Never Too Late to Start Saving
Dave Ramsey is a money-management expert, national radio personality and best-selling author. His column appears regularly in American Profile
.Dear Dave,I'm 42 years old, and I haven't started saving for retirement. I'm self-employed and not making a lot of money right now, plus I have about $8,000 in debt. It feels like I'm living paycheck to paycheck, and I just can't seem to save or get anything paid off. Can you help?
—
Avis in Kansas City, Mo.Dave Says: It's never too late to start saving for retirement. If you're breathing, there's still time. My guess is that it feels like you're living paycheck to paycheck because you are living paycheck to paycheck. Let's back up a little and take a look at this. You already know that you've got some stuff to clean up before you'll be in a position of strength. Paying off the debt is a great idea, but how do you make that happen? If you're not making much money, you may have to take on a part-time job while you grow your business. It might mean a career change or something as simple as putting in more hours and kicking that business in the tail to really get it running.
A lot of your money is going out the door every month to pay those debts. But if your debt were paid off, you'd have money to invest for retirement. It's a combination of an income problem and an outgo problem that's standing in your way, Avis. Get the income up and stabilized, knock out the debt, and then you'll create cash flow to save and fund retirement!
Dear Dave,My wife and I make contributions to a company to help support children in Third World countries. This company has a plan where they make microloans to young entrepreneurs. It seems good in a way, because it makes them feel less like it's a handout. Still, I have a problem with the debt aspect. What's your opinion?
—Taylor in Little Rock, Ark.
Dave Says: Well, I'm certainly not mad at anyone who wants to help people in Third World countries. I think there's one big question you have to ask yourself: If you truly believe that debt is a bad idea, then why would it be an acceptable or good thing in a poverty-stricken society?
If it were me, I'd love to help people get entrepreneurial projects off the ground in a way that's a "hand up" instead of a handout. Teach them good business and marketing skills, too, and turn it into an educational situation where they can really pay it forward. I think most people who are decent and have good hearts turn into big givers when they become successful. And really, this kind of scenario is about the only way the microloan will work, anyway.
Everyone seems to think these kinds of loans are some kind of great, altruistic thing. But to me they sound a lot like miniature credit cards, and that's the part that scares me!
first appeared: 1/28/2010
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1/29/10 12:18 PM
I wish this guy, who is read across the country, would have done some research before publishing an assumption.
"Micro's" don't go to American idiots, who treat credit like it can be played until it's no longer any fun and then complain about it; it turns lives around for for future generations for good in countries where male alienation leaves females out of the education loop.
Would love to hear from those who work at micro loan NGO's and ask this guy to issue a public apology!!!
Grrrr - this was a typical "I can't be bothered" talk from yet another undereducated, under-appreciating American...
1/30/10 4:36 PM
While not stating it quite the way the previous correspondent did, I would suggest that Dave take a look at the work of Muhammad Yunus and his Grameen Bank and various others.
Many of the micro-loan makers use communities of people to help bring the skills necessary to invest the money wisely and repay the loan in a short time. Then, based on the success of the previous small loan, a decision is made to loan more money.
Some criticism of these loans is that the loans typically only create a job, or improve the situation of the one "entrepreneur", and do not create jobs for lots of people. I question whether every loan program has to create jobs for dozens of people, or whether the improvement of one person's plight is enough. As long as the person benefits from the result of the loan, and the loan is paid back, it is a "hand up" instead of "hand out".
The organization that the reader is contributing to should have information about what interest rates they charge on the loan, what the percentage defaults they have, and even information on their lending strategies. All of these would be worthwhile reading for people making contributions to these lending organizations.
1/31/10 11:46 PM
Dear Dave,
As a matter of fact, the best microfinance institutions have long incorporated business, marketing, and financial skills training as an important component of microcredit loans to very poor women and communities. Rather than place the onus of trying to secure a loan at prohibitively high interest rates from a traditional banking institution, microfinance organizations may instead offer a loan to a group of women who use a portion of the total sum to start their own business efforts, and are responsible for repaying a certain amount each month just as in any other lending scenario. In my experience doing international development work, even the poorest of the poor do not wish to be the objects of Western pity, and are eager to work hard to make a better life for their family.
Microcredit loans differ greatly from the voyeuristic credit card industry in America. We need to be wise consumers when we donate our money, and do the necessary research to ensure that our dollars are reaching the right people. I appreciate that the reader from Arkansas is being responsible in making a wise donation that is, in fact, an investment in women and youth in developing countries. Your response, however, clearly lacked the level of research a person in your position should give in response. I am extremely disappointed that a well-respected financial expert would share such an ignorant, uninformed opinion in a national publication and on the World Wide Web. THIS is how we continue to hurt families living in poverty across the world.
Taylor, Freedom from Hunger, based in Davis, California, developed the “Credit with Education” model that is now considered best practice in the field of microfinance. The organization recently launched an initiative aimed at providing youth with the resources and skills necessary to run a successful microenterprise. Please see their website,
http://www.freedomfromhunger.org/, for more information.
2/1/10 6:09 PM
You should have done a little research before bashing microlending.
For self esteem it is often better to work for it than to receive a hand out.
http://www.kiva.org/about/what/Kiva's mission is to connect people through lending for the sake of alleviating poverty.
Kiva is the world's first person-to-person micro-lending website, empowering individuals to lend to unique entrepreneurs around the globe.
The people you see on Kiva's site are real individuals. When you browse entrepreneurs' profiles on Kiva, choose someone to lend to, and then make a loan, you are helping a real person make great strides towards economic independence and improve life for themselves, their family, and their community. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates and track repayments. Then, when you get your loan money back, you can relend to someone else.
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