Dave Ramsey on bailouts, foreclosures, and how the recession can save America
Filed under: Recession, Celebs & Money
Demographically, I should hate Dave Ramsey.I'm a gay, Jewish liberal from New England, and he's a Bible quoting family values type from Tennessee.
Still: He's one of my favorite financial gurus. He offers sensible financial advice with no shortcuts: 15-year fixed rate mortgages with large down payments, stay out of credit card debt, live below your means, and save for the future.
And while you might not like his possibly condescending delivery, he reaches a demographic that probably wouldn't pay much attention to Suze Orman or David Bach. Dollar for dollar, there are probably few people who can claim to have helped as many people turn around their financial lives as Dave Ramsey has.
Plus, his delivery is funny and his book "The Total Money Makeover: A Proven Plan For Financial Fitness" should be sent to every single American who has credit card debt.
I had a chance to interview him via e-mail about the recession, bailouts, and what it all means for the future.
WalletPop: You're a big advocate of personal responsibility on your show. Do programs like TARP and Making Home Affordable bother you? Are we veering off course in terms of what America is supposed to be about?
David Ramsey: I think these programs are doing a great disservice to our country and it's people. We've forgotten that the whole idea of the American dream is that every individual has the power to do something great. You don't have to rely on anybody else, and you shouldn't rely on anybody else. You are in control of your financial destiny. The only person that can bail you out is YOU!Banks should not have been making loans to people who can't afford to pay them back. Companies that were operating irresponsibly should not have been bailed out with a big check from the government.Don't underestimate the power of failure. It's good for us. Failure brings about clarity and learning. With failure as an option, you are forced to run towards excellence.
WP: People who followed your advice would have avoided a huge amount of pain over the past couple years -- especially with respect to your insistence on 15-year fixed rate mortgages with significant down payments. Are people more receptive to your teachings now than when the economy was golden and homes could be used as ATMs?
Ramsey: Imagine going through this past year with no debt. No monthly payments except perhaps your mortgage. When you're not paying out every dime towards debt, you have a lot of wiggle room and peace. If you had no debt and lost your job this past year, you'd be stressed out....but it would be a lot easier to make ends meet during the lean times. Our financial advice works in a good economy and a down economy. For many people, the last year has been a big wakeup call to change their behavior.
WP: One of my favorite lines from your books/show is "where the paid off home mortgage has replaced the BMW as the status symbol of choice." Is the increase in savings and the decline in consumption a temporary thing, or is there a chance that we're seeing the beginning of a long-term trend toward financial responsibility? Has America changed its ways, or will we be right back too much debt, too much consumption, and not enough savings once the economy turns around? How can we prevent that from happening?
Ramsey: My hope is that this past year will go down in the history books as this generation's "Great Depression." If you're under 40 years old, you've never worked in a down market. My hope is that those who were not being intentional with their money up until now will get a clue and start budgeting. It doesn't matter how much money you make, you've got to have a written plan. You've got to live on less than you make. You've got to get out of debt and stay out of debt. These things are the only keys to building wealth.
WP: You're a critic of irresponsible spending and borrowing, but you've also been very critical of predatory lending practices like the payday loan industry. How much of the subprime mess should be blamed on the banks and how much should be blamed on the borrowers?
Ramsey: Both sides are to blame. The banks should not be making loans to people who can't afford to pay them back. People who are not financially fit should have never applied for a loan to begin with.
WP: Is there a silver lining to the mess we're in? When we look back at in ten years, will we be able to say "This is something that came out of it that is good"?
Ramsey: The silver lining is for the first time in decades, the savings rate is climbing! Bargain shopping is cool! Cheap is in! For once, many people are starting to pay attention to their finances and take personal responsibility for their households. There is always a lesson to be learned from a fall.
Reader Comments (Page 1 of 1)
7-25-2009 @ 12:45PM
Dave said...
Gay, Jewish and liberal fine but your from New England??? That's just too much.
I have some criticisms though of his response. i think some of his responses show a lack of understanding as to just how desperate some people are. It's all very well to say Payday loans are bad and they are but people don't go there because they want to go out and buy a scarf. When I used the service it was because I had nothing, rent was overdue, I had no gas money to get to work and by that point my credit cards were either maxed out of cancelled. I went to the Payday loan place out of sheer desperation just like most people. It's a choice between putting a meal on the table or going without for the next week or two. Saying that people in this situation should not be able to borrow money is a very narrow way of looking at things. Financially bad idea but you need to survive.
He does give some good advice to those people who are simply irresponsible and not in financial dire straights.
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8-04-2009 @ 4:03PM
sally said...
Do not underestimate the power of the People , The ones that had to file The Foreclosures .
These are the People that truly count .
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7-23-2009 @ 10:36AM
DP said...
Is CNBC unwatchable?
How can anyone trust these people?
Ask yourselves: What did the financial media do to help you protect your money? Nothing!
All the way down from DOW 14000, all we heard was buy buy buy.
We were told the bottom was in, no less than 10 different times!
Yet all the anchors on TV and their guest are millionaires, while millions of Americans are on the verge of bankruptcy. Where is the accountability?
For the truth:
www.compdivplan.com
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7-22-2009 @ 9:25PM
mslou707 said...
Everyone also check out http://Loudebtfree.blogspot.com. It is a great website about how to get yourself out of debt and speaks about consolidation loans, credit cards, etc.
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7-23-2009 @ 10:45AM
Gina said...
Thanks in part to Dave, I have been debtfree for over a year, house and all. It wasn't always easy. Many times, I wanted STUFF, but passed it up because I couldn't afford it. I am tired of lazy people thinking they are owed an easy life dragging this country down. If some people would put the same amount of effort into working that they do in avoiding work, our unemployment rate would be much lower. Waiting for the "perfect job" shouldn't mean doing nothing in the meantime. I have worked at jobs cleaning toilets, painting houses, farmwork, etc. to get through college. I have NEVER been unemployed since age 15, and worked more than one job many times. Broke people have to be willing to do ANYTHING, as long as it isn't illegal or immoral, to get out of debt. Believe me, screaming I'M DEBT FREEEEEEEE!!!! is totally awesome! Thanks Dave!
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7-23-2009 @ 10:56AM
Amy said...
Dave has really great advice. I think now that we are all forced to 'cut back' and live on less...hopefully we can carry that over to our lives once the economy is booming again.
http://www.ManyMoneySavers.com
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7-23-2009 @ 1:17PM
Sue said...
My husband and I have been debt free for over 15 years and now, as Dave so aptly puts it, we're living like no one else because we've lived like no one else. While others are bemoaning not being able to make their hefty car payments, mortages on their over-sized homes, etc., we're going on cruises, doing lots of other travelling, and sleeping well at night knowing our frugal lifestyle has paid off.
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7-26-2009 @ 9:56AM
Bucksomeboomer said...
I am graduating from Dave Ramsey's Financial Peace University tomorrow. I wasn't in financial trouble, just not savvy.
This course and what I've learned have inspired me so much that I started a personal finance blog. I do disagree with him on some items but overall following his seven baby steps will leave anyone financially secure.
http://bucksomeboomer.com
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9-14-2009 @ 7:53AM
G said...
Gay, Jewish, liberal, but yet you are the first to put out the word 'hate' in your opening sentence. Why be a hater at all? Doesn't that make you the bigot? Why does hate even enter into it? What happened to just 'disagree?'
G
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