Oh Preacher Ramsey, Deliver Us from Debt

We meet at an old church. There are introductions. Everyone seems friendly enough. The instructors are warm and welcoming: Liz, possibly in her early 30s, and Mary, possibly in her early 40s. They offer us name cards and cookies. After the hour-long video (all introductory and motivation stuff at this point), the group—there’s about a dozen of us—move to a circle of chairs at the front of the sanctuary. We go around the circle and introduce ourselves. Before this is all over, these strangers will know more about my deepest secrets than my own family. When it’s my turn, I gulp and admit my hard truth.

“Hi, my name is Amanda, and I’m in debt.”

They reply, in sympathetic unison: “Hi, Amanda.” 


Week 1
The church is old, so the pews are hard and uncomfortable. When it’s time to begin, Liz lays out the ground rules and makes some announcements. Then, she starts the first part of the two-hour meeting: the video.

To be honest, this has been a long time coming. I told myself I wasn’t that bad, really—just a few family loans here, a couple overdrafts there—nothing I couldn’t manage. But then I met a guy and he started talking about marriage. Together, he and I wondered if this is what the rest of our life together was going to look like: aimlessly wandering from bill to bill, wishing for a better life, but doing nothing to attain it. Oh, we’d tried things before—leaving our debit cards at home, writing down every purchase, but deep down we knew we couldn’t do it alone. We needed professional help. That’s when we found Dave Ramsey, the personal finance guru and talk show host with a radical view of debt and money. Ramsey advocates a way of life that is foreign to most of my 20-something peers: All debt is bad, and paying cash for everything is the only responsible way to go.

But is it, really? I wanted to find out, so I did the only thing I could do. I paid $90 to sign up for Financial Peace University—Ramsey’s crash course in sound financial planning that teaches “cash is king, debt is dumb, and the paid-off home mortgage has taken the place of the BMW as the new status symbol of choice.”

One week down. Eight more to go.


Week 2
My fiance Nate and I are going through FPU together. Call it a form of pre-marital counseling. A survey by Utah State University found that couples who disagree over money at least once a week are 30 percent more likely to get a divorce. We may have only been engaged for nine days at this point, but we’re not taking any chances. Very quickly, it’s obvious that he is what Ramsey calls a “nerd,” while I am more of the “free spirit” variety when it comes to money. In short, this means that Nate delights in tracking and budgeting every dollar that comes in and out of our checking accounts down to the penny, while I naturally abhor budgets, balance sheets, and decimals. I also, over the years, developed an unhealthy relationship with my online bank account. I have to close my eyes and swallow several times before I can bring myself to look at the posted balance.

I eye him warily, unsure of what this means for our future.

The entire class jots notes while watching Ramsey on the projector. Because these classes are taught nationwide and Ramsey can’t possibly be everywhere all the time, the instructors play pre-recorded DVD’s for us.

The rest of the group is a mix of young to middle-aged singles and couples, and we’re all here for various reasons. One 20-something female is trying to figure out how to live a normal life while paying a bazilion dollars a month in student loan payments. Another couple just had their second child and has decided they want to get serious about their financial planning. Another young female says she is struggling with credit card debt after years of borrowing her way into the upper-middle class. Strangely, the only men in the class (three) are here with significant others. The rest are women.

It’s clear from the start that the circle is a no-judgment zone. In between testimonials and various discussions, we share knowing glances that betray our common struggle. We’ve hit rock bottom, admitted it, and are now searching for a way to make things right. Like struggling alcoholics wandering toward redemption, we’re a bunch of broke, credit-happy, debt-bearing lost souls atoning for past financial sins.


Week 3
To succeed in this course means accepting Ramsey’s philosophy whole. No credit card purchases. No using a debit card when cash will do. No more lavish purchases when loan payments are piling up. You can’t be a recovering alcoholic who just drinks wine on Tuesdays and Thursdays. Ramsey’s philosophy is a take-it-or leave-it kind of thing and now, I’m having a new appreciation for the term “delayed gratification.”

Thankfully, he breaks it down into a seven-step program. He calls these “baby steps.”

Step 1: Save up a $1,000-emergency fund.
Step 2: Pay off all your debt using the debt snowball (except the mortgage).
Step 3: Save up 3-6 months’ worth of living expenses.
Step 4: Invest 15 percent of your income into Roth IRAs and pre-tax retirement plans.
Step 5: Save for your children’s college education using education savings accounts (ESAs).
Step 6: Pay off mortgage ASAP
Step 7: Build wealth and give.

The bad news is that unlike some other recovery programs, Ramsey’s takes a good, long while to complete. We’re talking seven to ten years here. Ramsey must know this, because in every lecture he jumps around on his faraway stage, passionately preaching his message as if his own motivation and zealousness will reach us through osmosis.

This week the instructors also start a new end-of-class tradition: sharing victories! The class goes around the circle and shares what they’ve accomplished in the last week. It doesn’t matter how small the victory is—even forgoing a Starbucks latte for some home-brewed coffee counts as a good step toward the debt-free life. Liz uses colorful sharpies to write our victories down on large pieces of paper she leaves taped to the wall.


Week 4
Today we turn in our zero-based budgets—a personal budget based on having zero dollars left when you’re finished. Nate and I are skeptical at first, but conclude that Ramsey has a point. Making a zero-based budget, we learn, is essential to the recovery process.

It only took about five minutes though, to realize that the secret of the zero-based budget is that it forces us to confront our wayward spending, and in many cases, repent for sins.

One exchange might go something like this:

Me: “I’m so sorry I spent $120 on eating out for lunch this month. I didn’t even realize I was doing it.”

Nate: “I forgive you, but from now on things need to change. Eating out for lunch will come from the ‘Food and Grocery’ budget.”

The point, as Ramsey explains, is to have an assignment for every dollar you bring in each month. For turning in our budgets, our instructors reward us with apple cobbler. As a class, our egos are a little fragile right now so positive reinforcement is crucial.

At this point in the program, we are supposed to start getting used to paying cash for everything. Ramsey provides what he calls the “envelope system” in order to help us do this. Nate and I agree we’ll start soon, though it will be a hard adjustment.


Week 5
This week, we shared our debt snowball plans. The concept is simple enough: start paying off small debts, then medium-sized debts, then the really big debts.

This week was also traumatizing because Nate told the whole group that I am in possession of three separate and individual credit cards. The judgment-free zone does nothing to prevent my shame and embarrassment. My classmates cast looks my way that vary between sympathy and downright dismay. I promise the group that I will seriously consider cutting up my credit cards.

I still can’t help but get the sense they believe me about as much as they believe a recovering alcoholic who says he’s only going into the bar for some water.

In the car after class, I chew Nate out for throwing me under the proverbial bus—even though I know he was only trying to help my wayward soul.

Last week our egos were in tatters. This week, we face failure by learning to confront the idea that the lovely conventional wisdom we all subscribe to has put us in this mess. The credit card, Ramsey predicts, will eventually turn into the cigarette of our generation. By that, he means they are killing us slowly.


Week 6
Insurance: all I know is that I’m lucky enough to have health insurance through my employer, and buying my car insurance was a fairly painless experience, all things considered. Though the fact that I can’t actually explain to the group what kind of policies I have suggests there might be a problem here. Thankfully, Nate bailed me out, though the moment left me feeling like I had just cheated on a test. Or worse, relapsed into financial irresponsibility.

The do’s are: term life insurance, long-term disability insurance, long-term care insurance (when you turn 60), and renter’s/homeowner’s insurance. We learn to run far, far away from accidental death insurance, mortgage protection insurance, whole life insurance, and things like cancer insurance.

Ramsey defines insurance as a “transfer of risk.” We also get a new motto this week: “Life is messy. Get yourself covered!”

We’re more than halfway through now, yet the group is dwindling. The couple with the two kids stopped coming a couple weeks ago. Another middle-aged lady stopped attending as well. Nate and I agree she never seemed to be able to get used to opening up about her finances, anyway. Liz and Mary say having a couple dropouts is normal.

The rest of us are feeling optimistic. We can beat this! This thing called risk! Yeah!


Week 7
We are warriors. We are warriors in the fight against stupid financial planning.

After this week’s class, Nate and I are determined to be able to send our future children to quality institutions of higher learning AND enjoy our later years without depending on the mercies of our future offspring. Yes, this week’s class was on retirement and college planning. Will we ever co-sign a student loan for our future children? Um, no!

Nate and I also took time this week to calculate what we pay in interest each year on our student loans. The answer simultaneously shocked and angered us. We solemnly promise to each other that we’ll pay them off soon. Very soon.

This week’s lesson was also a giant smack in the face against the “there is plenty of time to figure this stuff out” strategy for retirement and future savings. In the group discussion part this week, we all swapped stories of stupid financial mistakes our own parents made in the eighties and nineties. JUST LOOK WHERE IT GOT US.

On a positive note, this week I won the victories round for cutting up one of my credit cards in class. I also shared with the group about how I turned down signing up for a store credit card at the mall the other day, even though it would have saved me 20 percent off my purchase.

Mary nodded approvingly, reminding us that credit cards are never worth it in the long run. I get a couple pats on the back.


Week 8
Only one more lesson after this. It’s sad because Nate and I have really come to depend on our instructors and fellow class-takers. Eight weeks ago we were strangers who, through separate chains of events, decided to pay almost $100 to sit in a church one night a week and watch DVD’s about personal finance. Now, we’re each other’s support system.

Today Ramsey talks about buying a house. It’s probably the single biggest financial decision we will make throughout the course of our lives. It’s so important, in fact, that Ramsey has dedicated the second-to-last week of his course solely to the subject of homes and mortgages. If there’s one thing we already know, it’s that buyer’s remorse in the real estate market is a lot like betting your entire savings on the losing team at the Super Bowl. It blows. Our goal is to avoid this and not go into too much debt in the process.

Ramsey instructs us to just be smart: pay for 100 percent of your home in cash! But if that doesn’t work, you have options! Get a 15-year, fixed-rate mortgage with at least 10 percent down, and monthly payments that don’t exceed 25 percent of your monthly income.

Now was that so hard?


Week 9
After today, Nate and I will be released into the world armed with our newfound wisdom, a savvy financial plan, and a healthy suspicion toward insurance companies, banks, mortgage brokers, real estate agents, credit card companies, payday lender, reversed mortgages, and just all salespeople in general.

But that’s okay! We’d rather be rich than sorry, and who can blame us? Ramsey spends his last pre-recorded lecture telling us why it’s all worth it: so that someday we can be in a position to give to those who really need it. He places a lot of emphasis on giving.

A lot has changed since we started this class. Nate got a weekend job to save up money for the wedding—he’d rather do that than go into debt for it. We also save a lot more than we used to. And we track every single purchase, though we haven’t fully embraced the “all cash all the time” method. Nate thinks we’ll get there eventually. Things have improved in our financial lives, but we’re still works in progress. The biggest change—other than the fact that I have agreed to Nate’s request for monthly budget meetings—is that now we have a plan for our financial future. We’ve saved up our $1,000 emergency fund, and if all goes according to plan, we’ll have paid off all our debt—and completed baby step 2—in less than four years.

As the class ends, Nate and I pass out hugs and well-wishes, then get into our 1992 Honda Accord – which we paid cash for—and vow that living debt free will forever be our drug of choice.


A.C. is a writer and recovering spendaholic living in Washington, D.C.


35 Comments / Post A Comment

olivia (#1,618)

Very interesting article! I’ve heard about Dave Ramsey and know about some of the principles but I didn’t realize there are classes you can take. I would love to see more articles just like this on The Billfold!

WaityKatie (#1,696)

Wait, shame based on owning 3 credit cards? (shame because it is too few??)

@WaityKatie yeah girl i read that and was like … i live on a different planet than these folks

ThatJenn (#916)

@Logan Sachon Maybe it was the fact that she was still carrying them around with her despite the fact that she’s supposed to avoid using any kind of debt to make purchases? Maybe? Like, the problem isn’t that the accounts exist, but that she physically “has” them? That line confused me until I thought of it that way.

pterodactylish (#2,321)

@Logan Sachon hell, the credit score sweet spot is 13 effing accounts!!! also, this method ABSOLUTELY ignores the idea that the points you get from credit cards save you money. plane tickets! the key is to pay your cc bill each week. i did the envelope budget for weeks (there are apps for this, they are great!) while still using my credit cards and it absolutely changed my spending habits.

ThatJenn (#916)

@pterodactylish Of course, it only saves you money if you don’t have a tendency to rack up massive debts and accrue a lot of interest. I think there’s a very good middle ground where you practice not using cards for a longish period of time in order to have a good feel for how much money you ACTUALLY have, and then can go back to using credit cards cautiously. You may have been able to keep your CC bills low enough to pay off your bill each week, but if someone has a real spending problem that may not be possible.

ccq (#1,175)

@WaityKatie another Ramsey follower here (not his politics, just his personal finance, ack). one of the baby steps is cutting up your credit cards so they’re not there being tempting anymore, so having three you still hadn’t cut up might be against “the rules”.

….i skipped that rule too! lol. ramsey’s method helped me pay off 20k in credit card/tax debts on a 20k/year salary in 5 years. but, haha, i couldn’t sacrifice my credit card. momma ingrained it in me too deep that it’s “for emergencies”… and i’ve slipped up since on the card, but oh well. paying it back down.


highjump (#39)

I was wondering if I’d see a Dave Ramsey related article on The Billfold. I like his back to basics live within your means approach and I can even tolerate the religiosity. But zero based budgeting makes me so anxious. Leave ZERO dollars in my checking account? No.

@highjump the zero based budget, means that every dollar is accounted for. If you have $200 extra after food and other expenses, you budget the $200 to go into savings.

highjump (#39)

@Nick Elliott@facebook Yeah and you’re supposed to have a buffer in your checking account for bank errors or whatnot too (but you are expected to pretend it is not there?) I think. But that level of ‘assign every dollar a job’ detail is just not for me because I just get frustrated and throw my hands up at the whole enterprise.

My version of this is I overestimate my budget categories on purpose and keep a large buffer in my checking account. On the day before payday I try to move whatever is over the amount I like to keep in checking over to savings.

@highjump I think the big point of it all, is to be aware of your finances, and it sounds like you are

honey cowl (#1,510)

This is such a great piece!

BananaPeel (#1,555)

I get that this system is maybe the only thing that will work for some people so I totally support it existing but Ramit Sethi is definitely my guy when it comes to budgeting.

Also, yesterday on the Diane Rehm show they were talking about financial planning and one of the guests pointed out how restrictive budget advice can be pretty Victorian in its morality: http://thedianerehmshow.org/shows/2012-12-17/financial-planning-uncertain-times

readyornot (#816)

@BananaPeel the commenters here do tend to go all victorian moralizing, with a smattering of greek chorus, on logan any time she writes a piece about her personal finances.

@BananaPeel I didn’t listen to the show, but if expecting people to keep track of their money so they don’t need to get bailed out by other people is Victorian moralizing, I’m okay with that bit of Victorianism.

ccq (#1,175)

@BananaPeel i liked sethi before he realized he could make a profit off all those readers coming around. i had to unsubscribe to all his multitudes of lists and twitters, i couldn’t deal with the constant link-baiting to his paid courses. there was too much salesmanship, even if a lot of the advice was sound, it turned me off and i stopped reading.

that said, his actual financial advice before the whole career planning mess started, is really solid. he summarized it all up in a book named the same as his website, “i will teach you to be rich”. get the book, but shy away from the website :)

Lucy (#2,883)

I loved this. My dad dragged me to Dave Ramsey right after I graduated from college (although for some reason my class was 13 weeks). I hated going at the time, but now I wonder why something like this isn’t part of all high schools’ curricula.

kellyography (#250)

This was a great read, and pretty informative, too.

SterlingCooper05 (#2,529)

I completed FPU at home and it really helped. DW and I have averaged paying off an average of $30K a year for the last 3 years. Now we have about $2,500 remaining on student loans. The budgeting is really the key, but we didn’t buy into cutting up the credit cards. (We’ve kept 3 and a debit card)

probs (#296)

I genuinely don’t see anything wrong with this, but it creeps me out all the same!

zou bisou (#1,637)

@probs what about it creeps you out?

probs (#296)

@zou bisou not strictly rational. Just a general distrust of religious things, and the format of the meetings reminded me of culty/scammy stuff. I kept expecting them to suddenly get roped into some sort of sponge-selling pyramid scheme. Again, it’s clearly a good thing, just flipped certain unconscious switches for me.

Oof, I know that people have to make money somehow, but charging $90(each I assume?) to people already in debt somehow seems nefarious to me.

Bennigan (#2,885)

@Michelle LeBlanc@twitter $90 is nothing compared to the feeling of FREEDOM you feel after becoming debt-free. I had student loans, maxed out credit cards and an auto loan before finding Dave in 2009; paid off everything this year. $90? Totally worth it. And it’s $90 per family, not per individual.

wallrock (#1,003)

There’s quite a few things in the Ramsey doctrine that I can get behind but I disagree on a number of his points, not to mention chafe at the religiosity of the whole package. I have a good friend that went through the program and we’ve gotten into a couple of arguments over the snowball method. I guess it makes sense from a psychological standpoint but you’ll never convince me that paying off lower rate debt first makes any sense at all.

@wallrock I thought it was the smallest total balance? So that you’d have one thing totally paid off (therefore not earning interest) before moving on to the next, which makes sense. Is that not it? Because agreed – paying off a lower interest rate first without regard to balance makes no sense.

@wallrock It’s the lower rate debt? I thought it was the lower principle (only from reading this article, I know little else about Ramsey). Which would make sense in a lot of cases because for example, store cards often have low limits with outrageous rates and fees. So it makes sense to pay them off first. But yeah paying off the lowest rate debt first does not make any sense. Unless its like you owe your brother 50 bucks.

wallrock (#1,003)

@swampette@twitter My understanding is that it’s lowest balance without regard to rate, but there might be an exemption if you’re looking at 18% vs 7% or something equally imbalanced. I just remember my friend paying off a card with a lower rate but smaller balance first and being completely unswayed by my calculations.

may june july (#2,862)

@wallrock I never understood that either.. I’ve been throwing as much money as I can at my %18.4 car loan and paying minimums on my 6% credit cards (even though they have a smaller balance) and school loans because I thought that was the best way to go about it..

selenana (#673)

@may june july See articles on this site on the pros and cons of snowball method vs. avalanche method of paying debt.

His financial tips are not actually that bad, but I find the moralization of debt deeply unpleasant (on which topic I highly recommend Debt: The First 5,000 Years).

Also, zero-based budgeting means building up your budget from scratch rather than revising last year’s line items, not “a budget where there are zero dollars left.” At least in the contexts I’ve heard it in.

Aeroplane (#2,886)

@stuffisthings I agree, but I’m also not crippled by all-encompassing debt. AA stuff sounds pretty heavy-handed to a social drinker, but it works for people who want it to work.

E$ (#1,636)

I don’t follow the Dave Ramsey plan but I LOVE listening to his show. I stream it at work for free and I find the problems that people call in about and their stories absolutely fascinating. If you enjoy the stories on the Billfold, you might like it also.

I also need to give the show credit because when I started listening to it, I was motivated to start an emergency fund, which helped about four months later when I was laid off. I had read about the concept many times, but for some reason his show made me actually do it.

Madge (#1,677)

@E$ i go through phases with his show … sometimes it is really compelling and then every once in a while he’ll go off on some anti-obama pro-jesus tangent and i stop subscribing again.

it is really interesting sometimes though. the thing i like best about him is that he’s very thoughtful and considerate to people who call with problems, but when they start trotting out victim speak and saying there’s no way they can make the changes he’s suggesting, he hangs up on them!

i think he’s right that you really can’t help someone who’s in this headspace.

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