I had heard of Dave Ramsey after the SLA flash survey on financial literacy when a few respondents talked about his program in glowing terms. I found out more about Dave Ramsey after reading this article in the Atlantic Monthly "Lead Us Not Into Debt":
Here is an excerpt:
"Ramsey offers some investment advice (much of which would have struck
horror in my business-school professors), but for most of his
followers, the main attraction is a simple program: give 10 percent of
your income to charity, save 15 percent for retirement, build up a
sizable emergency stash and a college fund for your kids, and above
all, stop borrowing money. Ramsey devotees pay cash for everything they
can. They are allowed only one exception to the no-more-debt rule: a
15-year fixed-rate mortgage."
One of his most popular recommendations involves stuffing cash in envelopes:
"At the beginning of August, I had dutifully sat down with Peter, my
fiancé, to draft a budget. Once we’d given every dollar a name (as the
book puts it), I drove to the bank and withdrew 1,800 of them. Huddled
over the wheel to hide this stupendous wad of cash from prying eyes, I
doled out the money among various envelopes for groceries, parking,
entertainment, clothing, and so on, as recommended by Ramsey—and,
funnily enough, by my grandmother, who invented a nearly identical
system to manage my grandfather’s meager earnings from delivering
groceries during the Great Depression."
As for education debt, Ramsey remains unwavering in his disdain for all forms of debt:
"Some of his most scathing mockery is reserved for people who take
out loans to pay tuition at an expensive private college. No school, he
avers, is so much better than the local college that it’s worth
gambling with your financial future.
There’s some evidence that he’s right about this; a study
by the economists Stacy Berg Dale and Alan Krueger famously found that
students who were accepted by schools with high average SAT scores, but
chose to go somewhere else, earn about the same as those who actually
attend the higher-ranked school. But there is also evidence to the
contrary; and what nice upper-middle-class family is willing to, well,
gamble with their child’s financial future?"
With growing evidence that more shoppers are putting away the credit cards and paying with cash, it appears that Ramsey's message is getting across to some.
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