I came across an interesting story the other day of how Dave Ramsey celebrates Christmas with his employees.
For those who don’t know the name, Dave Ramsey is best known for providing information and help on personal finance. He has had his share of criticism, most because his techniques and suggestions are aimed at, and work tremendously well for, the bottom 50% of earners. Refusing to go into debt for anything bar housing, paying off said debt as fast as possible, and focussing on low cost index funds and bonds aren’t glamorous, high return, or sophisticated. They won’t make you fabulously wealthy, but if you stick with them, you’ll almost always, after some time, be comfortable. For the millions of Americans (and Brits, and Australians, and New Zealanders) who feel like they’re drowning in debt, this is a wonderful alternative.
The other thing that Mr Ramsey is well known for is his Christian faith. Not really my cup of tea, but I respect that he really puts his money where his mouth is. According to the story, each Christmas his organisation buys $10 million in bad debt, which on secondary markets you can pick up for as little as 2.5c on the dollar. These are people’s blown out credit cards, delinquent car notes, overdue medical bills etc. The banks have given up on them, so selling those debts for pennies is better than nothing.
Once they have the debt in their possession, Dave then asks his employees to call the holders of the debt, tell them it has been cleared, and wish them a merry Christmas. Apparently the staff LOVE it.
Initially, I thought I’d prefer to have the cash myself, but on second thoughts, I think the whole idea is super lovely. The fact that the whole office does it together, the gratitude you get throwing people financial life rafts, the “spirit of Christmas” vibe. I think it’s really neat.
What I liked most was the EFFICIENCY of his gifting. We have all heard stories oh how for every $100 you give to charity X, only $7 or so ends up digging the well in Africa. Meanwhile, this method allow you to buy $10m of debt for $250k, essentially 40x your contribution.
Clever stuff.