Suze Orman vs. Dave Ramsey — how do these two differ, and who do you think is right? I talk about Suze giving Dave Ramsey the financial smack-down on her show, plus more.
One Saturday night, I had settled in for a long stretch of great financial television: Suze Orman’s show at 8:00, followed by Gail Vaz-Oxlade’s ‘Til Debt Do Us Part at 9:00.
Suze’s Moneylogue that night was called “Don’t be Debt Dumb”, during which she called out a “so-called financial pundit” she had tuned in to watch on television at an earlier time.
Her lip curled and she gritted her teeth in distaste as she recalled literally screaming at this man through her television screen because he was touting “the dumbest debt pay-off strategy” she has ever heard.
Listening more closely in between spoonfuls of Chocolate Chip Cookie Dough ice-cream, I was intrigued.
Who was this “so-called financial pundit”, this master puppeteer of dumb debt strategy that Suze so disgustingly despised?
As Suze unveiled more details about his debt pay down strategy — pay off the credit card with the lowest balance first, forget about interest rates, psychologically feel good — my eyes widened.
Even though Suze never named the man during the segment, anyone who knows his financial advice could clearly make out who she was referring to: Dave Ramsey.
Let's look at Suze Orman vs. Dave Ramsey, how their debt payoff advice differs, and my own personal take on the whole thing (including the debt method we used to pay off our own $59,496 of debt).
Suze Orman Vs. Dave Ramsey
Here's a few ways you can compare the two of these financial gurus.
Net Worth Estimates
Suze Orman's net worth (estimated) is $50 million.
Dave Ramsey's net worth (estimated) is $55 million.
So, they're “pretty” equal in terms of net worth.
How they Got their Start in Teaching Finances
Both of these guys have very interesting start-up stories about how they got into financial work.
Suze Orman was a well-loved waitress at a diner. She was so well-loved, in fact, that some of her loyal patrons got $52,000 together to loan her so that she could open up her own restaurant. She took the money and gave it to a brokerage firm to invest…and they lost all of her money. Crazy enough, she decided that she would become a broker…and trained and the exact office that had lost all of her money!
Dave Ramsey graduated college with a degree in Finance and Real Estate, and became a real estate investor. He built up his real estate portfolio to be worth over $4 million, but was wiped out and had to declare bankruptcy after a change in bank ownership demanded he repay all of his loans. After his financial recovery, he started financially counseling couples at his church.
Both of these financial gurus suffered huge financial losses in their lives, which undoubtedly motivated them to not only get an education in personal finance, but to then share with others what they had learned.
However, their advice for how to payoff debts differs.
Suze’s Debt Advice
I got to see Suze in person once, and it was awesome! It was during the recession at a Women's conference, and she said something that stuck with me:
Debt is bondage, especially in uncertain times.
This really resonated with me, because what better way is there to prepare yourself for financial insecurity than to be out of debt (our debt would have sunk us in unemployment)?
Who knows what position you may be in five years from now, or three years from now. But you do know that if you don’t pay down your loans, you will still owe $300, $500, $1,000+ each month.
It's best to work on paying down these debts now while you are fully capable to do so, then to straddle yourself with consistent debt in an inconsistent future.
Paul and I are working diligently at this. We have some debts outside of our mortgage that we are working on paying off before we go down the aisle in April and say “I Do”. These include a car loan and student loans. Most of our debts (outside of our mortgage) will be paid off by the wedding, and then we can tackle the remainder of my student loan debt (which is at 1.65% interest) afterwards. What debts do you have, and what is your plan?
Psst: update — we paid off all of our debts in September 2010, except for our mortgage. Here's our how I got out of debt story.
Suze’s debt pay down strategy is very logical and certainly makes good financial sense:
- Line up credit cards from the highest interest to the lowest interest.
- Call your credit card companies to see if you can get interest rates lowered (though she advises that this is not likely they will work with you in the current economy).
- Try to do a balance transfer from your highest rate credit cards to a credit union card with a much lower interest rate (the most credit unions can charge you in interest is 18% if they are federally chartered; still a whopping figure).
- Pay the minimum on each of your credit card debts, and then put any extra money onto the one with the highest interest rate card.
- Once the highest rate interest card is paid off, then you move the money you were putting towards that debt onto the next highest interest rate card, and thus continue with your debt snowball in that fashion.
If you're just looking at the numbers, then it's the best way to pay off multiple credit cards. But, it's not the only way.
Dave Ramsey’s Debt Advice
Dave Ramsey is all about behavior modification and the psychological wins. He advises you to:
- list out your debts from the smallest balance to the highest balance despite the interest rates (in fact, in his book Total Money Makeover he states, “I don’t care if some have 24 percent interest and others 4 percent”…the only time to pay off a larger debt sooner than a smaller one is some kind of big-time emergency such as owing the IRS and having them come after you, or in situations where there will be a foreclosure if you don’t pay it off.”)
- By paying off the smaller debts first and having some big wins in the beginning, you will get “fired up” and be more apt to stick with the program.
- Just as in Suze’s model, as you pay off each debt (from smallest to largest in balance) you then use the money you were paying towards the debts that are now paid off and throw them at the debt balance that is next in line.
Psst: be sure to check out what are Dave Ramsey's 7 total money makeover steps, and how we worked through them (plus what our finances look like 7 years later).
My Take on the Suze Orman vs. Dave Ramsey Debate
I was a bit taken aback by her attack, quite honestly.
I want people to pay off their debts and live debt-free, and how they accomplish this doesn’t really matter to me. The method is not as important as the outcome.
Living debt free is an amazing feeling; Paul and I accomplished this (aside from our mortgage) last September using a hybrid approach between Suze Orman’s plan of paying off the loans with the highest interest rate first and Dave Ramsey’s strategy of paying down debt from the lowest balance the to highest balance. Since then we have built our emergency fund up to its fullest, begun investing in an index fund, opened up a “large expense” saving account for things like our next car purchase (not for years hopefully), and opened up a vacation fund.
Psst: I think with Dave Ramsey's plan, you might overexpose yourself during debt repayment (he says you should have just $1,000 in an emergency fund, and the rest goes to debt).
Being debt-free is allowing us to save ahead of every purchase, save up for large expenses, and spend on the things and experiences that we value the most.
We are all different, and what may work for me may not work for you and vice versa. In my opinion, having as many viable and effective options available as possible is best.
Which debt reduction plan do you think is best? Have you used one over the other, or have you used something different? I’d love to hear your thoughts.
What Kind of Grade Would you Get on Suze Orman's “How Am I Doing” Segment?
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