Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Ever since the financial crisis hit full steam in the fall of 2008, we’ve grown accustomed to thinking of the carnage purely in macroeconomic terms: systemic risks to the financial system, hemorrhaging deficits, an anemic housing market, etc.
Yet lost in that interpretation is the microeconomic aspect, which, while affected by public policy, also depends largely on prevailing cultural and moral norms. America, it turns out, is not just a debtor nation; it is a nation populated by debtors. As a piece in Saturday’s Los Angeles Times noted:
U.S. households owe a combined $11.5 trillion on credit cards, car loans, mortgages and other consumer debt, according to the Federal Reserve Bank of New York.
The piece (which is well worth reading in full) goes on to profile how four Southern California couples unwound themselves from chronic debt. It turns out that two of them had Dave Ramsey, the Nashville-based radio talk show host who offers personal financial advice, to thank. Of one couple:
Following a method in one of Ramsey's books, the couple began tracking every expense.
To get feedback on spending, [they] used the time-honored envelope budgeting system. Taking an envelope for each category — such as groceries, gasoline and entertainment — they inserted enough cash to cover monthly budgeted expenses. Each time they took money out, they noted what it was for (if a debit card was used, they noted the amount).
They dramatically slashed their dining-out expenses from $800 a month to $80. They did away with cable, nixing $70 a month, when a friend built them an antenna capable of picking up digital signals.
Of another:
Their son gave them a book by Dave Ramsey — whose radio show and personal appearances about handling debt are widely renowned — to show them how they could track their spending. Out came the envelopes … and they began paying for things with cash as much as possible. "Before the month begins, every dollar has a name," Dan said.
It became almost a game to find ways to save. Instead of buying $30 bottles of wine, Dan used his know-how to discover decent wines for $6.99. After they stopped dining at fancy restaurants, they went to chains such as El Pollo Loco. But then they realized they could save more by having chicken and a salad at home.
The first couple cited above has lowered their debt from $106,000 to $1,000, which they plan on paying off this month. The second has gone from owing $680,000 to their creditors to only $3,000, which they expect to be clear of by the time the summer rolls around.
As these examples show, Ramsey – who counsels against the evils of debt at every turn – has become a sensation throughout the country, largely because his methods, when faithfully applied, consistently work. Against the trend of the age – the get-rich-quick scheme – he preaches instead the virtues of prolonged, patient savings, budgeting, and abstention from debt.
That there is such a robust market for his message augurs well for us. That so many Americans had to turn to their radios for lessons that were taught at the kitchen table only a few generations ago does not.
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May '10
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Troy, the penultimate paragraph should read "counsels against" instead of "councils". That said, enjoy your work and your podcast-hosting talents. 8^)
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Further proof that man has not yet devised coffee strong enough for a Monday morning. Many thanks for your gentle observation, George.
Jul '10
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Troy, your last line nails it. A lot of this is a simple failure of one generation passing these lessons on to the next. I don't know if it's because parents are having a harder time telling their children no or some other cause, but basic financial responsibility is sorely lacking. People need to learn to truly assess what a need is and to live within their means. You'd be surprised how many people ask churches for assistance who turn out to have multiple phones, cable TV, internet access, several cars, etc. Somewhere along the way basic needs went from food, shelter, and clothing to food, shelter, clothing, and whatever creature comfort my neighbor has.
Mar '12
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
I really like Dave Ramsey. I differ with him on a few issues, but I really think he's one of the only people out there today that talks about personal finance in a way that laypeople can understand. His system also makes it easy for people to do something about their situation; personal finance is behavioral change, and Ramsey's stuff is good for getting over the hurdle of knowing you ought to do something but not actually doing it.
Mar '11
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Thank you very much for bringing up this topic, Troy.
Having recently moved from Germany, which has a individual savings rate between 10-20% of income (depending on the study) back to the US, I have been absolutely dumbstruck by the acceptance of debt among Americans to finance everyday or luxury needs. Say what you will about their penchant for overfunding social programs - Germans understand the importance of living within one's means.
Debt is a great tool for investing in expensive items which will bring long-term rewards to the individual debtor - a house, a needed new car, student loans. Using debt to eat out? Pathetic.
A democracy in which individual voters cannot comprehend the need for their own financial prudence will never keep its public debt under control.
Mar '11
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Society plays a huge role here. Much of our consumption, especially non-essential consumption (dining out, cable tv, cars, size of house, etc) is an attempt to keep up with our peers. Even parents who instill a strong sense of finanical responsibility in their children can only wield limited influence when compared to the constant barrage of bling-flashing which takes place everywhere in America.
The individual debt problem will only be surmounted when living beyond one's means is considered by society to be "uncool".
Apr '11
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Nice find, Troy. My wife and I used a slightly modified version of Ramsey's method (we were too skittish to go full-on "gazelle intensity" due to a recent unemployment scare), and we managed to pay off our car and college loans in less than a year.
The stuff he teaches works well, and I think the key to it is, frankly, that he is able to tell people in a very charming way that they are being stupid. He is excellent at being judgmental about people's practices (which is often necessary and prudent, despite our culture's prevailing mores) without alienating the people practicing them; in this way he is something like an anti-Santorum. That sort of charisma is a powerful and lucrative skill, and I am glad Ramsey is using it in such a constructive and helpful way.
Apr '11
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Whiskey Sam: "...a lot of this is a simple failure of one generation passing these lessons on to the next. I don't know if it's because parents are having a harder time telling their children no or some other cause, but basic financial responsibility is sorely lacking."
Problem is, the generation "to blame" for this is the one that created & promoted and sold the idea of consumer credit, and the labyrinthine rules & moving goalposts which are part & parcel of that industry. It's no wonder the last couple of generations haven't shared their financial wisdom over the dinner table. What wisdom? What dinner table? You mean the drive thru at Mickey D's?
Mar '11
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
You really can't blame people for abandoning the ethic of thrift and savings when a zero interest rate makes saving a suckers game. The economy is rigged to promote debt and credit.
Nov '10
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
I agree with this, but people's values have also changed a lot. When I had to freeze my credit report due to an identity theft, lots of people--my physician colleagues--told me I'd have to unfreeze it if I needed to buy a car. It didn't occur to them that I might not want to take out a car loan if I were buying a car. In contrast, when my father's stepfather wanted to buy a house back in the late 1930s, he felt that it would be socially unacceptable and would ruin his reputation and career as an attorney if he took out a mortgage for 20% of the cost of the house. Debt was that shameful.
Of course, low interest rates are part of the problem, as is the government's backing of student loans and mortgages, which has led to hyperinflation (bubbles) in the price of tuition and housing.
Mar '12
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Lucy Pevensie
I agree with this, but people's values have also changed a lot. When I had to freeze my credit report due to an identity theft, lots of people--my physician colleagues--told me I'd have to unfreeze it if I needed to buy a car.
It astounds me how normal credit has become. I walked into a cell phone store, wanting to buy a smartphone in full, so that I could use it without a contract to subsidize the purchase price over a few years. The salesman actually asked me if I was "rich or something."
Mar '11
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
For our family, Dave was a God-send. We were carrying over $70K in non-mortgage debt a few years ago. With Dave's guidance, we've whittled it down to $5K, which should be $0 by summer's end, while putting 2 kids through college without incurring new debt. (State schools, scholarships, and part-time jobs is a better dividend than an Ivy-league $100K+ student loan debt, IMO.)
Nov '10
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Troy, this was one of my "mental posts." I've been thinking about what you are saying here, but never got around to writing.
Except I was going to emphasize how Dave had started a new program--I poked around on his site and couldn't find the name of it--wherein families sign up to take personal responsibility for spending and thus take care of our economic difficulties a family at a time. Imagine how much we would be empowered if most families in the US were out of debt, saving, and otherwise financially independent.
Edited on March 26, 2012 at 11:33pmJun '10
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Let's hope that folks don't use our government as a role model. Fifteen Trillion dollars in debt and borrowing 40% of every dollar they spend while continuing to spend exhorbitantly more than they can collect. Nothing to learn from our esteemed "leaders". That is for sure.
Oct '10
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
The thing that separates Dave Ramsey's radio show from the rest is this: It's not only entertaining -- it's also amazingly uplifting.
The other day a woman who was having trouble making mortgage payments called Dave for advice. She was divorced with a few kids, still living in the house that she and her ex-husband had owned.
Dave could have just talked dollars and cents to her about the mortgage, but instead he said (paraphrasing): "Here's what's going on. You're trying to give your kids stability by keeping the house. You're trying to be a good mom to them."
The woman broke down crying.
"But your nobility is causing you to make a bad decision. A mistake made out of a sense of duty is the best kind to make -- but it's still a mistake. You can't afford this house anymore."
He then went on to give her practical advice on how to move forward, but the financial advice was almost secondary. The woman needed to hear that she was a good mom, even if she couldn't give her kids everything.
Life-changing show.
Nov '10
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Blake: "Life-changing show."
Or when he gave the man whose wife had terminal cancer permission to do nothing but be with his wife 100% in her final months and sort out the financial details later.
In that case, as in others, Ramsey is spot-on in identifying the real issue and then empowers and inspires as he guides the caller to do the right thing.
I often sense the black cloud of discouragement as listeners call for advice and can tell by their voices after sorting the issues out with Dave that they've achieved clarity. Even I feel lighter afterwards.
That is effective counseling. I suppose it comes from years of experience, unequalled skill in the field of finances, intuitive sense of where people are coming from, plus the ability to cogently put his advice into words.
Jun '11
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
I listen to him every AM. While we never went through Financial Peace U we took his advice to heart. Our son now has chores and buya hia own Wii games, saves, and gives his own $ during the offering. Dave believea that this is his calling and ministry, which is what diatinguiahes him from other financial talking heads. I heard the episodes related above: Dave's counsel was indeed about much more than money.
Jun '11
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Rice and beans. Beans and rice. Dave is financial tough love. I love the guy.
How can paying your way as a stand up individual be confirmed and then get so ignored as congress spends twice as much as our country takes in?
Jan '12
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
Dave Ramsey should be running for something! We've read his books, and he does have the ability to take something we know, that's obvious and make it clear. Although we're in the midst of a career move and relocation, we have clear plans to follow Dave Ramsey to get out of student loan/credit card debt and hopefully be in charge of our wealth over the next ten years. Wish I'd read his books in college, but then I wonder if I'd have the maturity to get it? Anyway, he should be required reading - a big fan of his!
Apr '11
Re: Who's Doing More to Fix America's Economy: Barack Obama or Dave Ramsey?
You're (just about) DEBT FREEEEEEEE!!!!
Congratulations!