Comments: Best Money Post I've Ever Written, Part 2; Bad Math

Here's a comment a reader who responded to my post on Best Money Post I've Ever Written, Part 2:

As a believer in Ramsey's principles, and an engineer, I can see the conflicts from the math and psychological.  I have followed Ramsey's "baby steps" and this is the only one I've deviated on.  I attack higher interest rate first.  In fairness to Ramsey, he recognizes and states you will pay your debt off in a few more weeks, but also pays more stock to the psychology of the snowball.  I would recommend the snowball method to most that lack the fortitude, but I felt I could handle it, and I did.  I like Ramsey, and believe he's spot on 95% of the time.  This one tenant doesn't suit me, but I think its best for most.

I'm in the "higher interest first" group too, but I can see the benefits of the other option. It still makes me think, though -- does Ramsey think this is really the best way or does he just want to be different. he's a smart marketing guy just as much as he's a solid financial author, so I wouldn't put it past him.

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Comments

[Michael]

There are two things that folks argue with Dave Ramsey about: (1) His "no credit cards at all" mantra, and (2) his assertion that debts should be paid off according to balance.

In my financial life, I've taken a stance opposite to Dave's in both aspects. I have credit cards, and I use them constantly (both for cash rewards and for the buyer protections they offer). I paid off my debts largely in order of interest rate, rather than by balance.

I do, however, understand the psychological basis for both tenets. Watch enough folks struggle with credit cards and other consumer debts, and you begin to see that most times, the "common sense" method for handling money just doesn't stick. (If it did, credit card companies wouldn't be as profitable as they are, right?) The simple fact is that our culture is set up to promote advertising, consumerism, and capitalism. Flying in the face of that is a tough proposition -- perhaps impossible -- for most of us.

And yes, Dave is an extremely good marketer. He wouldn't be where he is if this weren't the case. But as is most areas of life, his blanket assertions just don't cover every individual case as well as he would like us to believe.

[FMF]

"There are two things that folks argue with Dave Ramsey about: (1) His "no credit cards at all" mantra, and (2) his assertion that debts should be paid off according to balance.

In my financial life, I've taken a stance opposite to Dave's in both aspects. I have credit cards, and I use them constantly (both for cash rewards and for the buyer protections they offer). I paid off my debts largely in order of interest rate, rather than by balance."

I'm with you on these too! (except I don't pay in order of interest -- I pay both cards off every month).

The issues you bring up are my biggest beefs with Dave as well. Thanks for commenting.

[Frugal Momma]

It's all about behavior. I am pretty sure Dave knows that he is bad at math.

Think about going on a diet and focusing on the 50lbs you need to lose. Breaking it down into 5lb increments might not get your there faster but you feel more positive about it.

The same thing goes with paying the lowest balance off first. You get that motivation. Heck surf the credit card balances as much as you can.

As for no credit cards, we don't use them except for when we needed something at Sears and I didn't want to touch the emergency fund. 0% for 3 months wasn't bad And eek I financed a car this past spring.

Inspiration, motivation and a no bull attitude is why Dave's system works. http://www.livinglikenooneelse.com/forum/index.php is a good (free unlike Dave's site) site for people following his plan.