Anyway, here is the compound interest clip.

http://www.economicvindicator.com/2010/02/dave-ramsey-compound-interest.html

Step 1. Unless your home needs new wiring, a new roof, or your ‘81 Datsun needs a new engine, you can handle any emergency with $1000 and a little leg work/sweat equity.

Step 2. Compounding interest works AGAINST you as well. Lose the need for immediate gratification society demands and pay off your debt. Translation: Quit spending more than you make.

Step 3. In the current economy this might be the most important. If I lost my job tomorrow – which none of us is immune to – I would be able to job hunt and not feel inadequate taking minimum wage in the meantime – income is income.

Step 4. Pretty soon your disposable income is working JUST for you. Too many hands in the cookie jar empties it real quick and Uncle Sam takes far less than Uncle Credit Card Interest.

Step 5. Student loans charge interest too, even if it is a quarter of other lending products. And I’d rather keep my money during the year instead of waiting twelve mos. for a credit

Step 6 & 7. Here is where there is the most room for tweaking. By now the largest debt you have, your home, is the last debt to pay according to the snowball method – which, by the way, even Oprah dedicated a large segment of her show to several years back. Pay off your house early AND build wealth at the same time. Hopefully you can all multi-task. Mutual funds and real estate are the fastest and most liquid investments, respectfully. The monthly investment in a fund buys MORE in an economic down turn, and nets MORE in an up turn.
If you pay $200k for an average home and it grows a MODEST 5% in five years, you’ve made $10k(put that income in your mutual fund). Average home value increase for the median U.S. home is 15% every 10 years between 1940 and 2000, taken right from the census web site. Assuming you can rent it for more than the monthly mortgage(ceartainly not out of the question in a decent economic forecast), AND your down payment is 20% – which it SHOULD be if you are buying any real estate – you ARE making money – even after maintenance costs(more leg work/sweat equity). When the economy turns down, sell the house – even if it’s at a minor loss – and put the net profits into the mutual fund. Scrooge McDuck said, “Work smarter, not harder,” and that’s exactly what your money will be doing. One caveat(warning), however, investing is like comedy, timing is everything.

Dave’s motto is this, “Live like no one else, so you can LIVE like no one else.” My motto is “Keep it simple, stupid,” and Dave has simplified fincancial advice. ‘Nuff said!

Any questions/complaints, comment

He may not be for everyone but he can help most people out of the mess they are in.

Dave’s increased income from the radio syndication allowed him to start investing in real estate again, this time with cash purchases. He mentions this on his how.

Also, after his BK, he has stated on his show that he and Sharon went back and paid off the debts that had been cleared as part of the BK because they felt like they were led to do so by the Holy Spirit.

To the poster who says Dave’s plan lacks things like saving for a new car, keep reading. It’s in there, it just doesn’t get its own baby step.

I hate to say it, but Dave has had an answer for every argument that shows up here. they’ve all been asked on the show before, and they’ve all been shot down. If they bring up valid points, he changes things. In the early days, the baby steps were in a different order. They are the way they are because of years of “daily life” have formed them as such.

I also never understood why there’s no baby step for saving up for non-emergency things like a car. He is so rabidly anti-debt, but if you follow his plan to the letter you’re probably going to end up having to finance a car at some point before you reach step 7 unless you totally drain your emergency fund.

I tried living the baby steps for about two years, thought it was a good way to get started, but pretty much went my own way several years ago after getting a little more than half-way through the debt snowball. I pay a few hundred extra towards my mortgage each month, but I’m not about to go all “gazelle intense” about it. I think I’d rather have a vacation savings fund, a house repairs fund, and a car replacement fund instead so I won’t have to worry about going right back into debt after I finish paying it off.

I can appreciate the analogy between dieting and personal finance because they both require something difficult: DISCIPLINE. The fact of the matter is that goals of any type are reached through discipline, and usually during the beginning of attempting to begin the path toward a big goal like losing weight, paying off debt, or running a marathon, a strict program must be adhered to in order for behaviors to change. Then, once these changes in behaviors become second nature to you, you can begin to relax a bit. That’s what the information that Dave teaches is really all about. Most people these days have never had discipline and self-control when it comes to finances, which is why most people in the US have very little savings, know almost nothing about investing in the future, and actually think credit cards are real money! Get a clue, people…it takes discipline and common sense to win with money or really in any area of life.

Everyone is entitled to their own opinion and ways of handling their money. I know from experience that if you follow the plan that DR lays out, it does work. It also changes the way you handle your money for the better. But please, before you write a criticism of someone’s program/book/etc… you should be much more familiar with it.

And one more thing…since when is it a moral crime to get paid for creating, marketing, and distributing information that helps other people? People need help managing their money. Dave sells information to help them improve that area of their lives. He doesn’t charge millions of dollars for it. Its a small investment to make for life-changing information that really works if it is applied.

I want to touch more on the first one. Compounding interest works both ways. The reason it doesn’t look the same is because credit card companies force you to pay the interest, while banks don’t force you to spend the interest you make. Therefore, mathematically you’re better off putting money towards whatever has the highest interest rate. (Ok, well taxes and other things can change the ‘effective’ interest rate, but we’ll ignore that for now). I’m sure Dave is well aware of compounding interest, unfortunately some of the rest of us aren’t.

Oh and another note. I love Dave Ramsey, but I don’t follow his plan to the T.

As for investing, I’ll take the guaranteed return of XX% of paying off debt to the hypothetical return on the stock market.