WHY I CAN'T STAND DAVE RAMSEY

When it comes to personal finance gurus, Dave Ramsey pretty much sits at the top of that pecking order. You can enroll in a nine week course that’s offered by his Financial Peace University where, according to the advertisement, you can learn how to “save for emergencies, pay off debts fast, spend wisely, and invest for your future.” He’s a disciple of the late Larry Burkett, the founder of Crown Financial, a ministry who sees it mission as spreading “the principles and practices of God’s economy throughout the world.” Like Burkett, Ramsey is particularly popular amongst conservative White evangelicals, although his appeal has also clearly spread beyond those boundaries and have even become part of the financial teachings of some churches and denominations whose basic theology is at odds with that of conservative, White evangelicalism.

His radio show, the Ramsey Show, is syndicated on 600 radio stations and has a listenership of 16 million. He’s authored seven national best-selling books, including, for instance, The Total Money Makeover, and Dave Ramsey’s Complete Guide To Money. His estimated net worth is at least 500 million dollars. Any way you cut it, Ramsey is both extraordinarily popular and rich.

If you know anything about Ramsey, you undoubtedly know that his deal, so to speak, is debt, and how to get out of it. He sees household debt as financial shackles that keep millions of persons poor and financially marginalized. For Ramsey, debt is a destroyer of dreams, and nothing short of the demolition of debt— a complete blowing up of the piles of money that we owe— is a fundamental pre-requisite for experiencing the joys of freedom. The power of Ramsey’s appeal is that he purports to have a fool-proof strategy for getting your household out of hock and launching you and yours down that ever ascending path of liberation.

There’s no denying the seriousness of the level of household debt in the United States. According to the Federal Reserve Bank of New York, households closed out 2021 owing $15.58 trillion in debt, with much of it being accounted for by mortgage loans, auto loans, student loans, and credit cards. So, one can hardly fault Ramsey or any other personal finance guru for devoting attention to household indebtedness. Millions of households are struggling with heavy debt loads and find themselves having more month than money.

But I’ve got to keep it one hundred: I’ve never had much love for Dave Ramsey and all those personal finance gurus that he’s so representative of. Don’t get me wrong. I’ve got nothing against exhorting people to make and adhere to a budget. It’s easy to spend more than you’re taking in and end up in tight financial spot. I’ve got nothing against encouraging people to watch and be aware of their debt/income ratio. Nothing against people chopping it up about the stock market, planning for retirement, saving some coins, comparing different insurance plans, and doing what they can to not drown in debt.

So, in this post, I have nothing to say about Ramsey’s “snow-ball” strategy for digging yourself out of his debt. You know, the debt reduction strategy where you pay off all your debts in order, from smallest to largest, regardless of the interest rates. Nor do I have much to say—at least not here, right now—about his theological views that are sprinkled throughout his personal finance pronouncements. My silence on these issues, however, should not be taken as a sign of agreement or endorsement of either one of these issues. In fact, I have some concerns about his debt reduction strategy, and I do not share his theological views—his particular understanding of the Divine and how the Divine is acting within the world.

I’m relatively silent here on these issues because, quite frankly, there’s another dimension of Ramsey’s teaching that I want to highlight here, a dimension that’s too often overlooked, especially by those who embrace Ramsey’s teaching while at the same time claiming to stand in solidarity with the poor. It’s a dimension that projects a fundamental misunderstanding about the creation and reproduction of poverty and. to the extent that it’s embraced, it encourages people to view the poor and those struggling with onerous debt burdens as being responsible for their own predicament. Underlying Ramsey’s teachings is a vicious vision of the poor, a strident anti-statism, and an uncritical worship of the so-called “free-market.”

POOR PEOPLE NEED TO START DOING RICH PEOPLE STUFF Ramsey has long made his views about the poor and what he believes to be the underlying causes of poverty crystal clear. He has a history of comments that reveals that he’s part of a long tradition that locates the cause of poverty within the poor themselves. That tradition views the poor and the indebted as morally flawed financial dim wits whose behavior both causes and reproduces their economic marginality. If you’re poor, according to Ramsey, that’s because you keep doing “poor people stuff”— stuff like not tracking your spending, not saving, and accumulating debt to impress people who, in actuality, couldn’t care less about you. If you’re drowning in debt, to hear people like Ramsey tell it, that’s because you fail to mimic the behavior of the rich. Just a few years ago, he put in this way in one of his numerous tweets about poverty, debt, and personal finance:

“If you do rich people stuff, eventually you will be rich. If you do poor people stuff, eventually you will be poor.”

And here’s a couple more examples of the type of pithy sayings that flow out of the pen and mouth of Ramsey, and that doubles down on his conviction that it’s poor people behavior that traps them in a quagmire of indebtedness:

“People are made poor every day by their need to appear rich. Act your wage.”

“We buy things we don’t need with money we don’t have to impress people we don’t like.”

Like many other personal finance gurus, Ramsey specializes in lecturing and scolding the poor to correct what he sees as their dysfunctional behavior. Again, in Ramsey’s vision the poor are their own worst enemies.

WHEN THE ENEMY IS WITHIN When you posit that poor are the source of their indebtedness and economic misery, when you accept it as axiomatic that the economically marginalized are in a mess because they mismanage their finances by refusing to “act their wage.” then it follows that any “external” aid is bound to be futile; that is, if the enemy—as Ramsey believes— is within, state intervention in the form of anti-poverty policy or economic stimulus is pointless. In fact, as far as Ramsey is concerned, such intervention is likely to do more harm than good.

As indicated earlier, anti-statism is a hallmark feature of much of the personal finance industry, and nowhere is it clearer than in Ramsey’s dismissive response to the economic initiatives that were taken to contain fallout from the COVID19 induced recession. By the time such initiatives as sending payments to struggling households, beefing up the reach and aid associated with unemployment assistance, placing a moratorium on evictions, and pushing the pause button on student loan payments, the economy had already starting shedding jobs by the millions and the numbers of persons seeking but unable to secure employment was on the rise. It’s against this background that Ramsey dismissed state intervention as essentially useless because—surprise!— the poor’s problem was the poor. Speaking on Fox News, Ramsey pulled no punches on articulating his opposition to economic stimulus payments: “I don’t believe in a stimulus check,” said Ramsey. He then goes on to briefly but tellingly explain the rationale behind his opposition: “If $600 or $1400 changes your life, you’re pretty much screwed already.” In Ramsey’s world, if you’re amongst the poor and those struggling with onerous debt loads, you’re “screwed” because, among other things, you’re financially illiterate —and it you weren’t you wouldn’t be in that position in the first place. In order to get out of poverty, then, the poor must build up the character, will, and knowledge that putatively opens the door that’ll lead out of indebtedness and into economic security.

You’ve got to conquer that so-called enemy within.

Or, at least, that what Ramsey says.

IGNORING THE BROADER SOCIO-ECONOMIC CONTEXT The foregoing underscores a fundamental flaw in Ramsey’s framework, and highlights what resides at the core of my disdain for most personal finance gurus (PFG). PFG’s like Ramsey completely ignore the broader social context within which people make financial decisions. In Ramsey’s world, it’s pretty much you—and only you— that determines whether or not you’re damned by debt or delivered to some greater economic destiny.

But this is preposterous. Just a moment’s reflection ought to bring to mind the multiple ways in which are choices are shaped by broader socio-economic forces. These broader economic forces are beyond any individual’s control yet they possess enormous influence on our economic well-being and household debt levels.

Take, for instance, the rising cost of childcare. Of those households coughing up the bucks for child-care, they’re spending an average of $8400 per year for each child. It’s not surprising to find some households paying anywhere between 20-30% of their monthly income in childcare. Nor is it surprising that a recent study finds that 40% of parents have said they’ve had to take on debt to be able to cover the child care and other expenses.

Or, for that matter, consider the rental market. Over the last five-to-six decades, the median rent has increased by 72%, more than twice the 29% increase in real (inflation adjusted) median household income that took place over the same period. In March 2022, there were about 5.8 million households in who, collectively, owed more than $15 trillion dollars in past due rent. It’s incredulous that anyone would believe that that $15 trillion rental debt is not influenced by the growing gap between median rent and median household income. Yet, outside of hectoring people to get their debt under control, PFG’S like Ramsey have very little to say about the ways in the growing chasm between rent and income may be contributing to household debt.

Or, what about the fact that the cost of attending college is rising much faster than household income, putting families under a growing need to take on debt to finance the education of its members. Just over the last two decades, the cost of attending college—including tuition, fees, room and board— jumped by almost 60%, from $15,485 to $24, 623. In contrast, real household income hardly budged, inching up from $63,292 in 2000 to $69, 560 in 2020. Excluding mortgage debt, student loan debt constitutes the largest chunk of total household debt, and this burgeoning gap between college cost and income is blowing a huge hole in household balance sheets.

Systematic analyses of the impact of all of these on household debt—and the difficulty of extricating oneself from its hold— essentially goes missing in Ramsey’s ruminations and rants about people not “acting their wage” and diving deeper and deeper into the debt pool. These are systemic issues and, if we follow their lead, it implicates trends in the broader socio-economic landscape that are deleterious to millions and driving them ever deeper into debt.

Sure, some of us make poor individual decisions that aggravate our already fragile economic well-being. But to ignore the broader changes taking place in our economy and its impact on household debt accumulation is to sign off on an asinine and cruel conclusion: The poor and indebted are solely responsible for their economic marginality, and their lack of financial acumen is perpetuating that poverty and indebtedness.

The “problem” with the poor is not that they live beyond their means but that they lack the means to live.