Best Advice: Dave Ramsey

I've written several "best advice" pieces (see my best advice category for details) and love to hear short takes on what financial "experts" view to be their best piece of financial advice. Here's the last bit of advice from a Bankrate article on best personal finance advice. It's from Dave Ramsey, author of "The Total Money Makeover":

"A friend of mine who is a billionaire told me that he reads a book to his grandkids and I should read that book. The book is 'The Tortoise and the Hare.' Every time he reads the book, the tortoise wins. Slow and steady wins the race, and consistency matters. Get-rich-quick never wins.

"If you try to impress other people, you'll lose the wealth race, as well," Ramsey says. "It sure did give me a nice metaphor. It's a good reminder to somebody like me to keep me in check. It has implications for debt, for mutual funds, for budgets -- an overlay for everything."

That's funny. Dave gave me a completely different answer to this question. Huh.

But regarding the advice he gives above -- it's solid. If you can forget what others are doing (mostly spending) and concentrate on what you want to accomplish, you'll be far better off financially.

What about you? What do you think of Ramsey's advice?

Click here to read part 1 of this series.

Comments

[traineeinvestor]

Interesting post.

I'm afraid I have to disagree with Dave Ramsey here (or with his billionaire friend). The analysis with the tortise and the hare is a poor one. If you want to do well financially, slowly plodding along like the tortise is a bad move - the time value of money, the power of compounding and the need to avoid parking money in sub-optimal investments (e.g. low interest savings accounts) all would suggest that you cannot afford to simply plod along like the tortise. You actually need to be aggressive in keeping your money working for you (which is very different from taking silly risks).

I just do not see a link between the parable and risk/risky investments - but then I am neither a billionaire nor an author of best selling financial advice books. :-)

[Saving Freak]

The parable makes sense in that consistently doing the right things will allow for much greater reward than going at life haphazard. The other thing to see is that Ramsey is seeking the advice of someone who has already been successful, not someone who thinks they know what is going on.

[Eric]

I don't think it applies to every situation in personal finance, but it is good advice. Making money involves a lot of waiting...waiting for a market to drop, waiting for a stock to top out, etc. Patience is an important virtue. I also think he hits on the problem of people thinking they need to appear successful. I see it a lot where I live; people buying too much house or driving cars they can't afford just to look successful.

[Kevin]

I think the original answer he gave you was better. It's not that hard to start investing but some people just don't bother.

[Todd]

It is a good metaphor because it points to the fact the path to wealth for most people is steady consistent saving and investing. (i.e. the tortoise) The hare approach is going for the get rich quick scheme which is rarely happens to anyone. Dave mentions spending to impress people. He is just pointing out that this always makes the first path difficult. i.e. not what the millionaire next door typically does.

[mykhutchjr]

Dave Ramsey's advice will certainly prove beneficial to those whom adopt, and commit to the discipline required of his method. The tortoise and the hare concept, is one most of us have been taught early in life. Dave's concept aligns nicely with that story. He simply says get out of debt and begin to control what your money does for you. It is simple……..Control your money rather than letting your money control you.
Dave’s theory on the way to gain control of your finances is to slowly get out of debt, and then begin to slowly build wealth. Compound interest works folks, and is very simple to understand and explain. To put it in perspective, think about pushing a car that has run out of gas to a gas station. Think of the gas station, as not the place to refuel, but as retirement. If you have ever had to push a car, you will agree that it is struggle to get it started, but once it is rolling you can keep it rolling with a little effort and consistent discipline. If you fail to continually apply effort, or come upon a slight incline and fail to apply a tad more effort, you will begin to slow and it will take you longer to get to that gas station. Well if you follow Dave’s plan you will learn to not only apply consistent pressure to your vehicle, but also prepare for those inclines, and thus get to that gas station as quickly as possible.

I am a believer, and have been applying ‘Dave’s theory’ even before hearing of him. Therefore, I can tell you, that through consistent efforts and applied discipline, anyone can build wealth.