What Drives You for Better Personal Finance?

My Google News feed picked up this article a couple of weeks ago: Dave Says: You Need Something That Matters

It is a good article and one worth sharing. However, I had to think whether I was really wanted to write about Dave Ramsey again. When I last wrote about him it when he clearly seemed to support pyramid schemes. To be more specific, his explanation for Multi-level Marketing matches the FTC’s guidelines for when an MLM company is an illegal pyramid schemes, and he supported MLM as if it wasn’t a pyramid scheme.

Social media picked it up and he finally gave out a response that you’d expect from a politician, not from someone trying to help people with their finances:

LOL…you fools. Pyramid Schemes are illegal. Of course I dont support them. https://t.co/j6NT6BclK9

— Dave Ramsey (@DaveRamsey) April 16, 2015

Imagine watching a video where Ramsey explained that all rectangles are illegal. He follows it up by saying that squares are fine without explanation why. I explain to Ramsey that all squares are indeed rectangles (as they are) and thus illegal as he claims. His response ignores the topic of squares and reverts to “rectangles are illegal and I don’t support them.”

That’s essentially what he’s doing. It is so frustrating, because Dave Ramsey has a large audience.

Despite this, I have to recognize that Dave Ramsey does a lot of good. He’s got a wide audience and I think somewhere around 90% of his advice is sound. So I thought I’d give him another shot, because his answer in this article was quite interesting.

Isaac asks:

“My wife and I are in our twenties. We have no debt and $50,000 in the bank. Our income is $90,000 a year, and we’re cautious to live on less than we make. Still, we can’t seem to get motivated to make a budget. How can we get inspired to do this?”

Ramsey responds:

“Two of the biggest motivators we have are pain and pleasure. Financially, you guys don’t have any pain. You’re killing it! So, we’re going to have to figure out something associated with pleasure.
…
It sounds to me like you both realize money can’t be the goal. And that’s a good thing. You guys are obviously smart, gifted people. I’m sure you have ideas and goals, dreams and desires. Talk about them and write them down. By doing this, you’ll be taking the first steps toward making these things reality. When you have something specific that you want money to do, it gives you a reason to make it behave.”

I love the response. Money helps us avoid pain and it can enhance our pleasure.

It is inspiring to stop and think, “Money is great… but I should really do something with it.”

I only have one minor quibble. To some degree money CAN be the goal when you are in your twenties. For example they could set a goal to of financial freedom by 30, 35, or 40.

They’ve got a tremendous start, but $50,000 is not financial freedom. It isn’t even close. Using the rule 4% it would throw off an income of about $2000 a year. It’s hard to retire on that. However, if they invest that money at their young age that money can grow exponentially.

Also, let’s not forget that life has a way of creating expenses after your twenties. They may want to own or a home (or not). They will probably have to buy cars. They may have children which could require child care or a temporary loss of income while one stays at home.

Dreams and desires change over time. Ten years ago, I would not have imagined a dream where our family immerses ourselves in Spain or Italy for a month. I have that desire today. Because money was one of my goals ten years ago, it looks like a strong possibility in a few years, when the kids are a little older.

I wish I could answer Isaac directly. I’d tell him that he’s already using one of my Three Budget Systems. That’s simply to be cautious and live on less what you make. Training yourself to make smart buying decisions may be all you need.

If it isn’t broke, don’t fix it.

Financial freedom drives me to work for better personal finance. What drives you?