A few years ago, when I was aggressively paying off debt, I would listen to Dave Ramsey’s podcast in my car as I drove to and from work. As you might be aware, Los Angeles is not the most god-fearingly Christian of cities, and we tend to stick our noses up at both the thought of saving money and of taking advice on spending money from a Southerner. Maybe that’s just me, actually–but in any case, Dave wasn’t on the radio here, and I liked to listen to his show both to keep myself on track and also to get answers to those nitpicky questions about staying on a debt recovery plan. Not every scenario is covered by any one plan, which is why I think you ultimately have to come up with your own personal financial philosophy to meet your own needs. But still, when I read personal finance blogs, I do see these kinds of questions coming up again and again, so I thought I would address some of these here and see what you guys think.
- Should you tithe while getting out of debt?
This is an easy one for me, because I don’t tithe. I don’t practice any form of organized religion, in fact, so tithing has never been an issue for me. However, I figure that for agnostics, the question might be, “Do you give to charities when trying to get out of debt?” My answer has been, “No,” in the past. However, I do wonder about this. A cornerstone of the Dave Ramsey program involves giving even when you are in debt–this is based on tithing in Christianity, but you might also think of it as a Law of Attraction kind of thing. The theory is that you get back more than what you put out. I don’t know, though. I tend to think that you should apply all that money to debt repayment.
- Does your budget each month allow for annual payments?
Some people budget fifty dollars or whatever each month toward payments that are due annually, like life insurance and homeowners insurance premiums. This tends to create too many different things to keep track of for me, and I forget how much money I’ve put aside or where it is, unless I make up a new account for every single payment, which is just crazy. So what I have taken to doing is putting money in a “sinking fund” for that kind of stuff. I put money into the sinking fund as it is needed, and then write checks out of that when these kinds of payments are due.
- Pay off student loans before putting 15% toward retirement?
Dave Ramsey is pretty adamant about being completely out of debt (other than the mortgage) before you start putting money toward retirement. Once you do start, though, it is supposed to be 15% of your income, which is higher than many people save. The thing is, if you have advanced degrees, and/or if you have anyone who went to a private school, your student loans probably total more than a house does in some parts of the country. In these cases, I tend to think you should save toward retirement while you’re paying off your student loan debt, so that you get the benefit of savings in the early years, even if your student loans are not paid off as aggressively.
Now it’s your turn. What are your financial quandries? How have you decided to handle them?
I read somewhere that Suze Orman is the blue state version of Dave Ramsey–I’m pretty sure I read that and didn’t make it up myself, I should say. And I do think this is superficially true: Suze is a woman, she’s self-made, she’s a lesbian, and is presumably more liberal in a social sense than is Dave Ramsey, who is an evangelical Christian from Tennessee.
So why is it, I wonder, that I like and respect Dave Ramsey and cannot stand Suze? I think it has something to do with this: Suze’s message seems to be always in flux, and negotiable based upon her own best interest. There is something about her that does not ring true to me. This is all on an unconscious level, mind you: I have no real proof that she’s disingenuous. Well, unless you count her claim that she has always “encouraged people to get out of credit card debt” and its contrast to the promotional deals with various credit card companies that she has signed. Which, by the way? Sucks. But that’s just the thing–she says that she’s been encouraging people to get out of credit card debt, but really what she has been doing for as long as I can remember is to encourage people “use credit responsibly.” Maybe this is hairsplitting, but I don’t consider this to be the same thing. It’s like telling an alcoholic to just try to start drinking responsibly–if people who have credit card debt could do that, let me assure you they would already be doing this!
Yes, I am starting to ramble about this, and where’s the damn list, anyway? Look, the bottom line is: Dave Ramsey stands for a lot of things that I don’t like. He voted for Bush, probably would a million more times if he could. He says things like “don’t you mean Social InSecurity?” and “Certificates of Depression.” He once had to have it explained to him why a caller using the phrase “Jew you down” might be considered offensive. But, with Dave Ramsey, I get the feeling that these things have more to do with being sheltered than true bigotry, or willful ignorance. There is always a sense with him, that whatever the topic, he is willing to hear the other side, and that he is true to his own beliefs. Somehow, that rings more true to me, even if I don’t agree with the beliefs themselves.
So, Suze has become Oprah’s go-to financial person of late, and last week she was on the show pushing her “new” five reseccion rescue rules. As usual, the rules are stupid and should be pretty intuitive to anyone with their head out of the sand. But let’s go over them anyway:
- Live on half. To illustrate this point, Suze told the audience they needed to start living on half their income and banking the other half. For people with two incomes, this hardly news. It was hardly news six years ago when Elizabeth Warren published The Two-Income Trap. I think it is about two decades too late for this advice, by the way, because if you have been living on two incomes for any amount of time, chances are that you have a mortgage that reflects this. Cutting down to one income can be done in some cases, but it is tricky. The people who need a rescue from the recession are probably well beyond this point. What about the people who keep losing their jobs? Should they bank half of their (already halved) unemployment checks? What about food stamps? Bank half?
- Stash your cash. This point had the unique effect of being both too literal and too vague. Suze never explained if by “stash your cash” she meant to literally stash it–like put it in my mattress, or if keeping it in my (hopefully not going to fail) bank is OK. Among the other things mentioned on this topic was Suze’s revolutionary “new advice” on handling credit card debt (only make minimum payments) so you can bank a larger emergency fund. Hmm. Where have I heard that before? Oh yeah, Dave Ramsey. Huh.
- Make the Stimulus Package Work For You. This part was more useful than most of the rest of the show, as Suze explained the benefits available for COBRA reimbursements, tax credits for homebuyers, and tax credit for buyers of new cars. None of the information was new, but putting it on Oprah ensures that more people will take advantage of it. So I liked this section.
- Make your home affordable. Here, Suze goes over the loan modification programs offered for Fannie Mae and Freddie Mac mortgage holders. This is not earth shaking news, but I suppose it’s good to get the word out for those few people who might be able to avoid foreclosure through these programs and have been living under a rock for the last four months.
- Look at What You Have, Not What You Had Of all the recycled and appropriated advice on the show, I have to say this was my favorite section by far. During this section, Suze admonished us for not wanting what we have and focusing on what we have lost in the stock market crash. OK fine, a little trite but OK. I’ll accept Suze telling me, poster child for agnosticism, to “have faith” that “God does things for a reason,” even if it all feels a little contrived. But the best part was when they featured a little video segment on a pastor and his wife who had lived beneath their means for years, and lost so much in the stock market crash that they now fear that they will outlive their savings. Instead of giving valuable advice to the next generation–like, say, you shouldn’t have more than like 5% of your assets in the market if you’re in retirement or very close to it, for example–Suze busts out with the “God doesn’t give us anything we cannot handle,” crap *to a pastor* who has *not been living above his means* and enumerates his “mistakes” in not having faith. RICH. Even the poor pastor was like, “Uh, yeah, my faith is fine, I’m more worried about outliving my savings . . .” If it had been me, I would have said, “you smug dumbass” to the end of that sentence.
To be perfectly honest, I think I would like Suze Orman better if she didn’t make these crazy overarching claims for herself, like when she appears on the cover of Time saying, “I told you so” about the financial meltdown. Oh really? Nobody else realized that living on credit cards was a bad plan, Suze? Nobody else predicted that housing prices were inflated beyond any kind of market supportability? That was all you, huh? I just don’t like smug attitude.
Bad Money Advice is a new blog I discovered through one of the eighty five million personal finance blogs I read. Written by “Frank Curmudgeon,” Bad Money Advice has an interesting take on some of the personal finance advice available on the net and elsewhere, finding errors where others miss them and deconstructing the overly simplified take on broad stroke financial issues that are covered by the mainstream media. I suspect Frank Curmudgeon is a dyed in the wool conservative, but I love him anyway.
Today, Frank talked about the unique problem of determining who is qualified to give personal finance advice:
But all this begs the question as to what a properly qualified giver of advice on personal finance would look like. Would they have impressive credentials, such as advanced degrees or professional certifications?
Based on a quick review of Wikipedia and various other websites, as best I can tell, Suze Orman, David Bach, Dave Ramsey, Phil Town, and Jim Cramer have between them only one graduate degree. (Cramer went to law school.) Orman majored in social work in college. She and Bach once worked as stockbrokers, so presumably have the necessary government licenses. (But then so does Martha Stewart.) Again, as best I can tell, none of the five have any professional designations or certifications.
Generally speaking, the people who are avowedly in the business of giving advice have only the circular qualification that they’re successful givers of advice. And that’s a qualification, it seems to me, to which the big bloggers have as legitimate a claim as the big gurus.
Moreover, there really isn’t a better qualification out there. There are no prestigious graduate schools of personal finance. There is such a thing as a Certified Financial Planner (CFP) designation, but it is not widely recognized. There are no government licenses for financial advisors, nor is there anything remotely like the professional certification process we have for doctors and lawyers.
Personal finance is an unsettled field. Some know more than others, and some claim expertise while others shy away from it. But nobody has any particularly useful qualifications.
Well said, Frank. You can read the rest of the article here.
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