Dave Ramsey and Financial Peace University: the Good, the Bad, and the Ugly, Part 1

Few people today interested in personal money management have not heard the name Dave Ramsey. Ramsey has built an empire of financial counseling that includes a nationally-syndicated radio show, a slot on Fox Business channel, and a NY Times bestseller, The Total Money Makeover. His website claims that over 1,000,000 families have taken Financial Peace University (FPU), his financial class designed to help people take charge of their money. On average, the website claims, attendees pay off $5,300 in debt and save $2,700 in just 90 days. FPU is billed as “a 13-week video curriculum—taught by financial expert Dave Ramsey—that incorporates small-group discussions to encourage accountability and discipleship. Financial Peace University is highly entertaining for everyone, with a unique combination of humor, informative financial advice and biblical messages.”

With such stunning results, it’s easy to understand why so many people are turning to Ramsey for financial advice. Since FPU is marketed to churches (along with other institutions such as businesses and the military), it is worth the effort to examine the program and evaluate it biblically. While Ramsey professes to be a Christian and uses Scripture liberally (in his church version of FPU), I discovered profound problems with the program, both in its content, and in its use by churches as an evangelistic tool. What follows is not a thorough critique, but a general attempt to evaluate the program biblically and theologically, while being as charitable as possible.

The Good

FPU is a professionally-presented, entertaining course of financial management. It does not teach advanced skills such as stock market investing or business finance, but focuses on the individual’s escape from debt and saving for the future. My wife and I learned many invaluable lessons, some of which were reminders, others that were new and crucial.

First, FPU teaches the simplicity and power of saving. Using vivid examples and simple charts, Ramsey shows the power of compound interest (although he presents wildly optimistic interest rates as normal). This taught us that anyone could save a little over many years and gain considerable interest through consistent investing. Also, Ramsey emphasizes living on a written budget, something we had not done so explicitly in the past. This has proven to be one of the most difficult disciplines to master. But Ramsey is right, that if you don’t tell your money what to do, you’ll wonder where it went. Budgeting is simply naming every dollar at the beginning of the month, and assigning it a place. I’ve heard this before, but it was good reminder.

Second, FPU teaches people how to get out of debt. The most powerful testimonials in FPU are those stories of people getting out of massive amounts of debt through the principles learned in the class. I personally know of one person who worked her way out of $60,000 of debt in less than three years through FPU. This alone may make the course worth many times its $100 price tag. Ramsey also gives helpful advice regarding creditors, credit scores, collection agencies and telemarketing.

Third, FPU teaches the inside story of marketing, and how to buy things wisely, with cash, and for a bargain price. He teaches the power of negotiating, even for things you thought had a fixed price. He also teaches invaluable lessons regarding identity theft and what kinds of insurances to buy and not to buy. He gives advice about real estate (Ramsey’s area of expertise), job interviews, retirement, and college savings. Some of the advice in these areas is debatable, but generally helpful. It would be wise to get advice from other sources as well in order to get differing perspectives on these vital areas.

While taking the course, my wife and I were given access to a wide variety of helpful tools through the FPU website. Readers should be aware, however, that once the thirteen weeks are over, many of these services require a subscription fee to continue using. In fact, for many of the topics covered in FPU, Ramsey’s company offers services that require payment once the class has ended, including insurances, financial advice, and identity theft protection. One is quickly reminded that this is a business, not a ministry, even though at times, the “feel” of it is church-like.

For all its benefits regarding financial advice, however, I found several troubling problems with FPU. Before I treat what I consider to be the truly bad elements of FPU, I would like to point out its ugliness first.

The Ugly

It doesn’t take more than a few weeks of exposure to the FPU videos before Ramsey’s arrogance and self-glorification becomes obvious. Dave Ramsey is not a humble man, and I would argue strongly that what some perceive to be his self-confidence is actually a bad case of egotism. After a few weeks of the class, I could barely control my gag reflex anymore when at the beginning of EACH video, all of his accolades (see above) were mentioned AGAIN. No doubt, this bald self-promotion is applauded by the world, but in a Christian atmosphere, it was downright sickening. On the way to FPU class one week I said to my wife in disgust, “I can’t stand to see his face again, and hear him brag about his money.” But this is not the truly ugly aspect of FPU.

The ugliest facet of FPU is actually something internal to me. I can’t really blame Dave Ramsey for this, but FPU does bear some responsibility. I found growing in my heart, after the first few weeks, a subtle materialism and greed I had never experienced before. So much of the advice given in FPU is designed to help people earn the kind of wealth that would free them from ever having to worry about money again. This is a rather explicit message throughout FPU and is reinforced by the oft-repeated mantra, “Live like no one else now, so you can live like no one else later.” The first half of this motto is helpful. It encourages frugality, saving and financial planning, but the second half promotes a lavish lifestyle and self-sufficiency. Audiences are wowed by compound-interest tables showing what it takes to retire with two, five and even eleven million dollars. Ramsey tells story after story of his wealth and what he has been able to purchase in cash, the financial freedom his millions have earned him, and how you too can live this way, thank you very much.

Now, I don’t blame Ramsey entirely for the greed I found being nurtured in my heart. He was simply telling the truth about the amazing power of compound interest. I found myself fantasizing about how comfortably we could live if we could just sock away the recommended amount for the recommended number of years. For a couple weeks my head was in the stars, and all thoughts of sacrificial service and daily bread were gone. I eventually came to recognize my greed and confess it as such. I had tried never to live for money in the past, so why were promises of millions suddenly turning my head at age 43?

There is a clear message throughout FPU—if you are not getting richer, you are a loser. In fact, in one of the videos, Ramsey says as much when he quips that if you are making the same amount of money you did twenty years ago, you are a loser. This is the ugly side of FPU. It knows nothing of sacrifice, of losing one’s life, of taking up one’s cross. It is a theology of glory and power and wealth, not of suffering and humiliation. Money seems to attain godlike status at times in FPU, as if it were the solution to everything. At one point Ramsey claims that having more money means less money fights in a marriage. Really? Are we to believe that wealth by itself has this kind of power?

Another ugly facet of FPU is the wildly optimistic picture Ramsey paints in his descriptions of saving and investing. By taking 12% as the average return on investments, he implies that extreme wealth is a normal result of saving just a little. For example, one table shows that a person would accumulate over $20,000,000 if he invested the cost of his lunch instead of going out to eat. This rather unreal scenario, however, is based on never going out to eat for lunch over a 60-year span (between ages 16 and 76) and earning 12% interest for those 60 years. Ramsey fails to take into consideration the cost of making one’s own lunch, which while minimal in comparison to the $8 a day he allots in the illustration, would still cut into his profit considerably. In another example he compares buying a new car with buying a clunker, but doesn’t consider the added expense of repairs a used car would necessitate.

One last charge of ugliness. FPU is nothing more than brilliant marketing, with a dazzling set, cool graphics and carefully designed elements to make the viewer feel good. Almost none of Ramsey’s material is original; it is merely a collection of financial wisdom packaged for a 21st century video-trained audience. I was flipping through an old Reader’s Digest magazine from April 1998 and found an article entitled “How to Plan for Your Financial Future” by Richard Miniter. Everything of value I learned in thirteen weeks of attending FPU I found in this article. As I said, there is not much original in FPU, just the glitz and glamour.


Mark Farnham is Assistant Professor of Theology and New Testament at Calvary Baptist Theological Seminary (Lansdale, PA). He and his wife, Adrienne, grew up in Connecticut and were married after graduating from Maranatha Baptist Bible College (Watertown, WI). They have two daughters and a son, all teenagers. Mark served as director of youth ministries at Positive Action for Christ (Rocky Mount, NC) right out of seminary and pastored for seven years in New London, Connecticut. He holds an MDiv from Calvary and a ThM in New Testament from Gordon-Conwell Theological Seminary (South Hamilton, MA). He has also studied ancient manuscripts at Harvard Divinity School and philosophy at Villanova University. He is presently a doctoral student at Westminster Theological Seminary (Glenside, PA) in the field of Apologetics. These views do not necessarily reflect those of Calvary Baptist Theological Seminary or its faculty and administration.

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There are 104 Comments

Jonathan Charles's picture

AMEN! Dave Ramsey is the current "it" thing and I'm supposing that churches are using his material rather than Crown because of Ramsey's name recognition and the draw he will have. It would be very, very poor biblical stewardship to pay a guy $100 to teach me what I can learn from others for free or for much less.

Paul J. Scharf's picture

Mark Farnham wrote:
Almost none of Ramsey's material is original; it is merely a collection of financial wisdom packaged for a 21st century video-trained audience.

Sounds like Mark REALLY did not like FPU, since "the truly bad elements" are still to come. I guess I would just ask, however, if the above quote is correct, how come so many fundamentalist churches and institutions are head-over-heels in debt and giving their constituents (church members and students) a horrible financial example which is lived out every day in their personal lives? Isn't that REAL worldliness?
To put it bluntly, is this widely-known financial wisdom someday going to make it into the financial aid offices of our Christian colleges?
For the sake of full disclosure, I have not officially gone through FPU, although I have listened to the audio version. I have spent scores of hours listening to Dave Ramsey, and my copy of TTMM is marked up like my Bible and other favorite textbooks. I do believe that a case could be made that Mark is, at the very least, giving his own personal interpretation to Ramsey's statements without including any context for someone who has never listened to him.
Personally, I cannot say enough about the benefit I have received from Ramsey's teaching.

Church Ministries Representative for the Friends of Israel Gospel Ministry

Susan R's picture

EditorModerator

My 11 yo dd is taking the Foundations course for her Consumer Math credit. She enjoys it thoroughly, and the difference in her perceptions and attitude when we go shopping has been much different- she's very interested in understanding the relation of quality and pricing, and now she doesn't get a case of the 'gimmees' every time we see pretty things. Wink

I think one would have to 1) be seriously lacking in spiritual discernment and/or 2) really immerse themselves in a 'personality' in order to be drastically affected in an adverse way by DR. Too many weak-minded people are looking for a guru- they need a weight-loss exercise guru, a financial guru, a 'feel-good-about-myself' guru, a marriage and family guru, a theology guru... it never seems to end. So I understand the cautions about following someone, in this case Dave Ramsey, wholeheartedly and without reservation. I've not listened to everything he's ever said nor read everything he's ever written- but I think he fills in a gap that exists in many churches and Bible colleges.

Paul J. Scharf's picture

Mark Farnham wrote:
In fact, for many of the topics covered in FPU, Ramsey's company offers services that require payment once the class has ended, including insurances, financial advice, and identity theft protection.

Honestly, this statement makes me wonder if Mark, who is above reproach as a theologian, is qualified to write these articles on Dave Ramsey, since this statement is a major gaffe which serves to put Ramsey in a very negative light.
Ramsey's company does not sell insurance or identity theft protection. For details, one can simply go to the home page of www.daveramsey.com.

Church Ministries Representative for the Friends of Israel Gospel Ministry

Jonathan Charles's picture

What is there to "get" about stewardship? Spend less than you make. If you are in debt, make draconian cuts to get your expenses down. My problem with material like Ramsey's is that it doesn't deal with the core of the issue: the human heart and its sinful bent towards coveteousness and a lack of contentedness. Is a person spiritually better off to be debt free and be boasting about their wealth than to be in debt? I don't think so.

Darren Mc's picture

My direct experience with Ramsey has been limited to his radio and TV shows; my wife has taken his FPU course. I have a number of friends who are Ramsey aficionados, and I have noticed many of them are totally focused on money, and judge one's spirituality by the amount of money you have put away or whether or not you buy cars with cash. I have to agree with the other commenters that his advice is good to help people think about their finances in a correct way, but we always need to be careful and remember that Scripture alone is our ultimate guide book, and Jesus tells us to seek His kingdom first and all these earthly things will be added as He sees fit.

No wisdom, no understanding, and no counsel will prevail against the LORD. Proverbs 21:30

Wayne Wilson's picture

I haven't taken the course, and find the razzle dazzle a little off-putting. I did see one video shown in our men's group that was completely devoted to using that extra money you save to minister to other people. Giving, not just to the church, but to those in need, seems to be a big emphasis of Ramsey. That side needs to be mentioned, and maybe that's the dream Mark should have about his later years. Also, people I know that have taken the course are indeed generally much more frugal and wise in their use of money. Being wise, and that leading to some level of prosperity in the later years seems to me to be very much the counsel of Solomon in Proverbs.

Jason Boling's picture

My only personal experience with Dave is his daily radio program. To be honest, I have been really turned off due to his crude language. I'm not sure if this shows up in FPU, but I really expected something better from him. Sure, some of his ideas and advise are spot on, but I have found it difficult to listen to someone who uses such language. It seems so beneath what he is trying to accomplish...unless he is trying to come across as "your everyday kinda guy".

FWIW, I now change the station when he is on.

Susan R's picture

EditorModerator

Jonathan Charles wrote:
What is there to "get" about stewardship? Spend less than you make. If you are in debt, make draconian cuts to get your expenses down. My problem with material like Ramsey's is that it doesn't deal with the core of the issue: the human heart and its sinful bent towards coveteousness and a lack of contentedness...

It may seem intuitive if someone is well-grounded in Scripture, but the reality is that quite a few people are NOT well-grounded in Scripture, and don't know enough about finances to write a check, much less balance a budget. I've known young people who've had to have their paychecks explained to them because even after taking Consumer Math in high school, they didn't know the difference between net and gross, or what FICA is. They are shocked at how much comes out of their paycheck in taxes. "What? I have to pay federal, state, and local? When did that happen?" The cluelessness about how to deal with money is wide-spread and pervasive.

Maybe in some churches the principles of financial stewardship are taught and issues of covetousness and greed are being addressed, but for people who've never received any teaching about the mechanics of stewardship, there is still a real need. DR and Crown and other people/ministries fill that need. DR is not a pastor/preacher. The website clearly states that their emphasis is "reducing, avoiding, and eliminating debt". His presentation is very entertaining- but so what? I guess I just don't know why people get upset when someone fills a gap and makes money from it. I'm all for people getting paid for providing information and services, even Christians.

Paul J. Scharf's picture

Jonathan Charles wrote:
What is there to "get" about stewardship? Spend less than you make. If you are in debt, make draconian cuts to get your expenses down...Is a person spiritually better off to be debt free and be boasting about their wealth than to be in debt? I don't think so.

Jonathan,

Do you think that message will carry water with someone who just lost his house in foreclosure?

The second line offers a false choice. Is a person spiritually better off to be out of debt than in debt? Absolutely. The message is simple to be sure, but as Dave says, it is "a concept that Congress (and, I would add, college admissions counselors and lots of church leaders) can't grasp."

Quoting Susan: "I guess I just don't know why people get upset when someone fills a gap and makes money from it."
In general this can be a tactic to use when one is either guilty of his own shortcomings, or else threatened by either the principles or success of someone else.

Church Ministries Representative for the Friends of Israel Gospel Ministry

GregH's picture

I agree with the original article. I sat through most of Ramsey's class last year. It is not hard to see what Mark is referring to.

First, here is what is good about Ramsey. He helps people get excited about paying down debt, saving, and managing their finances.

Here is the bad:

1) He portrays himself in an extremely arrogant way.

2) He puts an unnatural amount of emphasis on growing wealth. It feels anything but Christian regardless of how many Bible verses he quotes. And I really believe (based on my experience) that people often come away thinking about money in a less Christian way (more materialistic or viewing money as a solution to problems.)

3) His financial advice is often just wrong and probably dangerous to some people.

To be more specific, I would point to his examples about home mortgages. He advocates a 15 year mortgage rather than a 30 year. He gives a chart that shows that if you pay a few hundred more dollars/month and get the 15 year mortgage, you will save tens of thousands of dollars in interest over 30 years.

What he conveniently leaves out is opportunity cost of the extra few hundred dollars/month. If that money was invested well, it is highly likely that it would at grow at least enough to cover the interest expense. It is quite conceivable that someone will come out ahead with a 30 year mortgage if you look at all the factors.

The example in the article about taking a lunch to work is a good example of bad data as well.

I am all for paying off debt. But doing it too aggressively could be dangerous, especially in the economic situations we have now. Let's say someone decided to use every scrap of cash and pay off a HELOC. If they pay off $5K in 2010, the bank is likely to reduce their limit by $5K. Now they have no cash and no way to get the $5K back on the HELOC. What happens if they lose their job? (Yes, Ramsey says have an emergency fund, but not big enough for the times we are in right now.)

4) Ramsey uses the church to market his stuff. Almost anybody that sells anything knows how valuable a church can be. That is why we all have people trying to sell us knives and tupperware and makeup everytime we go to church. Ramsey has capitalized on this brilliantly. He sprinkles in enough Bible verses to get the churches to run infomercials disguised as seminars for him and then charges participants a few hundred dollars. If you like it enough, you can go to his more advanced seminars or his small business seminars which cost thousands of dollars.

Ramsey has basically found out a way to use church for advertising. The marketing plan is brilliant. But the church needs to know it is being badly used.

ChrisC's picture

Susan R wrote:
It may seem intuitive if someone is well-grounded in Scripture…
spending less than you make is just good math that even unbelievers should be able to understand. there are also lots of financial counselors/advisers who have no religious backdrop to their plan at all. they still are able to help people get out of bad financial situations and learn to manage their money.

Paul J. Scharf's picture

Greg,

Your post (#12) is a great advertisement for why we need FPU so desperately. Your advice under point three is extremely dangerous.

Further, your criticisms of Ramsey are mostly highly subjective and personal without concrete examples. I could not disagree with you more.

Church Ministries Representative for the Friends of Israel Gospel Ministry

Mark Farnham's picture

Quote:
Honestly, this statement makes me wonder if Mark, who is above reproach as a theologian, is qualified to write these articles on Dave Ramsey, since this statement is a major gaffe which serves to put Ramsey in a very negative light.
Ramsey's company does not sell insurance or identity theft protection. For details, one can simply go to the home page of www.daveramsey.com.

Correction needed here. I OWN identity theft insurance from Dave Ramsey's spin-off company, Zander Insurance. So yes, he does indeed sell a multitude of services through shell companies, but they are all ultimately part of Ramsey's financial empire. I have no problem with this, and chose his I.D. theft insurance over other similar products because I thought it was the best deal. But in the interest of full disclosure, people ought to know the connection.

Mark

Paul J. Scharf's picture

Mark,

Do you have proof that these are "shell" or "spin-off" companies connected with Ramsey other than through his endorsements and through advertising? If "people ought to know the connection," we need to see proof that there is a connection. These seem to be serious allegations, since Ramsey does not represent those companies in that way.

Quote from www.zanderins.com:

"Zander Insurance Group®, Dave Ramsey's choice for term life, disability insurance, and Identity Theft Protection, has been serving its customers for over 80 years."

Church Ministries Representative for the Friends of Israel Gospel Ministry

Susan R's picture

EditorModerator

ChrisC wrote:
Susan R wrote:
It may seem intuitive if someone is well-grounded in Scripture…
spending less than you make is just good math that even unbelievers should be able to understand. there are also lots of financial counselors/advisers who have no religious backdrop to their plan at all. they still are able to help people get out of bad financial situations and learn to manage their money.

So a Christian teaching financial planning from a Christian perspective is a bad thing? Sure- one could learn the 'math' of income to debt ratio- but what about the Biblical principles that apply to good stewardship? The lost world can't discern or teach those things, and I don't believe in the artificial separation of sacred and secular- for a Christian, everything has eternal impact.

I don't understand why Christians shouldn't market their products or services to other Christians. From books to Bible colleges, the church is a fine place for people to find out what has been a help to other Christians, and to obtain those materials.

Bottom line IMO- From Ramsey to MacArthur to Piper to Spurgeon- you take what lines up with Scripture and is beneficial to you, and leave the rest.

Mark Farnham's picture

Paul has pointed out a legitimate gaffe on my part. What I perceived to be a Dave Ramsey owned company (Zander) may merely be a paid advertiser of the Dave Ramsey show (I can't seem to confirm if Ramsey has any financial investment in the company). Thanks, Paul, for that correction. I still have concern, however, over Ramsey's promotion of a specific provider for these services as he is perhaps recieiving commission from Zander for promoting their product on his show. He could merely recommend certain kinds of products wthout endorsing one specific company. Otherwise I don't know whether the product is truly the best product.

Susan R's picture

EditorModerator

OK- so now Christians should not be paid to advertise products they want to endorse? Christians shouldn't work on commission? I am really just trying to figure out what it is people are objecting to, and if they apply these objections across the board.

Barry L.'s picture

I did go to your link and he is hocking all that stuff mentioned and more. My guess is he's getting paid handsomely for those endorsements. Watching his show he's definitely not a humble person. If another tv evangelist made as much as him he would be ridiculed.

Having said that, I think Dave Ramsey is doing a great service and it would be good if Christians followed alot of his principles. I think you get the same info from Crown ministries.

Jonathan Charles's picture

Paul J. Scharf wrote:
Jonathan Charles wrote:
What is there to "get" about stewardship? Spend less than you make. If you are in debt, make draconian cuts to get your expenses down...Is a person spiritually better off to be debt free and be boasting about their wealth than to be in debt? I don't think so.

Jonathan,

Do you think that message will carry water with someone who just lost his house in foreclosure?

The second line offers a false choice. Is a person spiritually better off to be out of debt than in debt? Absolutely. The message is simple to be sure, but as Dave says, it is "a concept that Congress (and, I would add, college admissions counselors and lots of church leaders) can't grasp."

Those certainly aren't the only choices. But coming from what Mark and others have experienced, Ramsey presents 2 choices: be in debt or get out of debt and strive for wealth. Does Ramsey present some other choices like "get out of debt, but God may want you to be content and live paycheck to paycheck the rest of your life?" I didn't say that it is better to be in debt than out of debt, I said that it is no better to be out of debt and greedily striving for wealth than to be in debt.

Jonathan Charles's picture

GregH wrote:
Ramsey has basically found out a way to use church for advertising. The marketing plan is brilliant. But the church needs to know it is being badly used.

Will my church get a commission or kickback from Ramsey Inc. for serving up to him my members as his customers?

GregH's picture

Paul J. Scharf wrote:
Greg,

Your post (#12) is a great advertisement for why we need FPU so desperately. Your advice under point three is extremely dangerous.

Further, your criticisms of Ramsey are mostly highly subjective and personal without concrete examples. I could not disagree with you more.

What is dangerous? Choosing a 30 year mortgage rather than a 15 year? Choosing to maximize cash rather than pay off debt?

You may not agree, but dangerous?

Tell me why. I am all ears...

Don Johnson's picture

Susan R wrote:
I don't understand why Christians shouldn't market their products or services to other Christians. From books to Bible colleges, the church is a fine place for people to find out what has been a help to other Christians, and to obtain those materials.

KJV Matthew 21:13 And said unto them, It is written, My house shall be called the house of prayer; but ye have made it a den of thieves.

NAU 1 Corinthians 9:18 What then is my reward? That, when I preach the gospel, I may offer the gospel without charge, so as not to make full use of my right in the gospel.

Obviously that is not to say that money is not a part of church life, or we shouldn't pay ministers, or we shouldn't make books and the like available via bookrooms or tables, etc.

But there is something wrong with making the church a marketplace. And that would include well known 'names' who only appear if a minimum financial return is guaranteed.

Maranatha!
Don Johnson
Jer 33.3

Larry's picture

Moderator

Several thoughts:

I have only listened to DR a little bit here and there, and haven't read anything by him, but it seems like a general financial advice program. I don't hear anything distinctively Christian about it, and not sure how it would be different from the run of the mill financial advice program from a unbelieving standpoint. Mark's comments, both good and bad, resonate with me so far.

I think much of what he says is debateable. It's not as cut and dried as he makes it out to be. Being debt free is not always the best thing. I have had one loan in my life for my first car that I paid off in a 1 1/2 years (instead of three). In twenty years of having a credit card, I have carried a balance over less time than you can count on two hands (aside from 0% interest promotions). I think debt is silly. I am not sure how investing $300 a month to pay off a 4.75% mortgage is better than investing that $300 at 7% and also taking a tax deduction on the mortgage. I think that argument can go either way.

Here's some numbers for consideration/correction (feel free to tell me where my math is wrong, or right).

Quote:
Term of the loan: 30 Years | Loan amount: $100,000.00 | Interest rate: 5.000%

  • Starting date of the loan: May, 2010
    Monthly mortgage payments: $536.82

Prepayments

  • Monthly prepayments of $300.00 beginning from May, 2010, last payment in May, 2040

Calculation Results

  • Total interest paid over the life of the loan (no pre-payment): $93,255.79
  • Total interest paid over the life of the loan (with pre-payment): $38,662.73

Your Savings:

  • Total interest saved: $54,593.06
  • 16 years and 2 months shorter loan

So by prepaying $300 a month you have saved 54,593.06. If you then invest the 836 at 7% for the next 14 years, you end up with 238,839.81. Add those together, you have 293,432.87.

Take that same $300 a month prepayment and invest it at 7% over the same 30 years and you end up with $368,126.25.

So, all things being equal, paying your mortgage off early cost you about 75,000 dollars over thirty years. That's a pretty substantial loss isn't it?

I think even if your mortgage rate and investment rate are the same (5%) you still come out ahead slightly be investing the 300 and carrying the mortgage to full term.

Plus those numbers don't account for the tax deduction of mortgage interest. It also doesn't account for appreciation (which will come back some over time, but hopefully never to where it was).

So DR may argue legitimately that being free from mortgage debt is liberating in that no one can kick you out of your home and foreclose (which is true). But I am not sure that it is an ironclad financial argument. It seems to me that the "piece of mind" for having a paid off mortgage will cost you about 75,000 dollars. Is that worth it?

Other things he has said make me raise my eyebrows in curiosity.

Lastly, to Susan and the ad revenue for endorsement, I think the point is once someone is getting paid to say something is good, there is at least the possibility that they are persuaded by money and not the product. I imagine he can't recommend another service as better.

npaul's picture

Disclaimer up front: I have never watched Ramsey on TV, nor have I taken the FPU course.

A friend of mine is an assistant pastor in a large conservative Southern Baptist church in our city. Part of his responsibilities include counseling church members with debt/finances issues. He had heard Ramsey speak, and asked the senior pastor if Ramsey could come in and take a Sunday night service to speak on family finances, with a view to possibly bringing in the FPU course in small group settings. The senior pastor refused to give him an answer without knowing more about Ramsey, and told the assistant to give him some time to do some research on Ramsey. Within a month the senior pastor happened to catch Ramsey on TV, and heard him use foul language. The senior pastor told his assistant that under no circumstances would Ramsey ever appear on the platform of his church.

I'd agree with others here that Ramsey is not appropriate in church settings. However, there is a huge unmet need for financial counseling, as both young and older marriages are being severely strained with all kinds of financial problems, they are embarrassed to even talk about it. and they don't know where to turn. I am familiar with Crown Ministries, and have urged people to use their resources.

Paul J. Scharf's picture

Mark,

Thank you for the correction (#18).

I certainly respect your right -- or anyone's right -- to have a different opinion about Dave Ramsey than I do. Further, there certainly is room to critique, or even dislike, some of his programs, presentations and methodology. Ramsey is certainly not a Biblical counselor or a Bible expositor, nor does he claim to be, and he has not altered my views of the Bible or the Christian life -- with the possible exception of my awareness of the seriousness of debt.

I personally dislike some of his Christian associations, and agree that his language on the radio gets a bit too colorful at times.

What I do not get is the antagonism which flows from people, such as in the above posts, especially when they basically admit that they know very little about Ramsey or have never even listened to him, or when they are willing to go on the record with statements like "my guess is." That kind of thing does not fly, especially on a fundamentalist Web site. Perhaps it is a reaction against people who love Ramsey so much -- who have "drunk the Kool-Aid" Smile

If someone has a specific charge to bring against Ramsey or has tried his program and found it wanting -- fine! If someone does not care for him, my advice is that they not listen. If there is a better program out there, let's hear about it. Speculation and guessing, however, are very dangerous, and criticisms based on Ramsey's personal wealth are out of bounds. Some people talk as if the whole program is a money-making scheme foisted on mindless, gullible Christians. That is such a ludicrous charge because it is antithetical to Ramsey's entire program. It really demonstrates little more than the ignorance of the person making the claim.

Ramsey is not my "guru." Rather, he is like my personal "football coach" coming through my earphones late at night and inspiring me toward excellence and working toward freedom from the bondage of debt. I have learned more about finances from him -- sadly -- than from any other source. I highly recommend his teaching and resources.

And I listen to many more sermons each week than I do Dave Ramsey broadcasts.

Church Ministries Representative for the Friends of Israel Gospel Ministry

GregH's picture

Larry wrote:

I think much of what he says is debateable. It's not as cut and dried as he makes it out to be. Being debt free is not always the best thing. I have had one loan in my life for my first car that I paid off in a 1 1/2 years (instead of three). In twenty years of having a credit card, I have carried a balance over less time than you can count on two hands (aside from 0% interest promotions). I think debt is silly. I am not sure how investing $300 a month to pay off a 4.75% mortgage is better than investing that $300 at 7% and also taking a tax deduction on the mortgage. I think that argument can go either way.

Here's some numbers for consideration/correction (feel free to tell me where my math is wrong, or right).

Quote:
Term of the loan: 30 Years | Loan amount: $100,000.00 | Interest rate: 5.000%

  • Starting date of the loan: May, 2010
    Monthly mortgage payments: $536.82

Prepayments

  • Monthly prepayments of $300.00 beginning from May, 2010, last payment in May, 2040

Calculation Results

  • Total interest paid over the life of the loan (no pre-payment): $93,255.79
  • Total interest paid over the life of the loan (with pre-payment): $38,662.73

Your Savings:

  • Total interest saved: $54,593.06
  • 16 years and 2 months shorter loan

So by prepaying $300 a month you have saved 54,593.06. If you then invest the 836 at 7% for the next 14 years, you end up with 238,839.81. Add those together, you have 293,432.87.

Take that same $300 a month prepayment and invest it at 7% over the same 30 years and you end up with $368,126.25.

So, all things being equal, paying your mortgage off early cost you about 75,000 dollars over thirty years. That's a pretty substantial loss isn't it?

I think even if your mortgage rate and investment rate are the same (5%) you still come out ahead slightly be investing the 300 and carrying the mortgage to full term.

Plus those numbers don't account for the tax deduction of mortgage interest. It also doesn't account for appreciation (which will come back some over time, but hopefully never to where it was).

So DR may argue legitimately that being free from mortgage debt is liberating in that no one can kick you out of your home and foreclose (which is true). But I am not sure that it is an ironclad financial argument. It seems to me that the "piece of mind" for having a paid off mortgage will cost you about 75,000 dollars. Is that worth it?

Yes Larry, I was too lazy to write out an actual example, but you have demonstrated why the 30 yr vs 15 yr is at least debatable.

The whole concept of "peace of mind" in regards to debt free does not resonate with me. I have had various stages of financial success during my life. I know what it is like to pay cash for cars and I have taken out loans for cars. Whether I had loans outstanding or not has not affected my peace of mind.

Matthew Olmstead's picture

First, I'll offer a rejoinder to the article itself. Then engage in the conversations that have followed.

@Mark

Frankly, which propagandist should I believe—Dave Ramsey or you?

Though you offered a "good" section, it was fraught with disclaimers about its elements. One example is the second paragraph under "The Good" where you proclaimed that his rate was "wildly optimistic" yet you failed to demonstrate how your claim. So why should I grant you your superlative and not DR his?

Along with that paragraph on savings (and elsewhere), you failed to mention the disclaimers that DR himself gives throughout his presentation—e.g. that the investments should only be in growth-stock mutual funds with at least a ten year track record.

Finally, regarding the "good" section, what elements of FPU ever indicate that what it does is a ministry—nevermind the presupposition that ministries should not do what they do to make money. Why would I ever think such a thing. Of course its a business! The way you couches your comments casts a disparaging light on the business of FPU.

Regarding the "ugly" section, you say that you would "argue strongly" that DR is arrogant rather than self-confident. But why didn't you? What's the difference?

When you recall your conversation with your wife about how much DR exasperates you, it seems like DR opens up his checkbook and says "see how much money I have." When in truth, he never comes close to that.

When you speak of the "living like no one else now . . ." mantra as leading to a greedy outlook on money, you fail to note how much DR emphasizes giving sacrificially. Or that he places giving above everything else in the budgeting process!

Regarding the ugliness of marketing, why is it ugly to market something well? Shall I look at Calvary's website, with its dazzling setting, cool graphics and carefully designed elements to "sell" the seminary and conclude that it's ugly? Also, I don't recall DR claiming that the content of his presentation was original. Indeed, he quotes other frequently—Zig Zigler and Larry Burkett to name a few.

You didn't appreciate FPU, we get it. But what were you doing with this post. You acknowledge in the opening paragraph that most people probably know about DR. So, are you telling all of us that we are unwise to heed his advice or subscribe to his methods? Or are you trying to warn those who have never heard of DR that they should proceed with caution? Either way I don't believe you have been fair.

Father of three, husband of one, servant of the Lord Jesus Christ. I blog at mattolmstead.com.

Bob T.'s picture

Well, we need to admire the way many do handle finances.

Dave Ramsey declared Bankruptcy due to the failure of Ramsey Investments. Then he starts teaching people in his church how to handle finances. He begins to read and go to financial seminars. Begins to put together his own financial presentation and promote his own expertise. He is evidently a great marketer. He probably now has no debts as he is making millions telling you how to have no debts. Can he really earn money and live debt free and successfully financially in the real world? Who knows! Those who can do. Those who can't teach.

There has been Larry Burkett, Ron Blue, and now Dave Ramsey. Throw in Suzy Orman as the present secular option. They appear to have similarities to their advice. I purchased a couple Larry Burkett books and two Ron Blue's books cheap used. Good common sense advice. I have watched Dave Ramsey occasionally and will purchase a couple of his books if available used and real cheap.

The best financial advice would be to save money and avoid all seminars of any kind. That includes, church growth, spiritual life, Pastoral, and counseling. Buy any available books offered by those giving seminars when they are available used and cheap. Almost all have some advice that may good and some that may be questionable. If I had followed Larry Burkett concerning the coming financial disaster, I would have lost a lot on investments. He was right about the coming disaster but off by over 20 years. In between was a prospering financial and real estate market.

It is interesting that in America we often have people becoming experts through failure. Get a divorce and write a book about divorce recovery. Then follow up with one about holding marriages together. Get caught in immorality and write a book about how to to recover and forgive. Get caught living as a Homosexual and write a book about the struggle of recovery. Usually these people do well financially after the failure as they tell you and I about it.

I wouldn't waste the time or money on "Financial Peace University." You will have financial peace in the coming blessings of Heaven and the Kingdom. Study about that. Take all the free financial advice about the present life but get it from many sources, pray, and make no one your Guru on the subject.

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