Confessions of a Dave Ramsey Endorsed Local Provider (ELP)
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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?
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. . 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. Returns vary widely in the stock market and over long periods the stock market returns 7% plus inflation
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.
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