Dave Ramsey a Hypocrite?
March 19th, 2008 by Ana
Among the hundred of different search phrases I get each month, “Dave Ramsey hypocrite” is one that keeps popping up. I have seen on other blogs (can’t remember where thanks to a good dose of pain pills) the allegation that because Dave Ramsey declared bankruptcy about twenty years ago, and strongly urges his listeners NOT to file bankruptcy, that makes him a hypocrite.
Not really. Dave Ramsey went through it, and came out a bit scarred psychologically. I’ve heard him say several times on the radio, “I wouldn’t wish bankruptcy on my worst enemy.” It’s about the same as a reformed drug addict saying “Don’t use drugs.” Or me saying “Don’t buy that first pack of cigarettes.” It’s the old “I’ve been there, done that, got the T-shirt and definitely DON’T want to go back.”
People don’t call reformed addicts hypocrites for telling kids to not touch drugs. People don’t call sober alcoholics hypocrites for telling others not to drink excessively. So why do some folks call Dave Ramsey a hypocrite for trying to dissuade people from what he calls a gut-wrenching, horrible ordeal?
The story Dave Ramsey tells is that at age 26, he was a millionaire on paper, having over $4 million in real estate and about $3 million of it leveraged (debt). He says the bank he dealt with for all of the financing was bought out by another bank from out of town, and when the new bank loan officers looked over the books they freaked out about having someone that young with that much financed. So they called his loans. All of them.
When he couldn’t sell the property fast enough, he was foreclosed on, then sued six ways from Sunday. He says he fought tooth and nail for over two years before he finally declared bankruptcy. He almost lost his marriage, and on the new FPU videos his wife admits she seriously thought about leaving him during that dark time. In his live events, Dave Ramsey describes when he hit bottom, standing in the shower crying because of the fear and sense of failure. None of that sounds pleasant in the least bit.
So, with all this background, can someone who gets here using the search phrase “Dave Ramsey hypocrite” please explain how he is one? If someone makes a horrible mistake that brings about a lot of emotional pain and financial upheaval, how does that person become a hypocrite for telling others to avoid that situation if humanly possible? Or maybe I can get some feedback from the Dave Ramsey critics who have actually levelled that charge in the blogosphere? Because I tend to listen to people who have been through something and say, “Whatever you do, don’t do THAT.”
Posted in Dave Ramsey |
March 19th, 2008 at 7:13 pm
Right on, sister! I’d love to hear someone try to defend the hypocrite title on DR. I am a huge fan, so I’m biased. But still, looking objectively, I can’t see how he is one. He has his principals and life lessons and stands by them, from experience and common sense. There’s nothing hypocritical in that.
March 19th, 2008 at 8:34 pm
I’ve met the man a few times in person. He’s about as far removed from a hypocrite as you can get. Integrity is the word I’d use to describe him. Passionately dedicated to helping other people (and making a fair profit along the way).
March 19th, 2008 at 10:36 pm
I agree with your Drug user analogy. No one would call them a hypocrite.
I like Dave, though i don’t hold with everything he says. (tithing, absolutely no CC) I follow the baby steps have gone between 2 and 6 for years as I’m a self employed contract worker. Currently the only debt is in our House, but our savings funds got decimated last year due to Emrgency repairs and appliances for the house. So now i’m back at Step 3.
I too went through a bankruptcy 10 years ago. I’m glad I did because there was no way to pay off the hospital debt we accumulated on my then income in 20 years. But i’m only glad because we had worked out a payment plan with them but they sold the debt to a collection agency that wouldn’t honor it.
If I hadn’t heard about DR six months after we finalized I’d probably be filing again as I never learned money skills while growing up.
SO Today I tell friends and acquaintances how to budget when they see that we have so much when we make less money than them. And i buy them used copies of FP. (mostly because I didn’t like reading TMMO)
By the standard those accusers hold Dave to, I would be a hypocrite.
March 20th, 2008 at 6:37 am
Dave isn’t fundamentalist about no BK, he just tries to analyze it to show that it usually isn’t going to solve the problem. (IRS and student loan debt is not dischargeable in BK, if you’re keeping the house and the car you have to reaffirm the debt and keep making the payments…so usually the caller only has a small amount of other debt that would be discharged in BK, and usually not worth the attorney’s fees…DR shows them how to redo everything and solve the problem fast.)
DR has also paid everyone he owed–so even with BK, he paid them back anyway. So that shoots down that objection. (He doesn’t tell others who have filed BK to repay either, he tells them it’s between them and God, to pray about it, and they are not legally or morally obligated to repay.)
But that’s not the only accusation of hypocrisy. Read the following blogpost about DR taking CC’s (which he does–but read the combox wars for why).
http://www.freemoneyfinance.com/2007/10/i-think-dave-ra.html
I also once found a discussion board posting, someone was claiming that Dave Ramsey bought a car with a car loan at the dealership where they worked. I tried to do a search just now but can’t find that post, so either that discussion board site no longer exists, or that thread was pulled. Of course the burden of proof is on the person who makes such a claim and there was no such proof. DR’s credit report would show the car loan if there was one, but DR is the only person who could legally access it, so there is no way to disprove such a claim (you can’t prove a negative). But the claim is patently ridiculous on its face and suggests that the person is trying to rationalize their own debt-loving behavior.
After all, the little man can’t get ahead. You’ll always have a car payment. Practice the Goat. LOL
A lot of DR haters just hate the message, because they’re stuck in debt-loving attitudes and behaviors that are dragging them down.
What’s in my wallet? A big fat wad of CASH!!! Because I’m debt freeeeeeeee!!!!!! Thanks to Dave Ramsey.
March 20th, 2008 at 8:36 am
Liz, I have heard DR say on the radio show that callers should do everything they can to avoid bankruptcy. “It’s not a place you want to go to,” is one phrase he uses. And yes, bankruptcy is much more difficult to file since 2005, with less and less qualifying for complete discharge (is that the correct term?).
Blackneto, you won’t be judged here by me. If there is no other possible way out, then there is no options. It does happen. But there are quite a few people who think they are candidates for bankruptcy, and too many commercials from bankruptcy lawyers that say it is a way to “start over” in spite of a bankruptcy following you the rest of your life. Both Dave Ramsey and I say it should be the last resort (my parents filed bankruptcy when I was a kid, but I still remember the stress in the house even if I didn’t understand it at the time).
March 20th, 2008 at 9:20 am
My parents filed bankruptcy when I was seven or eight years old, and it followed my mom for a long time. Today, she has no debt, but when she was still using credit carefully–never irresponsibly–she had to indicate every time that she filed bankruptcy once upon a time. You never really live it down.
I think there are genuine extreme circumstances where bankruptcy may be the final solution (i.e. Dave Ramsey’s situation). However, most people filing bankruptcy are–as Dave says–not really bankrupt. They’re simply overwhelmed by student loan debt and mortgage debt. And then they look up and realize they’re drowning. Worse yet, they head straight to the bankruptcy attorney’s office to ask a dog if it’s hungry. Talk about a bad plan!
A written budget is most often the best and easiest solution. Sure, you’ll still have some pain, but you’ll come out of it with your credit and pride still intact.
March 20th, 2008 at 9:29 am
Actually, I do see people accusing former drug users and alcoholics of being hypocrites when they advise against taking up their respective vices. But the people I see doing the accusing are usually teenagers. In short, immature and unwise in the ways of the world.
Which should tell you something about the mindset of people who call Dave a hypocrite.
March 20th, 2008 at 9:34 am
@Blackneto: If you don’t believe in tithing for religious reasons (i.e., you disagree with that interpretation of the Bible or you’re not a Christian), how about donating that amount to charity instead?
In Islam one of the five pillars of the faith is something called zakat, or charitable donation. This means helping the poor and downtrodden, not donating to the mosque. They even worked out a standard percentage of assets that believers are supposed to give.
I’m not Muslim but I thought that was really neat, and I figure that non-Christian, non-Muslim religious folks and even atheists and agnostics could stand to do something like that in their own lives. I definitely have it as a goal in mine.
March 20th, 2008 at 11:31 am
Dave rocks! Period. We ALL speak from our own experiences, good or bad. I have no problem debating WHAT a person says, but the personal attacks are silly. Dave makes tons of money. Good for him! We live in a capitalist society. He provides a service, and people pay for that service. But, he also GIVES AWAY tons and tons of free, helpful advice and tools. Without him, I might still be in debt. I’ve heard arguments - he’s too simple, he sells too much product, etc. Fine. Go listen to someone else. But, for me, he rocks now, and he will rock forever. EVEN IF I LEARNED THAT HE WAS MAKING IT ALL UP, I WOULD STILL THINK THAT HE ROCKS! Why? Because the teachings helped me - and thousands of others.
NCN
March 20th, 2008 at 3:15 pm
In no way do I think Dave Ramsey is a hypocrite. I think he would be less believeable when he tells people they don’t need to file bankrupcy if he hadn’t done it himself.
However, after listening to his podcast for eight months, it seems like he invokes certain “rules” when dealing with callers. Like he will NEVER say that someone should declare bankrupcy (even if that is truly their only/best option), he will NEVER say to pay off a larger debt first (even if the debt is only slightly larger and it has a much higher interest rate), etc. Sometimes I think he’s a little too rigid.
March 20th, 2008 at 5:26 pm
I agree with your post. Dave Ramsey’s urging others to not file bankruptcy is not hyocritic, especially since he’s been there. I, too, filed bankruptcy about 15 years ago. I was out on my own for the first time, very inexperienced with money and naive. When I finally did give up and go to the bankruptcy lawyer, one of the first things he said to me was that he didn’t see how I was able to hold out as long as I did. I would never advise anyone to file. I’m so glad that there are people like Dave teaching us how to get out of debt and how to stay out of debt.
March 20th, 2008 at 5:49 pm
I think it’s a good analysis. It’s not even like he’s giving advice about something he hasn’t experienced. If a guy who never smoked told me not to smoke I’d be less inclined to trust him than a guy who had smoked. Same with bankruptcy and other experiences…
March 22nd, 2008 at 1:50 am
@ Dana
I won’t go into why I believe that tithing is not a requirement of Christians.
I don’t get into those discussions on the “tubes” anymore.
But I will say that Giving is first on our budget and has gone up as years have gone by.
We have to give. Without giving we become self centered and that causes problems.
April 8th, 2008 at 8:19 pm
IF YOU WANT TO GET SHUT DOWN REAL FAST BY D.R., JUST ASK HIM ABOUT PUTTING YOUR MONEY IN PRECIOUS METALS, I.E. GOLD AND SILVER BULLION. EVEN THOUGH GOLD HAS INCREASED ABOUT 30% OVER THE PAST CALENDAR YEAR, HE WOULD ADVISE YOU TO PUT YOUR SAVINGS INTO A MONEY MARKET ACCOUNT, A MUTUAL FUND, OR A U.S. TREASURY, WHICH WOULD NOT EVEN KEEP UP WITH INFLATION.
April 9th, 2008 at 11:30 pm
Garey, please tell us in your wisdom, what have gold and silver averaged over the last 20 years? squat! that’s what.
April 9th, 2008 at 11:47 pm
Vitsparky, but it does look nice in my ears and on my fingers
April 10th, 2008 at 8:58 am
Learning your lesson and being smarter than you were in your young stupid days, does not a hypocrite make. It’s the bas basic, don’t do the stupid things that I did type of things than parents have to do with their kids everyday. It is possible to grow and evolve. I would not want to be judged by how I was 20 years ago when I was young and stupid.
FJH
April 21st, 2008 at 11:24 am
It’s not about Ramseys bankruptcy, but he does go over the top about what a horrible life changing experience BK is.
It’s more traumatic to be held hostage by co’s that are charging loan shark interest and ripping you off at every turn than it is to file bankruptcy!
Ramsey takes debit card purchases for his merchandise and books. Visa and MC will not allow him to only use thier service for debit cards purchases.
Therefore, Ramsey is paying a merchants fee to VISA and Master Card. All merchants charge more for their merchandise because of the merchants fee.
Yet, Ramsey the HYPOCRITE rails against VISA and MC.
He could set up his business to only accept checks via mail or echecks. And maybe lower his cost since he would no longer be paying VISA and MC.
But it’s all about Ramsey and whats going into HIS bank account.
April 29th, 2008 at 10:35 am
“But it’s all about Ramsey and whats going into HIS bank account.”
You obviously don’t listen to Dave’s show. You are make him out to be Mr. Greedy Corporate Man. That’s just not true. On the detail of your comments, you don’t have any clue about how Dave’s merchant system is setup. He takes debit cards only. There are plenty of merchant processing programs that accept debit card only. There is a restaurant in my town that accepts debit cards only. A little google search also reveals that merchants can have the option to choose which types of cards they will accept.
“Visa and MC will not allow him to only use thier service for debit cards purchases.” - FALSE. Don’t believe everything you read on the Internet. This has been regular line by those jealous of Dave. Simply not true.
June 4th, 2008 at 6:15 pm
Our law firm, Busby & Associates, went to one of his seminars. Good stuff, but when you are $100k in debt and make $30k a year where are you going to find the ability to pay your debts. I’m an unabashed bankruptcy attorney and sometimes its not only the best way, but the only way to get out of debt.
June 7th, 2008 at 12:55 pm
I don’t think DR is a hypocrite, but I agree that he is too reluctant to recommend bankruptcy or debt consolidation.
When I met my wife shortly after law school, we had a combined income of around $80K and debt of around $190K (almost all law school loans). We did not get high paying attorney jobs, so we did not know how we could possibly pay off all the debt. Though our income has slowly increased over the years, it has been a very long road to get out of debt. It has been nearly ten years and we still have $60K of debt left (though we have set aside a $10K emergency fund and we have around $160K in 401ks). But it has been hard and it has taken a lot of sacrifices. We lived in my mother in law’s garage for 4 years. We had a $5,000 wedding. We still live in a 1 bedroom apartment to this day with our daughter. Etc…
DR is also often unrealistic about how quickly people can repay debt. I think it is because he hasn’t done it himself, so he tends to forget about pesky things like interest and income taxes.
Sorry Dave, but a family making $4K/month gross can’t possibly pay off $24K in high interest credit cards within 2 years. The taxes and non-deductible interest will kill their efforts. After payroll deductions, they will probably take home $2,700. The interest accrual on their debt will likely be $400. A lean budget for food, utilities, rent, auto maintenance, auto insurance, gas and regular occurrences like Christmas and birthdays is at least $2000/month in most parts of the country. That leaves $300 to apply toward principal reduction. At that rate, it will take a very long time to pay off the debt. And in many situations, with normal life emergencies (unforeseen medical expenses, etc.) it will be impossible.
Sometimes bankruptcy should be an option. I agree in principal, though, that most people should try to avoid it if possible. And for those who do declare BK, they really need to examine how they handle their finances in the future.
I like DR’s show, and I realize he is trying to get people pumped up, but I think sometimes he may be a little unrealistic.
June 7th, 2008 at 3:23 pm
Cliff B, if you have been listening to Dave’s radio and pod casts, that is great, but you are missing some major points if you have not read one or both of his books, or attending one of his financial freedom classes. You are quoting one of Dave’s main points, that on a limited income you cannot clear huge debt, so greater measures are required. A second job, a family part time business — yard sales — selling assets you really do not need or can afford or have time to play with, second vehicles, can all bring in chunks of wealth to pay down debt. You also missed the debt snowball — paying off smaller debts first, then rolling that payment into a larger snowball to pay larger debts. Tightening our belts, working harder, paying off the debt we incurred in a responsible manner — it is all so much better than bankruptcy. The huge pressure of being so far in debt that you can’t see your way out takes all these measures and more — and Dave has the answers. Please check out his web site and his books, and by the way, his books are very popular at really reduced prices on Amazon. If your church has not offered a D. Ramsay class, or if you are not in a church, his web site can tell you how to get in one. I wish you the best,it sounds like you are doing the things that Dave recommends, and when you are finally out of debt you are going to be so proud of yourselves — compare that to bankruptcy which erodes your pride for the rest of your lives. Been there, done that, now we are Dave Ramsay all the way.