Dave Ramsey and critical thinking

[stevea]

For those wondering how otherwise intelligent adults can make such facepalm-worthy financial decisions, this series of blog posts offers one person's story. The short version is that he grew up thinking that frivolous spending was what you were supposed to do, and since it made him feel good he kept doing it. So long as he could make minimum payments on his credit cards he didn't have to address how bad the situation was. It's an interesting look at how a smart person can be so, well, dumb.

Yes it's an excellent example in several respects. The blogger is clearly intelligent, writes clearly and likely thinks clearly, and obviously had the mental capacity to foresee the outcomes of his actions without difficulty, yet he proceeded to take actions that were antithetical to his eventual goals. We might describe this as a change in personal goals or else a neurosis that caused the guy to sabotage his (likely, assumed) self-interests.

Even if one goes off the financial rails either by reckless spending, job loss, medical emergency, I still can't understand how Suze Orman makes a career telling them how to get out of debt. The calculations are not that difficult. That's the part that amazes me.

I agree to the extent that we should expect ppl with a normal range of IQs to correctly answer these very basic personal finance questions that Ms.Orman addresses.

Much of the barrier to acting on these generally obvious conclusions is psychological. Is there any evidence that listening to a Ramsey/Orman type person is any more effective than pulling a pamphlet from the GSA printing office ?

Some people just want someone to hold their hand while they do the obvious but un-fun stuff to straighten themselves out. Isn't this the fuel that e.g. Weight Watchers runs on?

Good analogy wrt weight loss. There is some decent evidence that weight loss programs that include regular meetings & weigh-ins are more effective than others. The implication is that social pressure acts as motivation to continue, but there is also the confounder that less successful ppl may dropout (causing a self-selection problem).

Would be interesting to see of a debt related meeting structure would help. It seems more of a treatment rather than problem prevention scheme.

 

[marplots]

My example of an irrational goal: One that exists solely in the past.

"My goal is to stop Hitler from being born."

My example of a rational goal: A goal that is necessary to obtain another goal (the subsequent goal may be rational or irrational).

"I will continue to breathe so that I do not die."

If that wasn't clear, just pick any old goal, determine the necessary and sufficient conditions that lead to it and make those into goals. If your goal is to count to a thousand by twos, a rational goal would be to count to 8 by twos.

The fact that rational and irrational are context-dependent only requires that I accept some epistemological basis and axioms as prerequisite context.

 

[Akri]

Yes it's an excellent example in several respects. The blogger is clearly intelligent, writes clearly and likely thinks clearly, and obviously had the mental capacity to foresee the outcomes of his actions without difficulty, yet he proceeded to take actions that were antithetical to his eventual goals. We might describe this as a change in personal goals or else a neurosis that caused the guy to sabotage his (likely, assumed) self-interests.

I think he sees it largely as an issue of changing goals. He talks a lot in that blog about how nowadays every financial decision he makes, big or small, is done with the goal of ensuring his kids have a stable future. I think he keeps a picture of his son wrapped around his credit card, for example.

 

[briwd2012]

Everyone, thanks for your input.

I've been so she'll shocked by my "come to reason" moment in regards to this debt I haven't had time to respond here. I apologize for that.

I know the broad strokes in regards to what I need to do next

* get a second job and suck it up knowing that the extra hours are and will pay off in the long term
* 500 to 1000 start point for emergency fund
* stop using credit
* get on a budget
* debt snowball, tho I will get rid of one particular loan first

I probably will contact someone locally thru the National Federation for Credit Counseling as well.

 

[The Central Scrutinizer]

Everyone, thanks for your input.

I've been so she'll shocked by my "come to reason" moment in regards to this debt I haven't had time to respond here. I apologize for that.

I know the broad strokes in regards to what I need to do next

* get a second job and suck it up knowing that the extra hours are and will pay off in the long term
* 500 to 1000 start point for emergency fund
* stop using credit
* get on a budget

I probably will contact someone locally thru the National Federation for Credit Counseling as well.

Sounds good. You didn't need Suze Orman to tell you that.

 

[Muldur]

The one area that Ramsey refuses to address is the growing use of credit scores in things like job applications and housing rentals. His phobia about credit of all kinds (except for mortgages) means that increasing numbers of people who faithfully apply his teachings have a serious vulnerability that they otherwise would not have.

 

[Roboramma]

My example of an irrational goal: One that exists solely in the past.

"My goal is to stop Hitler from being born."

By goal it's clear that stevea is simply talking about the things that you want. There's nothing irrational about wanting Hitler never to have been born.

What you do about that desire may or may not be rational within the context of that and other desires. For instance, spending your time studying alchemy in the hope that you'll one day figure out a way to create a metal that will let you travel back in time would be irrational, because it won't work (and thus won't contribute to that particular goal), and will waste time and resources that you could otherwise apply to other goals.

My example of a rational goal: A goal that is necessary to obtain another goal (the subsequent goal may be rational or irrational).

Yes, it's obviously the case that wanting X because it will lead to Y is rational when you want Y (as long as X actually will lead to Y).

But did you really think that stevea disagrees with that, or that that's what he was talking about?

 

[The Don]

By goal it's clear that stevea is simply talking about the things that you want. There's nothing irrational about wanting Hitler never to have been born.

A critical aspect of goal is the fact that it is in the future.

As a consequence a goal of Hitler not being born is nonsensical.

 

[marplots]

By goal it's clear that stevea is simply talking about the things that you want. There's nothing irrational about wanting Hitler never to have been born.

If a goal is simply a statement about a desire/want, then I propose the dichotomy of irrational/rational isn't useful. If it's simply a matter of discovering something in my head and expressing it, I'd say that falls under a-rational instead.

My example would be finding a tree growing in your gutter. It's a bald fact, something about the world that doesn't have a logical basis. One may say there is a reason the tree sprouted there and may track the history of how it happened, but trying to map the tree itself as either rational or irrational doesn't work.

I'm using a-rational here, not to mean logically flawed, but outside the realm of logical analysis altogether. It would be rational for me to think you took the last cookie, knowing what I know about you and cookies. It would be irrational for me to conclude the cookie spontaneously combusted (again, based on what I know about cookies), but the mere fact that there is no cookie remaining is a-rational.

If a goal or want can simply be stated, without an attached logical chain of obtaining the goal or way to evaluate it as possible or sensible, then I have to agree - I've been defined out of the argument - but I'd then have to drop the labels (rational/irrational) that can only come with evaluation.

How's that?

 

[Roboramma]

Yep, and I'm pretty sure that was stevea's point.

 

[marplots]

Yep, and I'm pretty sure that was stevea's point.

Yeah, but I was able to stretch it into several paragraphs and work in cookies. There's just no fun to be had in agreeing right off.

 

[marting]

The one area that Ramsey refuses to address is the growing use of credit scores in things like job applications and housing rentals. His phobia about credit of all kinds (except for mortgages) means that increasing numbers of people who faithfully apply his teachings have a serious vulnerability that they otherwise would not have.

Credit scores are not used in hiring or housing rentals. Credit reports are used and the portions that are of interest are examined. Amongst these are collections from rentals or indications of financial problems. There is generally no interest in whether you have credit cards or not.

However, credit scores of a sort are used in auto insurance decisioning.

Dave R's advice about not having any credit card or loans is extremely dangerous. It is really hard to rent a car and sometimes even a hotel room without a credit card. Credit cards are signals that you less likely to not return a car or trash a hotel room. Also, responsible use of credit cards is the single largest form of debt in a good credit score. It is not possible to get normal mortgages unless you have established credit. Mortgages are the one form of debt he doesn't discourage. He pushes a mortgage broker that specializes in alternate documentation mortgages.

 

[Dr. Keith]

He pushes a mortgage broker that specializes in alternate documentation mortgages.

Create a problem and sell the solution. I respect this guy even more, now!