Never trust a financial guru
Dave Ramsey's plan: pay off your debts; give your money to my friends. It isn't a plan for *you* to get rich, it's a plan for *him* to get rich off of you.
So what does Ramsey have to say to these millions of people? On the subject of debt, his advice can be summed up in one word: abstinence. Just say no, Ramsey says, to credit cards. No to student loans. No to anything you cannot afford with cash, with the exception of a fixed-rate 15-year home mortgage. Lenders, he says, are a scourge on the American public, and borrowers are their slaves. “Debt has so sunk its claws into our culture, we believe we are here to work, play, make payments, and die,” he told his rapt audience in Houston. “It’s a life of desperation. You feel like a gerbil in a wheel. We borrow … then everything hits the wall: the marriage, the kids. It’s a NASCAR car crash.”
At this, the Texas crowd erupted in cheers. And it’s easy to understand why. Like the Ackleys, the audience members are mostly white, over the age of 35, and apparently middle class (in the way we generally assume people who aren’t obviously destitute to be middle class). They belong to a generation battered by lousy household economics. Adjusted for inflation, median household income in America fell by seven percent between 1999 and 2010. At the same time, the costs of child rearing, health care, education, and housing continued their decades-long climb. In 2012 alone, the average family’s medical bills went up by 7.2 percent. And the deflated housing bubble hasn’t stopped rents from climbing—in Houston, they’re at a record high. The rest of the story is familiar, and accounts for all the cheers at the megachurch: To make up for this shortfall between our salaries and our bills, we have borrowed, and borrowed, and borrowed. And we have paid for it.
Anger at predatory lenders and disgust with the indentured servitude of debt have been a huge part of America’s public consciousness since the financial crisis of 2008. They have fired the politics of Occupy Wall Street and the careers of financial reformers like Elizabeth Warren, who are calling for greater financial regulation, a stronger safety net, and efforts to reverse decades of increasing wealth inequality.
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This is Ramsey’s self-help proposition: If you can only impose discipline on yourself, wealth will follow. Purge yourself of debt through self-mastery, and you will enter a life of prosperity and 12 percent annual returns in the stock market (with the help of Ramsey’s endorsed network of financial advisers).
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