financial advice to be pretty un-revolutionary. That’s not a knock on him, just an observation that he’s not promoting any concepts that blew me away. He preaches the wisdom of getting out of debt, of building an emergency fund, of preparing for retirement, etc. – pretty much, the kind of stuff that anyone ought to know about. Of course, from listening to some of the callers on his radio program, it became apparent that there are a lot of clueless people when it comes to financial matters.
“Hi Dave, do I have enough money to buy a new motorcycle? I’m bringing home $22,000 a year and have eight kids.”
I never cease to be amazed at how people insist in living beyond their means. They rack up thousands of dollars in credit card debt, drive fancy cars, buy houses they can’t afford – and wonder why it is they are in such dire financial straits. Gee, I wonder.
This weekend, while I was visiting my parents, I read through Ramsey’s book, “The Total Money Makeover.” It’s pretty much a rehash of what he talks about on his radio program (so save your money on the book, listen to his show a couple of times, and you’ll get the gist of it).
There’s certainly some biblical wisdom here. He discusses the folly of pleasing men and “keeping up with the Joneses,” because the Joneses, most likely, are head over heels in debt. He talks about the importance of living modestly. He deals with some common myths that keep people in debt.
I fully agree with Ramsey when he talks about the importance of paying off debts. His strategy is to attack your smallest debts first, regardless of interest rates, so that you’ll feel a sense of accomplishment when you pay off one debt completely. You then move to the next smallest debt and follow that procedure until you’re debt free, except for your mortgage. Seems like a decent strategy to me.
But I do have a couple of issues with some of Ramsey’s advice. First off, Ramsey is not a fan of student loans, and in his financial advice he tells parents how to go about saving money for their kids’ college education (and even suggests that some parents might want to pay for Ph.D. programs for their children).
While I agree that it’s wise not to go hog-wild with student loans, I can’t support his idea of parents totally funding their kids’ college education. Let me explain why.
When I was a high school student, I knew that my mom and dad didn’t have the money to pay for my college education. Oh, they were able to help me out from time to time, but they didn’t have thousands of dollars in the bank with my name on it for college. And so, because I knew that I’d have to carry much of the load myself, I busted my tail big-time. I worked hard academically, I prepared for my ACT test, I did those kinds of things that help you get scholarships. God was kind, and allowed me to get a substantial scholarship to attend college. I also worked hard during college, usually holding several jobs at a time, and was able to graduate without a dime in student loans. And I was better off for it, because of the work I put in.
Would I have worked as hard in high school if I knew my parents were going to fund my entire college education? No way. Would I have worked as hard during college if my parents were funding my entire education? Probably not. In fact, though I don’t have any statistics to back it up, I’d guess that of the people who flunk out of college, a large number of them are from families where mom and dad are paying the entire bill.
I’m not saying that it’s always wrong for parents to pay for their kids’ college education if they have the resources to do it. If you have a responsible student and you want to help them out by paying for some of their education – by all means do so. I am saying it would be helpful to your kids in the long run if you required them to carry at least some of the load.
The second issue I have with Ramsey has to do with stewardship. To be fair, once someone has amassed some wealth, Ramsey does advocate giving money away. I don’t think he emphasizes philanthropy enough, but it is there.
Here’s what I take issue with, in a statement from the book: “Should anyone wear a $30,000 watch? Should anyone drive a brand-new $50,000 car? Should anyone live in a $700,000 home? Absolutely, they should. The problem with people is, they buy those things when they can’t afford them.”
Without getting into the issue of whether it’s OK to have those things mentioned (although I can’t for the life of me see how buying a $30,000 watch is anything but poor stewardship), let’s address this from the broader perspective.
Ramsey seems to be advocating that it’s OK to buy anything you want to, as long as you have the money to do so. I think that’s terrible stewardship, and I can’t find anything in the Bible suggesting that we’re free to spend our money however we’d like – even if we have a lot of it.
If God has blessed you with material wealth, you should use those resources wisely. You shouldn’t go out spending money on stuff just because you can. A video that Joe Thorn posted a couple of weeks ago has application here. I’d encourage you to watch it.
The overall impression I get from reading Ramsey’s book is that we should be trying to accumulate wealth so that we can live the kind of lifestyle we want to live. I’d suggest that a purer, more God-honoring motive in accumulating wealth is to use that money for God’s purposes, and not to satisfy our own selfish desires – like wearing a $30,000 watch.
As John Piper said in a sermon on the parable of the rich fool, found in Luke 12, “In other words, if a person finds his income rising and rising, and instead of funneling that increase into kingdom ministry he buys more and bigger things to increase his ease and security (like this rich man), then God will call that person a fool and take away his soul.”
Tim, great to hang out with you in San Antonio. I think that I agree with a lot of your assessment. One thing I came away with was that I did not think that he was hard enough on greed. Where I have appreciated Ramsey was that before I read his book, I did not understand how money really worked. So the principles in his book have made me a much better steward of the money that God has given me. Most of the advice that I needed was pretty common sense stuff, but the problem is that we don’t live in a culture that has much common sense and I had been drinking the water.
Dave Ramsey isn’t brilliant because he’s revolutionary in his thinking. At his own admission, he’s brillant in marketing “common sense”.
He’s certainly not perfect, but I do think he’s pretty sound both in what he teaches, and his approach to “allowing” people to spend their money.
True, at no point does Scripture say “If you have it, spend it”. But neither does Ramsey. He’s quite careful to talk about only spending money after other things (practices) are in place. Since he has a broader audience than just Christians, he does have a broader stance that he communicates as his official “advice”, but will frequently say things “from a Christian worldview” - which he associates himself to. He also believes that if you’ve worked hard enough to “earn” your money, you’re typically not quick to want to blow it on a ton of stupid stuff. That’s different than a single indulgence.
My criticism of Dave Ramsey is not in what he teaches. I think you might soften on your opinion of him after listening to him after some extended time, but that’s just my opinion. That said, my criticism of Dave is that he is quite acidic, sarcastic, and borderline harsh frequently. He can be quite compassionate to some, rightly kick the pants of others, but occasionally, I think the pattern of listening to his callers for so long has hardened him (only sometimes, mind you) to their situation and he’s unnecessarily harsh with them.
But that’s just the opinion of one who really needs his advice and is in no place to criticize his success.
Maybe you’re right, Jason. I certainly hope he’s not saying “if you have it, spend it,” but the quote in the book I referenced seems to be coming awfully close to that.
Alice and I were listening to him one day while driving. He ought to stick to financial advice. Twice he said, “Well, I don’t believe in divorce, but you need to get a divorce.” And neither of the situations were that clear cut. I guess some people trust strangers on the radio more than their friends. Of course, considering some of the people I’ve heard on his show and the good sense they’ve demonstrated so far, I wouldn’t trust their friends either
My wife and I read this book and, as you say, found the advice to be sound and really just ‘common sense’. However, I don’t know that I’d lable Ramsey’s approach to be a ‘Christian’ approach to finances. I think his techniques work well here in the prosperous West but cannot somehow see them working out as well for a brother or sister in less affluent parts of the globe. For example having 6 months’ living expenses sitting in savings would seem bizarre to one who lives hand to mouth as an underground pastor in China. All in all a good book but as Tim says, save your money and check him out on the web or on the radio, its not rocket science.
Look up Larry Burkett. This is the guy who taught Dave Ramsey what he knows. Ironically enough, Larry’s son never really heard what Larry was teaching and it took a lot of mistakes and Dave Ramsey to bring him back to his financial senses.
Crown Financial Ministries is a more biblically grounded study that deals more with concepts while Ramsey is more practical hands on. If you are going to read Ramsey, I would first go through the Crown study as it gives you the proper foundation and starts with the principle that the money you have is not yours but you are a steward of it.
j razz
I actually just picked up Ramsey’s book from the church library and am about to start reading it…I definitely don’t agree with all of his principles, but some are definitely biblical…
A word on student loans…although “debt” is often frowned upon…I think, if handled correctly, student loans are not horrible to have–because the interest rates are so low. I was one of those who also worked hard in HS and college..but still had to take out loans, but the Lord has provided and they are not a burden to pay-off.
Also…I’ve heard good recommendations for Crown Ministries as well.
The thing that I think set Dave Ramsey apart is his understanding of human behavior. Is it really wise to build your financial house debt free or never use a credit card? Technically, I would argue “no” but Ramsey understands the temptations of debt and why one should avoid it. The advice he gives is sound based on his experience with how people behave in real situations. You may be a part of the minority that can handle a credit card wisely but Ramsey will not gamble the future of his listeners on what a minority is able to do.
As someone who has student loans, let me gently debunk Susan’s claims. Student loans are a big part of our financial burden. And my wife and I are not alone. There have been several studies done that show many in our generation (20s to mid-30s) who are struggling because of educational loans, and those in their 30s who actually have the kind of jobs that allow them to pay the debt off quickly are only now paying them off. Unfortunately, most of us don’t have those kind of jobs, especially those of us in ministry. It will be a very long time for some of us before that debt is paid, and it is difficult for us to afford a home, reliable cars, or even to afford the medical bills of having children. As it is most of us are just getting by.
As someone who is actually in that experience, let me tell you student loans are not the way to go. Dave Ramsey is correct when he says that if we have not hit up all the grants and scholarships we can, we can’t afford the school.
Regarding student loans,I think some people get into trouble by spending a lot of money at a private college for a degree that isn’t going to increase their career prospects at all. Taking on a moderate amount of loans to earn a degree that will give you access to a career that pays well is a good investment. On the other hand, if your career choice is going to result in a lower income level (e.g. full-time ministry, nonprofit work, the arts), you should try to avoid taking on a lot of debt.
I think Joel and Stephen articulated what I glossed over. In no way is Ramsey the most Biblicaly-centered program or even most conservative. But he is a master in his understanding of how people REALLY act. He’s quite good (although prone to the errors in judgement I mentioned earlier) at discerning when someone isn’t “getting it”.
In fact, most of us DON’T get it, even though we’d all admit that it’s common sense. It’s just not that common any more.
I’m in the same boat with Stephen. I did/do have a ton of student loans. While I have a pretty healthy work ethic, the school I chose was WAY beyond my means in working/paying my way through. Ramsey would say that I should have picked a different, more financially feasible school. He would have been right, had I known of him at the time.
True enough, while some of us can “logically” believe that debt is a tool we can use, Ramsey is right when he states that he can’t find any Scripture to back up the idea of debt. In fact, all will call the borrower some derivative of “fool”.
Honestly, after 30+ years, I agree with that teetotaler position on debt. Unfortunately, it’ll take me a few years to not bear the scars.
…if your career choice is going to result in a lower income level (e.g. full-time ministry, nonprofit work, the arts), you should try to avoid taking on a lot of debt.
It is a shame though. If you go to a state school you can pretty much guarantee that you will not get a good education in biblical studies while going to an expensive private school you are afforded much more opportunity to learn exactly what you need to learn. There are some schools that understand this though and have a great model from what I can see. Such a school is College of the Ozarks in Southwest Missouri. I think thier model helps students to get the education they need without the debt that usually follows such an education.
j razz
I wonder if a private Christian school would ever tell anyone, “Sorry kid, but it looks like you can’t really afford to come to our school.” Instead, they seem to encourage even the poorest of students to spend money on an education that creates crushing debt that will take them years to recover. Is that really ethical?
Dave isn’t saying “If you got it, spend it however you like!” It’s like looking at a Picasso and picking out one brush stroke and saying “That stroke looks like wave, so this painting must be of a wave.” No. Read his other books. Listen to the show for a while. Go see him live. Attend FPU. Talk to people who know him personally. Step back and look at the entire package. Is it wrong for a person to own a $30k watch? If you think so, try to support it with Scripture. I don’t think you’ll be able to. Now surely, is it wise for everyone to do that? Absofreakinglutely not. But Dave’s talking about the top 0.01% of earners in the country with that line. If you’re making $5 million/year and you’re giving away over a million a year to your local church and other great causes and you want a $30k watch, please, by all means, go buy the thing. It’s ultimately small in comparison to where you’re spending the majority of your earthly treasure (Where your treasure is…). Could one not nitpick and argue that ordering pizza over cooking at home is poor stewardship? What about renting a movie from Blockbuster over reading your Bible? It’s all about the condition of your heart people. Dave makes it abundantly clear that the reason why you should get out of debt/live within your means/manage your money more wisely and build wealth is so you can give away large amounts of cash to impact lives that need the impact. Manage the money for God. Live life with open hands, knowing that it’s all His. It’s that simple.
Thanks for your perspective about your employer, Chris.
Saying that student loans aren’t the way to go is akin to saying that you shouldn’t take on a mortgage because you can’t afford the home at the current time.
Student loans are absolutely the way to go if need be.
HAHAHAHAHAHAHAHA!!!! Wow, you act like you caught me or something. Oh my gosh, I totally have never commented on a blog before. I had no idea that when it asked me for my e-mail address (@daveramsey.com) or my blog address (where I tell people I work for Dave), that you would actually find me out! Please. Does it make what I said untrue? That’s typically the last resort for someone who can’t find fault in what I say: “Well, you work for him!” Okay. So?
Okay, Chris, that’s a good way to represent someone who ought to be respected. :-p
What does that even mean Stephen? My first comment was as nice as could be. I don’t know Tim at all, but if you read his comment again and if you’re honest with yourself, you’ll probably detect some smugness in it. An “I caught you” type flavor. I entered a serious conversation and offered a serious comment and he chose to add nothing but instead came at me with THAT??? How can I take that seriously???
Chris,
OK, now that I have a few minutes to respond, allow me to do so. My first post pointing out that you were an employee of Dave Ramsey was offered solely as an FYI for anyone who might read it. Does that mean that your thoughts are disingenuous? Of course not, and I never suggested as much. Is it possible that someone reading what you wrote would like to know that you are a Dave Ramsey employee? I’d say it’s certainly possible. And so I thought I’d point out that info.
There was no smugness or “I caught you” flavor to it at all, and I don’t appreciate you assigning motives to me. Heck, anyone who would click on the link to your blog would notice it immediately. I was simply offering it for the sake of those who might not visit your blog.
Now, to respond to what you wrote originally.
“Read his other books. Listen to the show for a while. Go see him live. Attend FPU. Talk to people who know him personally. Step back and look at the entire package.
The point of this whole topic was not to provide a thorough analysis of Dave Ramsey the man, or Dave Ramsey the financial counselor, or Dave Ramsey the whatever. All you have to do is look at the title for the post, where the words “Book review” are the first two words you’ll read. This was intended as a review of what Ramsey wrote in his book. Nothing more.
My overall opinion of Dave Ramsey is positive, and I say as much in the review. There were simply a couple of concerns that I had, and I raised them. You disagree. Fine. That’s why we have the discussion.
In order…
1)I think anyone reading the series of comments and not knowing you personally would have assumed the “flavor” that I assumed. You’re saying it wasn’t there and I have no reason to think you’re a liar, so I completely apologize for the tone of my second comment, which I 100% admit was peppered with sarcasm and what I like to refer to “pissed-offness.”
2)I know your post was on the book itself, but as the comments were added a different conversation took shape. I never heard someone say “Let’s just focus on what he says in this book.” It definitely evolved into more of a general discussion of Dave.
I think that Tim raises a legitimate point about disclosure. If Tim were asked his opinion about Union University or Baptist Press in a neutral forum, it would behoove him to disclose his ties to those organizations. Does that mean that his opinion is shaped by those relationships? Maybe, maybe not. But it should be up to the reader to decide that.
Now that we have that out of the way, Tim, would you please send the check to my home address?
Chris,
1. Apology accepted. I apologize if my first comment didn’t reflect what I had intended to communicate. I actually wrote the comment two or three times in an attempt not to suggest that “this guy’s only saying this because he’s a Dave Ramsey employee.” I thought the one I settled on did the best job of that, but apparently not.
2. Understood.
I couldn’t agree with you more about college loans. Parents should certainly help out but to completely pay for the education of your child is a bad idea.
Eighteen is the age when a child should begin to take on responsibility, this means financially as well as emotionally.
College is a perfect way to introduce them to life. It is NOT free, and they shouldn’t be fooled into thinking it is. First off, talk with them about budget. Not every kid can and should afford an Ivy League education. Second, lead them in the right direction of how to pay for school. Have them fill out their FAFSAA, find appropriate loans, and figure out how to make it work based on what they want to do with their life.
What a fantastic learning experience for anyone who is starting off a new life as an adult. And what a shame to take it away from them and make everything so easy.
There is all kinds of help on the web for parents and students. Finaid.org is one of my favorite. As well as blogs and plenty of news articles. Try http://www.thinkfinancial.com/blog/student-loans/six-ways-to-make-college-affordable/
Great tips on how to make it all affordable.
While the FAFSA is a good thing, it is also not very helpful, at least not in my experience. The only thing my FAFSA was ever used for was to determine how much of a student loan I qualified for. When my wife and I have children, we are going to try and set up an Education IRA (as Dave suggests) and educate the child about it as he/she becomes old enough to understand finances.
I like what Dave did with his kids, the “401-DAVE,” in which he offered to match anything his kids put into their “big ticket” items like a college fund or car fund. What a wonderful way to teach financial responsibility to a kid as well as introducing them to a concept that can potentially make their lives easier when they reach the end of their working lives.
I noticed Tim said Dave’s following is almost “cult-like.” I totally agree with that, but much if not all of that following comes from those who have been helped redeemed from their financial pitfalls through his work.
To actually say something about the book (though everything I’ve said comes from the book thus far), I think Total Money Makeover is the more practical of his books, taking a more “how-to” approach, whereas Financial Peace is more about his principles and philosophy. You could go back and forth, but I have tended to use them simultaneously, with FP as my “Scriptural principles,” so to speak, and using TMM as the blueprint.
It’s a sad thing to see college graduates finish school only to find out that they are deep in debt. I have some friends who went to a private Christian school in the South. They met each other there and got married. Their parents took care of everything but never shared exactly what they were doing. Both sets of parents had attended the same school and had met and married there. When the couple graduated, they were told about their college loans, given a payment book and sent on their merry way. Of course they had conflicted feelings about the whole thing. They presumably would have never met each other had they not attended the school together. Yet they were not told of what the financial ramifictions were of attending a private school on student loans.
One thing that I come back to, it seems like Christian schools almost never tell anyone that they can’t afford the expense. Instead they talk about what a “priceless” experience it is and use student loans as a lure. “After all, could you put a price on having a Christian spouse?” While I am a huge advocate or Christian education, I think that Christian schools should not be in the business of luring people into debt that they will spend much of their lives trying to pay off.