Ramsey doles out advice

Tuesday, October 3, 2006
Dave Ramsey

MADISON -- Who knew that learning about money could be so much fun?

About 3,000 picked up on that lesson Saturday during the Total Money Makeover Live Event hosted by national radio talk show host Dave Ramsey.

Using humor, multi-media and his own experiences, Ramsey laid out his plan for financial success, showing young couples starting out how to save and invest so that they may retire with no worries.

Ramsey knows all about building wealth and then losing it, because it happened to him. Growing up in Antioch, his father taught him about the value of a hard day's work and Ramsey took that lesson to heart.

By the time he was 26, Ramsey had a net worth of a little over a million dollars. He was making $250,000 a year -- more than $20,000 a month net in taxable income.

"I was really having fun," Ramsey said. But, he stated, if 2 percent of 100 is a lie, that 2 percent can cause big problems, "especially with $4 million in real estate." The real estate was tied up in a lot of short term debt and during the bank mergers of the 1980s, Ramsey had his notes called in.

Over the next 2 1/2 years, he lost everything he had built from scratch. Determined not to "take advice from broke people anymore," he set out to find where he went wrong.

He said he soon learned that the only person at fault was the fellow looking back at him in the mirror. "If I could learn to manage the character I shaved with every morning, I would win with money."

Getting back into real estate, he began to pull himself out of debt and committed himself to helping other people avoid the mess he found himself in. He formed the Lampo Group in 1988 to council families how to cope with financial stress.

He then wrote his first book, "Financial Peace," based on all that he and his wife Sharon had learned. He began selling the book out of his car. The next step was starting a local radio call-in show on WWTN in Nashville called "The Money Game," which is now nationally syndicated as "The Dave Ramsey Show.

He's now heard by two million people Monday through Friday on 250 stations across the country, advising people how get out of debt. Many, on air, cut up their credit cards and celebrate with Ramsey as they are finally debt free.

In a highly energetic five hours Saturday, Ramsey explained his seven "baby steps" to financial peace; namely starting an emergency fund of $1,000, paying off all debt using the Debt Snowball method, putting three to six months of expenses into savings, investing 15 percent of household income into Roth Individual Retirement Accounts [IRA] and pre-tax retirement, setting up college funding for your children, paying off your home early and then how to build wealth and give, investing in mutual funds and real estate.

Ramsey demonstrated that by investing $2,000 a year in Roth IRA from age 19 to 27, a person could have well over $2.2 million dollars saved by age 70. Many young couples, which made up much of the audience, could be seen taking notes on this point.

"Live like no one else so that you can live like no one else" was a point Ramsey frequently repeated, suggesting that a couple of years of living on a bare bones budget will result in much of a family's debt being paid off. According to the Wall Street Journal, 70 percent of families are living paycheck to paycheck.

Ramsey also expressed his disgust for credit cards, which he says are mostly responsible for debt. Using footage of a cheetah chasing a baby gazelle from the Discovery Channel, Ramsey had the audience in stitches as he described how credit card companies try to entice young consumers into getting hooked. There were over six billion credit cards offered to customers last year, Ramsey said.

Most people know how to build wealth and get out of debt, but the hardest part is changing behavior, Ramsey explained. He also made it easy for the audience to understand investing and the kinds of stocks and funds to put your money in.

Ramsey also has taken what he teaches and turned it into a successful business in of itself. His Financial Peace University is a a 13-week program empowering families how to make the right money decisions to achieve their financial goals and experience "a total money makeover."

Ramsey claims that on average, families participating have paid off over $5,300 in debt and saved $2,700 during the 91-day program.