TomCollins understands that Ramsey does what he does because Ramsey is catering to degenerates/******s.

DR is catering to anyone that doesn't manage their money well. This includes a lot more than degenerates/******s. It also includes lazy, undisciplined, apathetical, etc.. Unfortunately that only leaves the reasonably smart and motivated people when it comes to money which is not a lot of people.

If he did he wouldn't be posting novels in this thread.

Not really. There are a ton of people who were bad with money due to ignorance, not due to lack of intelligence or lack of ability to understand or lack of motivation. It doesn't take a huge amount of intelligence to understand a lot of the basic concepts of finance. It doesn't take an extraordinary amount of motivation to do it either. The idea that only a limited set of the population can manage money without Ramsey-like methods is hilariously wrong.

And yet the Ramsey knob-slobbers only have 1-sentence retorts without any actual arguments countering anything I've said. But if they were able to do so, they probably wouldn't be Ramsey followers.

And yet there are tons of people that are in huge amounts of people in debt and not making good financial decisions. Why do you think that is? My guess is it's because they've never put any effort into learning which seems a lot like laziness/apathy to me.

I'm sure you're right though. It has nothing to do with motivation. They should just go with the most EV plan and stick to it. I'm sure it will take for everyone.

People have limited amount of time in the and do not want to put effort into being experts at everything. You do not have to be lazy to neglect certain aspects of life. You simply need to be more focused on other areas. Or simply you need to not even realize you are making a mistake or that better options are even available. There are thousands of things you do in your life suboptimally because the effort it takes to improve isn't worth it (as far as you know). When you are raised with a mentality of spending every dime in your pocket, you don't even realize there's another way. Personal finance isn't something that people tend to talk to in great detail with others as well. Plus, it's not something that is taught very well in schools and most people do not have the intellectual curiosity to seek it out. This has nothing to do with laziness. It has to do with prioritization.

I absolutely think this has to do with motivation. Motivation and having resources on learning. Most people are not good self-learners. That has nothing to do with motivation or apathy. Motivation to improve yourself combined with the resources to know what to do is a huge factor. Which is why people who follow Ramsey tend to do well- they are sufficiently motivated (if they weren't, they wouldn't seek it out or be attracted to it), and it gives them some tools (even if they are flawed). That puts them in a better spot than they were before. I'm not denying any of that.

Continued motivation is the other factor and it's very hard to achieve this on your own. Fitness is a great example of where it's super easy on New Years to get motivated to lose weight, but a lot of plans burn you out and you stop caring, and eventually fall off the wagon. This is why some of the best fitness plans are not the most optimal ones, but the ones that make it the easiest to keep doing them. They need to have some value in themselves, but if you want to measure a fitness program's successfulness, measuring how many people stick with it and are better off after a year or 5 years, you'll see that how enjoyable it is and how convenient it is for people is a far better factor than the technical aspects of it.

And for that, Ramsey seems to do well. He keeps people motivated by changing them psychologically in many ways, turning their addiction to debt into an addiction in hating debt. And I'll give him credit for that, it will help out a lot of people. But that does not mean he is immune from criticism, or that his plan could not be improved (even with the same target audience!). There are certain aspects that are extremely helpful. There are certain aspects he addresses that not many do (the structure and rigidity of it can help a lot of people with motivation, just like having specific workout plans and measurements along the way can keep people motivated to keep going to the gym). But there are some very obvious mistakes in it that make it seem silly to people who actually can understand the logic behind it rather than the emotions.

To put it another way, say there was a fitness plan that was super popular and people loved it and stuck with it a lot. But it had some clearly inferior techniques in it that could be improved without sacrificing the amount people like it or how it motivates people. It would be really dumb not to correct those holes. For example, say there was a fitness program where they used three pieces of equipment every time. But say it was actually harmful to use one of them, and you could replace it with a different one that was just as easy for people to access and just as enjoyable to use. It's a no-brainer to fix that.

Of course, such a plan might also be completely foolish for a lot of people who are already motivated to work out but just don't know what to do. An athlete training for a sport might have enough motivation to get better at his sport, he would be able to do a more technically correct workout, even if it was less fun. A bodybuilder would take an even different approach.

The same thing goes with personal finance. Different approaches for different people. But even when accounting for that, some methods are better than others and almost all can be improved upon. Ramsey has some very obvious holes for very dubious reasons that may work for some but in no way work for all, and may even be inferior for almost all people.

The whole point of ramsey type plans is that they are are easy, people don't have to think and they minimize the risk of people making big mistakes. His whole point is targeting people who have already proved that they are not able to be financial responsible (let alone financially savvy).

For the average person who was previously floundering in debt, giving up the opportunity to make an extra 6% a year through extremely well thought out financial planning is nothing in comparison to the financial security afforded by not squandering money on paying credit card interest/bad investments/scams/cars/boats/etc. Plus making a single bad financial choice by getting too arrogant can easily wipe out decades of careful investment. For a lot of the country its better to just stick to something easy that keeps them from making life altering mistakes.

Even if that's the point, which I understand, doesn't mean it's a good idea even for those people.

I'm back to giving up on you. For each of the things you want to change, there are disadvantages along with the advantages. Most of the disadvantages are psychological that you don't seem to want to admit. Nothing I say is going to change your mind so I give up.

Again, I think we all agree that his methods have helped a lot of people that would have otherwise not gotten help. But we also agree that his methods are not optimal from a mathematical standpoint.

I did the Ramsey plan, paid off my house 7 years early on a 15 year note, have no debt, me and my wife both put 25% of our income into retirement plus a separate Roth IRA.....

some on here might say that's sub optimal lol!

Congratulations, or as Dave would say...."You're so weird!"

What percentage (ballpark) of your wealth is in your house, retirement accounts and other places?

Agreed on you giving up on TC. The prior poster nailed it, people who have shown a knack for being financially irresponsible don't need optimal results. What they need it simple so it makes sense to them so.....and here is the key point....they are comfortable with actually implementing a plan.

Implementing an action plan even though mathematically is not optimal is greater than being too intimidated to implement an optimal strategy while continuing on with their old habits.

I agree with everything you've said since my last post with the exception of the statement above. I also believe I have adequately defined and offered meaningful rebuttals to most, if not all, of your criticisms of the Ramsey plan.

You raise many good points on your side of the argument. And I wholeheartedly agree that his plan swings the pendulum from one extreme to the other. That said, I personally would rather be on the debt free, low risk side of things than the other. My preference and understandably not the preference of all.

Congrats.

And not to minimize your accomplishments, but people reading this thread should know that your story is a pretty standard one for people on the plan. His plan simply works. And while it can be argued how "optimal" it is, someone putting this plan into place in their 20s will likely have more money than they can ever spend by the time they retire.

150k House, 350k in retirement accounts and about 60k in the bank

Me and my wife make about 150k combined and I'm 40yrs old

The only thing I'd disagree with is I think most people that start the plan give up or fail. Yea it works if you stick to it but few do. I know several that started and quit. I was pretty good about not having debt anyway

My statement meant to infer those who live the plan long-term (e.g. forever), not those who do it for a xx years then quit. The plan is easy to comprehend; much harder to follow through on long-term.

Thanks...I really don't see a problem with your allocation. I asked because I was imagining something like your retirement account and house value switched...which doesn't seem smart, but your situation seems pretty good. (Obv you have a pretty high income so you'll be better off than most but I imagine you are in a much better spot than the average person in your income/age group)

Northwestern likes interesting studies apparently!

tl;dr: Snowball is superior for actually getting out of debt

http://www.kellogg.northwestern.edu/...-approach.aspx

The ‘snowball approach’ to debt
Kellogg researchers find that consumers who tackle small balances first are likelier to eliminate their overall debt
By Ray Boyer

8/7/2012 - Which account balances should consumers pay off first to reach their ultimate goal of being debt-free?

A team of Kellogg School researchers has found that people with large credit-card balances are more likely to pay down their entire debt if they focus first on paying off the cards with the smallest balances — even if that approach doesn’t make the best economic sense.

Credit card debt in the U.S. totals about $1 trillion, and U.S. residents, on average, each have five cards. So when cardholders don’t have enough money at bill-paying time to cover their entire debt, they have to choose the best strategy for paying it down over time.

The “rational” strategy is to pay off the cards with the highest rate of interest first, regardless of the amount owed on the card. This is the strategy recommended by the U.S. government, as it ultimately costs consumers less in interest.

However, an alternative approach advocated by some financial advisers is to pay off the small balances first and the big ones later. This “snowball approach” is believed to increase the likelihood of getting out of debt, as it keeps consumers motivated through “small victories.”

How they did it
Assistant professors of marketing David Gal and Blakeley B. McShane got to the heart of the question by obtaining access to a unique data set. Provided by a leading debt settlement company, it gave precise information as to how 6,000 people finally eliminated their credit-card debt. In their analysis, Gal and McShane found that consumers who pursued the “small victories” strategy were more likely to eliminate their entire debt balance.

Their findings appear in the August issue of the American Marketing Association’s Journal of Marketing Research.

“We found that closing debt accounts — Independent of the dollar balances of the closed accounts—predicted successful debt elimination at any point in the debt settlement program,” Gal says.

The authors say their research raises important policy questions. “Perhaps consumers should be told of both the rationally optimal approach to eliminate debt — that is, paying off higher-interest balances first — as well as the possible psychological benefits of closing account balances. Consumers can then make an informed decision,” McShane said.

Sort of like explaining the placebo effect to a patient and then giving them a placebo....

Do you think Warren Buffett has a mortgage on his house? It is worth about 500K, so why don't you send him a letter and tell him how dumb he is. He certainly could get a maximum mortgage at the lowest rate any human could get, and then simply invest the 500K in smaller cap companies and come out way ahead.

Do you people just fall out of trees? The world's greatest investor/ money manager in world history doesn't have a mortgage, but all of a sudden people like you are smarter than him. He paid 32K for his house in the 1950's, and never took a mortgage. Do you think he regrets that? No he does not.

You are a real piece of work.

Sort of like a really bad comparison.

A placebo would be to restructure the debt to get a better overall interest rate, yet still paying less on the debt than the interest alone...

This is a ******ed argument. When your home represents such a negligible portion of your worth it doesn't matter. It is very different if your home represents a significant portion of your worth.

I'm sure that 500K he could take out would really make a huge difference to him. That is peanuts for him, why does he worry about that? I'm sure he has leaks that are enormous to peons but insignificant to him.

When he didn't have capital and he sunk it in a house, he of course made a foolish investment, since his RoR on his other investments were far greater than his 32K->500K over 60 years. If he would have invested that 32K in his other investments, he might have a few extra billion by now, instead of just 500K.

And yes, even Warren Buffet has leaks. Which is why you simply rely on arguing from authority rather than any actual sense.