What's Wrong with Suze Orman and Dave Ramsey?
Chuck Jaffe has an interesting article about financial guru Suze Orman. Check it out here.
I am no fan of Suze Orman. She is typical of so many people on television and radio, heavy on advice that appeals to the masses, but lacking in the specialized advice that people need. Its not unlike a doctor going on television and saying that in order to stay healthy, you should do this or take that. It might be true in a general sense, but the smart thing to do is ask a doctor who is familiar with your specific situation. Dave Ramsey is the same way (only Dave Ramsey is not a lesbian).
Here are some of the things that I do not agree with Suze Orman and Dave Ramsey:
—Their asset allocation models are way off base. Orman's tend to be too conservative, Ramsey's are too aggressive for most people. For example, Ramsey tells everyone in his audience to divide their assets between mutual funds that are 25% small cap, 25% mid cap, 25% large cap, and 25% international/global. Sounds good, right? But take a closer look at that allocation. One-fourth is in large cap, which is relatively conservative, but everything else is aggressive. For someone in their 40s, a portfolio that is 75% aggressive might be okay. But if you're in your 60s, that might be too aggressive. Point is, blanket recommendations are dangerous.
—They take money from people that can influence their recommendations. Orman is the queen of endorsement deals. That's fine, I guess. I always worry that it will negatively influence her to say things that are not in your best interest, but in hers. I don't know about Ramsey taking money to endorse a product, but I know that he does take money (considerable amounts of it, believe me) to endorse his local providers. He calls them "ELPs" and it costs a great deal for him to recommend their services. For insurance salesmen, he splits commissions with the agents who sell policies as a result of his endorsement. To me, this is a major conflict of interest.
—They recommend using excess money to pay off your house. Don't get me wrong—I agree with that. If I get a lump sum of cash, I would pay off my house because I don't want to lose it if my job goes away. I have been laid off from my job before, and my biggest fear is being homeless. Paying off your house takes that fear away. However, some financial consultants would say that paying off your house instead of investing in the stock market can overload an investor in real estate, which can be a bad idea.
—They both hate variable annuities. I'm not a big fan of annuities. They are way over-prescribed, mostly because brokers are paid high commissions to sell them, much higher than stocks and mutual funds. However, if they are a right fit, they are great investments. If a person is nearing retirement, does not want to pay large up front commissions, and cannot sleep at night for fear that their investments will lose value, a variable annuity can be a great way to protect an investment. Blanket statements do not help investors.
Now, I should say that I appreciate the way that Orman and Ramsey have helped a lot of people. Their advice, even if too general for most investors, has been good in many ways. They have a way of saying what needs to be said. They are like the Simon Cowell of the financial world. People sometimes need to be slapped up side the head with the truth about their spending, their debt, their lack of savings, etc. Orman and Ramsey do that, and they do it very well.
So in light of what you have just read, please consult a financial professional before taking any advice contained herein
Hey Jason,
Just checked in to see if you had any discussion of important things - like for example American Idol - Did you realize www.dialidol.com has Sanjaya in the top three? Give me a break. But here you are discussing trival things like my financial future and whether or not I will have to eat dog food when I'm 70.
As to the Dave Ramsey - We have used financial peace in our church a couple of times and are planning on doing it again. The value is what you stated. It slaps people upside the head to wake up and see the financial mess they have gotten themselves into. Most of the people we have seen go through it work hard at eliminating debt, don't take everything Ramsey says as the only way to do things, and generally are better off for it.
Monica and I have adopted some of his advice and it has been a blessing. We don't have our house paid for, though like you I would love to, we use cash for some things like gas and groceries and entertainment and we only have one credit card.
Don't know about Ortman (especially the lesbian thing), other than what I have heard briefly on PBS. I do think these people are helping some people in that they are at least getting people to think about finances.
Now - get back to more important things like Idol or Survivor!!!!!
Reply to this
What was I thinking of?! Okay, I'll tell you. I took the day off yesterday and wrote my blog in the morning, before Idol ever aired. I knew with everyone coming over last night that I wouldn't have time to write in the evening like I normally do, so I wrote early and published it later.
Like I said, Ramsey does a lot of good, but I would not be surprised if the SEC stays on his can a lot over some of the issues I mentioned. This is such a compliance-driven industry, that it is hard to avoid it when you take endorsements and such.
Reply to this
Oh no.
Sanjaya is horrible!
Reply to this
You summed up the article quite well and it happened to be the most relevant portion. What Dave Ramsey has done for us, is his information has allowed us to begin to even think about serious investing. By following the plan, we paid off over $120,000 in student loans, car notes & credit card bills, in less than 3 years. Now, we can invest all of that money into IRA's 401k's college savings, the house, whatever we want to. Basically, Dave's advice is much more important prior to being to able to invest, he's the king of helping folks get out of debt. Now Suze, Miss FICO if you will... well, I'll pass on her. My FICO is getting worse the wealthier we become. We too, were idiots, and needed the slap in the head. One more note, I'd verify the info on the ELP's, from my understanding, 'no' commissions are paid, only flat rate lead fees, however I could be wrong as well.
Reply to this
Good Gravy!! You are essentially an idiot. I'm sure you also believe that the stock market is meant for the little people to buy/sell/trade on. You most likely would also attempt to make a compelling argument for having a credit card..."just in case". Interest that cancels out your gains!?! Oh wait, that's right, your savvy
Reply to this
I'm not sure what you're so upset about, Fishman. I'll admit it has been awhile since I wrote this article, but I went back and re-read it after your verbal assault to see what you were talking about. Perhaps you could go back and stop the name-calling, the accusations, and the false quotes (I never said anything about interest cancelling out gains), and your inability to spell, and phrase your argument in a way that makes sense. Go ahead, give it a shot.
Reply to this