Dave Ramsey is a multiple best-selling author, a national radio host and financial expert.
Ramsey also does television work on a number of networks and travels the country teaching his "Financial Peace University" seminars.
He doesn't promise "get rich fast" ideas, he simply shows Americans what he considers the best ways to attack debt and build up personal wealth.
While in town on January 24 for another nearly sold-out seminar at Van Andel Arena, Derek Francis sat down with Ramsey to specifically address the problems Michiganders face.
Michigan is number one in the nation in unemployment and in the top five in home foreclosures, we asked him if it's a good idea to buy a house in the state right now.
"If the economy is hurting and it is, it's always a good time to buy a house. As long as you're in good shape financially," Ramsey says.
Ramsey has always warned of avoiding ARM's (Adjustable Rate Mortgages)or balloons. His warnings have made him look like a prophet lately with home foreclosures being blamed on the ARMs.
"No, I've been preaching it long enough that it just finally came true," Ramsey says. "All that stuff means is that you're not ready to buy a house."
The only debt Ramsey allows in his program is for a mortgage, and only a 15-year fixed-rate mortgage. If you can't afford a 15-year mortgage, Ramsey is quick to point out, "you bought too much house."
Ramsey went further in warning not to be scared of buying a home right now.
"West Michigan's economy isn't going to be down forever," he says. "Five years from now, if you bought a bunch of real estate you're going to look like a genius."
Situations like the ones were facing right now is a prime reason why Ramsey preaches that at least three - if not six months - of your expenses be saved in an easily accessible emergency fund.
"The best place to be if you have a job layoff or recession or a high foreclosure rate is out of debt and to have an emergency fund," Ramsey says. "Then when the boss comes in and says there's a lay-off, just grin and say, 'How big is the severance package?' because you're going to be in good shape at that point. The quicker you land (a job) somewhere, the more that severance package becomes a signing bonus!"
But if you don't find another job, Ramsey recommends putting the money away immediately as an emergency fund.
"What I would do is park that money. It's a big, hairy emergency fund until I land!"
Ramsey also recommends taking your old job's 401k and rolling it into a tax-free Roth IRA.
If you're desperate to make ends meet and tempted to dip into your retirement, Ramsey says there are only two excuses for touching it.
"There's not a painless way to cash out retirement accounts," he says. "You're going to get your head taken off if you do that! I recommend you leave your retirement accounts alone unless it's to avoid a foreclosure or a bankruptcy. If you pull money out of your 401k, the government is going to hit you with a 10% penalty plus your tax rate, so that's like a 40% hit! This does not make sense."
If you're in danger of losing your home or filing for bankruptcy, Ramsey says all other debt should be considered irrelevant.
"A credit card company will call your home if they even heard a rumor that you might be late, and what happens is we oil the squeaky wheel. But what you've got to do is just hang up the phone on the squeaky wheel and deal with the stuff that's important first. Put the student loan on a hard-ship deferral, because Sallie Mae is not going to get fed right now. A hard-ship deferral is when you call up the student loan people and say 'I'm out of work.' They usually - without much question - will give you about six months time. The interest still accrues, but at least you're not being hammered with late charges and messing up your credit as you go." Considering Michigan is home to the Big Three automakers - and part of our trouble is related to GM, Chrysler and Ford's troubles - I asked Ramsey if he felt at all responsible. After all, he preaches on his radio show that we should avoid the high depreciation that comes with a new car and instead buy a nice two- or three-year-old used car.
He laughingly added, "No, because Toyota is still selling cars. I buy American and foreign cars both, but it's not my fault. If people buy cars when they're already wealthy, that's okay. I think there's other factors other than Dave!"
In your voice
