Unpopular Opinion: I don't like Dave Ramsey

[Gobbler36]

And yet, the guy’s net worth is probably more than everyone who’s commented on this thread combined... what a bonehead.

Yeah because he asks people that have spending problems to pay for his products!

 

[MTtrout]

OP, a lot of good stuff has already been discussed here and I’ve followed some of Dave Ramsey’s podcast. If it hasn’t already been mentioned, I would recommend checking out the “White Coat Investor”. I feel his advices are better sound than Dave’s and more relevant for folks who want to invest more.

 

[hodgeman]

Yeah because he asks people that have spending problems to pay for his products!

In all fairness, even Dave admits you can completely do his program off his radio show and free content on his website. His book in your local public library is just icing on the cake.

 

[Marbles]

I know several people who Dave has been good for. People who where in debt for no real purpose. Personally I don't follow his system. Though, I am more conservative with risk and as a result am unlikely to end up rich. I'm fine with that, for me money is about security and if I have a lot of money, but also have a lot of exposure, than I'm not at the point I want to be. I'm a pessimist and a perma-bear though. I also see tones of risk built into our current economy (the market clearly disagrees with me on this). I'm fine with being wrong, I'm happier having a Honda generator in my garage just in case than I would be having that $1K in money making investments. Consequently, I would not follow your (the OP) financial advice either.

 

[MuleyFever]

Cash envelopes and the baby steps. Paid off 60k in consumer and college debt this year. Debt free. Every 20 something should at least listen to Dave’s system.

Anyone can get a loan these days and start a side rental hustle, doesn’t mean you’re smarter than those who follow Dave’s steps.

I don’t follow all of Dave’s advice and have a solid portfolio that includes single stocks, but I am debt free other than rent and I’m saving to buy a home on a 15 year with the payment being 25% of my take home pay.

I’ll have a paid off home and hopefully over a million invested by 47.

Different strokes for different folks. Dave helped me, and you won’t lump me in with that “99% oF tHe FiNaNcIAllY iLLiTErATE poPuLATion” BS


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Dave didnt make any of that possible. You paid off 60k in debt this year because you make way more that the average person (the average person does not even make 60k in a year) and made the right decisions.

Thats one reason I do not get into these Dave type people. They dont have some big secret. They just tell you what you should be doing. People know what they should do they just dont want to. Eventually people get so into the hole they realize they effed up and seek out help to do what they already know they should be doing.

 

[Keedman]

I like most of what he preaches about in terms of paying things off, use cash more/mainly. It helped me and my wife as we were young and stupid. Still are someday lol.
But he lost me when an older gentleman called in. They had put off vacationing and trips for years like 10 15+ years. And just worked and saved to pay off the house and everything they were debt free. They had a huge retirement amount. But the wife got sick and became bed ridden, and required a bunch of medical attention. So she never got to enjoy her retirement. You could hear in the old man's voice he was mad that as soon as he retired he basically lost his wife.
Dave says to the guy good thing you saved for this.
So after that I got off the kool-aid and don't mind use my cards to take my kids on trips or a date here and there in moderation.

 

[peterk123]

A house is an asset with a high probability of appreciation and the utility of giving you a place to live. Why wouldn't I leverage it if the numbers work?

I could pay off my mortgage right now and have money left over, all without touching my emergency fund or retirement accounts, but why would I? Being VERY conservative, I expect the return on my investments to be 2% greater than my interest rate, and they will likely be 3-5% greater. I've run this through basic, straight-line time value of money calculations and a few different types of planning software that use Monte Carlo analysis. Paying off my mortgage with my current situation would be a very bad move.

What no one else seems to mention when this comes up: Let's assume I'm a relatively responsible, normal person with a mortgage with 15 years left, a 6 month emergency fund, and a decent amount in a pretax 401k. If I start aggressively paying down my mortgage, the bank doesn't give a shit when I lose my job or am unable to work 2 years later and have burned through my emergency fund, but if I'd saved and invested those extra mortgage payments I have a much larger runway that buys me time without the massive tax hit of dipping into retirement accounts pre 59.5.

A house is an asset..... for your kids when you die. Even if you down size, you have paid for you home at least 1.5 times due to financing. Yes there is an opportunity cost if you prepay or don't have a 2.5% mortgage and can get 8% in the market, but that assumes that the person will not run the risk of losing their job and not keep up with the payments. A home is a cost of living. You will not make money with it, only your children will. This is one of the largest issues most couples fail to realize, and end up with much too much home because they look at it as an investment. One of the biggest scams going on in this country if you ask me.

We have owned one home our entire 31 years of marriage. It was quite small compared to what we could "afford" or what everyone in my circles own. Single smartest decision of our lives not to upsize. The ability to eliminate personal debt completely cannot be overstated for this discussion. Only when you eliminate all personal debt can you really begin to attain financial freedom. Now, if you make $750,000 per year, the discussion is different. But the average family that is pulling in maybe $80,000 between the two of them..... get rid of debt and do not be lulled into thinking your dream home is the secret to financial security because it will be worth so much in the future.

Assets that generate income should be considered for leveraging. Leveraging an income producing asset increases your return on that asset because your initial input is lower. That is why a 7% cap rate on an investment property can result in double digit returns. You can't do that with a house.

I should add that I am not advocating not to have a mortgage. You need to finance such a large purchase. It also provides opportunity to use your cash for other things, like living. But get rid of it as soon as you can, and for the love of god, do not re-leverage it to buy a car, pay for college, etc. You do that and you are done.

 

[Ben Nicholson]

Definitely not a Dave Ramsey fan. I’ve done alright with my finances without him.

 

[5MilesBack]

People who he's great for.
1.) People struggling with their finances.

That's his target market, so it is what it is.

 

[z987k]

A house is an asset..... for your kids when you die. Even if you down size, you have paid for you home at least 1.5 times due to financing. Yes there is an opportunity cost if you prepay or don't have a 2.5% mortgage and can get 8% in the market, but that assumes that the person will not run the risk of losing their job and not keep up with the payments. A home is a cost of living. You will not make money with it, only your children will. This is one of the largest issues most couples fail to realize, and end up with much too much home because they look at it as an investment. One of the biggest scams going on in this country if you ask me.

We have owned one home our entire 31 years of marriage. It was quite small compared to what we could "afford" or what everyone in my circles own. Single smartest decision of our lives not to upsize. The ability to eliminate personal debt completely cannot be overstated for this discussion. Only when you eliminate all personal debt can you really begin to attain financial freedom. Now, if you make $750,000 per year, the discussion is different. But the average family that is pulling in maybe $80,000 between the two of them..... get rid of debt and do not be lulled into thinking your dream home is the secret to financial security because it will be worth so much in the future.

Assets that generate income should be considered for leveraging. Leveraging an income producing asset increases your return on that asset because your initial input is lower. That is why a 7% cap rate on an investment property can result in double digit returns. You can't do that with a house.

I should add that I am not advocating not to have a mortgage. You need to finance such a large purchase. It also provides opportunity to use your cash for other things, like living. But get rid of it as soon as you can, and for the love of god, do not re-leverage it to buy a car, pay for college, etc. You do that and you are done.

But who doesn't have a 2.5-2.7% mortgage rate after this year? Paying that off would be stupid.

Something I don't like about Ramsey is he advocates paying off the smallest debts first rather than the highest interest. That's really really dumb.

 

[MattB]

But who doesn't have a 2.5-2.7% mortgage rate after this year? Paying that off would be stupid.

Something I don't like about Ramsey is he advocates paying off the smallest debts first rather than the highest interest. That's really really dumb.

While I agree, I believe there is a method to his madness. He is predominantly pitching to people who have demonstrated poor financial accumen, and he may have determined that they stick to the program better when they have a relatively fast and easy win (paying off the first debt) - even if that is not the debt they should be paying off. His program is more psychology than a math problem.

 

[browning2480]

While I agree, I believe there is a method to his madness. He is predominantly pitching to people who have demonstrated poor financial accumen, and he may have determined that they stick to the program better when they have a relatively fast and easy win (paying off the first debt) - even if that is not the debt they should be paying off. His program is more psychology than a math problem.

This is correct. He also pushes paying off the mortgage because for the majority of people don’t benefit from having it and would benefit more from having that house payment used in a different way.

He has also done an extensive study on Milionairs and the majority of them say pay off your mortgage.

 

[MattB]

A house is an asset..... for your kids when you die. Even if you down size, you have paid for you home at least 1.5 times due to financing. Yes there is an opportunity cost if you prepay or don't have a 2.5% mortgage and can get 8% in the market, but that assumes that the person will not run the risk of losing their job and not keep up with the payments. A home is a cost of living. You will not make money with it, only your children will. This is one of the largest issues most couples fail to realize, and end up with much too much home because they look at it as an investment. One of the biggest scams going on in this country if you ask me.

We have owned one home our entire 31 years of marriage. It was quite small compared to what we could "afford" or what everyone in my circles own. Single smartest decision of our lives not to upsize. The ability to eliminate personal debt completely cannot be overstated for this discussion. Only when you eliminate all personal debt can you really begin to attain financial freedom. Now, if you make $750,000 per year, the discussion is different. But the average family that is pulling in maybe $80,000 between the two of them..... get rid of debt and do not be lulled into thinking your dream home is the secret to financial security because it will be worth so much in the future.

Assets that generate income should be considered for leveraging. Leveraging an income producing asset increases your return on that asset because your initial input is lower. That is why a 7% cap rate on an investment property can result in double digit returns. You can't do that with a house.

I should add that I am not advocating not to have a mortgage. You need to finance such a large purchase. It also provides opportunity to use your cash for other things, like living. But get rid of it as soon as you can, and for the love of god, do not re-leverage it to buy a car, pay for college, etc. You do that and you are done.

That is a very myopic view on what for most will be their most significant financial asset.

Many folks will not have the option of living in their homes until the day they die and may need to monetize the equity to pay for convalescent housing/care. With that in mind, evaluating a primary residence from the perspective of potential appreciation/depreciation and being mindful of net equity over time can be a critical component to a life plan.

 

[All American Boy]

I don't follow Ramsey but I like where he is going. The amount of personal debt (and government debt) has been growing at a staggering rate for the last 30 years.

I preached to my kids since they were young (adults now) to: make a lot of money, live within your means, get a career not just a job, save and invest a lot. Let's be clear, perilous days are ahead!!!

 

[EastMT]

But who doesn't have a 2.5-2.7% mortgage rate after this year? Paying that off would be stupid.

Something I don't like about Ramsey is he advocates paying off the smallest debts first rather than the highest interest. That's really really dumb.

The reason he advocates smallest to largest is the psychological benefits of meeting a goal. They have proven many hundreds of thousands of times that starting with the largest people give up a huge % of the time. If you have the ability to stick with a single debt and hammer it then you don’t need his ideas. Most people don’t. If you can get 25% to stick with it one way, 10% the other way, you use the one that is successful the most.

43, debt free since 2015. 25% of my salary now goes to expenses, leaving 75% free per month, that includes having a stay at home wife. Maxed 401k, maxed IRA, funded pension, save $500 for my next new truck (10 years hopefully). No idea if I will retire early, I ok working till 70, but could at 58 I suppose. I don’t think I could handle hunting 12 weeks a year haha.

Its called baby steps for a reason, small steps to change your behaviors. Very few people can do and about face in a week. Start with a small goal, reach the goal, grab the next bigger goal. It ins t about % interest, it’s about keeping your interest in the process so you don’t throw in the towel. Keep it simple for the masses.

My father in law followed his ideas without knowing it, 7th grade education, has 3 homes, 3 commercial properties, 3 rental houses. Pulls in $8000 per month, retired at 53 well into the 8 figures of net worth.


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[Middleofnowhere]

I had a buddy at work that was financially struggling after the housing crash. Young guy in early 30’s with wife and 3-kids renting a house and barely getting by with his debt load increasing.

~5-years ago I recommended Dave Ramsey to my buddy and they started the program. He was able to buy a house last year and they are almost completely out of debt and actually have a savings account. My buddy and his wife were not the most disciplined or sophisticated financially, so Dave Ramsey’s program was a godsend for them.

Even though I don’t follow or use any of Dave Ramsey’s program/products, I do find his radio show entertaining when I am driving home from jobsites. I think my buddy would consider the money he spent on Dave Ramsey’s program was well spent.

 

[Ntgm37]

Dave didnt make any of that possible. You paid off 60k in debt this year because you make way more that the average person (the average person does not even make 60k in a year) and made the right decisions.

Thats one reason I do not get into these Dave type people. They dont have some big secret. They just tell you what you should be doing. People know what they should do they just dont want to. Eventually people get so into the hole they realize they effed up and seek out help to do what they already know they should be doing.

Well yeah, and Dave says that all the time. "I didn't do anything, you did. I just showed you some steps and you did all the work". Like all the time.

 

[handwerk]

I can tell you I was glad when my daughter recently left his company, it's run like Covid doesn't exist.

 

[.204smokechaser]

Have to take advice on media platforms both good and bad with a grain of salt. I don't agree with Dave on some things, but one thing I learned growing up from his show was live within your means, do everything possible to not have college debt, and don't go into debt except for a mortgage. The last one I failed at but IMO, if one can make payments on something on time and pay it off fast, that will be good for building credit fast.

Now I'm 26, paid for my B.S. with cash, no credit to my name as I always thought credit cards were bad (Dave Ramsey) but I have opened a savings account to establish credit so I can buy a home in the next 5 years. Have a small truck loan to establish credit as well even though I could have paid for truck outright. Invested 20% of my paychecks into my TSP (+5% the fed Gov matches) and have started making headway on savings again. I'm happy where I'm at even though I am not rich.

Looking at people my age bitching about their massive debt just makes me shake my head as they put themselves there. If someone established a well known radio show or podcast to get to 20 somethings and 30 somethings heads about why to not fall for the "American way" buying all this fancy stuff the average joe cannot afford payments on this country could be better off!

 

[Nasty Bastage]

I like Dave Ramsey, don't agree with everything he says, particularly holding off contributing to a 401k or IRA until you have paid off everything but your home. When I was just starting my career back in the 90's I read The Millionaire Next Door and became obsessed with accumulating wealth and I have ever since. For about 2.5 decades now my wife and I lived well below our means and after about 20 years we no longer had any logical need for debt. Was it fun early on, no it sucked. Anyone who says they enjoy debt has never really lived without it. Straight cash homey!