Every once in a while someone from one of the personal finance guru camps comes to call me an idiot. It just happened again the other day. And for the record, it seems to be Dave Ramsey believers 9 out of 10 times.
Dave Ramsey is a popular personal finance, faith-based idol who has a loyal following and a popular money-making enterprise.
Now don't get me wrong, a healthy discussion of facts around dealing with debt should be a goal so all can learn. But blind belief in what any personal finance guru says seems more dangerous than beneficial.
The other day the attack against me was over borrowing. "You can't borrow your way out of debt," said this fan. Dave seems to give that advice a lot, even on his website. "You're an idiot," was the followup. Now I fully admit I'm an idiot at some things but in this case the belief that you can't borrow your way out of debt is just mathematically not true. You can and many successfully do.
Dave seems to treat people as if they are financial sinners who can't think for themselves. I'm not the only one to think so.
You can borrow your way out of debt. I even cover how to do it (click here). A loan with better terms that costs less will get you out of debt faster. In fact, some creditors are often willing to accept 50%, or less, of the balance to eliminate some debts and send out proactive offers to do so. You could even pay the settlement with borrowed funds. Crowd-sourced loans are available for that or maybe a loan from a family member will eliminate your debt faster.
So clearly not only can a bad loan be replaced with a better loan but debt can be eliminated faster with a loan. And the result of doing this, you can get back to saving and living within your budget faster. A month or year delayed in getting back to saving will cost you dearly later in life when you need it most. Don't believe me? Use this calculator to see for yourself.
But the perplexed look on my face does not end with the borrowing issue. Ramsey's view of bankruptcy is not logical either. Ramsey appears to have tempered his negative opinion about bankruptcy a bit over the years but his believers still seems to think bankruptcy is bad and sinful. It's not. It is a legal process to allow someone to recover from an unsustainable situation. Some mainstream creditors are even eager to lend again to people immediately after bankruptcy.
I wrote about the incongruity of Ramsey's position in Dave Ramsey's Hatred of Bankruptcy and Credit Cards Makes No Logical Sense. And others have shared their concerns as well, here and here.
A blind faith in anything can lead to fanatical problems. The world has proven that to us time and time again. The personal consequences in not asking or seeking answers to blanket personal finance beliefs can cause you immense loss. Don't do it. Question authority and discover reality for yourself.
Oh, and on budgeting, I don't need to sell you a book or tape series to get you on track. Just spend less than you make, save a percentage of your income in a savings account and a retirement fund and enjoy life. There is a wealth of free information on there on money saving tips you can use without going to the seminar.