Schafer: Financial adviser gives tough love – and hope

Those curious about what's really happening in the American economy could do worse than listen to a few hours of "The Dave Ramsey Show."

Ramsey is a self-made and self-styled financial adviser, but don't bother listening for the finer points of investment strategies. What Ramsey's callers want from him is far more likely to be advice about how to get to the end of the month in one financial piece.

He delivers, too, with a tough-love approach on the virtues of scrimping, saving and above all, getting rid of debt. This wouldn't seem to be particularly controversial, but Ramsey's critics, who blame him for blaming and misleading the very people he tries to help, have had a very busy year.

Some of the conflict may be cultural, as Ramsey doesn't appear to have much in common with New York journalists and certified financial planners. He's from ­Tennessee, and he developed his audience through evangelical Christian churches. Today his more than 7 million radio listeners and buyers of his other media products seem to be more Wal-Mart Republicans than the country-club variety.

Don't be surprised to hear him quote Jesus in the context of managing money. Keep listening anyway, as he has something very ­valuable to teach.

Ramsey touches on everything from budgeting to staying out of business with family members. But nothing heats him up quite like talk of debt.

His own experience with debt is a story of failure and redemption. He once was a highly leveraged — and later bankrupt — real estate dealmaker. His epiphany was sparked by a biblical passage from Proverbs 22, "The rich rule over the poor, and the borrower is the slave of the lender."

Ramsey teaches the practice of paying off the smallest debts first. Finance majors know it's much smarter to pay off the highest interest rate debt first, yet Ramsey knows his audience. He knows that it's a feeling of progress that keeps any debt reduction program rolling.

Callers to his show will hear that a car that runs beats a new one with payments that are a stretch to make, a studio apartment with heat beats a two-bedroom townhouse headed for foreclosure and the snowmobile has to go if there's a balance on a credit card.

So how could critics find much to say about this kind of pretty sensible advice? The most articulate is probably Helaine Olen, author of a rousing critique in 2012 of the entire pantheon of personal finance pundits, columnists and gurus called "Pound Foolish." This fall she added a critical magazine article about Ramsey.

For her, the problem with these self-helpers, maybe particularly Ramsey, is that they all seem to think consumers have complete control over their finances. And if that's the case, any and all money problems have to be of their own making.

That is so obviously unfair. In 2013, playing by the rules and working hard can't even ensure a roof over your head.

Every month for the past three years, the Internet publisher Bankrate.com has asked Americans, "Do you feel better about your savings now vs. one year ago, worse or about the same?" Every time, for 36 months in a row, more people said worse than better.

"This month's results in particular are discouraging," said Bankrate.com senior financial analyst Greg McBride. "It kind of reflects the reality of so many people. Incomes haven't gone up, and if they have they haven't kept up with expenses."

Ramsey is mostly quiet on the economic tsunami that has swamped so many American households, choosing instead to coach people to deal with the circumstances as they are. The thing is, he is correct to do so.

Those with no job security are far better off without credit-card debt. It's smart to buy a smaller house than you could afford. If the car still runs, keep it. And fishing can still be fun off the bow of a borrowed boat.

If you listen long enough to his show, you also will see glimpses into the lives of people just short of desperate. Ramsey will actually help those folks, too.

Ramsey quickly learned that rent took all but $50 of her husband's monthly disability check. Melinda had been unemployed for years, and was struggling to retrain after failing to find any job for her old wage of about $15 an hour.

Worse, they owed a friend $11,800 on a car worth at most $8,000, paying it off at a rate of $100 a month. What was keeping them alive was the Supplemental Nutrition Assistance Program, which Melinda called by its old name: food stamps.

So what would Ramsey's critics suggest he say to someone like Melinda?

It would obviously have done her no good to hear from Ramsey that productivity improvements and outsourcing have all but eliminated jobs like she used to have, or how the job market has been particularly cold for older workers.

It would not have helped to hear Ramsey mention the 11.3 million Americans now looking for work or complain about the obvious unfairness of a compensation system capable of producing an average perks package — just perks — worth $321,000 for the 100 highest-paid CEOs.

Ramsey didn't blame her for any of this. Moreover, amid his more-or-less common-sense advice was an implicit message that her finances could be turned around.

At that moment, hope may have been what she needed the most.