RPF-0066-Does_Dave_Ramsey_Do_More_Harm_Than

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00:00:14.560 | ones.

00:00:15.560 | Welcome to the Radical Personal Finance Podcast.

00:00:17.560 | My name is Joshua Sheets.

00:00:18.800 | I'm your host.

00:00:19.800 | Today's show, a little bit different, just a quick intro here.

00:00:22.880 | I am at FinCon 2014, actually podcasting or actually releasing this introduction right

00:00:29.440 | from the hallway, right between sessions.

00:00:32.160 | And I've just recorded this show that you will hear in just a moment, which is an interview

00:00:36.360 | with Steve Stewart.

00:00:38.160 | And for a long time people have been asking me, I've made various comments about Dave

00:00:42.160 | Ramsey and I'm a fan of his, but I'm also not.

00:00:46.200 | And Steve and I decided to go ahead and sit down and do a show together.

00:00:49.000 | And Steve is a really a great guy.

00:00:52.320 | He runs a show called Money Plan SOS.

00:00:55.360 | And he's a big fan of Dave Ramsey.

00:00:56.760 | He's a Dave Ramsey coach and big fan.

00:01:00.360 | Dave has had a great impact in his life.

00:01:03.080 | I've been a little bit fearful to do this content just because I want to be very careful.

00:01:10.520 | I'm a big Dave fan, but I also want to have some things I would like to see done differently,

00:01:14.880 | which is why I'm doing my show in the first place.

00:01:16.560 | So I told Steve, I said, "Thankfully, since you're a big fan, maybe you can help me keep

00:01:20.880 | from destroying myself in the conversation."

00:01:25.260 | So you're about to hear a recorded conversation between Steve and myself.

00:01:28.720 | I hope you enjoy it and I hope you find it thought provoking.

00:01:32.200 | I am probably more than any other show I've released.

00:01:35.400 | I'm nervous about releasing this one, but I feel like I've got to.

00:01:39.640 | So I hope you enjoy it and I would love your feedback.

00:01:42.680 | Here's the interview.

00:01:43.680 | I'm sitting here with Joshua Sheets from Radical Personal Finance, one of my favorite new finance

00:01:49.320 | podcasts.

00:01:50.320 | Joshua Sheets, tell us a little bit about your podcast and what you're doing over there.

00:01:53.960 | I am trying to provide an alternative for existing financial broadcast radio.

00:01:59.720 | So when people are tired of the current options, then they have an option for maybe a slightly

00:02:05.560 | more in-depth level of financial radio.

00:02:07.400 | That's basically my vision of what I'm looking to create.

00:02:10.460 | My audience is traditionally people who are just trying to get out of debt and we don't

00:02:13.160 | get too deep into the personal finance topics, but you have a history and you've got a whole

00:02:18.360 | bunch of letters behind your name.

00:02:19.640 | Tell us a little bit about what those are.

00:02:21.020 | Not going into too much depth, but you've got a background.

00:02:23.080 | That's what I'm trying to get at.

00:02:24.760 | All that stuff means is I'm good at taking tests.

00:02:26.800 | That's basically all it is.

00:02:27.800 | But yes, I have been a professional financial advisor for the last six years.

00:02:32.040 | And during that time, I've worked hard.

00:02:33.760 | I have a bunch of financial planning designations.

00:02:36.120 | Probably the, I think I counted the other day, I think it was seven at this point.

00:02:39.640 | But again, all it means is just I'm good at taking tests, but a CFP background.

00:02:42.720 | And then I actually just finished a master's degree in financial planning.

00:02:45.380 | So I do have some history in the technical side of financial planning, as well as a history

00:02:50.640 | of actually working with clients, which probably is the biggest difference between me and many

00:02:54.800 | other people is when you work with clients.

00:02:57.000 | And I've worked with over a thousand people face to face over the last six years.

00:03:00.640 | That makes a big difference in your perspective.

00:03:03.080 | You know, listening to your podcast, I can tell that you've got the knowledge behind

00:03:05.680 | it all.

00:03:06.680 | And the approach that I like, I like the approach that you have in your show because it does

00:03:10.120 | come off.

00:03:11.180 | You do give your opinion, but it is, it's not as if this is the way it works.

00:03:15.560 | It is as if another option that will work for specific people.

00:03:19.860 | So I appreciate that aspect.

00:03:21.720 | Tell us a little bit why you do it that way.

00:03:23.840 | I am a recovering dogmatic, which is actually kind of the primary thing I know what we were

00:03:31.560 | going to talk about.

00:03:32.560 | But I spent years as a personal finance junkie, and I always loved finance.

00:03:38.080 | I always loved reading the books.

00:03:40.320 | I love listening to the shows.

00:03:42.080 | I love listening to the radio.

00:03:44.080 | But what you pick up, whether it's you listen to whether it's, you know, AM political talk

00:03:48.480 | or whether it's you watch kind of the way media works, you pick up this mode of thinking

00:03:53.080 | of right and wrong, this idea that there is right and then there is wrong.

00:03:57.680 | And I'm not talking about morality at this moment.

00:04:00.440 | That's a whole separate philosophical discussion.

00:04:02.320 | But especially with regard to money, we get these certain ideas that this is right and

00:04:06.480 | this is wrong.

00:04:08.360 | And I know that for me, that was a big thing because I fully adopted that approach and

00:04:15.080 | that idea that there are certain right ways to handle money or certain right financial

00:04:20.560 | decisions to make.

00:04:21.880 | And then there are certain wrong ways to handle money and certain wrong financial decisions

00:04:25.260 | to make.

00:04:26.640 | And what I learned with actually practice, practice in the professional sense, meaning

00:04:31.800 | actually working with clients, is that it's simply not true.

00:04:35.920 | There are things that are technically correct, but many times a lot of it isn't subject to

00:04:42.280 | personal adaptation.

00:04:43.900 | And that's the key point that is missing in financial talk radio.

00:04:48.240 | That's the key point that's missing in most personal finance books.

00:04:51.840 | And so that's what I determined to do is not to tell somebody what to think or what to

00:04:56.600 | do, but rather teach them everything I know and allow them to be adults.

00:05:00.780 | What happens is we pick this up somehow, this idea that we have to tell each other how to

00:05:05.480 | live and tell each other what to do.

00:05:07.440 | And it's this very juvenile thing, I think, it's probably schooled into us where we're

00:05:11.120 | taught that there is right and there is wrong and there is a master at the front of the

00:05:14.000 | class and we're the slaves who have to regurgitate to the master the right answer to get the

00:05:18.000 | appropriate reward and avoid the punishment and avoid the penalty.

00:05:21.360 | So our society, speaking of the US American society, gets more and more in this direction

00:05:25.940 | where we get into the idea of this is right and wrong in areas where there's just simply

00:05:30.500 | not right and wrong.

00:05:31.500 | It's simply not.

00:05:32.700 | And so it took years, literally I would say about three years of actually working as a

00:05:37.560 | financial advisor to where I finally discovered that I was an idiot and I'm taking this approach

00:05:43.200 | of telling clients this is what's right and finally I just learned to shut up and start

00:05:46.920 | listening.

00:05:48.260 | And once I learned to shut up and start listening to people and then just simply started being

00:05:53.360 | more of a coach and teaching them the things that are technically accurate, it made a major

00:05:59.660 | difference in the results the clients achieved.

00:06:03.560 | Made a major difference.

00:06:04.560 | And there's more to it but that's why in my show I refuse to say this is what you should

00:06:10.040 | do with your life.

00:06:11.040 | Rather I say you're an adult.

00:06:12.760 | Figure out what you want to do with your life.

00:06:14.760 | And I can destroy most of the things that people take for granted.

00:06:19.200 | I can destroy most of the purple cows.

00:06:21.200 | Maybe that's not the right word but there are certain things that people hold as the

00:06:24.560 | holy grail.

00:06:25.560 | This is the way that things should be done.

00:06:27.920 | And I can destroy most of those and I've learned to do that over time.

00:06:31.440 | And so now because all the things that I used to think were right to do or not right to

00:06:37.400 | do, again I've learned that everything is not black and white.

00:06:42.840 | And so that heavily influences my show.

00:06:44.680 | >> See I think for my show I do a lot of this is the way it works stuff but hopefully I

00:06:49.640 | educate my audience as well.

00:06:51.920 | Do you think that we as a culture think that maybe the answers are in a book and it really

00:06:57.800 | is a misconception?

00:06:59.960 | There's really no way to learn everything in one book.

00:07:01.760 | Do you believe that?

00:07:02.760 | >> It's not so much about the book.

00:07:04.600 | All you get when you're reading a book is you're getting an author's perspective and

00:07:08.520 | you're getting a philosophy.

00:07:09.600 | And so I don't mind, for example, I don't mind having a book where someone is presenting

00:07:13.320 | a strong opinion.

00:07:14.320 | But what happens is that there's almost many, especially in the financial world, there are

00:07:18.240 | certain things that go to another level and then we adapt this idea of this is right and

00:07:24.160 | this is wrong.

00:07:25.160 | I'll give you an example.

00:07:26.160 | Maybe this will help to clarify.

00:07:27.160 | Would you generally counsel people that it's a good idea to save money?

00:07:30.920 | >> Yes.

00:07:31.920 | >> Okay.

00:07:32.920 | I would too.

00:07:33.920 | Okay.

00:07:34.920 | But can you also then concurrent with that thought hold on your other thought and design

00:07:39.520 | ideas and situations in which saving money is not a good thing?

00:07:45.080 | And here let me flesh this out so you understand.

00:07:47.280 | So there is only one reason in the world to save money because you value what that future

00:07:53.820 | savings means to you for your goals more than you value the consumption that you can have

00:07:58.400 | today.

00:07:59.400 | So if I have $100 and I have a choice between spending the $100 and consuming it today versus

00:08:05.080 | saving the $100, the only rational reason for me to save the money is because I value

00:08:11.320 | what the future higher dollars would mean to me more than I value the consumption for

00:08:15.840 | $100 today.

00:08:17.180 | So what happens in personal finance is that it's easy for us who are involved and really

00:08:21.520 | engaged in this to look down on people who are spending all their money.

00:08:26.280 | And I've learned not to do that.

00:08:28.360 | I just simply view it as they're being rational.

00:08:30.760 | They're expending their money and enjoying the consumption that they can get with this.

00:08:34.800 | So we develop this culture of being critical of people who buy new cars or people who spend

00:08:39.920 | money on things that we perceive to be frivolous.

00:08:43.220 | And we look down on them because, well, that's not us.

00:08:45.560 | But we don't recognize that that's just simply not us.

00:08:48.920 | There's a personality difference.

00:08:50.320 | I'm a huge, huge proponent of saving.

00:08:56.120 | At this point in my life, I am very much saving money.

00:08:59.640 | But beyond the amount of money that I, as my wealth and my financial base grows over

00:09:07.720 | time, as I accumulate capital, I'll have a decision.

00:09:11.280 | Do I want to allocate that capital at my death to my kids or to a charity or something like

00:09:16.560 | that to build an estate?

00:09:18.480 | And I don't know what those decisions will be today.

00:09:20.240 | But let's assume that I allocate a certain amount of money towards those things.

00:09:23.480 | Then at that point in time, the rational thing for me to do is to spend the rest of my money

00:09:27.000 | on the things that are important to me throughout my lifetime.

00:09:29.840 | So that's a little bit more nuanced view of the saving versus spending.

00:09:34.260 | And so what happens is I think a better way to approach it, instead of looking down on

00:09:37.280 | people because they're not saving money and somehow viewing it as a moral shortcoming,

00:09:41.040 | why don't we show people what they can achieve if they save money?

00:09:44.760 | So look in the personal finance community.

00:09:46.260 | Look at the traction that occurs right now with the early retirement financial independence

00:09:50.800 | movement.

00:09:51.800 | There is a major, major push from many people pushing towards this idea of early retirement.

00:09:56.520 | And you say, "We've got this retirement crisis in the country.

00:09:58.960 | There's a retirement crisis in the country, but no one has any money saved for retirement."

00:10:01.720 | Well, that's true.

00:10:02.800 | But the reason is, have you ever thought of the fact that most people just simply don't

00:10:05.600 | want to retire?

00:10:07.080 | They might not want to retire.

00:10:08.400 | Now, I certainly don't think that everybody holds that opinion.

00:10:12.600 | There are many things that can happen.

00:10:14.380 | But look at the motivation that somebody can achieve when they're focusing on early retirement.

00:10:18.520 | Because now they can see and they can connect this idea that, "I would like to be financially

00:10:23.880 | independent in 10 years."

00:10:25.620 | And there's this idea of freedom, and that's very motivating.

00:10:28.460 | So now, instead of having to fight this stupid, "Oh, I have to budget $100 in this category

00:10:34.120 | and I have to feel deprived because I'd like to spend $150."

00:10:37.000 | No, it's not about deprivation.

00:10:39.040 | It's about seeing the vision of what I want and then following it.

00:10:42.720 | So that would be just an example of one of those things that would be the fundamental

00:10:45.680 | of personal finance.

00:10:47.100 | Saving money.

00:10:48.100 | Saving money is not always the rational thing to do.

00:10:50.120 | If I had a million dollars and I were diagnosed with terminal cancer, if I, assuming I had

00:10:53.920 | taken care of my medical costs, assuming I had taken care of my family that was depending

00:10:57.440 | on me, I would work as hard as I could to spend the million dollars before I died.

00:11:01.560 | I would.

00:11:02.560 | And I think that's a rational approach.

00:11:04.200 | Now that's very different than at this stage of my life, where I'm very focused on saving

00:11:08.000 | money because I value the future higher dollars and the freedom that money buys me for the

00:11:13.200 | future.

00:11:14.200 | That's why I save money.

00:11:15.200 | Does that help to understand what I say as far as dogma versus going a little deeper

00:11:18.800 | and teaching people how to think?

00:11:20.640 | That's what I mean.

00:11:21.640 | Yes, yes.

00:11:22.640 | And I hope my listeners don't think that I'm looking down on them if they're not saving

00:11:24.560 | money, but I do preach that they should save money because ... And maybe on my show I don't

00:11:29.200 | explain this enough, but if we don't save any money, then we are trading in those future

00:11:34.520 | dollars for stress when we don't have the money for a broken engine in the car or whatever

00:11:39.360 | like that.

00:11:40.360 | All right.

00:11:41.560 | The real reason why we're getting on this topic today is because ... And I remember

00:11:45.440 | it was way back in episode 25 or something of yours that you had mentioned that you wanted

00:11:48.800 | to get into the discussion about Dave Ramsey's investing advice.

00:11:52.800 | And now we need to lay the foundation here that Joshua Sheets is not a Dave Ramsey hater.

00:11:57.320 | He actually went through the process of getting out of debt following Dave's principles.

00:12:02.040 | Is that correct?

00:12:03.040 | You want to tell a little bit about that story?

00:12:04.040 | I'll tell the story.

00:12:05.040 | I know that I've been looking forward to this conversation, but I've also been very fearful

00:12:10.080 | of the conversation because it's easy to pick on those who are successful.

00:12:18.240 | And it's very challenging to negotiate because I do not want to be negative towards any one

00:12:24.400 | person.

00:12:25.720 | And so let me tell my Dave Ramsey story.

00:12:28.360 | What if I called in?

00:12:29.360 | I think I did call in.

00:12:30.360 | I don't remember.

00:12:31.360 | But let me tell ... I may have called in on this Friday show.

00:12:33.440 | But I think it's important because I hear this consistently throughout even this conference

00:12:37.840 | at FinCon.

00:12:38.840 | I hear this all through the halls.

00:12:40.480 | Everyone is talking about this type of thing.

00:12:42.000 | And I think we've got to get the conversation out there because then we can grow together.

00:12:45.800 | So I'm depending on you to help me not be a hater because I'm not a hater.

00:12:50.040 | I like Dave.

00:12:51.040 | I would enjoy meeting him.

00:12:52.120 | I don't see realistically, I don't think we'd ever be best buddies.

00:12:56.200 | We don't really have a lot in common other than finance.

00:12:58.920 | But I'm not an anti-Dave guy.

00:13:01.000 | I first was exposed to Dave Ramsey when I was in college.

00:13:05.120 | And my brother listened to his show and my brother gave me a copy of Total Money Makeover.

00:13:10.200 | And at that point in time, I was a fairly arrogant, know-it-all business person.

00:13:15.240 | I'm sure it's very surprising because I was a young male in college and we think we know

00:13:19.440 | it all.

00:13:20.800 | And I was very much focused on real estate investment at that time as my path to wealth

00:13:24.680 | and other people's money and no money down and this was in the real estate heyday.

00:13:28.160 | And I got sucked into that.

00:13:30.120 | So my brother gave me a copy of Dave's book.

00:13:32.280 | He had listened to the show.

00:13:33.280 | He'd bought the Total Money Makeover.

00:13:34.280 | He gave a copy to me and said, "Here, read this book.

00:13:36.640 | I think you'd enjoy it."

00:13:37.840 | Not any kind of manipulative, "You've got to do this.

00:13:39.680 | I like this book.

00:13:40.680 | I think you'd enjoy it."

00:13:41.680 | So I read the book once and I thought, "This guy's dumb.

00:13:44.280 | He doesn't know what he's talking about."

00:13:45.680 | But there was something that kind of tickled me a little bit.

00:13:47.640 | I read it again and then I read it again.

00:13:50.080 | And then the third time through, just the statement that stood out to me is he made

00:13:54.520 | a statement in the book.

00:13:55.520 | He said, "If you had no payments, how much money would you have in your life?"

00:14:02.080 | And at that point in time, I was paying my way through school and what I would wind up

00:14:06.880 | doing is I was always just a little bit short and I worked my way through my freshman year,

00:14:12.120 | barely.

00:14:13.120 | Then in my sophomore year, I decided I was working too hard, which was nonsense.

00:14:15.840 | I was working, but I wasn't working too hard.

00:14:18.080 | I actually had three jobs my first freshman year, but I still had plenty of time.

00:14:22.400 | And then my sophomore year, so I started borrowing money on student loans.

00:14:24.640 | I borrowed a bunch of money my sophomore year, played and didn't really do any work.

00:14:28.600 | My junior year of college, I came back and I got all mixed up on why was I in school

00:14:33.440 | at all?

00:14:34.440 | What was I going to study?

00:14:35.440 | What was I doing?

00:14:36.440 | And so I had more loans and I had credit cards.

00:14:38.760 | And what would happen is I would put my books and my gas on the credit card through the

00:14:42.020 | academic year and then during the summer, I'd be able to study and I would get it back

00:14:44.640 | to zero.

00:14:45.640 | So, I just said, "Wow, how much money would I have if I had no payments?"

00:14:49.800 | So I got motivated and I set myself a goal of getting out of debt.

00:14:54.440 | And I set myself a goal of getting out of debt, if possible, I wanted to get out of

00:14:58.600 | debt before I graduated.

00:15:00.160 | So all during my senior year of college, I worked a full-time job.

00:15:03.480 | I worked 40 hours a week.

00:15:04.720 | I went to class full-time.

00:15:06.080 | I took 19 hours of class of all my senior capstone courses.

00:15:10.200 | I saved.

00:15:11.560 | I paid cash for my senior year of college.

00:15:13.400 | I paid cash for some travel that I did as associated with the senior year.

00:15:17.680 | I paid off my credit cards and two weeks before I graduated, I wrote a check to Sally Mae

00:15:21.880 | and graduated from school completely debt-free.

00:15:24.920 | And it was freedom, right?

00:15:27.480 | And it was awesome.

00:15:28.480 | It was really, really cool.

00:15:29.480 | I was so proud of myself because I learned it was a stretching time for me to learn how

00:15:32.920 | to budget my time in such a way that I could be effective.

00:15:35.840 | And I never, I was just blown away.

00:15:39.120 | Graduated from school, took the opportunity, went on a road trip.

00:15:41.360 | Fast forward, cutting the story short, I continued to follow Dave's baby steps, excuse me, all

00:15:46.360 | during the time while I was doing that, working like a maniac, working 40 hours a week.

00:15:50.360 | Dave Ramsey's show was my constant companion, my encouragement.

00:15:53.360 | I was subscribed to his premium membership.

00:15:55.280 | I had the three hours a day of the podcast with no commercials, and I listened every

00:16:00.520 | day to three hours of his show.

00:16:02.740 | And it was a major encouragement for me all during that time.

00:16:05.760 | And I learned a lot about finance.

00:16:07.000 | I had always been a finance junkie before, but I learned a lot just hearing how he answered

00:16:10.160 | questions.

00:16:11.160 | Well, what happened is I went on and I wound up getting laid off from a job.

00:16:16.400 | I had finished, what was it, baby step three, emergency fund.

00:16:20.320 | That made, I was out of debt.

00:16:21.320 | I had an emergency fund.

00:16:22.320 | That's what allowed me to launch a financial planning practice.

00:16:24.600 | Well, when I started working as a financial planner, I started, I tried to apply the same

00:16:30.040 | Dave Ramsey principles that had worked for me.

00:16:32.200 | I literally carried, I would order his book, Total Money Maker, because it'd make such

00:16:36.080 | a big difference in my life.

00:16:37.360 | I ordered his book by the case, and I would carry a case of those books around, 10 in

00:16:42.080 | a case.

00:16:43.080 | I would get the deal where they were 10 bucks a book, 100 bucks for 10 of them, and I would

00:16:46.280 | carry them around in my car.

00:16:48.120 | And if I had a client or somebody who was struggling with debt, I couldn't really, in

00:16:51.400 | my practice, I couldn't really help them very much.

00:16:53.720 | I didn't have the time to really work with them.

00:16:56.200 | There was no compensation method where I could do it.

00:16:58.000 | I couldn't work for free.

00:16:59.000 | So I would give them a book and I'd say, "Look, this is my book."

00:17:01.520 | I gave it away for wedding presents.

00:17:03.000 | I gave away audio books.

00:17:04.320 | I would give it away as a wedding present, tuck $100 bills in the back of it.

00:17:07.960 | This was my thing.

00:17:09.520 | If you ask anyone that knows me, I was a raving fan.

00:17:12.880 | The problem was when I started working as an advisor, I tried to apply the same approach

00:17:18.120 | that he used with real people, and I started to learn that it didn't work.

00:17:23.840 | And it didn't work.

00:17:24.920 | Maybe it didn't work because of my personality.

00:17:26.680 | Maybe I was too aggressive, too abrasive.

00:17:29.360 | Maybe I was too hardheaded.

00:17:30.560 | I don't know.

00:17:31.720 | But then what happened is I found out that nobody really follows the Dave Ramsey plan

00:17:37.280 | as it's laid out.

00:17:38.280 | Now, there's nothing in the Dave Ramsey plan, quote-unquote, and by that I am encompassing

00:17:41.920 | not just his book, but everything that I've ever heard for years while listening to him

00:17:44.880 | talk on the radio.

00:17:45.880 | There's nothing that can't work.

00:17:48.160 | It's just simply that it doesn't work because people don't do it.

00:17:51.820 | And so I had all these experiences where people come and say, "I'm a Dave Ramsey fan.

00:17:54.720 | I'm a Dave Ramsey fan.

00:17:55.720 | I'm following the Dave Ramsey plan."

00:17:56.720 | And I say, "Awesome.

00:17:57.720 | I love Dave.

00:17:58.720 | Dave made a big difference in my life."

00:18:00.200 | And then I asked them what they meant.

00:18:02.160 | What happened is I learned that, "Wait a second.

00:18:03.840 | You're not actually following the Dave Ramsey plan."

00:18:06.200 | So I learned because they had certain opinions about financial products, which is what I

00:18:11.480 | was doing.

00:18:12.480 | I sold insurance.

00:18:13.480 | I sold investments.

00:18:14.480 | I did financial planning.

00:18:16.440 | And so they had certain opinions about financial products because they were fun to follow the

00:18:19.600 | Dave Ramsey plan.

00:18:20.600 | Then I learned, "Wait a second.

00:18:21.600 | You're not actually doing it."

00:18:23.220 | So I learned to say, "See, I actually followed the Dave Ramsey plan.

00:18:25.760 | I didn't have any credit cards.

00:18:26.960 | I had applied for a credit card on my 18th birthday.

00:18:28.760 | I learned my lesson, closed all my credit cards after they were paid off.

00:18:31.160 | I didn't have any credit cards.

00:18:32.600 | I followed all of his things to the letter."

00:18:34.960 | And then I started learning that nobody was actually following it.

00:18:38.240 | Then I started recognizing the Dave Ramsey plan is not what Dave Ramsey does.

00:18:43.640 | So this is the problem with personal finance, is that what made Dave Ramsey rich is not

00:18:48.760 | following the Dave Ramsey plan.

00:18:50.880 | What made Dave Ramsey rich was building a massive business, going deeply—well, first

00:18:54.840 | of all, going deeply into debt, being an idiot with his financing, screwing up royally, declaring

00:18:59.640 | bankruptcy to clear all of the debt, and then going on, pursuing a high-paying career—I'm

00:19:04.560 | sure he was a very effective real estate salesperson—pursuing a high-income career, building a business

00:19:08.880 | on the side, and the business on the side has ballooned to be huge.

00:19:12.820 | But that's not what his books teach.

00:19:14.320 | His books teach, "Save and invest 15% for retirement," not build a massive business.

00:19:18.720 | Now, he does talk about business.

00:19:19.880 | He has a book, Entree Leadership.

00:19:20.880 | It's a good book.

00:19:21.880 | I read it.

00:19:22.880 | So he does talk about that.

00:19:23.880 | But the problem is, the whole personal finance industry, we sell something that we don't

00:19:27.480 | do in and of ourselves.

00:19:29.160 | And so we sell this idea that, well, if we just get out of debt, and we just don't do

00:19:32.200 | this, and we save 10%.

00:19:33.200 | And what I found is that nobody actually—like, I would ask people, I was like, "Do you have

00:19:37.240 | credit cards?"

00:19:38.240 | "Well, yeah, I do."

00:19:39.240 | "Well, do you have a 15-year mortgage?"

00:19:40.240 | "No, no, no, I do."

00:19:41.240 | "Wait a second."

00:19:42.240 | And I learned.

00:19:43.920 | And the most disheartening one for me was—so here's how much I love that.

00:19:49.600 | I bought for some of my friends, after I started reading his books and listening to his show,

00:19:53.160 | I bought Financial Peace University, and I organized a class for my friends going through

00:19:57.120 | the video class, because I wanted to help my friends.

00:20:00.000 | And what I learned is—so I went through Financial Peace University.

00:20:04.360 | I guess what's the word?

00:20:05.360 | Proctored it or moderated it or whatever.

00:20:06.800 | I organized it.

00:20:08.600 | And unofficially, I bought the courses and played the DVDs for my friends.

00:20:14.040 | But even like the high school curriculum, I watched a friend of mine who went through

00:20:16.640 | the high school curriculum, came home from school, and was so excited, yelling at his

00:20:20.120 | parents, "You've got to get out of debt!"

00:20:21.120 | Dave says, "You've got to get out of debt."

00:20:22.120 | And I've heard, "Dave says blah blah blah blah blah," again and again.

00:20:25.640 | And then I watched him.

00:20:26.920 | He graduates from high school.

00:20:28.400 | Guess what?

00:20:29.400 | Six years later, he gets a big boy job.

00:20:31.240 | Guess what?

00:20:32.240 | Goes out, leases a brand new BMW, destroying his financial life, because he feels good

00:20:38.360 | that he knows what Dave Ramsey does.

00:20:39.680 | And so I started instituting this as my litmus test.

00:20:42.240 | People say, "I follow the Dave Ramsey plan."

00:20:43.480 | My first question would be, "How many credit cards do you have?"

00:20:47.240 | Nobody ever said zero.

00:20:48.240 | Like, I was the only one who followed the Dave Ramsey plan, and the Dave Ramsey plan

00:20:51.440 | wasn't working in the sense that it wasn't actually being effective.

00:20:55.960 | Now, there's no reason why it can't work.

00:20:57.800 | It's just that it doesn't work, because people don't do it.

00:21:00.280 | And that would be what Dave would say.

00:21:02.080 | But then I got into deeper level of financial planning, and I started to gain some actual

00:21:06.600 | knowledge in working with clients.

00:21:08.080 | Then I started looking at his recommendations.

00:21:10.880 | And the problem is, he goes where he shouldn't go.

00:21:15.720 | And by the way, cut me off and rebut at any point, because I don't want to be too harsh,

00:21:24.160 | but I think we've got to recognize this, that he goes where he shouldn't go.

00:21:27.880 | He's not a financial advisor, and yet he gives financial advice.

00:21:31.240 | And if I gave some of the advice that he gives every day on the radio as a financial advisor,

00:21:37.120 | if I gave that advice, I would be completely disbarred.

00:21:40.280 | I would lose my license in an instant.

00:21:42.040 | I would have lawsuits on my hands, because the advice is flat out dangerous in some ways.

00:21:47.200 | And go ahead.

00:21:48.200 | >> You want me to break in here?

00:21:49.320 | Because what I hear Dave Ramsey speaking is in general terms.

00:21:53.640 | Now there are some exclusions to what he advises on what to invest in.

00:21:58.440 | And of course, he teaches against the dangers of certain investments, like viaticals and

00:22:03.760 | annuities and things like that.

00:22:05.920 | So you just used the word, the advice that he's giving on investing.

00:22:09.500 | It's investing that we're talking about specifically, not to get out of debt plan, right?

00:22:12.800 | >> Right.

00:22:13.800 | And so that's where, and this is where if you talk to almost any financial advisor,

00:22:17.360 | or anybody who's interested, basically what I hear when I have these conversations, because

00:22:21.600 | you can't really, it's very dangerous to pick on Dave, because you get immediately qualified

00:22:27.760 | as a Dave hater.

00:22:30.440 | And what happens is because if I had listened to me when I was caught in the cult of personality

00:22:36.760 | that is the Dave Ramsey show years ago, when I was listening for hours a day, consider

00:22:41.280 | that, he's someone who for three hours a day sewed into my life.

00:22:45.140 | And I was, I mean, look how deeply my obsession went.

00:22:49.400 | I mean, and how much I did, I would invite friends to his conference.

00:22:53.560 | One time I had a friend that I invited to his conference in Tampa.

00:22:55.880 | I drove to Tampa to see him speak.

00:22:57.920 | And what happens is that I became attached to the person.

00:23:01.320 | And once you're attached to any person, then you face a situation where you start to become

00:23:07.560 | blind to the facts of what they're saying, and you start to have allegiance to a person.

00:23:14.400 | So that's where, what's dangerous is I wouldn't have listened to what I'm saying right now,

00:23:18.280 | because I would have said, no, Dave Ramsey's right.

00:23:19.960 | But once I got a little bit disattached, and I kind of was able to pull back a little bit,

00:23:23.880 | and I started looking at the recommendations, I'm going to set even investing aside, because

00:23:28.680 | there's nothing in what he says that is necessarily wrong.

00:23:32.440 | Can you buy mutual funds that are growth, aggressive growth, growth in income and international,

00:23:38.000 | split your assets 25% between them, and choose mutual funds that have at least a five to

00:23:42.200 | 10 year track record with a good mutual fund company?

00:23:44.360 | You can.

00:23:45.360 | Is there any reason why it won't work?

00:23:46.680 | I don't think so.

00:23:47.680 | I think it's as good as many other approaches.

00:23:50.640 | So from that perspective, I don't, a lot of financial advice would be really upset with

00:23:53.960 | me for right now on that.

00:23:55.920 | But I don't have any problem with that.

00:23:58.420 | What I have a problem though with is teaching people to expect a 12% rate of return.

00:24:05.200 | And so something like that.

00:24:06.360 | The one thing you can do that will get the SEC on your back is if you falsely promise

00:24:11.000 | rates of return that are not accurate.

00:24:14.960 | And so here's the thing.

00:24:15.960 | He ignores so much very important detail.

00:24:19.480 | When I have a client come into my office, so we all, if you're interested at all in

00:24:22.720 | personal finance, you will often hear something like, you'll hear of the 4% rule.

00:24:28.540 | And the 4% rule is very well known.

00:24:29.980 | It's based upon what's called the Trinity study, which was a study that three professors

00:24:33.740 | at Trinity College put together, which they basically went back and modeled and they said,

00:24:37.820 | what would be a distribution rate of a portfolio that is sustainable over time?

00:24:43.180 | So this is as good as that now, that is flawed.

00:24:46.460 | And without going into the details, that there are tons of problems in that, that lots of

00:24:50.460 | people smarter than I talk about.

00:24:51.820 | Let's use that as a proxy.

00:24:53.240 | So a financial advisor who is careful would probably very rarely go higher than a 4% distribution

00:25:00.780 | rate from a portfolio.

00:25:02.360 | And even that, I would be uncomfortable with that if the only asset were mutual funds and

00:25:07.040 | we were basing it on that.

00:25:08.120 | Because there are flaws in that, especially in today's investing environment.

00:25:11.560 | But that's a financial advisor who would usually not go over 4%.

00:25:14.640 | Well what happened is I had someone say, well I read Dave Ramsey's book, Total Money Makeover,

00:25:18.540 | and what Dave Ramsey says is you can average 12% on your mutual funds.

00:25:22.240 | And you can average 12% on your mutual funds and you account for, you lose 4% to inflation.

00:25:26.700 | So therefore you can pull 8% off of your portfolio every year.

00:25:30.620 | That is flat out dangerous.

00:25:32.480 | Because when most advisors will say 4%, and he's saying you can expect 12 minus 4% of

00:25:38.220 | inflation and take 8, that's flat out dangerous.

00:25:41.420 | And so you have, and there are far smarter financial advisors than me that write these

00:25:45.420 | things very carefully, very carefully, very scientifically.

00:25:48.700 | What happens is you can't get past the cult of personality.

00:25:51.900 | And so the people who are very engaged in his community, they're engaged around a person,

00:25:58.140 | not around ideas.

00:25:59.640 | And that's what's dangerous.

00:26:00.640 | Now you could go on to other areas.

00:26:02.700 | And so whether it's something like life insurance.

00:26:05.680 | So life insurance, everyone wants to get into the life insurance conversation.

00:26:08.820 | Most of the time they want to talk about the type of life insurance.

00:26:12.500 | Term life insurance, whole life insurance.

00:26:13.900 | I don't care about that conversation.

00:26:16.080 | Because what you actually find when you actually do life insurance planning is that asking

00:26:20.020 | if you should buy term life insurance or whether you should buy whole life insurance and comparing

00:26:26.220 | them, they are completely incompatible.

00:26:28.580 | It's like asking, I mean the example that I give, it's like asking should I rent a car,

00:26:33.360 | should I lease a car, or should I buy a car?

00:26:36.220 | So an example, and I'll give you this example because I just found this to make it be the

00:26:39.900 | most sense.

00:26:41.220 | To me when I was trying to research and trying to think my way through it, if you come to

00:26:44.460 | FinCon and you're going to be here for a week and you need a car to drive because you're

00:26:48.820 | going to travel around Louisiana, does it make sense for you to rent a car, lease a

00:26:52.340 | car, or buy a car?

00:26:53.340 | You rent a car, right?

00:26:54.500 | Now if you're going to move to Louisiana for a year and you're just doing some business

00:26:57.460 | project, you need a car to drive while you're here, and you need a nice car while you're

00:27:00.980 | going to be traveling around with clients, does it make sense to rent a car, lease a

00:27:04.860 | car, buy a car?

00:27:05.940 | Most Dave Ramsey fans would say never lease a car because that's a waste of money.

00:27:09.380 | I would lease a car.

00:27:10.380 | You could negotiate a one-year lease or something like that.

00:27:12.700 | You're traveling in, you're renting an apartment, you're doing some temporary point.

00:27:15.660 | So I'll concede the point.

00:27:17.020 | Most Dave Ramsey fans would say never lease a car.

00:27:18.760 | This is a cardinal rule.

00:27:20.900 | But most people would say, "I'm just renting a car for a year because I don't want to buy

00:27:23.420 | a car.

00:27:24.420 | I don't want to maintain two things."

00:27:25.420 | Now if you're going to buy a car for 20 years, and you're going to drive a car for 20 years

00:27:30.540 | and you've got maybe a 10-year-old son or daughter that you're going to pass a car onto,

00:27:34.020 | you're going to buy a car and you're going to own it for a long period of time.

00:27:38.180 | That's the difference between term life insurance and permanent life insurance.

00:27:40.740 | They're radically different because they do different things.

00:27:43.740 | And so if you are looking for an insurance policy to cover a five-year business buyout,

00:27:50.780 | you've bought a business from someone, you're paying a series of payments, they're going

00:27:54.060 | to buy a five-year term policy on your life.

00:27:55.740 | There's no question about it.

00:27:56.860 | If you are buying a life insurance policy to fund an irrevocable life insurance trust

00:28:01.180 | to fund your estate taxes, there's not a chance in the world you would fund that with a term

00:28:04.900 | policy over the long term.

00:28:06.220 | That's going to be a permanent policy.

00:28:07.900 | So I don't want to get any deeper into that because what happens is people get really

00:28:10.100 | upset about it.

00:28:11.100 | But let me focus on numbers.

00:28:13.140 | When you actually do a life insurance calculation properly, you sit down and there are three

00:28:18.220 | major ways to do it.

00:28:19.500 | The best of which is doing a needs analysis, which is actually if you die, what do you

00:28:24.580 | actually need?

00:28:25.580 | What debt do you want to pay off?

00:28:27.420 | What income do you need?

00:28:28.420 | For how long?

00:28:29.420 | What are the resources that are available?

00:28:30.420 | It's called a needs analysis.

00:28:31.620 | What Dave recommends is a multiple of income approach.

00:28:33.700 | So he says buy 8 to 10 times your income of life insurance.

00:28:36.580 | Now what's that number based upon?

00:28:38.380 | That number is based upon the 12% rate of return.

00:28:42.060 | So he says buy 8 to 10 times your income of life insurance.

00:28:44.500 | So let's say you make $100,000 a year, buy 10 times your income of life insurance.

00:28:49.340 | That gives you a million dollars of life insurance.

00:28:51.380 | You invest that at 12% per year.

00:28:53.140 | You get $120,000 of income.

00:28:55.540 | And then that pays your taxes and inflation and you wind up with $100,000.

00:28:59.500 | But that number, is it good enough to put in a book?

00:29:01.540 | Yeah, it is.

00:29:02.540 | And that's why he does it.

00:29:03.740 | But the problem is then that becomes the cardinal rule.

00:29:05.980 | And so a Dave Ramsey fan will come into my office and I'll say, "Joshua, let's calculate

00:29:09.100 | it."

00:29:10.100 | And I'll say, "Let me show you how to do a needs analysis."

00:29:11.100 | And he'll say, "No, Dave says I need 8 to 10 times your income."

00:29:13.820 | Well, I'm sorry, if you're 22 years old or 25 years old and you have a couple of kids,

00:29:18.960 | you need more like 20 times your income of life insurance.

00:29:21.920 | And if you're 55 years old, you probably need less than 8 if you are wealthy.

00:29:26.820 | So you may not need any.

00:29:28.180 | So what happens is that these "rules" because of the cult of personality, instead of teaching

00:29:33.780 | people, "Here's how you approach it," which is what I'm trying to do, and I don't know

00:29:36.460 | if I can do it.

00:29:37.460 | By the way, after doing a podcast, I have a world of respect for Dave that I never had

00:29:42.380 | before.

00:29:43.380 | It is tough to be a broadcaster.

00:29:44.380 | And it's tough because you're on the record for everything.

00:29:47.540 | And it is a constant challenge.

00:29:49.260 | So I have a world of respect that I probably never had before starting my show.

00:29:54.300 | But what happens is I just wish that he and all of us who are in this space, instead of

00:29:59.060 | telling people, "Here's what you should do," we would treat people like adults and teach

00:30:04.020 | them what we know and teach them how to arrive at their own conclusions and their answers.

00:30:08.900 | But what happens is that's bad marketing.

00:30:10.780 | Because then instead of being attached to our brand, then people are attached to the

00:30:15.140 | fact that they can do it themselves.

00:30:16.140 | But that's what we need to be doing.

00:30:18.380 | >> Well, let's go back to the question I had.

00:30:21.580 | Is there any one book with all the answers?

00:30:23.260 | I mean, we all know the truth is really only the Bible, but the rest of them are all great

00:30:27.260 | advice and you can follow the advice in there.

00:30:29.140 | But there's always going to be something else to be learned from another book.

00:30:32.060 | Isn't that the same way with Dave Ramsey's advice?

00:30:34.540 | He's writing a book for everybody, but it can't be for everybody.

00:30:38.300 | You say the advice is dangerous.

00:30:40.680 | I can see that it's not going to be perfect for everybody.

00:30:44.100 | But I don't see how it's harmful for somebody unless they have different goals as far as

00:30:49.740 | I'm not looking to retire, save for my retirement, I'm not looking to, well, it's a choice if

00:30:54.780 | you want to pay for your kid's college, the baby steps.

00:30:57.820 | So you're saying it's dangerous, though.

00:31:00.020 | There's other education out there, and none of the answers are going to be any one book.

00:31:04.300 | And Dave's even written more than one book.

00:31:06.740 | How can you say that Total Money Maker has all the answers?

00:31:10.900 | That's what I'm trying to say here is there's no one answer in one book because there's

00:31:14.700 | going to be a variety of people, variables in the game here.

00:31:19.180 | People have different goals.

00:31:21.580 | We could go back with the 12% discussion if you want.

00:31:24.340 | But I think that an educated consumer is a better consumer, and that's why we do multiple

00:31:30.580 | podcasts.

00:31:31.580 | It's not just one show.

00:31:32.580 | It's not one audio recording somebody downloads and listens to over and over again.

00:31:36.660 | We're educating people on a cycle, which his radio show does as well, which is heard by

00:31:42.540 | what, five, six million people?

00:31:44.860 | So he has to give general advice, and it's up to the consumer to take the advice that

00:31:50.100 | they choose.

00:31:51.780 | And so I don't see where it's as dangerous as most people sound like they're saying.

00:31:58.420 | Maybe I need to give the mic back to you and let you talk about that.

00:32:02.060 | Here would be what I would say as an example.

00:32:03.740 | So there are three large, there are many financial radio shows.

00:32:07.780 | There are many one hour a week show on Saturday mornings, a local financial advisor is buying

00:32:11.540 | air time, and that's, so I don't have any familiarity with those.

00:32:15.060 | But there are three large national radio shows, all of which are dealing with financial topics.

00:32:20.980 | I would invite you and others to listen to the difference in these shows.

00:32:25.500 | So the big dog is Dave Ramsey.

00:32:29.540 | Then you have Clark Howard, and you have Rick Edelman.

00:32:33.060 | Now if you go and listen to how they approach their show, there is a dramatic difference

00:32:38.300 | between them.

00:32:39.420 | So and you have basically, in my opinion, you have three different levels of professionalism

00:32:45.400 | and experience on behalf of the broadcaster.

00:32:48.460 | On the one end you have Rick Edelman.

00:32:50.260 | Rick Edelman is a financial advisor.

00:32:52.300 | He owns a massive financial planning firm, and he has a tremendous amount of experience

00:32:56.860 | as a financial advisor, and he added broadcasting on to his practice as a marketing method for

00:33:02.420 | his firm.

00:33:03.540 | Clark Howard comes not from a financial background as a financial advisor, but he comes from

00:33:08.660 | being interested in finance and being very careful, and he has learned a lot and knows

00:33:13.220 | a lot.

00:33:14.220 | Dave Ramsey comes from the perspective of primarily talking about budgeting and debt

00:33:17.900 | from his experience with his mistakes, but with the exception of a college degree in

00:33:21.580 | finance, which evidently he has, he has no other formal experience or formal qualifications

00:33:27.660 | in the world of financial planning.

00:33:28.660 | Now I would invite you to go and listen to how they handle financial topics, and you

00:33:33.380 | will notice a dramatic difference between the three.

00:33:37.300 | What Rick Edelman does, I probably most respect and admire what Rick Edelman does, because

00:33:41.940 | when a caller calls Rick Edelman, as a financial advisor who can be held more accountable because

00:33:49.100 | he is a financial advisor than Dave Ramsey can be, who is an entertainer, if you listen

00:33:54.020 | to how he answers a question, a caller will call in and ask him a question, and if it

00:33:58.060 | seems simple, he'll answer it in a simple way.

00:34:02.340 | He'll usually probe a little bit more and try to find out some more technical details,

00:34:07.940 | and then he will often say, "That's a really complicated question.

00:34:11.900 | I would invite you to call my office and speak with one of my planners."

00:34:15.540 | Here in general is what you would need to know to make the decision, though, but there

00:34:18.620 | are a lot of detailed facts that you would need to find out.

00:34:21.760 | So I'm going to pick on the hot button topic, and this will get me in trouble, but something

00:34:26.240 | like life insurance.

00:34:27.240 | If you ask any experienced life insurance agent, life insurance is not a simple thing.

00:34:32.060 | It's one of the most complicated financial products ever invented, and it is worse because

00:34:36.860 | they get more and more complicated all the time.

00:34:38.940 | There are great policies and there are terrible policies.

00:34:41.180 | There are great companies and there are awful companies, and until you are really an expert

00:34:45.220 | in life insurance, it's very difficult to identify between them.

00:34:48.580 | But if you listen to how Rick Edelman answers the question, he will generally probe, and

00:34:53.740 | then he'll say, "This is one where you've got to review your actual policy," and he's

00:34:59.140 | very quick to send people to his firm.

00:35:00.860 | Now, that may seem like he's just sending people to his firm because, "I need to build

00:35:04.180 | business for my firm."

00:35:05.180 | But he'll tell you, he answers the question when it can be answered, but when it can't

00:35:09.380 | be answered, he sends someone to an advisor.

00:35:11.220 | Clark Howard will get the same question, and Clark is quicker to give a simpler answer,

00:35:15.460 | but Clark is quick to acknowledge if the question is more complex.

00:35:19.500 | And Clark will say, "Listen, that's a really great question.

00:35:21.820 | I'm not sure I can answer it.

00:35:22.820 | I would invite you to, I would encourage you, call a fee-only planner, and you really need

00:35:27.060 | to get some good advice on your situation because I don't know the answer."

00:35:30.520 | And so if someone calls up and tells Clark, "Hey, listen, I've got this policy," he'll

00:35:34.100 | say, "Listen, well, these types of policies are generally not so good, but hey, if you've

00:35:38.700 | had this kind of policy and it fits these parameters, then maybe it would be good."

00:35:42.100 | When someone calls Dave, Dave is reckless with how he does it.

00:35:45.220 | I know I'm using a strong word, not to be critical.

00:35:49.940 | It is being critical.

00:35:51.900 | It's an accurate word.

00:35:52.940 | Dave has a rule.

00:35:53.940 | If you have a whole life insurance policy, sell it.

00:35:56.660 | That's his rule.

00:35:57.660 | He will never tell somebody, "Take a look at the actual policy and see where you are

00:36:01.940 | in the life cycle versus the expenses versus the cost."

00:36:05.020 | So Dave, I've heard him say to somebody, "Cancel a policy that's a mature policy, that this

00:36:09.860 | policy is growing at several percentage points per year over any other safe investment that

00:36:15.260 | you could have, and use that money to pay down your mortgage at 2%.

00:36:18.380 | That makes no mathematical sense."

00:36:20.660 | And he goes into all the financial, mutual funds versus the mortgage and the risk calculation.

00:36:24.820 | Baloney, guaranteed returns in excess of your mortgage payment, that's a very different

00:36:29.340 | thing.

00:36:30.340 | You can't just add that with mortgage payments.

00:36:32.980 | I'm walking on thin ice here, even bringing up any specific examples, but I'm trying to

00:36:37.380 | give a little bit of, not just say it's right, and Josh was in a war with him, because I'm

00:36:42.900 | not, but trying to give examples.

00:36:44.660 | Dave goes much farther than he should with entertainment.

00:36:50.780 | And there's a big difference between being able to listen to somebody and say, "Listen,

00:36:54.460 | I'm really struggling with my finances with my spouse, and we're not budgeting really

00:36:59.220 | well, and my spouse seems like he or she is spending recklessly, and we're not on the

00:37:02.780 | same page."

00:37:04.100 | That's advice that's very personal, and that works well to entertainment.

00:37:07.340 | But when you get off the ditch into detailed, complex financial planning, and you have no

00:37:11.500 | experience and no formal qualifications, by the way, I don't believe that formal qualifications

00:37:15.780 | are the key, but formal qualifications are a way for the public to judge what somebody

00:37:20.660 | knows and what somebody doesn't know.

00:37:22.500 | And I'm not sure that Dave could pass a CFP exam.

00:37:25.580 | I'm really not.

00:37:26.660 | Because when I listen to him, it's like, "Wow, what on earth, where does that come from?"

00:37:32.300 | You just ignored all these other things that you should know about, but it seems like you

00:37:35.140 | don't know.

00:37:36.260 | So the problem is, though, that you have an audience.

00:37:40.540 | And with this, I'll just wrap up what I'm saying and give you a chance to respond, and

00:37:44.940 | then hopefully we can, if I've ticked off the whole world, hopefully I can gain a little

00:37:50.420 | bit of back.

00:37:52.500 | But what I always tell people is you've got to look at the audience of a show, and the

00:37:56.220 | audience.

00:37:57.220 | And the challenge is that we are so bereft as a culture of any financial knowledge, any

00:38:05.900 | financial knowledge.

00:38:07.340 | We are not taught formally anything.

00:38:09.920 | And those who are trying to teach something formally have such an agenda, oftentimes,

00:38:14.980 | that the opinion is so skewed that we don't have any tools of defense.

00:38:19.540 | We don't have any critical thinking or any knowledge or any tools of defense.

00:38:23.380 | And this is one of the key things that I observe, is that as a public, as a general population,

00:38:30.060 | the general IQ of the general population is so low, it's so easy to be bamboozled.

00:38:35.220 | And so if Dave would admit that what I'm working with is I'm trying to work with the general

00:38:39.580 | population because I'm doing a mainstream radio show, working with people who are listening

00:38:44.060 | in their cars as they're driving around, and I'm working with kind of an entry level to

00:38:48.140 | finance, and then if he would be careful when he gets into the more advanced topics, and

00:38:53.100 | if he would make a referral that wasn't just call my investing ELP, you know, who that

00:38:57.780 | person is going to have the heart of a teacher because they're going to teach you about investments.

00:39:01.900 | And oh, by the way, you know, if it went, if it went, if he didn't just give a nod to

00:39:09.300 | that, but he actually said, call somebody who can get to know your situation, which

00:39:13.540 | is the key.

00:39:14.540 | You've got to look at your situation.

00:39:16.740 | Then it would be great.

00:39:17.740 | But he doesn't do that.

00:39:19.180 | And that's what frustrates, that's what frustrates the financial community, especially the community

00:39:23.380 | professional financial advisors.

00:39:25.700 | Because I would say that many people agree with so many things, but there are some very

00:39:30.220 | important deeper level things.

00:39:32.800 | And if he would just make, if he would, if he would not go into the technical things

00:39:37.020 | where it displays his ignorance, either ignorance or willful, just and I know it's again, a

00:39:42.140 | strong word is either ignorance or it's willful agenda, willful promotion of agenda.

00:39:48.220 | I don't know.

00:39:49.220 | Then I think it would be great.

00:39:51.340 | And that's what I would love to see him do because he has helped millions of people radically

00:39:56.900 | transform their lives, my own included and yours too.

00:39:59.780 | Right.

00:40:00.780 | So he has been a huge help and I want to give him full credit for that.

00:40:04.180 | But I hate to see, it's kind of like, I feel like it's as though if we don't, if we don't,

00:40:11.660 | we who have been helped and have been encouraged by that, if we don't hold our own people accountable,

00:40:20.180 | then what happens is we run the risk of losing any credibility.

00:40:22.780 | And I'll give, you're a Christian, so right.

00:40:25.020 | So okay, I'll give a, I'll give a spiritual example.

00:40:28.700 | If some person says, I'm a great man of God, or I'm a great woman of God, and they're out

00:40:34.180 | preaching in the streets, A, on a scriptural perspective, that person is held to a higher

00:40:38.860 | standard and rightly so.

00:40:43.060 | But if we wink at the infidelity, if we wink at a priest that abuses little boys, or if

00:40:49.320 | we wink at a pastor that has an adulterous relationship with their spouse, or if we wink

00:40:55.140 | at sin, who are we if we don't clean up our own industry?

00:40:59.220 | And that's kind of what I feel like is that I feel so timid that like I'm not qualified

00:41:06.380 | in many ways to judge Dave.

00:41:07.980 | I'm really not, because his level of experience and success has gone so far beyond my own

00:41:14.140 | that it's much easier for me to sit down and shut up.

00:41:17.140 | But the problem is that we have to hold people accountable, and we have to look accurately.

00:41:22.580 | And I would just love to see him adjust his message and acknowledge the fact that I'm

00:41:29.540 | working with a mainstream audience and be quicker to be slow with giving financial planning

00:41:35.140 | advice with his knowledge.

00:41:37.480 | So that would be my thoughts.

00:41:38.480 | Hopefully that makes sense.

00:41:39.480 | >> You know, I keep coming up with all these questions as you're talking, but I keep listening

00:41:43.780 | because you keep bringing on new stuff, big stuff, and you keep moving the conversation

00:41:47.540 | farther.

00:41:48.540 | It's hard to go back to that.

00:41:49.980 | You were talking about -- I'm just going to make a statement here.

00:41:52.980 | I don't know how to make it a question, and I forget what it was when I was thinking about

00:41:56.500 | it.

00:41:57.500 | You were talking about Rick Edelman's advice, Clark Howard's advice, Dave Ramsey's advice.

00:42:02.180 | And admittedly, I'm a Dave Ramsey fan.

00:42:03.740 | I went through counselor training.

00:42:04.740 | I teach financial peace at the university.

00:42:06.420 | I'm a huge Dave Ramsey fan, so I am in the Dave Ramsey camp, you could say.

00:42:11.060 | I do believe that there are different situations for everybody, and there may be a situation

00:42:14.620 | where Baby Steps doesn't work for a specific person.

00:42:18.120 | And I highly recommend everybody educate themselves on this stuff, and that's where I'm going

00:42:21.500 | to go with this.

00:42:22.720 | With Rick Edelman, you were talking about how Rick Edelman will answer the question,

00:42:25.940 | but he'll also direct them to his own firm.

00:42:27.940 | Whether that's a conflict of interest, I don't see it as a conflict of interest.

00:42:31.340 | He's directing people to get more education and help in their situation.

00:42:34.300 | Brilliant.

00:42:35.300 | Love it.

00:42:36.300 | That's what he'll need to do.

00:42:37.300 | Clark Howard, you said, he will answer the question, but he'll also say, you know, go

00:42:40.500 | talk to somebody.

00:42:42.720 | I don't listen to Clark Howard very often anymore, so I don't know who he's directing

00:42:46.180 | to.

00:42:47.180 | Who does he direct those people to?

00:42:48.180 | He will usually, Clark will usually make a referral to a fee-only financial planner,

00:42:52.760 | and he will usually mention either an organization called the Garrett Financial Planning Network,

00:42:57.580 | which is an organization of fee-only hourly planners, or NAPFA, which stands for National

00:43:02.580 | Association of Personal Financial Advisors, which is also a fee-only organization.

00:43:06.540 | So he's directing them to fee-only advisors, which I don't have any problem with that either,

00:43:10.500 | because the individual, the consumer, the customer is going to find specific advice

00:43:15.340 | to their situation.

00:43:16.740 | When you go to Dave Ramsey, he gives you the direction to go check in with one of his ELPs,

00:43:22.300 | which is essentially doing the same as Clark and as Rick, because he's directing them to

00:43:27.060 | people who are kind of in his network, like Rick Edelman, or to somebody outside of his

00:43:32.140 | network, like Clark Howard, but he's saying it in a more general term.

00:43:35.660 | Maybe I'm not saying that right.

00:43:38.100 | But these people have been fleshed out because they teach the same thing that he does.

00:43:42.120 | So in other words, he's giving advice to go speak to somebody that he knows is going to

00:43:47.260 | educate that consumer before they go and invest in anything.

00:43:50.340 | And that's one thing he says over and over again, is not just go to get help from somebody

00:43:54.740 | who has the heart of a teacher, but to learn about the stuff.

00:43:57.780 | Don't buy something you don't understand.

00:43:58.780 | You'll hear him say it over and over again.

00:44:01.260 | So it's not that he's not answering the question, and it's not that he's saying just trust my

00:44:08.340 | advisor and go with what he says.

00:44:10.340 | He always says, basically, learn for yourself what you're getting into so that you don't

00:44:14.940 | get bamboozled.

00:44:16.340 | Right.

00:44:17.660 | I, if he has changed in the last couple of years, I have not heard more than 20, 30 minutes

00:44:23.840 | of his show in the last couple of years, just because it's difficult for me to listen to

00:44:27.060 | because I get frustrated.

00:44:29.180 | And I have learned to simply to keep my sanity, to walk away from things that frustrate me.

00:44:34.340 | And I'm generally a happier person.

00:44:35.780 | I feel the same way about Susie Orman.

00:44:37.460 | Okay, good.

00:44:38.460 | All right.

00:44:39.460 | She gives some great advice, but once it's on the credit score thing, I'm gone.

00:44:42.060 | So I have no connection with her because with the exception of flipping through her books,

00:44:47.780 | I don't watch TV.

00:44:48.780 | I don't pay any attention to her.

00:44:50.460 | So that's why I'm completely unqualified to talk about what she talks about.

00:44:53.380 | And here we are, two guys who don't have a big national radio show, and we're ragging

00:44:56.300 | on these two successful people.

00:44:57.700 | I know what it looks like.

00:44:59.140 | Yeah, correct.

00:45:00.140 | You got to acknowledge that.

00:45:01.140 | But then for somebody to use that as a total ad hominem argument, and it's fallacy.

00:45:04.980 | So that's why I'm trying very hard to focus not on who I am, but on what I say and let

00:45:09.140 | the listener judge for themselves.

00:45:10.500 | So I'm trying to stay with, I'm trying to avoid using an appeal to expertise or to use

00:45:16.260 | myself and promote myself as being somebody I'm not.

00:45:19.260 | I am young.

00:45:20.260 | I'm inexperienced.

00:45:21.260 | I have some experience in the financial planning world, but I have nowhere near as much experience

00:45:25.460 | as Dave.

00:45:26.460 | I am a brand new broadcaster who has much to learn.

00:45:29.540 | But still, that should not and does not diminish the validity of my arguments.

00:45:34.460 | So I just would encourage people to consider my arguments, not me.

00:45:38.340 | To answer your question, I have never heard Dave say, "You need to call a financial planner,

00:45:46.260 | and here is the line for my ELP."

00:45:48.820 | Maybe he does.

00:45:49.820 | And if he does, I fully give him credit for that.

00:45:51.860 | So it is his ELP you're saying?

00:45:53.420 | Right.

00:45:54.420 | What he is saying, in general, in advertisement, if you need help with investing, then go ahead

00:45:59.860 | and call my group of ELPs.

00:46:02.460 | There is not generally in the broader financial planning community, there is not generally

00:46:06.860 | a high regard for the caliber of the, for the quality of his investing ELPs.

00:46:13.180 | I don't know anything about the other programs.

00:46:14.700 | I have no idea if his real estate agents are as great as he says they are.

00:46:19.200 | But there's not a high regard in the broader investment community for the technical ability

00:46:23.860 | or the high level of professional expertise of his ELP program.

00:46:28.820 | But just make audience aware.

00:46:30.420 | And again, I've not talked with the exception of one of his ELPs, and people have asked

00:46:34.140 | me, "Joshua, why don't you go join this program?"

00:46:36.140 | And I have my reasons for not, I don't want to be involved in this program.

00:46:40.060 | But the, and the reason, one of many reasons I don't want to be involved in this program

00:46:44.820 | is because then somebody comes in, and this is one of his ELPs that I spoke with, you

00:46:49.900 | know, then your clients are schooled to be looking for a 12 percent mutual fund.

00:46:54.500 | And so guess what?

00:46:55.500 | They're looking for 12 percent.

00:46:56.500 | And when you don't deliver 12 percent, you lose the client.

00:46:59.900 | And you have false expectations.

00:47:00.900 | And it's a very, I would not want to work with somebody who are coming from that perspective.

00:47:05.180 | So --

00:47:06.180 | I don't want to break your thought there, because I want to ask this of you, because

00:47:09.300 | I have talked to a couple people before about that.

00:47:11.800 | And that's what I believe is that the reason why the financial planners don't like the

00:47:14.980 | whole discussion of 12 percent is, now you have to tell me, are we looking at 10 year,

00:47:19.740 | 20 year track record?

00:47:20.740 | Where is that 12 percent that you're saying you can't get coming from?

00:47:23.780 | I'm saying is that, if you look, so what Dave's answer would be, unless he's changed in the

00:47:30.660 | last couple years, Dave would say, listen, I own many mutual funds that have returned

00:47:34.140 | in excess of 12 percent.

00:47:36.220 | All you got to do is sit down with Morningstar, have your advisor run a return of the 12 percent,

00:47:42.740 | and you'll get that.

00:47:43.980 | So I own, I sold it recently, but for many years I owned a mutual fund called, I no longer

00:47:49.700 | own it, it's not a recommendation to the fund.

00:47:51.780 | I liked it, and I think it's a good, instructive example.

00:47:55.260 | I own a mutual fund called the Investment Company of America.

00:47:58.020 | >> Yeah, I own that too.

00:48:00.060 | I will say, I own that, and I like it.

00:48:01.780 | >> All right, so you can say that I can't.

00:48:04.100 | So I own that fund called Investment Company of America, and it's put out by American Funds.

00:48:10.300 | If you look at their literature on the fund, the fund was, its inception date was either

00:48:15.300 | 1926 or 1930, somewhere in the mid-1920s.

00:48:19.660 | It's lifetime performance, the last time I looked, from then up through today, is about

00:48:24.460 | 12 percent.

00:48:26.140 | But what 12 percent, so that's the return of the fund.

00:48:29.020 | But what 12 percent ignores is A, that's a loaded fund, so it's going to come with a

00:48:34.340 | sales commission, and that sales commission on that fund would be anywhere from zero percent

00:48:39.140 | up to as high as 5.75 percent, depending on the amount of money that you have to invest.

00:48:45.100 | Well, that sales commission makes a dramatic difference in the return of the fund, because

00:48:48.980 | you have to account for that commission.

00:48:50.140 | Now, if you have a million bucks, American Funds will waive all the sales commissions,

00:48:55.340 | so you can break point out of it, but that has to be accounted.

00:48:59.500 | Number two is it doesn't account for expense ratios.

00:49:01.740 | So American Funds has excellently low expense ratios, but the 12 percent does not acknowledge

00:49:06.060 | the expense ratios.

00:49:07.860 | That's a gross return.

00:49:09.140 | And so when you look at the, depending on which number, you can go through that.

00:49:13.740 | But once you take out expenses for the management of the fund, you're not at 12 percent anymore.

00:49:17.540 | And that fund is, when you actually look at the history, and this is where it's very difficult

00:49:22.260 | to look at what actually, what number you should actually use.

00:49:25.780 | If you generalize the S&P 500 and say, okay, well the S&P 500 over the last 60, 70, 80,

00:49:31.460 | whatever number you use, it's about 10 percent rate of return.

00:49:34.800 | But that doesn't mean that the average investor gets 10 percent, and that has nothing to do

00:49:38.260 | with being able to count on the 12 percent every year.

00:49:41.460 | So if you run a financial calculation, and I assume a 12 percent rate of return every

00:49:45.740 | year, A, it's not possible.

00:49:48.020 | But B, it leads to such inflated numbers about how much money somebody needs to save that

00:49:52.860 | is nowhere near accurate.

00:49:54.620 | So when I run a rate of return calculation for retirement, I'm far more likely to use

00:49:58.180 | six or seven percent, unless a client can convince me that I should use a higher number.

00:50:02.540 | And this is what happens, is that if you actually run, if you actually run the calculations.

00:50:06.940 | >> Are you seriously pulling out a calculator right now?

00:50:08.820 | >> I'm looking to see if I have it.

00:50:10.220 | >> Are you looking, you're looking for a calculator.

00:50:11.820 | Unbelievable.

00:50:12.820 | >> I should, here we go.

00:50:13.820 | So let me give you just an example.

00:50:14.820 | >> We've got 10 minutes left.

00:50:15.820 | >> Right.

00:50:16.820 | So let me give you an example.

00:50:17.940 | So this would be, so if I were Dave, and I were saying, okay, let's say how much money

00:50:26.740 | we can invest over time, and how much it can grow to.

00:50:29.220 | So let's say that I'm a 25-year-old man, I'm talking about from 25 to 65, we're going to

00:50:33.380 | invest $100 a month.

00:50:34.940 | So let's clear this, let's do $100 per month, and let's put it in for 40 years, and let's

00:50:38.980 | use a 12 percent annual number.

00:50:41.220 | >> 1.176.

00:50:42.220 | >> 1.176.

00:50:43.220 | >> I already know that.

00:50:44.220 | >> Is that the number?

00:50:45.220 | >> That's the number.

00:50:46.220 | >> Okay.

00:50:47.220 | So let me just run the math, because I'm not as quick as you.

00:50:50.020 | So let's do 40 years, invested monthly, 10 percent, $100 per month, starting with nothing.

00:50:56.980 | At the end of 40 years, that number would be, oh, I used 10 percent, excuse me, just

00:51:01.180 | a moment.

00:51:02.180 | So let's put in 12 percent.

00:51:03.220 | At 12 percent, at the end of 40 years, that number would be $1,188,242.

00:51:08.700 | Now if you run that number at 10, okay, so let's just drop it to 10 percent, that number

00:51:12.900 | is now $637,000.

00:51:15.700 | That is a 50 percent difference between 10 percent and 12 percent.

00:51:19.260 | The average investor, you have to fact check me on this, but the average investor in the

00:51:24.420 | average mutual fund gets about, last 20-year study I saw from Dalbar Lipper, gets about

00:51:29.820 | like 3.6.

00:51:30.820 | >> Okay, but forgive me for interrupting here, because when we talk about following Dave

00:51:34.580 | Ramsey's advice, you will not be saving $100 for 40 years, $100 a month.

00:51:39.740 | It will always be $100 a month as just the example of, you know, everybody can become

00:51:44.740 | a millionaire.

00:51:45.740 | What he teaches is to get out of debt, save up an emergency fund, and then start to invest

00:51:51.220 | in your retirement, which is 15 percent of income, which will always be more than $100

00:51:54.620 | a month.

00:51:55.620 | So you're going to get to a million dollars.

00:51:57.660 | Yes, maybe the 12 percent is a different rate of return.

00:52:02.100 | I don't care which way.

00:52:03.460 | I know that we're going to be millionaires eventually, because we're saving more money

00:52:06.180 | than $100 a month.

00:52:07.660 | >> Right.

00:52:08.660 | And so you can get rich on a low income.

00:52:11.820 | I did a show, one of my favorite shows that I did on my show is I said how I'd become

00:52:16.140 | a millionaire on a minimum wage job at Walmart.

00:52:18.540 | So --

00:52:19.540 | >> I think I missed that one.

00:52:20.540 | >> Yeah, go check it.

00:52:21.540 | It's a fun one.

00:52:22.540 | >> Is it a three-hour show?

00:52:23.540 | >> No, it's about an hour and 20 minutes.

00:52:24.540 | So it should fit.

00:52:25.540 | Listen to it at 2x speed.

00:52:26.540 | That's what I do.

00:52:27.900 | So it's how I would become a millionaire on a minimum wage job at Walmart.

00:52:31.500 | >> So we're going to get lost in the weeds if we do too much math.

00:52:35.620 | Let me just avoid the rate of return conversation.

00:52:39.620 | Just simply say that I would encourage people to do their own research.

00:52:43.260 | I would never use 12 percent in any calculation, period, for a financial planning client.

00:52:49.420 | And I don't know a single financial planner.

00:52:52.660 | Now, we could all be crooks.

00:52:54.820 | We could all be ignorant.

00:52:56.140 | We could all not have access to Morningstar.

00:52:58.260 | We could all -- so you'd have to judge for yourself.

00:53:00.200 | I don't know a single financial planner who would ever use 12 percent in any kind of calculation.

00:53:06.420 | So I would just leave it at that and encourage people to do their own research.

00:53:10.300 | But even something like the 15 percent, I'll tell you, one of the things where I feel betrayed

00:53:14.740 | is that I saved 15 percent.

00:53:16.780 | Where does this number come from?

00:53:17.940 | It took me years to figure out where this number comes from.

00:53:20.420 | 15 percent.

00:53:21.420 | And this is where you'd get the problem.

00:53:22.700 | And I want to be very honest.

00:53:24.500 | You get the --

00:53:25.500 | >> Do you want the answer?

00:53:26.500 | Because I want to tell you what I think it is.

00:53:27.500 | And I'll see if you've got --

00:53:28.500 | >> Sure.

00:53:29.500 | >> -- the answer is that it allows you to save a good chunk of money without taking

00:53:33.700 | away from reaching your other goals following the baby steps.

00:53:36.500 | >> Right.

00:53:37.500 | So I would say here's where the answer is.

00:53:39.700 | And it's different.

00:53:40.700 | My answer is different.

00:53:41.700 | >> I knew it would be.

00:53:44.580 | >> And if you go and you run a chart, and the two best people who have this, which I

00:53:50.260 | don't have the chart on my site, but I would give two resources for listeners.

00:53:55.060 | Either go and read a book by -- you're the two most accessible.

00:53:58.660 | Go and read a blog post on Mr. Money Mustache called "The Shockingly Simple Math Behind

00:54:04.180 | Retirement."

00:54:05.180 | Or go and read the same chart in Jacob Lundfisker's book "Early Retirement Extreme."

00:54:09.860 | It's probably also on his website.

00:54:12.300 | But Money Mustache's is the more common.

00:54:14.460 | He does a good job of putting the numbers behind the charts.

00:54:17.620 | What you'll find is that if you save a percentage of income at a certain rate of growth over

00:54:21.580 | time -- and I'm going to stay out of the weeds with the numbers.

00:54:25.020 | If you save 10% of your income, it takes you about 45 years to be financially independent.

00:54:30.180 | If you save 15% of your income, it takes you about 40 years to be financially independent.

00:54:34.660 | So if you start at 25, and then if you work until 65, and you save 15% of your income,

00:54:39.500 | you'll be financially independent.

00:54:40.500 | But the problem is, what do you do if you're 45?

00:54:43.780 | What do you do if you're 52?

00:54:44.780 | So he says saving 15% when you're 40 years old is pointless.

00:54:48.960 | You will never get -- you will never be retired at 65.

00:54:52.060 | So instead of saying to somebody, "Start with 15% as a good role, but you should sit down

00:54:57.160 | with a good financial planner, or you should learn how to run a financial planning calculator,

00:55:00.980 | and calculate an actual amount of money that you need to hit your retirement goal," people

00:55:04.700 | save happily 15% and say, "Dave told me I'm going to be rich.

00:55:07.380 | Dave said I'm going to be rich by 15%."

00:55:09.380 | So I recognize the problem of putting everything in a book.

00:55:11.820 | You can't.

00:55:12.820 | And that's the problem, is you can't put everything in a book.

00:55:14.700 | And that's exactly right.

00:55:15.700 | So "Total Money Makeover" still, to this day, is the most motivational book I know about

00:55:20.220 | getting out of debt.

00:55:21.220 | I don't know how Dave did it.

00:55:22.900 | I've got to go and dissect it and see if I can learn, because I want to learn how to

00:55:27.220 | motivate people like he does with that book.

00:55:30.680 | But you can do that without crossing the line and giving advice that doesn't make any sense.

00:55:36.700 | And it's like there are so many things.

00:55:38.380 | I'll give you one last example and then answer any questions.

00:55:40.900 | >> I still want to hear how you came up with figuring out what the 15% represents.

00:55:45.900 | >> Oh, okay.

00:55:46.900 | So good answer.

00:55:47.900 | So the average person graduating from college, saving 15%, will be financially independent

00:55:51.740 | at 65.

00:55:52.740 | That's it.

00:55:53.740 | That's what the number is based upon.

00:55:54.740 | So every financial plan that I run for a 20-something-year-old, they need to save about 15% of their income.

00:56:00.260 | But it's dramatically different if they're 34, or if they're 44.

00:56:03.420 | >> Now, that 15% rate changes, though, at baby step seven once they pay off the house.

00:56:07.580 | >> Right.

00:56:08.580 | But baby step seven is so entirely nebulous that no one knows what it means.

00:56:13.300 | Save and invest, give money away and become rich.

00:56:15.100 | >> Yeah, and that's where he leaves it wide open, wide open for however much you can throw

00:56:20.060 | in there.

00:56:21.060 | >> I don't want to go into the weeds on that because I have no problem with the seven baby

00:56:23.860 | steps.

00:56:24.860 | They are as good a plan as any.

00:56:25.860 | They really are.

00:56:26.860 | I have no problem with them.

00:56:28.300 | What happens is that, and I sit down and I'm like, "Well, what would I give?"

00:56:30.940 | I don't have anything better than what Dave says as far as the steps.

00:56:33.480 | My steps say, "What are your goals?" and create an actual financial plan.

00:56:36.340 | But I don't have seven steps.

00:56:37.340 | They're as good as any other seven steps out there.

00:56:39.860 | I have no problem with them.

00:56:41.300 | My problem is on the specific financial planning recommendations.

00:56:44.380 | I'll give you one last one.

00:56:46.340 | Have you heard, when does Dave say to buy long-term care insurance?

00:56:50.620 | Remember?

00:56:51.620 | >> Right away.

00:56:52.620 | Oh, long-term care, I'm sorry.

00:56:53.820 | It's age 60.

00:56:54.820 | >> Age 60, right.

00:56:56.100 | So this bothered me because I always used to hear his advice and then I started selling

00:57:00.860 | long-term care insurance.

00:57:02.820 | I have looked high and low to find why age 60 is suddenly the magic date.

00:57:08.920 | I can't find.

00:57:09.920 | If anyone can send it to me, I would be interested.

00:57:11.340 | Email me, joshua@radicalpersonalfinance.com.

00:57:13.320 | You send me the study that would illustrate why age 60 is the age to buy long-term care

00:57:18.220 | insurance.

00:57:19.220 | Now, what Dave would say, and I also have heard, I think, Susie Orman say the same thing.

00:57:23.780 | They say, "Well, before that point in time, before age 60, the numbers are it's just too

00:57:27.940 | expensive but it becomes a good deal after age 60."

00:57:30.300 | Is that more or less what your impression would be?

00:57:32.620 | >> My impression was that most people don't need it until -- very little people need it

00:57:36.940 | at age 55 or lower.

00:57:38.980 | So age 60 is when he recommends that you look into buying it.

00:57:42.820 | >> Okay.

00:57:43.820 | >> Actually, he does say buy it then.

00:57:44.820 | He does say you buy it when you're 60.

00:57:47.380 | >> So that can be fine and I'll accept that.

00:57:50.260 | That's fine.

00:57:51.260 | But to me, this really bothered me because I'm an ethical person.

00:57:55.540 | I'm a man of integrity and I want to do the right thing for people.

00:57:58.900 | So I'm like, "Well, how should I do this?"

00:58:00.220 | So I started researching it.

00:58:01.420 | I cannot find a single reason why age 60 would make any difference in a long-term care insurance

00:58:06.780 | need versus anything else and here's why.

00:58:10.080 | If you buy insurance at age 55, the fundamental way insurance works is it is actuarially counted

00:58:17.220 | to cover the risk at every specific age.

00:58:20.960 | So if you buy long-term care insurance at the age of 50, it is dramatically cheaper

00:58:24.700 | than it is at the age of 60.

00:58:25.940 | If you buy it at 30, it's dramatically cheaper than 60.

00:58:28.020 | If you buy it at 72, it's more expensive.

00:58:30.580 | And I'm sitting here and saying, "Well, are Dave Ramsey and Suzy Orman more intelligent

00:58:34.220 | than the actuaries that have carefully calculated the risk?"

00:58:37.580 | I will tell you that long-term care insurance is perfectly priced at every single age.

00:58:44.380 | I own long-term care insurance and I'm 29 years old and it is perfectly priced for the

00:58:48.460 | risk for a 29-year-old.

00:58:50.200 | And there is no statistical difference in risk that's dramatic between age 59 and age

00:58:55.020 | 60.

00:58:56.020 | Why not 59?

00:58:57.020 | Why not 58?

00:58:58.020 | Well, the reason is you have to just pick a number.

00:58:59.740 | But what happens is it's complicated to explain how you actually need long-term care insurance.

00:59:03.940 | Here's my explanation.

00:59:04.940 | It's actually not that complicated, but here's my answer if you say, "Well, if not at age

00:59:08.380 | 60, then when?"

00:59:09.580 | You buy long-term care insurance when you have accumulated enough of a portfolio that

00:59:14.540 | that portfolio is then needing to be protected from the risk of the cost of a long-term care

00:59:19.220 | event.

00:59:20.220 | Now, that sounds nebulous if you don't understand what that means, but that's the answer.

00:59:23.780 | So once you are on track to accumulate enough assets that you would then need to protect

00:59:27.820 | from the risk of needing a long-term care event, and if your income and your expenses

00:59:32.620 | cannot handle the cost of long-term care, then you insure for it.

00:59:36.340 | Now, I don't care whether that's at 40 or whether that's at 65 or whether that's at

00:59:39.900 | 70.

00:59:40.900 | If I were working with a client who is 65 years old and they don't have enough assets

00:59:44.300 | for retirement, there is not a chance in the world that they should buy long-term care

00:59:48.460 | insurance regardless of their age because they need to develop assets.

00:59:52.340 | They can't afford it.

00:59:53.460 | And if I'm working with a client who is 40 who has substantial assets enough that they're

00:59:57.640 | on track for retirement, and we're doing a risk analysis of the risk of long-term care

01:00:02.460 | -- if they can afford it and they need it, they should buy it.

01:00:05.500 | So it's not that complicated, but that's how a financial planner thinks about it.

01:00:09.340 | What happens, though, is you get this sound bite.

01:00:11.140 | And I've had Dave Ramsey fans sitting in my office, "I'm going to buy long-term care

01:00:15.420 | insurance at the age of 60."

01:00:17.420 | Why?

01:00:18.420 | What's magical about 60?

01:00:19.980 | And so I would say, "Well, let's actually run an analysis on your situation."

01:00:23.020 | "No, no, no.

01:00:24.020 | Dave says 60.

01:00:25.020 | Everything before that is the insurance agent trying to rip you off.

01:00:26.740 | Everything after that is..."

01:00:27.740 | I'm like, "So that would be another good example."

01:00:29.860 | Analysis is something where if you go a little deeper, you get an answer that makes a lot

01:00:33.020 | more sense than a sound bite, which is that I recognize -- and with this, I'll wrap up

01:00:37.820 | my thoughts unless you have other questions, because I don't want to destroy your audience

01:00:41.540 | by going on for a two-hour show like mine.

01:00:44.140 | But hopefully this makes sense.

01:00:46.380 | And I would just say that I want people to learn.

01:00:50.080 | And I would still probably say to many people -- and this is where I've come -- I stopped

01:00:54.260 | giving his books away, because I learned that it wasn't effective for me to do that.

01:01:01.100 | And I couldn't find anybody who actually followed through on his plan.

01:01:05.280 | Like I said, ask the people who say, "I'm following the Dave Ramsey plan.

01:01:09.140 | How many credit cards do you have?"

01:01:10.700 | And I was always the one that didn't have a credit card.

01:01:13.380 | And yet they all did.

01:01:14.380 | "Well, Dave Ramsey says there are snakes."

01:01:16.260 | Okay, fine.

01:01:17.260 | So I learned that people weren't following.

01:01:19.780 | It's on one of them.

01:01:20.780 | As far as that book, if someone is struggling with debt, I still don't have a better

01:01:24.220 | option.

01:01:25.220 | Maybe someday I'll gain the skill to be able to write the book that I wish existed.

01:01:28.660 | But I don't have a better option for them yet.

01:01:30.380 | It's still an amazing book.

01:01:32.160 | And I think that Dave has helped tens of millions of people just think and become more conscious

01:01:39.000 | about their money.

01:01:40.000 | I really do.

01:01:41.140 | And I have a world of respect for him, because he's accomplished a lot of good.

01:01:44.980 | I just think he could do so much more good if he weren't so intent on building his brand

01:01:51.780 | and differentiating it from everyone else.

01:01:54.020 | And you can see that.

01:01:55.020 | Go back and look at the Twitter exchange that he had with the financial advisory community.

01:01:59.740 | And to me, that illustrates how he perceives what he's doing.

01:02:04.180 | He perceives, evidently, I don't know, I'd like to meet him someday, and if he invites

01:02:08.220 | me to dinner, which I doubt would happen, I would love, I would be thrilled to go and

01:02:12.300 | talk to him.

01:02:13.300 | Because there's, again, there's a big difference between seeing someone's public persona and

01:02:16.460 | what you do and say publicly versus who you are as a person.

01:02:19.580 | But I think he could be so much more effective if instead of trying to divide between the

01:02:24.740 | general public and his show, if we could all get together, and this is my burden, if we

01:02:31.460 | could all work together, and it sounds so airy-fairy, but it's true, if we could all

01:02:35.340 | work together and recognize that we each are interested in different things, then we could

01:02:39.980 | make a tremendous amount of progress.

01:02:42.940 | And the problem, we are not each other's enemies.

01:02:45.340 | The financial advisor and the financial blogger and Dave Ramsey and Jim Cramer, we're not

01:02:50.020 | each other's enemies.

01:02:52.020 | The enemy is financial ignorance.

01:02:54.300 | And the enemy is financial illiteracy.

01:02:57.260 | And we have huge problems in our world.

01:03:01.140 | And I just say, look at the $222 trillion of debt that the U.S. government has, including

01:03:07.020 | $17 trillion of existing debt and the remaining balance unfunded liabilities.

01:03:12.620 | That is not a problem of politicians.

01:03:15.740 | Politicians perfectly reflect the culture.

01:03:18.180 | That is a reflection on the American culture.

01:03:20.100 | And I just, maybe I'm idealistic, but I just think that we can work together instead of

01:03:25.780 | dividing and then we will conquer the financial illiteracy and the financial ignorance and

01:03:32.940 | will help people to find and achieve the lifestyles that they want to achieve if we work together

01:03:38.100 | instead of fighting all the time.

01:03:39.480 | So that would be my thought.

01:03:41.340 | All right.

01:03:42.340 | Will you allow me to wrap this up then?

01:03:44.300 | Because I think, okay, we're coming from you as a Dave Ramsey fan, just saying up to the

01:03:50.260 | end of debt point, maybe I'll make a generalized statement.

01:03:52.700 | Hold on a second.

01:03:55.660 | Yeah, we're right at the one minute mark, or one hour mark.

01:04:02.380 | You as a Dave Ramsey fan, just when it gets to the investing, it needs to be more complex.

01:04:06.260 | So not a Dave hater.

01:04:07.580 | We're not saying that.

01:04:09.220 | And me as a Dave Ramsey fan, we'll just say a Dave lover.

01:04:12.620 | We're both saying the same thing here as far as it's the perception of the consumer, to

01:04:20.380 | use these two words, Dave says.

01:04:22.980 | That's the dangerous part because I don't want to say they're blindly following.

01:04:26.460 | I'm saying they're only following the sound bites, the one advice.

01:04:30.340 | So that is, I think we're on the same track here.

01:04:33.080 | We're all trying to educate the consumer to learn for themselves, to know that there's

01:04:38.420 | different situations for each person, that there may be some adjustments to their financial

01:04:43.900 | plan, whether it's the seven baby steps or Susie Orman's build your FICO score plan,

01:04:48.940 | whatever.

01:04:49.940 | That it's the danger of ignorance.

01:04:53.100 | You said that earlier.

01:04:54.100 | Yeah.

01:04:55.100 | No, I agree.

01:04:56.100 | And I agree.

01:05:00.340 | And it's very challenging because, again, you're walking a tightrope.

01:05:05.540 | And I guess my summary would be is that it took me a long time and I think I'm still

01:05:13.820 | in many ways recovering from the dogma and the cult of personality that is so easy to

01:05:20.020 | want to build.

01:05:21.020 | And I'll tell you what I see as a difference is I think that, see, five years ago, he was

01:05:26.820 | the only option as far as for me.

01:05:29.620 | Where I think we're going to have a dramatic transformation, which I'm so excited about,

01:05:33.540 | is the financial blogging and podcasting community.

01:05:36.300 | Because now there are dozens and dozens of new financial shows.

01:05:41.380 | And a few years from now, there will be hundreds and hundreds of new financial shows.

01:05:45.740 | And that competition and that ability to more easily access a broader voice, I think is

01:05:50.140 | going to make a major difference as far as helping people to be educated.

01:05:54.260 | The audio resources for people to be educated have not existed.

01:05:57.860 | You've had to go and read books.

01:06:00.420 | And the average American simply doesn't read.

01:06:03.180 | And so that is a reflection on our, we're an ignorant culture in general because we

01:06:09.300 | don't read.

01:06:10.580 | And so we're easily led, we're easily attracted to personality.

01:06:14.140 | So the good thing is, the cool thing is, again, I'm inspired by Dave.

01:06:18.020 | That's why I started my show, is I want to provide the option for people who are ready

01:06:22.720 | to maybe go a little deeper, go a little farther.

01:06:25.980 | And I admire him for what he has done.

01:06:29.540 | And all of my comments are just that I think he could be more effective if he, I think

01:06:35.380 | he could be more effective.

01:06:36.580 | And that's my hope.

01:06:37.740 | Because we're not enemies.

01:06:39.300 | We need the education.

01:06:40.540 | We need to build financial literacy.

01:06:42.620 | So I hope that I have done an effective job at, you know, the problem is financial advisors

01:06:49.140 | can't talk in public.

01:06:51.100 | They're restricted behind the rules of the SEC and the financial industry.

01:06:56.060 | So they can't do it.

01:06:57.140 | So hopefully I have done an effective job speaking for, you know, the financial advice

01:07:01.660 | community just to say in a caring way that we do have some concerns because I have faced

01:07:10.140 | the clients.

01:07:11.140 | I faced the client who Dave said, "Buy a 10-year term," and guess what?

01:07:14.540 | You're uninsurable.

01:07:15.540 | That wasn't a good plan.

01:07:16.540 | You can't get any more life insurance.

01:07:18.380 | And that is heartbreaking.

01:07:19.380 | And I faced the clients who are in and out of debt, in and out of debt.

01:07:22.840 | And so I just wish that I think together we can grow and we can make a massive improvement

01:07:30.700 | in our culture.

01:07:31.700 | And I am entirely optimistic about that happening.

01:07:34.820 | And I'm so thrilled that you have your show because you can speak to an audience that

01:07:38.900 | Dave won't appeal to.

01:07:40.380 | And I have my show because I'm going to speak to an audience that Dave won't appeal to.

01:07:43.260 | And even just here at FinCon, there are dozens of people.

01:07:46.900 | And I think all of us, our lives have been touched by Dave.

01:07:49.260 | We owe him a great debt of gratitude because he has paved the way and tutored many of us.

01:07:57.320 | And yet the hallmark of a great teacher is acknowledging, is wanting to see their students

01:08:03.160 | be more successful.

01:08:05.040 | And that's what I love to see is I love to see people going a little bit beyond maybe

01:08:08.600 | the teacher that started with and going to a deeper level.

01:08:13.160 | Joshua Sheets, RadicalPersonalFinance.com.

01:08:16.880 | I'm spent.

01:08:17.880 | I'm done.

01:08:18.880 | I did an hour of show time.

01:08:19.880 | It's been a wonderful, wonderful discussion.

01:08:23.120 | And I thank my listeners for listening to this.

01:08:25.200 | We're also going to put this out on Joshua's feed as well.

01:08:28.080 | Joshua Sheets, thank you so much.

01:08:30.320 | Thank you.

01:08:31.320 | And I would just ask one last thing.

01:08:33.000 | I have tried very, I was very nervous about producing this show because I have good intentions

01:08:37.480 | and I do not want to be a Dave hater.

01:08:39.360 | I would crave some feedback for those of you listening.

01:08:42.560 | Either if what I've said has resonated or if you hate it, that's fine too.

01:08:46.320 | Tell me or comment on my show or comment on Steve's show.

01:08:49.040 | I would like to know and hopefully I've done a good job and I hope that my heart has come

01:08:54.160 | through and that this can be a helpful message.

01:08:58.020 | If this has offended you because I have, if this has offended you because I've stepped

01:09:03.680 | on a sacred cow, I understand because I think that in years past I would have been there

01:09:07.600 | too and I wouldn't have wanted to listen.

01:09:09.480 | It took a while.

01:09:11.120 | So I'm not bothered by that, but I'd love to have any feedback and I hope that my heart

01:09:14.440 | came through in this and was helpful.

01:09:16.960 | Thank you for the opportunity.

01:09:18.560 | I appreciate it.

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RPF-0066-Does_Dave_Ramsey_Do_More_Harm_Than_Good