Ramsey vs. Alcorn Throw Down
Should I leave an inheritance or give away most of my money during my lifetime?
Should I pay off the mortgage early or invest that money in retirement accounts and college funds?
How much life insurance is enough?
How much retirement savings is enough?
How much money should I give away?
These are hot topics for those who are living below their means and have income to work with. We’re such money nerds we’ve even been known to discuss these topics during our monthly date nights. Once you get your spending under control, have a yearly budget, and have implemented some practical thrifty ideas, it’s time to start thinking about building and sharing wealth. As I mentioned in Resolve Your Reasons This Year, I recently read Money, Possessions, and Eternity by Randy Alcorn (2004) and chased it with Dave Ramsey’s latest, The Legacy Journey (2014). Both authors are Christians and wrote these books at least in part to share what they believe the Bible says about money. Their messages are strikingly similar in some areas while very different in others. Reading them back-to-back was challenging and thought-provoking, which is why I’m comparing and contrasting their views for you.
Before getting into the details, I want to fairly convey the purpose of each book. Alcorn’s book is not a how-to book. He is a full-time pastor with some thoughts on practical financial principles, but the book is mainly a treatment of the Scriptures on money-related topics. The subtitle of Ramsey’s book is “a radical view of Biblical wealth and generosity.” This is the famous financial adviser’s first book to delve into the Scripture’s teaching on money, but he only deals with a few passages he believes are often misunderstood. The main topics of his book are leaving an inheritance and giving generously. His book is A LOT shorter!
Ramsey’s book aims to counter the “toxic messages” that rich people are evil, their wealth always takes away from others’ fortune, and that they should be judged for enjoying their wealth while also giving generously. He provides practical examples of what to do with “extra income” beyond a set amount one agrees to live on. He suggests setting ratios on the overflow for giving, (taxes), investing, and “lifestyle” (= fun). Basically, his book is for people with money. Normal people who are approaching steps 6 (early mortgage pay off) and 7 (build wealth and give) will benefit from his book and it may help them make decisions about investments, budgeting extra income, giving, and leaving an inheritance.
Alcorn’s book basically assumes the reader will not become wealthy since he advocates giving away most extra income immediately, after investing something for retirement, children’s college, and leaving room for modest discretionary spending. With the exception of the tithe he avoids specific, numeric advice to leave room for personal decision-making. He says he struggles all the time with the tension of how much to save for retirement vs. how much to give away now. Clearly he prefers to err on the side of generosity. He critiques “financial independence” on some of the same grounds we do, which is why we’ve coined financial flexibility. We’re managers, not owners, of the wealth God’s given us, and we always want to depend on God financially and otherwise. And we want to use money to help others as well as meeting our needs.
Here’s the throw down of their positions on different financial topics, with my two cents, too:
|Ramsey||Alcorn||Pretend to Be Poor|
|Debt||No consumer debt.Get rid of student debt ASAP.
15-year mortgages recommended; pay off early after steps 1-5.
|“We shouldn’t normally borrow and should always pay off debt as soon as possible”
“Not all debt is the same” e.g. mortgages can be reasonable. He paid his off early.
|No consumer debt, including cars.
Get rid of student debt ASAP by living like a student.
15-year mortgage; pay off early if possible.
|Insurance||Get term, not whole life insurance.||Most Americans are over-insured.Life insurance should meet family’s needs for a period of time but not indefinitely.
Don’t replace depending on God & Christian community with insurance.
|Get term, not whole life insurance.|
|Investing for retirement||Once consumer debt is paid and 3-6 emergency savings funded, invest 15% of income in retirement accounts.||People think they need enough to live a high-expense lifestyle indefinitely to retire.
Don’t replace depending on God & Christian community with retirement account.
Tension between meeting others’ present needs and our future needs; seek the Lord.
|Get your employer match.
Invest 15% after consumer debt paid & emergency fund in place.
Conflicted about investing more vs. paying off house early.
Investing makes more sense mathematically but we like the flexibility of no debt.
Not over 10% until out of consumer debt.
Occasional extra giving after out of consumer debt.Set an amt to live on & set a giving ratio for “overflow.”
“Go crazy” with giving once you get to step 6 or 7 (see above).
Leave a golden goose (principle) that will continue to lay eggs.
Set an amt to live on that includes some recreational/discretionary spending, and investing for retirement/college funds, and give away the rest.
Your lifetime is your opportunity to give; leaving isn’t giving; aim to leave as little as possible beyond small gift amounts.
|10% or more recommended.
Live on less without being miserly.
Extra giving: prayerfully respond to needs as they arise.
Time is also an important resource; therefore, we do not plan to build wealth at the expense of spending time to help others now.
|Inheritance||A good man leaves an inheritance to his children’s children.
Only to be given to children who are following the Lord & agree on how to use the money for God’s kingdom.
The golden goose should be kept to lay eggs to give away.
|Only leave small gift amounts.
You don’t know what your children will do with wealth; it is more likely to ruin than to help.
Don’t set up a foundation; how can you tell God the principle is untouchable?
|??? Not there yet in our financial journey.
As of now we’d leave money for our children’s care since they are young.
Overall, the normal income person could come away from the books with very similar applications. Give at least 10%, and more when you can (I don’t believe there’s anything magical about 10% but it’s a decent baseline). Get out of debt and stay out. Don’t over-insure. Plan for retirement and kids’ college. The big difference is their take on investments for building wealth and giving. I can see why, as a pastor, Alcorn has a different take on these issues than Ramsey, who has advised very wealthy people. I tend to agree with Alcorn’s interpretations of challenging money’s passages, but don’t like how he explains away Ramsey’s key verse about leaving an inheritance to your children’s children. I’ll post a more in-depth review of Alcorn’s book next since he deals with a lot of interesting principles that don’t fall into these categories.
Which author do you tend to agree with more? What financial questions do you wrestle with? Have you thought about leaving an inheritance?
I read Alcorn’s book many years ago and seem to remember that he advocated a pretty radical approach to money. Basically, in my memory, he thinks that you should give away practically all your money, but how he expects you to live I recall he proposed having no insurance. And he claimed that he gave all his possessions to the church but later admitted his wife owned everything they had, or else they received everything they needed through his church. As I said, it was probably 10 years ago when I read the book so my memory may be faulty. I recently read Ramsey’s book and felt he had a much more reasonable approach. He didn’t tell me to give away all that I had so maybe that’s why I liked his book more. Where Alcorn gave one biblical quote and presented that as how we should handle money, Ramsey took the quote and the whole story that surrounded the quote and made more sense. I often struggle with what God wants us to do with the financial resources we have and reading both books has not really solved the problem for me.
Thanks for weighing in! Alcorn is very radical. He does have medical and life insurance, as well as a retirement account and helped with children’s college. So obviously he wasn’t giving everything extra away, but he tends toward that side of the spectrum. He had his assets put in his wife’s name as he was sued for refusing to pay a fine to an abortion clinic after a nonviolent protest. I admire his loyalty to his values but also agree that some of his decisions don’t translate into practical steps for others. Ramsey dealt with longer portions of a few passages, but Alcorn handled a lot more verses about money. Both interesting guys to read!
Term life insurance is definitely the way to go. It’s what I have. I’m definitely not over-insured. If anything, I’m under-insured. But it’s all we can afford right now, since my health problems make insurance more expensive. It’s enough for my husband to pay off our relatively small mortgage and still have 1-2 year’s worth of money.
I really hate the concept of an inheritance. I mean, it’s lovely if you can leave money for your children. But I hate that people put it as a priority over other things. Any money I inherit from my mom will make me sad because it’s money she could have spent on herself, enjoying life.
I hadn’t ever thought of receiving or leaving an inheritance until reading these books. It’s just not a topic on my financial to-do list at the moment. Definitely not something I’d ever expect or want my children to expect.
I like Dave Ramsey a lot. He has helped me personally to become financially literate. And I think he’s doing a good thing by preaching against toxic ‘anti-rich’ sentiment. My main critique of his emphasis is that he often quotes the scriptures on money but very rarely quotes the scriptures which warn about loving money. There’s a lot of scripture which solemnly warns about our hearts desiring wealth. While money itself is not evil, it has motivated a lot of evil. And we spend a lot of time “longing for wealth”. I would like to see Dave offer more caution about longing for wealth when he deals with the Bible.
Alcorn has a lot of interesting things to say in that long book. He does a good job of ‘rattling our cage’ as rich Americans, by inviting us to consider that there may be fundamental areas where our hearts are off track with regard to money and greed. His calls back to trusting the Lord are really needed. Jesus himself rattled a lot of cages with regard to money. One weakness I see in Alcorn’s position is that there are also a lot of scriptures on being shrewd and stewarding money rather than just giving as much as possible away for others to steward.
Great summaries of these authors’ strengths and weaknesses. I found it really helpful to read them back-to-back since they tend toward different extremes.
Mark, I appreciate your input about the caution towards wealth. As one who grew up pretty meagerly but have now, into adulthood, worked my way up into a decent amount of wealth, I have watched my heart slowly turn towards the love of money. It’s a slow fade, and I see it. I’m aware of that and am seeking to return to my first love, Jesus. It’s hard to resist the pull of money. It infects you if you’re not careful. I think an awareness of that love of money should be forefront on everyone’s mind, regardless of how much money they have.
As an aside, I think the issue with leaving an inheritance to children is that too often the children end up fighting over who gets what because they haven’t understood the Treasure Principle first. I’ve seen it with my relatives. When it comes time for the patriarch/matriarch to pass away, they all smell blood in the water and want their share. And even before death, that’s obviously in the story of the Prodigal Son. I like what John Wayne says to his daughter in “McClintock” about his inheritance to her:
“Becky! Come here. Somethin’ I ought to tell you. Guess now’s as good a time as any. You’re going to have every young buck west of the Missouri around here tryin’ to marry you – mostly because you’re a handsome filly, but partly because I own everything in this country from here to there. They’ll think you’re going to inherit it. Well, you’re not. I’m going to leave most of it to, well, to the nation really, for a park where no lumbermen’ll cut down all the trees for houses with leaky roofs. Nobody’ll kill all the beaver for hats for dudes nor murder the buffalo for robes. What I’m going to give you is a 500 cow spread on the Upper Green River. Now that may not seem like much, but it’s more than we had, your mother and I. Some folks are gonna say I’m doin’ all this so I can sit up in the hereafter and look down on a park named after me, or that I was disappointed in you – didn’t want you to get all that money. But the real reason, Becky, is because I love you, and I want you and some young man to have what I had, because all the gold in the United States Treasury and all the harp music in heaven can’t equal what happens between a man and a woman with all that growin’ together. I can’t explain it any better than that.”
I appreciate your comparison of Dave Ramsey’s teaching and Rev. Alcorn’s teaching. I thought you might also be interested in watching this video of Larry Burkett teaching on finances.
He speaks of money difficulties not being the real problem but only a symptom of a deeper problem. Not long and well worth watching (hope that long link works!). Even has a ‘take-away’ picturing the difficulties that his listeners are thinking about as he is teaching. Really brings home the msg. I am grateful for very early teaching to ‘owe no man but to love him’ but Larry is the first teacher I ever knew about that taught extensively on this subject.
On a side issue: I am a very grateful widow who appreciates the small inheritance I rec’d. Some years ago the Lord impressed me to ‘watch over and care for my flocks’. I understood that flocks were the measure of wealth for those folks and so took it that I was supposed to pay more attention to what Iittle I had and manage it better. I became a real good bookkeeper but knew nothing about investing. So I’m a late learner in that regard but recently found ‘Seeing Alpha’ website and am absorbing all I can.
Thanks for sharing. Burkett is actually the first Christian financial teacher I became familiar with, right after high school. I liked his message but haven’t read him in years.
I think the inheritance debate surrounds whether to leave a large inheritance that will continue generating wealth that can be passed down though the generations.
My husband and I just recently started reading your blog (found you through a comment you made on Becoming Minimalist). You and my husband are long-lost financial twins. I’m just trying not to spend all our money on Starbucks. 😉 Anyway, we know both Ramsey and Alcorn and were just discussing their opposing views the other day and then found your article. Great overview, by the way! We are struggling as well with the question of how much to invest in our children’s college and our retirement and how aggressively we should pay down our mortgage. On another note, you raised the question of leaving an inheritance in this post. I began thinking about how we are spending a significant chunk of money on the private Christian education of our children. We could save thousands of dollars over the schooling years of our 4 children if we sent them to public school. That would certainly be more likely to leave them with a larger inheritance. However, we could also think in terms of leaving a legacy in that we are training them (and partnering with their school) to love and serve the Lord. So in a sense we are leaving an inheritance to the world of hopefully 4 children who will be better equipped and ready to go out into the world with a solid foundation. I guess I’m just thinking that a monetary inheritance isn’t necessarily the only type of inheritance we should consider when thinking about spending/saving our money. (ps. We have extensively considered public school (we went to public school) and homeschool and have decided that Christian school is the best option for us right now- although expensive!)
We are also more interested in leaving a spiritual legacy than a monetary one. We could “hustle” a lot more for extra money but we’d rather pour that time & energy into our kids & modeling a ministry lifestyle for them. Glad to hear from a fellow Alcorn reader & long-lost financial twin’s spouse!
To be fair, I am only vaguely familiar with Alcorn’s works, theology / philosophy, whereas the hubs and I went through Ramsey’s FPU (Financial Peace University program — not an accredited university or degree program, but helpful for getting folks out of debt / helping folks stay debt-free). Ramsey’s approach helped us get out of debt, I’ll say that much.
Here’s some food for thought: our family lives in a high cost-of-living area in which church folks often offer almost no support, be it financial or otherwise. Because of that, in our case, we’d be fools not to build up a healthy emergency fund and savings account to self-insure for medical and other expenses.
What you write about Alcorn’s approach would leave me concerned that it may end up a bit too idealistic for several situations, including sincere Christians who put Alcon’s recommendations into practice, only to move to an area like ours, and receive insufficient support from the church in times of need. Sadly, I know this from firsthand experience.
Among other things, it can lead to folks ending up in debt and can also lead to folks experiencing resentment from having given so much, only to end up shocked to receive very little support in their time of need. (This will vary by church and region, but I have been on the receiving end of this problem more than once.)
So, I now believe in considering the culture in which one lives and stewarding one’s resources accordingly. I find that by saving up a lot more, we end up having just enough to afford what we need — and as a result, we don’t end up with a sense of remorse, resentment and bitterness from having given away what we needed for our own family.
Frankly, I would rather have enough for my own family (and hopefully some left over for folks in need) than to have given away too much to others and end up with too little to take care of my own family, because I recognize my primary responsibility as being to my own family.
Yes, I agree with your concerns entirely, Lynda. You are right that it would be foolish to assume others will meet your needs just because you’ve met the needs of others. There are a number of missions organizations that have a community-based plan for supporting retired missionaries, and this may be what Alcorn is referring to. I don’t think you should just expect your church to take care of you because so much can change. There is also a cultural element like yous said.
Thanks for sharing your experience with FPU. I think it’s a great resource that has helped lots of people, including myself. As with any expert or author, it’s important to evaluate their message and take away what you believe to be true to Scripture.
Thanks for this review. I have followed Dave Ramsey for years trying to implement his teaching and always coming out feeling like a failure. It seems his answer to most things is go find more income or pay less rent which is ridiculous in many ways. He also never dives into what to do when you get hit with cancer bills or other medical expenses. He takes on everything as if all debt was willingly something you sought out and you need to take “a look at the goober in the mirror and say enough”.
I always love the ideas he puts out there and have given his books to many people. Trying his way always added so much stress to life as we try to live on beans and name every dollar in a life of misery in hopes of in future “living like no one else”. But it really becomes completely turning your life over to seving money all the time by squeezing every dollar and trying to create wealth for some future day that will never come. It seed so anti biblical and forces you to put yourself before God until that day you are rich, THEN give like crazy.
I just started Alcorn’s book and am on chapter 11 and every part so far has been answering questions I have asked as it seems like Ramsey only glosses over certain scripture and ignores most others to build his empire. Alcorn has set out a refreshing look at how I should handle God’s money stress and guilt free. Because it does line up with what I see in the Bible that I could never reconcile under Dave Ramsey. I’m still reading, so I may come away with a different view as I go on. But it has me seeking what is right which is how I just found your post to see if anyone else had wondered about the difference between the two men.
Leaving an inheritance to your children’s children in our day might be accomplished by providing for them to get an education or a life skill set so that they can work and support themselves. In an agricultural society, an inheritance would involve leaving land to your children.
Good point that an inheritance looks different at various times and places. We are saving to help with kids’ college, though I don’t see that as synonymous with leaving an inheritance. But I see your point!