Ramsey observations over time

Ramsey observations over time

Dave Ramsey does a radio show where people who are having financial issues call in for advice and help. His attitude is that everybody should be successful with their money – no matter what they make – and that you are ultimately the decisionmaker and responsible when it comes to your situation.  He’s also a big fan of not living beyond your means and paying off huge debt instead of filing bankruptcy. His personal experience with having filed bankruptcy several times showed him that until you change the behavior (i.e. living within your means and paying off debt) you will just continue the cycle of going bankrupt every few years and ruining your life/marriage/etc .

My personal reason to listen to the show: I really like listening to the amazing and varied things people have gotten themselves into, or have happened to them in financial matters.

A few of my own observations from the show:

1. You are only one debilitating accident/illness away from bankruptcy/complete ruin. This is shocking but amazing and consistent. This was pointed out by this guy (12 things I learned by 42 that I wish I knew at 22) as well as numerous people that call into the show. But it came home for me when a very successful $200k+/year software engineer called in and after a car accident – and in just over 1 year from the accident had lost all his contracts, lost his home, and was likely going to file bankrupcy over nearly a $100k+ in medical bills.  His injuries caused him 6 mo of recovery in which he lost all his contracts (and got sued by a few of them he couldn’t meet) and now could now barely work 4-6 hours a day due to his disabilities.  He was only in his late 30’s. That shocked me – if that guy got clobbered by one accident – so could anybody.

Probably one of the most common call-ins I have heard is ‘We were doing ok, then my wife/husband had X medical thing happen’. X being: back injury, cancer, car accident, accident on job, some kind of illness that sporadically popped up made keeping a regular/shift job that requires 9-5 5 days a week difficult. You absolutely must have health insurance and long-term disability – or you’re playing with so much fire you can’t even begin to imagine. One major illness can get you to $100k in medical bills in no time. This goes for car insurance too.

But it also showed me how many mid-income families run with minimal or no coverage – and one bad thing comes along and it completely ruins them. It does tell me something needs to be done in this department, but exactly what has been debated for years now. I’m not a fan of completely socialized medical coverage, but there are far too many people falling into these black holes and there is little or no way out.  If you declare bankruptcy, you’ll just keep running up more debt if the condition is a long-term debilitating condition.

2. People get ripped off by partners in business more than I imagined. Seems like there are lots of call-in stories of folks that start getting shafted by friends/family/partners in business. Things start off cordially enough – even when both parties want things to work. But people don’t adequately set up financial accounts, expectations, and protections early in the business dealings – then get left holding big bags of debt the other partner’s decisions left on them. Common ones:

  • Partner gets divorced and partners share of business becomes part of settlement – crippling your companies financing/day to day operations.
  • Business goes bad and now you’re about to lose your own home/car/etc because you didn’t isolate exposure.
  • Partner starts stealing from company and when they get arrested (or you can’t turn them in without having all your clients sue you too) – you get left holding the debt they ran up living the high life or going to jail/being sued with them.
  • Business idea just didn’t fly and the other guy and you get into huge lawsuits over the debt/assets
  • You see the business permanently going south and want to close up shop to cut loses – but the partner doesn’t and now you can’t get out of the mounting debt that can’t be paid off or stopped while the partner continues the downward trend.

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