4 Pillars Reply: Dave Ramsey

Quest for 4 Pillars, just put up an interesting post about Dave Ramsey Methods.

The main points are simple

1. Make a commitment to get out of debt
2. Start a cash emergency fund
3. Pay off debt using a debt snowball
4. Save 3-6 months of expenses in savings
5. Save 15% of household income into retirement savings accounts
6. College funding for children
7. Pay down mortgage quickly
8. Build wealth and give

And the conclusion from a Financial blogger's perspective is equally simple:
...these things that I do go against the “Ramsey” way but that’s ok because I’m not in need of any kind of financial rescue...I believe that for a lot of people, Ramsey’s methods can be very beneficial.

But I personally think that we're missing something really big here: Dave Ramsey is pimping a diet change and not a lifestyle change. This thing reads like a draconian weight loss plan and asks you to do things based on what he believes. He's imposing his lifestyle beliefs and telling people to save vast sums of money b/c that's what they should do.

Really, why should you save 15% into retirement savings (#5)? What if you don't plan to retire? What if you want to take mini-retirements? What if you want to invest that 15% into educating yourself? If you don't have a college degree, shouldn't that be a priority before retirement savings, how about before saving for your kids' education (#6)?

Paying down your mortgage quickly (#7) could turn out to be a horrible decision. What if you live in a mining town or a factory town? Throwing money at your home could leave you light on cash and investment money when the plant closes down and crisis hits.

Making a commitment to get out of debt (#1), is like making a commitment to losing weight without making a commitment to keep it off. The commitment here to live within your means.

This sounds like the "Wealthy Barber" plan of "Save lots of money so you won't be poor." The only two novel concepts here are #3 and #8. Giving, addresses the karmic nature of money which seems to be that those who give don't have trouble finding. And the debt snowball addresses the psychological aspects of debt payoff that some number-crunchers seem to forget.

But really, this is all just a diet plan for debtors. I know several people in debt and I wouldn't package up this advice with my name on it.

Of course, YMMV.