Keith Schroeder writes The Wealthy Accountant blog with 30 years experience in the tax field. He is the tax adviser of Mr. Money Mustache an
[Check out my awesome new blog: The Wealthy Accountant.]
Several years ago I sat down with my family in the living room for a nice early evening chat. As usual, we turned on the TV for background noise. I flipped through several channels before stopping on a program on the business channel. The guy on the screen floored me by his advice. Never before did I hear a financial guru say the things he did. I looked at my wife and said, “Finally, somebody gets it.”
The man that caught my attention was Dave Ramsey. Prior to this I had never heard of Dave Ramsey. I did like what I was hearing: pay off your debt and stop worrying about losing a tax deduction for mortgage interest, it’s not a deal. It felt so good knowing someone understood the mortgage interest deduction for what it was: a money loss, not the gain most financial advisors and banks claim it is.
After listening for the rest of the show, I tuned in several more times over the next several weeks. The advice was basic, but solid. There were a few things I found were stretching the truth, but so many people needed to learn step one before they can move on to anything more advanced. To me, it seemed Dave Ramsey talked a single issue: pay off debt and stay out of debt. Good advice, for sure.
Dave Cuts a Credit Card
I started looking into Dave’s background on the internet and found he has a well developed organization. He sells books and classes all stemming from his radio (and short-lived TV) show. From what I found Dave has a large group of dedicated followers.
Digging deeper, Dave endorsed local businesses that espoused his philosophy. I could raise my hand on this one. Dave and I share the same values when it comes to debt and much of personal finance. One group he endorsed was tax preparers/accountants. I felt it would be a good way to promote my practice. I emailed for more details.
A representative from Dave’s office called and the vetting process began. I filled out a questionnaire and answered questions over the phone. Several phone interviews were conducted over the next week or so. Once completed, I was accepted into the program. So far, so good.
Imagine Life Debt Free
As an endorsed local provider (ELP), I had to pay Dave for each lead. People need to understand this as it will reflect in their bill with an ELP. I live in a lower population part of the country so I generated 10-15 leads a month during tax season and 1 or 2 a month the rest of the year. For this Dave wanted $150 per month January thru April and $75 per month the remainder of the year.
It seemed like a reasonable deal at first. I remained an ELP for around 5 years because there were some profitable opportunities. Unfortunately, there were also problems. Many leads were tire-kickers, checking who the ELP was because Dave told everybody on his talk show to see who serviced their area. Many people had no intention of changing accountants. But I still paid the fee. Other people felt I should help them for free because that is what Dave would do. In most cases I took a pass. I can’t pay for leads to do free work. I am in business, you know.
Dave also charged me for leads that came from outside my service area. These people would not travel 2 or 3 hours to see an accountant so there were more wasted advertizing dollars. Then Dave started raising prices. Eventually he demanded $300 per month during tax season for 13 leads in the peak month and $150 per month the remainder of the year. The profitability was slim to start and it was foolish to spend more to get simple tax return leads generating maybe $100 or so each with people that needed massive hand-holding. Since not every lead became a client it was easy to see where this was going. Also, after a few years, it was obvious only a few would be repeat clients. People, it seems, go back to their old habits. Surprise, surprise!
How Big is Dave Ramsey's Home?
|Floor||Base Area||Finished Area|
How Much Does an ELP Cost?
A Dave Ramsey Endorsed Local Provider is also a business. As a business all expenses must be covered or the business will fail. The cost of acquiring a client is built into the price of goods and services.
Dave wanted to charge my small accounting firm $300 per month January - April and $150 per month the remainder of the year, for a total cost of $2,400 per year. For this Dave provided about 50 leads per year or about $50 per lead.
Many clients from Dave only came in one year for a specific tax issue and never returned. Dave Ramsey leads were frequently deep in debt and couldn't afford to pay for accounting services or only paid a token amount of $100 or so. After paying employees and overhead it wasn't a good investment anymore.
To get a Dave Ramsey lead to become a client took work. People did not just look up and ELP and call. It was up to me to call the client (Dave provided the information when someone looked for an ELP) and continue follow-up. The amount of follow-up on such small accounts took away from profitable clients.
Now you know why Dave has a massive home and I don't. Dave got paid and I didn't.
People from Dave’s leads also had special needs. They listened to Dave because they were over there heads and were finally willing to listen to common sense personal finance advice. They had no choice. But these people were so far in debt they didn’t have money to pay for the services. Yikes! Even the investment ELPs had to put up with a lot of very small, money-losing accounts. As much as we like to help, it wasn’t possible. We are an accounting office, not a financial crisis help center. Most leads from Dave would require large amounts of time just to figure out where the client stood financially. It was bull work. I don’t mind bull work, but only in dribs and drabs. I value my free time and life more than slaving over financial crisis management with people that frequently go back to the same well after the crisis is over.
As an ELP I learned more about Dave’s advice and practices. Dave said things that were false. I think he believed them, but he was wrong and refused to listen to experts telling him he was mistaken. For example, Dave got into a Twitter flame war over his statement people make 12% in the stock market. Of course this is false. Returns vary widely in the stock market and over long periods the stock market returns 7% plus inflation. See the work of Jeremy Siegel. He did the most in-depth research on stock market returns ever. Pick up a copy of his books at the library and really read them. His work is enlightening.
Dave also sold the dream of paying off debt, building wealth, and then giving from your wealth to charitable causes you support. This makes sense since Dave spends a lot of time catering to churches, frequently quoting the bible. Churches support Dave Ramsey hoping to cash in on his advice to “give more.” Most of Dave’s Financial Peace seminars take place in churches. I agree with Dave on this issue.
Dave Ramsey's New Home
Financial Peace University
Where Dave and I differ involves lifestyle. Dave has made a lot of money talking about paying off debt. Enough that he built a $9-$10 million dollar home next to Lee Ann Rimes. No mortgage, of course. But does this follow the spirit of Dave’s advice? Not to me. Just because you can do something doesn’t mean you should. A reasonable home makes sense. Buying a $10 million dollar home is idiotic and sends the wrong message. The money for upkeep (property taxes, utilities, repairs and maintenance) is a form of debt and goes against everything Dave teaches. I will not go so far as to say “hypocrite,” but one does start to wonder.
I can only imagine all the good Dave could have done if he bought a $1 million home and invested the rest into worthy charitable causes or the churches that promote his program. If a small portion were reinvested into the endorsed local providers (ELPs) in the form of a more reasonable fee, his message would not only reach further, but be practiced more widely. Remember, the people that need this the most need help the most. A lecture from a radio talk show is usually not enough. They need to sit down with a qualified individual that tailors a game-plan to their needs.
Would I sign up for Dave Ramsey’s ELP program if I had it to do all over again? No. Dave lost his way and doesn’t walk the talk. He trades bank debt and mortgage interest deductions with huge property tax deductions and utility bills. Dave could have made a real difference in the world, but instead decided to live the high-life. I see it happening to successful people all the time. They start out with a good message and get warped by too much success. They begin to believe they are the only ones that are right. Sad.
When Dave Ramsey was suffering through bankruptcy, I was already living the values he teaches. I guess that means I’ve been living Dave’s advice longer than he has been giving it. Dave still provides value. If you are under water and still sinking, Dave has a solid program to get out of debt and start building wealth. Don’t stop with reading and listening to Dave only. There are scores of great books available at the library on finance. Read them. Don’t just read and buy into the message. Question. Think. Take responsibility for your actions and financial condition.
The internets have great personal finance blogs. My favorite is Mr. Money Mustache. Here is a guy that really gets it. He has no debt, makes a ton of money and still lives on $25,000 per year. He walks the talk, literally. He bikes everywhere, using a gas powered vehicle as a last resort which isn’t too often. Read his entire blog from the beginning.
Let me know what you think about Dave Ramsey and if his advice helped you in the comments section below. Share any good books on living, lifestyle or personal finance you may have picked up at the library, also. And last, let me know what you think of Mr. Money Mustache and his website.
Most of all: have fun.
What do you Think?
Tori on September 21, 2019:
Dave DOES make real difference in the world!
Beth Webster-Duerr from Henrietta, New York on March 18, 2019:
I'm not familiar with Dave Ramsey. It sounds as if the lead generation program offered worked for you, at first.
I am familar with sub-contracting. In some instances it can work out for the person who doesn't want all the responsiblity and risks. In others can be a real crapshoot if you earn enough to make a living while still taking most if the risk.
Thanks for the interesting read.
MomsTheBoss on February 07, 2019:
I think it is ironically funny that as you read through this article there are four advertisements for Dave Ramsey.
The Logician from now on on November 11, 2018:
Very informative perspective on Dave Ramsey however if you included, from the horse's mouth, Dave's perspective on your varied assertions about him I would be convinced that this is nothing but a one-sided hit piece on Dave and his organization especially since you work for and are promoting his competition.
Are we to believe you harbor these complaints about Dave but have never expressed them to Dave whom you paid for 5 years? And if you did confront Dave you have no inkling it would only be fair to air his rebuttal here?
Are you sure your are not just an accountant but a journalist for the main stream media because that is exactly how they write hit pieces based on their personal agendas.
Lori Colbo from Pacific Northwest on November 10, 2018:
I am currently taking Ramsey's Peace University course and find it very good. Seeing he lives in such opulence and the practices he uses with the ELP's makes me uncomfortable but with his house he earned it and it's likely paid for. I am taking his course to manage my tiny income. So far so good. Thanks for this
Keith Schroeder (author) from Wisconsin on October 01, 2018:
Review more than one advisor to make sure you vet for the best advisor for your needs. Also, education yourself on financial matters so you better understand what an advisor recommends.
Lilly on September 30, 2018:
So who or what would you recommend i I do if I’m in search of an financial advisor?
Christine Williams from North Vancouver, BC on May 20, 2018:
Hi, thanks for this. I agree Mr. Ramsey offers some great advice to a very broad range of folks who are looking to align their finances with their personal values. I like to think anyone has a right to a gi-normous house and etc if they've earned it . . . but I too get a bad taste in my mouth when I learn of this expense from someone who lives a spiritual-based message. Id be interested to know if Mr. Ramsey has a charity/foundation.
Kerry A Jackson on July 27, 2017:
Seems a little like you're using a famous name to get a little fame for yourself.
Be careful! You're not immune to doing the same.
Access to large sums of money is not the issue, the state of one's heart is.
Keith Schroeder (author) from Wisconsin on July 26, 2017:
Wrenches, it started good and the fee was reasonable. Then the price started going up while the territory went down. In other words I paid more for less. It took less than two years once that started. Took lees than six months.
Neil Carlisle on July 26, 2017:
This is exactly what happened to me. I have been an ELP for almost 10 years and have enjoyed helping people out. I, to a fault, am not driven by money and don't have to have the biggest house in town. It was never about the money until Dave decided to triple the amount I was paying making it virtually impossible for me to continue with the program. I went from paying $2,000 a year to $6,000 a year.
Most of the clients were in bad financial shape to start with and could not pay huge fees. Almost always the first question was about the cost. I really enjoyed working the clients but the people at Dave Ramsey Inc, were a bit different and not the easiest to work with.
Time to move on I guess.
Neil on July 26, 2017:
I too have been an ELP for at least 10 years. I helped tons of people who really needed it and met a lot of great people. I was shock recently when they decided to triple my fees. It was a take it or leave it offer. There was no way I could pay more than I was making just so Dave Ramsey could increase his bottom line. I was very very disappointed.
Wrenches on July 25, 2017:
So if it was such a bad deal for you, why stay 5 YEARS!?... I will have understood if you say 2 years, one year to learn the ropes and maybe, just maybe a second year just to make sure the effort was done. But if you stayed 5 years, that means that something was working for you and if it was working you found the patience to overseeing his "lifestyle" and God ramming on your throat
Keith Schroeder (author) from Wisconsin on December 14, 2016:
There are better ways to promote services, Bill. You have a sound business plan, testing ideas and moving on when they don't work. Glad our paths crossed and appreciate the comment.
Bill Baker on December 13, 2016:
I am a real estate agent and I just terminated my relationship with Dave Ramseys ELP for real estate agents. The program is similar as discussed previously, the only difference is that the monthly fee is $500. The agreement stated that receive at least 4 leads per month. My company or team specializes in working with internet leads and we contact around 100 per month. I felt with the backing of Dave Ramsey and the financial programs that he offers, that we might experience a better lead flow with a more qualified buyer prospect. That did not occur and in fact the leads were a 1/4 of what was promised. Very disappointing to say the least. 5 leads in 6 months.... Not good.
Mariano m on May 22, 2016:
Good article. Made good points. His program has helped me become more financially better off. Don't agree with all his advice. Especially retirement planning Example herd several callers ask should they take a lump settlement or a retirement pension. He always recommend taking the money and putting it in mutual funds. People should always have some garented income for life with social security. As we age we loose financial steps. Dan Sila of Financial Issues AFA. Always encourages his listeners to look into garented income with social security.
Keith Schroeder (author) from Wisconsin on January 22, 2016:
dexthedog, thank you for your comment. I did do my research before signing up with Dave. It was the 100% price increase to my business for the ELP program, take it or leave it, that resulting in me cancelling my contract. I knew there would be junk referrals. What I didn't expect is people going back to Dave's site again and again just to look up my phone number. I got charged every time. Many new clients ended up money losers for my business as a result. This is not Dave's fault. What I didn't care for was Dave getting more and more aggressive in encouraging people on his show to just check out who their ELPs were. It was very self-serving. If he would say, "Hey, if you have a need for a tax professional, we do have a list of vetted ELPs." More qualified clients would check out the ELPs and not so many only kicking the tires. To Dave's credit, the ELP program started out making money. Unfortunately, Dave kept squeezing it until it wasn't worth it anymore. There are a lot of ways to get clients that cost a whole heck of a lot less and take less time and are more profitable. I also think people should understand Dave's recommendation is colored by profit; not necessarily a bad thing.
As for lifestyle. Our society is built upon a sick notion of spending more than we should, especially if we have it, Living a responsible lifestyle is available to most anyone. You don't need a massive 20,000 square foot home or any other such opulence. I think people are happier when living a modest lifestyle. If Dave can have an opinion, so can I. Dave has a right to his opinion, so do I. Dave is not right about everything. You are right to question my thesis here; you should also question Dave's.
And last, Dave really crammed religion down the throat.There is no problem with faith, but requiring people to subscribe to yours is what causes so much pain and suffering around the world. Faith should be personal, not an excuse to attack others that don't believe everything you say. It is the difference between a scary Christian and a good Christian.
dexthedog on January 21, 2016:
I can't say I'm a devout Dave follower, but I do like what he stands for and his overall principals. That said, I completely disagree with your article.
In regards to the ELP fees involved, it sounds like you should have done more research to see if becoming an ELP made sense with your location. Leads from any provider are expensive and are many times not the best. It comes with the territory. His fees do not seem outrageous to me.
You really lost me with your comments regarding his lifestyle. Who are you to say how people should live? Why would you have a problem with how much money a person spends on a house? You have no idea (and neither do I) how much money Dave gives back. Its really none of our business. I can't stand when people judge others based on their lifestyle. He has earned every dollar, he lives a great lifestyle, and he takes care of his family. In addition he gives back and teaches others his money principals and is working to change peoples lives.
If you didn't see a financial benefit in being part of his ELP program, that's fine, I'm sure it's not for everyone, but to criticize him for the way he lives is ridiculous.
Keith Schroeder (author) from Wisconsin on December 12, 2015:
Thanks for the comment, Dream On. I follow MrMoneyMustache.com for great financial ideas. His work is by far the best I've ever read. He is more about responsible financial behavior than a one size fits all approach of Dave Ramsey. Dave Ramsey is a good guy, but if you are not up to your eyeballs in debt his advice is very basic (get out of debt, stay out of debt). MrMoneyMustache talks about living a great lifestyle without spending like a drunken sailor. Rather than explain all MrMoneyMustache talks about, you can read him yourself. He has loads of great materials.
DREAM ON on December 12, 2015:
I have seen Dave Ramsey on book covers and read a little. What people do you follow now ? It is so important to watch where your money goes. Once it's gone it's so hard to replace. When I was small I use to listen to the Dolan's on A.M. Talk radio. Trying to learn some pointers. Thank you for sharing.
Keith Schroeder (author) from Wisconsin on January 23, 2015:
Thank you for the comment, Susan. You are kind in your praise.
Susan Deppner from Arkansas USA on January 23, 2015:
Very interesting read. My husband has always been smart with money (he learned from his parents and grandparents) and is a big fan of Dave's. As mentioned before, it is common sense stuff, but unfortunately most people seem to be lacking in that area these days, preferring to succumb to the credit offers that are just everywhere these days, then falling into the bad habits. I have mixed feelings about Dave's big house. I personally wouldn't want a huge house. No sour grapes here, I just can't imagine what I'd do with all that space. Dave's family, on the other hand, I have a feeling are very hospitable and use that space for family and business events. Bet he has a nice hideaway or two that he and Sharon prefer, too. Anyway, glad you're an independent thinker, not a cult-like follower of any one person or plan. Thanks for the ELP information. I've always wondered just how that works and now I know.
Keith Schroeder (author) from Wisconsin on September 07, 2014:
Thanks for the comment, Robert the Bruce. I think we all have debt when we own stuff. In other words: we don't own stuff, stuff owns us. I understand your point, too. It's certainly valid. I still think a utility bill bigger than a mortgage is not a good way to live. With those kinds of obligations it is possible to lose a home. We saw some of that in the last economic slowdown.
Yes, I follow the MMM plan. I live much of what Mr. Money Mustache advocates since way back before he thought about writing about it when he was a little tyke. Yeah, I'm a few years older. I strongly believe and live the stoic, minimalist, simple living lifestyle. I do some things different than MMM, but only because I live in a different part of the country. I bike to work (15.1 miles each way) and grow my own food. I retired when I was 22, didn't know what to do with myself so I started a tax preparation business. I love tax work. I hire people to do most of the work. I show up a day or two a week except for tax season when I go most days. I just can't get enough of tax work.
Again, thanks for the comment. It's a great pleasure to see others with the same lifestyle I have.
Robert the Bruce on September 07, 2014:
I've read two of Dave's books and have benefited from his advice. The truth is, much of his advice is just common sense decisions dealing with money. It's not rocket science. I'm in my 20's and have never carried debt. I currently rent an apartment cheaply and am consistently increasing my net worth every month. I don't make a large salary, but it is more than enough when you don't have unnecessary financial burdens.
I've never read an article from an ELP, much less and ex-ELP. It was very interesting to learn about some of the hidden things that a consumer would never know about. I have to disagree with a few things though:
(1) You criticize Dave's house as unnecessary and against his own philosophy. While it may be unnecessary, he certainly is not contradicting his own advice. As I have listened to his radio show and read his books, his advice is to buy only what you can afford. He doesn't condemn enjoying your wealth---only financing it. That said, he is following his own advice. Because of his financial success, he can obviously afford to build that home with cash, all the while continuing to give to others as he sees fit.
(2) This may be a minor point, but you stated that the utilities and taxes on Dave's mansion are "a form of debt." This of course is untrue given the definition of debt. Though his taxes and and utilities are probably very high, they cannot be considered a debt (liability) unless he would neglect to pay them.
That said, I have also recently found the blog of Mr. Money Mustache. I agree that he has done amazing things with moderate means. I hope to read more of his posts in the future. Have you begun to follow the plan that MMM endorses?