Dave Ramsey Relating with Money (Class 2 of 13)

In the second class Dave Ramsey explores the psychology of money through two simple dichotomies, men and women and nerds and free spirits. He also spends a good part of the class teaching basic principles for teaching children how to relate to money. There are two things about these classes that are difficult to convey with the written word. Dave Ramsey is big on repeating basic principles over and over. At the beginning and end of each class and sometimes in the middle of each class Dave makes the audience list some subset of the seven baby steps. I can’t adequately convey the level of emotion he engenders in the audience. Dave Ramsey is a master presenter who has perfected one speech. He really knows how to work a crowd. Since the class DVD is of a live event, some of that energy is transmitted to the classroom.

So in an attempt to give the reader a feeling for how Dave reviews the prior class, here are the first three baby steps for a second time. You will see them again and again in this series.

1)$1,000 in an emergency fund ($500 if combined family income is under 20,000)
2)Pay off all debt except mortgage using the debt snowball
3)Complete emergency fund containing 3-6 months expenses

Dave Ramsey begins by observing that, “The flow of money in a family represents the value system under which that family operates.” Indeed if one were to examine the check register and credit card statements of a given family it would produce a very clear picture of that family’s values. Police detectives and investigative journalists are both fond of saying, “If you want to know the truth, follow the money.”

Dave Ramsey contends that men frequently find the idea of 3 to 6 months in something like a money market fund extremely boring and unsophisticated. They are often tempted to invest that money in something that produces a greater rate of return. However, women tend to view a $15,000 safety net in an insured bank account as the key to an intelligent financial plan. Other aspects of this dichotomy are explored. The difference in how men and women go shopping is almost a joke. Men know what they want to buy, where to find it, how much in costs, and how long it will take to drive to the store, buy the item, and return home. Men plan shopping trips like a military operation. Women, on the other hand, find shopping a source of entertainment and pleasure. They wander around malls looking at and touching everything, even things they do not want or need. When a family finds itself in desperate financial straits men tend to feel that their self esteem, which is based on the ability to protect and provide for their family, is threatened by the crisis. Women tend to view such problems with fear. Dave Ramsey’s wife would say terror. When they faced bankruptcy early in their marriage she viewed the problem as one of security.

Money issues are the number one cause of divorce in America. If a husband and a wife can agree on a value system for handing money questions they are well on their way to a healthy marriage. Dave contends that a partnership is the most effective method of achieving this goal. The other options are one in which one partner is the driver and one partner is just along for the ride or a division of labor based on expertise. Frequently one partner is what Dave terms a nerd, a detail oriented individual who could be accused of being a control freak. The other partner is apt to be a free spirit who is not interested in the details of a budget. Dave believes both individuals are necessary in a marriage. The nerd to watch over and herd the flow of money and the free spirit is there to make certain the nerd actually has a life. Imagine Ebenezer Scrooge in his empty freezing apartment before the ghost of Jacob Marley appeared. At this point Dave encourages singles in the audience to find an accountability partner with the expertise and moral authority to review their budget even if it hurts their feelings.

Dave challenges parents to teach their children about money. He points to the odd proximity of two verses in proverbs 22 wondering why no one ever preaches on the obvious meaning if these verses are considered as a pair.

[6] Train up a child in the way he should go: and when he is old, he will not depart from it.
[7] The rich ruleth over the poor, and the borrower is servant to the lender.

In a nutshell, Dave insists that money is connected to work even from a very early age. Children should be given a reasonable number of age appropriate tasks outside of their normal family chores. If they do this work they get paid. If they do not work, they do not get paid. The second part of this equation is that then parents allow their children to spend their money on what they value, whether that would be a Celebration Barbie or a car. In fact Dave offered a 401-Dave plan for his children’s first car purchase. He matched their savings dollar for dollar. He concluded this was a mistake since the younger children saw this as a good deal and saved unexpectedly large sums of money. Dave told the audience to put a cap on their matching plan, lest they end up buying a Maserati for an ingenious highly motivated child.