350 posts to establish a nice circular logic. Amazing discoveries on the internets.

Not really circular...

If they need his advice, then they can't just use math and common sense.

By modus ponens:

They need his advice, therefore, they can't just use math and common sense.

Also, by modus tollens:

if they can just use math and common sense, then they don't need his advice.

Not circular...

Yes, it's dumb. But that's also not a fair comparison (no one gives 0% loans). The target of Ramsey's advice would have $10k at 20% and $15k at 25%. To Ramsey, the psychological benefit of paying one off the lower amount offsets the interest savings.

So what kind of debt did you pay off? If it were credit cards, then you can just live off the credit cards for a while. But it seems like it wasn't credit cards.

The people who call into his show with $100k CC debt are not capable of using "math and common sense". If they used math and common sense, they wouldn't have gotten into $100k CC debt in the first place.

That is who his advice is geared to. Not people like you.

awesome how it is some guy on the radio's fault that you are broke and jobless...


accountability and personal responsibility are a lost art form, I guess

Couldn't you start charging again? Emergency funds are so less important now with a huge amount of credit available.

That wasn't circular logic.

This is completely untrue.

There are plenty of places where, if you buy something, they will finance it at 0% over X years.

At 0% it seems better than just paying for the item.

Some are truly 0% for a while then switch to a normal rate, others have a balloon payment if you don't pay up in time (can still be good, but you must have the cash, and it's not really worth it).

I paid off a couple of 0% debts with the cash, another with a potential balloon payment if I didn't pay it and and bunch of little things with high rates. I also paid off several medical bills that, again, were mostly 0% so long as I was sending them fixed payments every month.

These are not loans in the conventional sense, but they _are_ debts that needed to be paid, and following the ramsey plan, I paid off a bunch of essentially 0% debt in addition to some high interest stuff. If I want to reborrow that money, I'll be paying about 11% for an unsecured line of credit/ loan.

(I have negative equity in my home, so no HELOC for me, and it's hard to get any loan at all with no current employment.)

Note: not complaining at all, just pointing out some problems with a plan that sounds nice in theory.

This wasn't CC debt (for the most part) - it's was medical bills on 0% payment plans and a few items that were again on fixed payment, 0% plans. I don't really have an extra available revolving credit. Can I get some? Probably, but it will cost me 11% for an unsecured loan, and that's if I commit fraud and lie about my employment status.

I never, ever said it was anyone's fault but my own.

It's my own fault, entirely.

I made the decisions and I face the consequences. "Dave" didn't make me do anything - I read the information and made the choices myself. The only person to blame is me, and I am the only one who is going to get myself unbroke and unjobless.

All I am doing here is showing that the "Ramsey Plan", despite being marketed as a great solution to money problems for damn near everyone, isn't so hot in certain specific circumstances.

Sure, it sounds good psychologically to pay off the smallest debts first, but perhaps this isn't such a great idea, especially with 0% debt. (He is emphatic about this point - he always wants you to pay off the smallest, even if the differential in rates is large.)

It's also a bad idea to get rid of a cash emergency fund if you already have one to "jump start" the plan. If you already have 3-6 months of expenses cash saved, keep it. The added risk is not worth the added benefit.

Third: his investing advice is pretty lousy. It seems to mostly consist of 4 different mutual funds where he insists you can average > 12%. He repeatedly makes statements like "There has never been a 10 year period where investing in the stock market has not made money" that are provably false. Much of the time, he just wants to send you to one of his ELP partners.

The general approach that Dave takes to getting out of debt, namely, don't try to play stupid games, just work your ass off and pay it off and never get into debt again, is gold. I totally agree with it. I disagree with some of the implementation and the "one size fits all" mentality (this mentality is really important if you are trying to market a system and get TV shows and book sales from it.)

This is exactly why the Ramsey plan is faulty. And it's exactly what my point has been since the beginning.

I like Ramsey's message to get free of debt as there are enough people that can't handle debt. But the fact that he advises to pay off the smallest rather than the most expensive debt is the dumbest thing I've heard.

It's like this thread is going around in circles faster and faster every page.

The question is how do people who are that ******ed get that much credit? There is something wrong with the system as I can't imagine how they could have an income that could justify extending excessive credit yet they get it. I know a girl who managed to get herself into $70-80k of consumer debt despite being a receptionist that made $28k/year with no future prospects of making higher income. If someone already has a consumer credit equal to what they make in a year then they shouldn't qualify for more credit.

I figured there is something I didn't understand about credit because I never got why Ramsey stress the starter emergency fund. Just pay the debt and if an emergency happens use the credit.

Well in Ramsey's world, you burn the cards so you have 1k to live on. I probably would last a matter of days. Maybe 10.

ETA: The credit argument is complex and interesting. With parties to blame on both sides and ridiculous legislation abounding.

Ah, but the whole point of credit card debt is that they don't really need to measure default risk because they charge such high interest rates. Their business model is to incur no costs doing detailed credit risk check and drag out debt repayment at high interest rates and accept a number of defaults. It's a perfectly viable business model so long as the public remains generally financially illiterate and perfectly happy as long as they have a high-definition TV and pleny of pairs of shoes.

Greed...easy.

******ed people tend to pay more interest than smart people...so the ******ed people are the principal targets of the companies.

They don't want someone with a super stable job who will charge 2k/month and pay off every penny every month for their whole life...those people might lose the company money!

Rather, they want people who make poor decisions to get themselves into debt...and end up paying minimums and carrying balances and having to pay interest and fees. To compensate for the risk, they have higher rates and the companies swallow default rates as the price for doing business.

Elizabeth Warren explains an anecdote where she went to give a talk to a credit card company and how they could simply cut their default rate in HALF by slightly tightening their lending standards to avoid the ultra high risk people...and the big shot made the authoritative comment that "well! then we'd lose over half of our profits!"

The card companies KNOW that the risky people are where the money is...that's why risky people can get so much credit.

I understand the lender's motivation I just don't get how they don't get burned. If someone like that girl could get more than three times her income in credit what stops people like her from just doing that converting all the credit to cash and just not paying. The SOL on consumer debt where I live is ridiculously low at two years and while that will **** your credit score for the next six years that really isn't a big deal since unlike the States credit scores are pretty meaningless unless you actually want credit. I realize there are moral reasons not to do this but generally people are not that honorable and it seems like the system is asking to be scammed by the very large segment of the population that is in their early twenties making less than $30k and with no prospects.

People like that girl are the exception...not the rule. They do get burned...it's their default rate.

And you can't just convert it all to cash and not pay it back...unless you stuffed it in a mattress. The bankruptcy procedure is a little more rigorous than that. They go through your taxes, your assets, what you own...etc. It would show up if you bought 100k of stuff and had ZERO to show for it (no stuff on the bought list around the house).

If you are charging 16%+ interest, you can afford to get burned a few times. A lot of times the young people who get themselves into a ton of debt and no ways to pay it off have mommy and daddy come in and pay it off for them as well.

Ramsey is basically like the Bible for finances- some people need simple easy to remember rules that are not-optimal because they are unable to figure things out for themselves.

You don't need to declare bankruptcy. If you just don't acknowledge the debt it becomes uncollectable after two years. A guy I knew in law school was in a similar situation he had $35-40k in debt and no job (plus $80k in student debt). Just ignored the credit card companies for two years and that was it. If you are unemployed and have no assets they don't bother to get a judgment against you so the debt gets erased without having to declare bankruptcy.

in that case - my apologies - obviously read some things into your post that weren't there.

Canada is a weird place.

I know someone who did this in the U.S. too.

While his books are emphatic, I'd bet that if you were to call in to his show and ask the same question, he'd say pay off the debt with interest before the debt without interest. His emphasis on paying small debts first seems to assume a small differential in interest, not 0% vs 30%.

Ramsey suggested this on his show once. Just stop paying, your credit rating will go in the toilet, but will recover faster than it would if you had declared bankruptcy.