Can someone give me a quick Cliff Notes of Dave Ramsey?

After setting up my girlfri...er, fiance's, retirement benefits last night (she just started her new job), and seeing some of the pushback with things that frankly just were non-negotiable--like contributing the maximum company match--I think that she needs a lesson from someone other than me. The good news is that most of the pushback was due to lack of understanding. The only thing that I had an issue with was her seeming inabiliity to grasp that some of her friends and family might not get Christmas gifts, because you pay yourself FIRST. Again, 30 days into the job, there is a liquidity problem.

From what I've read here and elsewhere, it seems that Dave Ramsey's book is probably a good one for her. I've never read the book. I've meant to, but just never got around to it--not that important to me seeing as I save quite a bit, and don't have any debt. But before I buy it for her, can someone give me a quick cliff notes on the book?

I think the the main point he makes is, Live like no one else, so that later you can live like no one else. 1- make a budget where every incoming dollar is alloted for something, including savings plan 2- stick to the budget 3- pay cash for everything, no more credit cards 4- pay off highest interest loans or smallest $ amount loans first, then apply the $ that was going to that bill toward the next highest $ loan, until all creditors are paid.

http://www.daveramsey.com/new/baby-steps/

Baby Step 1 $1,000 to start an Emergency Fund

An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen. Learn more

Baby Step 2 Pay off all debt using the Debt Snowball

List your debts, excluding the house, in order. The smallest balance generally should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first. Learn more

Baby Step 3 3 to 6 months of expenses in savings

Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund. Learn more

Baby Step 4 Invest 15% of household income into Roth IRAs and pre-tax retirement

When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth. Learn more

Baby Step 5 College funding for children

By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now. Learn more

Baby Step 6 Pay off home early

Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments. Learn more

Baby Step 7 Build wealth and give!

It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It's really the only way to live! Learn more

The problem I see here is with that whole Step 7... mine reads like

"Squander it all on racing and baller travel, die broke, berkeley the kids - let them get their own stash by following steps 1-6"

In reply to Giant Purple Snorklewacker:
If you get to 7, you will have taught the kids 1-6 and they will follow.

Instead of no gifts - get creative with cheap but thoughtful gifts. My new wife and I (mostly her) did various mixes in mason jars - soups, cookies, etc., and similar gifts, our first year or two when we were just starting out. Probably better gifts than the crap we've bought since then. At the time I was a law student and she was a new teacher.

Pushback on contributing to max out the company match? It's free money! Good luck to you (sincerely, I don't mean that in a snarky way).

klb67 wrote: Pushback on contributing to max out the company match? It's free money! Good luck to you (sincerely, I don't mean that in a snarky way).

Yeah, that was for a lack of understanding. Due to company/fund regulations, she was not able to enroll in the 401k until last night (well, Sunday technically), and since she already had 2 or 3 paychecks, those didn't get anything diverted into the fund. She wanted to contribute just the 5% (the maximum match). I finally convinced her she needed to contribute 20% of her final 2013 paychecks for the year, to make sure that she had 5% of her total pay of 2013 in the 401k. She thought it was for every paycheck, not total annual contributions. It doesn't amount to much ($100 more contributed by her, and $100 of free money), but I want an extra $100 for free.

Normally there wouldn't be any pushback from her, but she has January rent and December utilities, as well as probably $100 in gas that she will need to pay for and she wasn't sure that she was going to be able to cover it all. Even though she will probably still have $800 left after all of that has been paid for--that is where the "fight" started, because I said that the remainder was for her Christmas gifts, and she said that it should be the other way around, since Christmas comes first. I will get it into her head eventually.

She needs to learn how to budget. Especially because I told her I would loan her up to $1,000 (from what was my baby steps 1 and 3, wihtout my knowing it) if need be to cover stuff and she was still freaking out.

I've read his books and listened to his show (in podcast form) on and off. While he has some good ideas he pisses me off in short order so I end up stopping for a while. His fundamental message is fine. Pay off debt, don't spend more than you earn, pay for E36 M3 with cash and save. I have some big problems with some of the specifics. First of all one of my big gripes with his show is he keeps complaining about people talking in sound bites then does it himself. But here are some specific issues I have with his overall process.

1. Don't stop saving for retirement while paying off debt.

2. Don't pay off the smallest debts first, pay off the highest interest you dumb ass.

3. HE keeps talking about a 10-12% rate of return as pretty much guaranteed with index linked mutual funds. I guess he wasn't watching the market through the 70's, the dot com crash the 08 fiasco etc.

4. While I totally agree people shouldn't live on credit his mantra that all credit (except a 15 year mortgage with 20% down) is evil is also wrong. I don't see a low interest car loan over a reasonable period of time as the end of the world, especially if you’re not mechanically minded and for the average person a $2,000 car is going to be a maintenance money pit (Not being a GRM'r is not a crime you know).

5. His berkeleying mantra that gold and commodities are always a bad investment is nearly as bad as his guaranteed 10-12% returns with index funds. So you lost some money on them once upon a time numb nuts, so has everyone in commodities, the stock market, index linked funds etc.

6. We use credit cards for everything, then pay if off in full every month. That gets me free airline tickets around the country and across to the UK regularly for no risk with lots of protection. According to his royal highness I am on the verge of bankruptcy and will die with debt any minuet. Nope, you’re wrong again.

7. HE says don’t’ worry about your credit score and wears a low credit score as a badge of honor as he doesn’t use credit. That’s fine as the head of a multimillion (billion??) dollar corporation, but if you’re a normal person applying for a normal middle class job, lots of companies check your credit score. You may be Dave’s prize pupil, but if you’re up against an identically qualified person who has used credit responsibly and so has an 800+ credit score where you have one in the 500’s as you never use credit, kiss that job offer goodbye, because you appear on paper to be worse at looking after your money.

As I say, his general idea isn't bad, but take it with a grain of salt and also read things like the Millionaire next door and other finance books etc. Avoid 'rich dad poor dad' unless you want to leverage yourself into bankruptcy though. I think if she has a daily commute, regular run, walk whatever his podcasts are good to listen too for a time. If for no other reason than you will get to hear lots of mistakes people have made as well as people who have done it right, this acts as inspiration. As I say, I do that from time to time, but after 2 weeks to 2 months I get to the point I want to jump through the headphones of my iPod and beat the ever living crap out of his annoying condescending ass. Then it's time for a 12 month break from him

And someone from this website turned me on to this guy:

Mr. Money Mustache

A little goofy name, but interesting $$ philosophy. Also, regarding investing (not a whole financial plan) John Bogle's "Little Book of Common Sense Investing" is an easy read, and makes investing easy.

As for budgets, I don't go crazy with that. I fund my pension obligations to the max allowable, pay all my bills (no cc debt), and don't sweat every detail of the rest. We revisit it annually after taxes to ensure we are doing the most we can, and when the wife gets a job this summer, we'll start putting serious coin toward the house. I'd love to have it paid for by the time I retire from the military.

From someone who grew up in a family with horrible financial habits, and who's had to fight to break them, keep it up. You're doing a good job. She'll fight you, just be patient and persistent. Your support and patience will help her get herself there. She needs to decide she can do it, and the more supportive you are, the easier that decision is.

In reply to Adrian_Thompson:

I haven't read his stuff, but I wonder if the pay the smallest one first is to get the debtor eliminating something quickly, to help with esteem as well as to help spur further savings/debt reduction - having an available payment now gone to now apply to something else. Makes sense unless you do that and ignore 20% interest on a CC.

I do think you have to take it all with a grain of salt and find your own plan, using these resources, and applying to your situation. I could not get my wife to track daily expenses - she just couldn't stand it and it was a big source of stress. So we used a debit card or credit card for everything for one month, and that let me figure it all out without having to hound her to keep receipts. We weren't paycheck to paycheck at that time (or really ever) and had some savings, so we could do that. Neither of us have ever substantially overspent to any degree either, which helps a lot. If either of us were significantly in debt and still spending like we weren't, I'd have taken a much more firm and strict approach to debt and spending issues.

Adrian_Thompson wrote: A lot of stuff

Mostly looking for guidelines, so we will modify them for sure. Is there anything that you recommend other than Ramsey?

Teh E36 M3 wrote: And someone from this website turned me on to this guy: Mr. Money Mustache A little goofy name, but interesting $$ philosophy. Also, regarding investing (not a whole financial plan) John Bogle's "Little Book of Common Sense Investing" is an easy read, and makes investing easy. As for budgets, I don't go crazy with that. I fund my pension obligations to the max allowable, pay all my bills (no cc debt), and don't sweat every detail of the rest. We revisit it annually after taxes to ensure we are doing the most we can, and when the wife gets a job this summer, we'll start putting serious coin toward the house. I'd love to have it paid for by the time I retire from the military.

Mr. Money Mustache is good, but some of it is a little too... Extreme? I am on there a few times a month, but we'll wait before exposing the fiance to it. It would probably just confuse her.

I'll have to pick up Bogle's book. We did pick all Vanguard funds last night.

I don't go crazy with the budget either, and don't need her to--I do need her to figure out a ball park figure for stuff though, and find out if she will have enough to cover it rather than "I might not be able to afford it all, so we can't put that much into the 401k". She absolutely could afford to put that money into the 401, she just didn't do some simple addition.

bluej wrote: From someone who grew up in a family with horrible financial habits, and who's had to fight to break them, keep it up. You're doing a good job. She'll fight you, just be patient and persistent. Your support and patience will help her get herself there. She needs to decide she can do it, and the more supportive you are, the easier that decision is.

The good news is that she and her family do not have horrible financial habits--but her dad didn't really teach her much more than don't buy a new car. Aside from that, the highest math that she has taken was the basic requirement for graduation for college.

mtn wrote: I finally convinced her she needed to contribute 20% of her final 2013 paychecks for the year, to make sure that she had 5% of her total pay of 2013 in the 401k. She thought it was for every paycheck, not total annual contributions.

I believe she is correct.

Most payroll systems will only match on the deferral up to the maximum (5%) per pay period. They won't do it retroactively for the annual contribution.

It's not a bad idea to put the extra away, but I doubt she'll get any matching on anything other than the first 5% of that particular paycheck's withholding.

xflowgolf wrote:

mtn wrote: I finally convinced her she needed to contribute 20% of her final 2013 paychecks for the year, to make sure that she had 5% of her total pay of 2013 in the 401k. She thought it was for every paycheck, not total annual contributions.

I believe she is correct. Most payroll systems will only match on the deferral up to the maximum (5%) per pay period. They won't do it retroactively for the annual contribution. It's not a bad idea to put the extra away, but I doubt she'll get any matching on anything other than the first 5% of that particular paycheck's withholding.

My payroll (different company) matches at the beginning of the following year. From what I read in her benefits package information, which was not very detailed, hers is the same. If it is, then we're getting that free money. If it is not, then that money will grow longer.

this may sound odd. But depending on how much you want to really invest your time into knowing what to invest in, you may consider getting a financial analyst.

My wife and I got one before we got married- which really helped, since we knew our spending habits and our retirement goals way before it became an issue.

While I have friends who love doing their own work, and resarching their own stuff, that's just not interesting to me- I'd rather spend the time doing something else.

So, for this case, that outside guideline will tell you both, face to face, some of the same stuff. And help make adjustments- like the example of multiple debts- you can consolodate all of that into one, with probable better rates, AND a better credit score since you are working the debts well. Cost can be an issue, but that is why you interview many of them before deciding. You can get an idea their core recommendations, if they are trying just to sell one thing, or if they really are going to look out for you.

If you are ok with doing all of that leg work- that's cool. But if not, your own analyst will really help.

There is a really big problem with a "fight" developing over "non-negotiables" when you are not even married yet.

I know you don't mean it this way, but it sounds like you are being pretty dictatorial.

Hate to be "that guy" but at some level it's none of your darned business.

Consider your approach VERY carefully. You are establishing relationship patterns that will be with you for the rest if your life.

You can't dump a book on her that advocates a lifestyle mantra that you haven't even read. Don't try to "fix" her. I'll bet you could learn a few things from her on the subject.

Seriously... Take it from someone who has been there.

alfadriver wrote: this may sound odd. But depending on how much you want to really invest your time into knowing what to invest in, you may consider getting a financial analyst. My wife and I got one before we got married- which really helped, since we knew our spending habits and our retirement goals way before it became an issue. While I have friends who love doing their own work, and resarching their own stuff, that's just not interesting to me- I'd rather spend the time doing something else. So, for this case, that outside guideline will tell you both, face to face, some of the same stuff. And help make adjustments- like the example of multiple debts- you can consolodate all of that into one, with probable better rates, AND a better credit score since you are working the debts well. Cost can be an issue, but that is why you interview many of them before deciding. You can get an idea their core recommendations, if they are trying just to sell one thing, or if they really are going to look out for you. If you are ok with doing all of that leg work- that's cool. But if not, your own analyst will really help.

Already in consideration. But whether we do or don't, we both need to at least understand it independently of what some adviser is telling us.

Perhaps your wife-to-be would relate better to someone like Suze Orman. I'm quite certain that she has written numerous books on personal finance.

http://www.suzeorman.com/

In reply to SVreX:

Wise words, and relevant to what I meant about her having to decide for herself if she wants to make changes.

SVreX wrote: There is a really big problem with a "fight" developing over "non-negotiables" when you are not even married yet. I know you don't mean it this way, but it sounds like you are being pretty dictatorial. Hate to be "that guy" but at some level it's none of your darned business. Consider your approach VERY carefully. You are establishing relationship patterns that will be with you for the rest if your life. You can't dump a book on her that advocates a lifestyle mantra that you haven't even read. Don't try to "fix" her. I'll bet you could learn a few things from her on the subject. Seriously... Take it from someone who has been there.

Paul, I do not disagree. But this has been an on-going discussion that has not gotten anywhere--the past times that we have tried to talk about it, she shuts down because she does not understand it, and we don't get anywhere. My "dictatorial" manner came on because we are in a time crunch to get this done before her next paycheck was cut, which is today. I need for her to understand it, and she clearly needs to learn it from someone other than me. From what I have heard, Dave Ramsey will be a good base (and I will read it before giving it to her). Or maybe Suze Orman would be better.

As for establishing relationship patterns, we have been dating for 5 years. She has established a pattern of not knowing anything about money, or saving, or retirement. This isn't me establishing a relationship pattern, it is trying to beat the calendar. If she learns what I am talking about, at least in a general sense, there would be no more "fights" of this nature. She wants kids, but to me you cannot begin that conversation until you have a decent savings pattern in place. (Yes, I want kids as much as she does).

And learn a few things from her on what? (EDIT: That wasn't meant to be snarky, serious question for clarity)Trying to fix her, or finance? Because finance, like I said, she knows next to nothing whereas I have a degree in Math, Econ, and Business. Trying to fix her? I'm not. I'm trying to teach her. She doesn't need to be "fixed", she just needs awareness. My dad taught me when I was still in middle school, and continued the practice to this very day. Her dad, did not. In fact, last night he texted me if I was at her house. I said "Yes, working with [fiance] to set up her retirement benefits". His response? "Thank God she needs to save"

Once again, it is only a "fight" because it isn't even a discussion, because she can't comprehend it at all.

Adrian_Thompson wrote: As I say, his general idea isn't bad, but take it with a grain of salt

I think what you are missing is the fact that he isn't describing the "best" way to do finances (IMO), but the way that "anyone" SHOULD be able to do finances. The older I get, the more I realize that while there is always a best way, rarely is it the right way (especially when it comes to actually getting people do to something). Someone doing something 80% of "the best" is better than doing NOTHING.

The purpose of starting with the smallest loan is that it allows you to pay down debt while ramping up the payments the more debt you cut down. It's a forced system that takes control away from the people doing it, because if they have a choice in the matter, they'll probably just squander the money to begin with once they pay off a big loan.

I agree with what everyone said here. Especially Adrian_Thompson. Dave Ramsey's tips and program are really good for someone who is forehead deep in credit card debt and looking to get out from under it. But I do think he goes over the top at times. He calls for people to be on a rice and beans diet, get rid of any entertainment expenses, yada yada yada. Again, when you are drowning, that is probably a good idea to get yourself afloat. Otherwise, some moderation is called for.

Here's my takeaway from everything I've heard/read.

Communication. Talking about the budget and listening to each other is critical. You don't want to make your partner feel resentful about the budgeting/spending. Work it out together, and talk about it regularly. Even monthly if needed. Think of it a bit like a business. Make sure you are on the same page. It will make everything easier. Don't play a blame game. Once you are married, you are going to be a team. It will not help to say something is caused by one or the other. Just acknowledge that something is not going the way both of you want and try to adjust it.

Take advantage of free money. Even if you can't get to the 15% recommended level for retirement savings, at least get all the matching dollars that are on the table.

Get an emergency fund together. The $1000 pot is a good starting point. Once you have that, pretend that it isn't there. That way you won't use it because you have it. As income increases, try to put some of the increase into the emergency fund just to grow it. Once you can get to the 3-6 months of expenses, then you don't need to try to grow it unless income/expenses increase. Doesn't have to be the highest priority to get to 3-6 months, but you want to end up there.

Pay yourself first! This is for everything. Retirement, vacation, gifts, car savings, house savings, emergency fund, entertainment, whatever. Just figure out what you want/need to do and try to put money aside for it. This will have to be balanced against housing/food/utilities costs. We make it a point to put a certain amount per month into vacation fund, car fund, savings for the kids, emergency fund, etc. We do that right off the top. All of our credit card, housing expenses, utilities, and running costs all come after that. When you are starting out, it might not be much. And it is ok if you can't do it early on because you just don't make enough. But as income improves, try to put the increases into the pay yourself pool. As with the debt snowball stuff, the more you make paying yourself a priority, the quicker you can reach you goals...

Pay off the credit cards every month. This is the opposite of the "Take advantage of the free money" step. You don't want to give someone money for not much in return, if anything. If you have trouble keeping the credit card expenses under control, put the credit card away and try to do cash. Use the credit card for emergencies. If you can't pay it all off, so be it. Just don't do the minimum payment. That way leads to drowning in debt.

Take advantage of free interest financing deals for big purchases. IF we are buy something like tires, furniture, materials for home improvements, we take advantage of a X month no interest deals. We figure out how much we need to pay per month to get it done before month X. It allows you to make a little more interest on your money, rather than the store/bank.

Pay off other debt as fast as you can. Housing debt is not one to worry about paying off as fast as possible. Unless that is your only debt.

And remember, nothing has to be set in stone. Just try to do your best. Some months you'll do great and have extra to put aside or spend, some months you will have greater expenses and might need to dip into some savings. It's ok. Just try to have a few things that are non-negotiable (like 401k match, rent/mortgage/food/electric/gas/water) and then work out the others as best as you can.

Yeah - Ramsey's debt snowball is a good plan for people who NEED to see that sense of accomplishment, but won't get it off of a slightly reduced balance on the high interest debt. When I got serious about my debt, I did it high interest first, because to me seeing that $20k become $19k was just as big a kick as seeing $1k become $0, but not everyone functions that way.

As for his lines in the sand, I'm weary of any message that x is ALWAYS good or y is ALWAYS bad. They have their place, but I'm not sure finance is one of those places. That said, since so few people do use debt responsibly, I think it's a reasonable approach to message that debt = bad and rely on those who are capable to filter, rather than try to send a nuanced message that doesn't get through to those that do need it. For the vast majority of people listening to him, Debt = bad, so I forgive the lack of exceptions.

And even people who do get the nuance still berkeley it up a fair bit IMO. Someone above mentioned that a low interest car loan isn't bad debt. Well, it's not as bad as a high interest credit card, but it's worse than a paid off car. Really, the only "good" debt in my view is debt that is incurred in captial acquisition that will enable enhanced revenues. If the debt isn't making you money, it's bad debt. But there certainly are degrees of bad.

Ramsey's advice is great for the 80% of the U.S. population that can't manage credit.

Many of his sound bites are overly simplistic for the sake of being easily digestible. Great if you're mired in debt and trying to get out; out-and-out terrible if you're trying to accumulate wealth with any amount of saavy

Giant Purple Snorklewacker wrote: The problem I see here is with that whole Step 7... mine reads like "Squander it all on racing and baller travel, die broke, berkeley the kids - let them get their own stash by following steps 1-6"

You do know that the way the rich stay rich is by passing down their money... right?

I hope this post was in jest. Wealth building is critical to the eventual goal of creating a sustained lineage of a well off bloodline. My parents are the first in the respective families to have done so for my sister and I (in the form of our inheritance's once they pass), of course, once they pass away it will be a formality as I will be fairly well off by that point through my own means, but by then my own (eventual) children, my children's children, etc etc will basically be provided for into perpetuity unless they cock it up somehow :p