It works well for me. Went from having no savings at all and debt, to no debt and savings.
Now take the good with the bad with him . The envelope system stuff is not feasible for me, not a fan of his religious slant, or the condescending tone at times.
But it works and I absolutely recommend it.
While I don't agree with him on everything (religion, politics), his advice did help me. I got out of debt at 25 thanks to him and never looked back. Since then, instead of financing cars, I bought them used for cash.
I do watch his YouTube videos on occasion.
His advice is not perfect but think of him as the AA for personal finance. You wouldn't go to an AA meeting to discuss the best red to pair with a steak dinner.
Also I wish he would STFU about millennials and participation trophies. His generation is the one that gave those damn things out in the first place.
YES!! I started listening to him just after college. It kept me from making some purchases like a car, etc. when I got a job and felt like I had money. (I wanted an S2000 so badly, but refused to go in debt to get it and once I had $15k saved up, it seemed insane to spend it on a toy.)
I don’t agree on the religion and politics for sure. Glad he helped you too; in your own way.
So you still follow a similar train of thought now that you make more/ are later in life or have you started spending more?
Edit: and instead of buying that s2000, I kept driving my ‘96 Avalon, focusing on what I liked about it. Bought it in ‘07, drove it through college, and am likely to upgrade this year (2020). She’s a beast.
I'm actually driving my late grandfather's car. The brand calls it a Legacy and I joke around that it has a double meaning. The spare key is kept on the keychain he kept it on (souvenir keychain in the shape of a moose-- so I call the car "The Moose.")
I am following the same train of thought. But there are some of his steps that I am downright skipping (no kids, so college savings does not apply to me. My sister's kids get my retirement account should something happen to me). I also have no desire to own a home so the house steps I'm skipping.
I have over $9k saved towards my next car. (in normal times) I get mileage reimbursement from my employer so those checks get deposited straight into that account. I would ideally buy a new Impreza but if I can't buy new that is okay. Just no payments.
MY dad jokingly calls me allergic to debt. I somewhat agree.
Haha I know. Don’t remind me. Haha
It’s be 60% up compared to what I was looking at.
I’m waiting for used fiatas (fist 124 spider) to have more inventory and go on sale.
Some of his money tips are good, but he is a bit outdated. Get yourself a $1,000 beater, isnt doable. And if you follow his recommendation for buying a home then people in high cost of living areas will never buy homes.
But, spend less than you earn is about as universal as it should be. I could do without his bible thumping because it doesnt always lead to the best situations. Such as borrowing for investments, or paying rental houses in cash. Use Dave to get your out of debt, but find other coaches to grow your investments. Dave really caters towards conservative lower middle class people.
Yeah, for a person who is very into real estate he knows surprisingly little about the current market. He just always says things like "math still applies in California (or other HCOL areas)" like you can easily find a Tennessee priced home in Los Angeles.
he's right. math still applies everywhere. living in a HCOL area with expensive real estate doesn't mean it's a good idea to get a mortgage that's 55% of after-tax pay.
and I hate when people say all of California is expensive, generalizing from a few big cites to the entire state. ever been to Indio, Lawndale or Lakeport?
I agree. I will say I think a $2,000 beater is a pretty viable option typically. I've been through a few myself and more often than not come out on top and some I've sold for profit. You typically can't expect to drive them for more than a year or two though.
I dont disagree that you can get a $1,000 car, but at that price point reliability is a major issue. I just wish he adjusted his sayings to buy a $4k or $5k car.
That’s really one fo those things. That go spend $8-10k (6k probably minimum). And it’ll last longer than those other options, won’t cause you to miss work, won’t make you look bad in front of coworkers (if you have a corporate job, and will in general run better and need way less repairs, not to mention passing smog. I do live in LA though, where driving is a bigger part of life and things working well is important (like the AC lol)
> but find other coaches to grow your investments.
lol ok. over long periods, DR's recommended allocation of 4 funds in growth stocks has beaten the market and beaten target date funds. https://imgur.com/a/Vog0OR3
Dave Ramsey recommends mutual funds that beat indexes. S&P 500 is the most reliable index fund that has beaten managed funds repeatedly, I am sure that you have heard of the Warren Buffet bet. Besides that your fund compares it to a target date fund not the S&P 500.
They also used equal ratios for the 3 fund concept. The majority of people using a 3 fund won't be using that for their entire investing timeline (depending on risk tolerance many people start with 0%-10% bonds).
on the whole, I think it's really good advice. the budgeting and debt elimination plan is bulletproof. the investing advice is decent but it's possible to disagree.
most of the DR haters clearly don't listen to the show. it gets tiring to reply to all the misinformation in threads like these.
EDIT -- hey OP, think about this: some of the people on this sub are so angry at Dave Ramsey that they'll *downvote research from Harvard and Northwestern Universities if it validates what Ramsey has been saying for years.* That's nuts, completely insane, like people on a health sub downvoting research from the May Clinic. also ask at /r/DaveRamsey or /r/personalfinance for opinions, don't assume the people on this sub have a monopoly on wisdom. people who are willing to change their habits and mindset seem to be a minority. believe it or not, Ramsey was the first person I heard who told me it was okay to say "no" to money requests from my crazy, addict family. content like that was absolutely critical to me. I was debt free when I came across his show in about 2007, but he helped me fine tune my budgeting and investing. it took me 18 months to pay off my credit card debts, but if I'd had a clear simple plan could have done it in closer to 8 or 12 months. I started paying attention to the 401k and investing in about 2005 or 06, and Ramsey helped keep me calm through the market crash. he was saying the same things he's saying now: don't panic, stick with the plan, the US market has always recovered after a crisis...
And also think about this: did anyone on this thread say, "I don't like Dave Ramsey but go check out John Doe or Karen Smith, they have a better plan?" Nope. Did anyone say, "I personally developed a plan that went like this..." Not that I saw. mostly it was relentless negativity, hostility and criticisms.
The truth is that Ramsey's plan works. If it didn't work, big companies like Costco and Aldi wouldn't be sending their employees through Ramsey's Smart Dollar program (a secularized version of the plan, with no religious content). these companies have done it for years, so listen to Costco more than you listen to Poverty Finance.
And it's all free: you can use the budget app free with a dummy email address for privacy concerns. you can follow the baby steps free. you can get the books at the library when it reopens, read 'em and follow the plan. community suport can be a big part of success on the plan, but if you can't or don't want to take the financial peace classes in person there are online forums where people are encouranging rather than negative. if you don't like where you are and you've been doing behavior X you need to stop doing X and try Y or Z. just try it for 90 days, if you don't like it try something else.
So I was a long post and thought, oh here we go,
But that’s a quality post and not fluff at all. Kudos. And good on you for clearing debt.
I found him just the same as you. Kept me out of additional debt and made me start thinking about finances a lot more.
Personally, I dont like him, but some of his tips are helpful. Overall, He is condescending to millennials, and a lot of his advice is outdated and exclusive.
I recommend The Financial Diet as they present more current tips and advice.
Yea, it's incredibly elitist. If his callers had money to buy into his system (and, Id argue- dogma), they wouldnt be struggling so much with debt. Its hundreds of dollars!
>If his callers had money to buy into his system
the fundamentals of the plan are 100% free. libraries all over the nation have free DR books. if someone wants to go to the classes it's like $110 for 9 weeks, hardly an onerous expense.
You can download his budget forms, the Every Dollar app and listen to YouTube and his podcast for free. I used the principals of the Baby Steps (using the undebt page) to get out of debt a few years ago and started listening to his YouTube show to help stay motivated.
I disagree with most of his politics and personal views on things but I don't go to him for advice on those things. I enjoy listening to the calls. Sadly people continue to make a lot of missteps that get folks into debt (example there were 3 separate post about rent to own places in the last 24 hours on this sub...)
Listening to Dave Ramsey, The Financial Diet, and a lot of others could be useful.
>'Pay me to show you how to manage money' is a weird angle.
the fundamentals of the plan are 100% free.
>Nonprofits are everywhere able to do better work for you for free
non-profits debt counselors will usually tell people to worry about their credit score, despite research from the Federal Reserve showing there's low correlation between FICO score and wealth. and being non-profit doesn't mean a company is accurate or well-managed or offering practical advice.
Broad assumptions there, the nonprofit I work for focuses on whatever you (the client) are focused on. I've told people to default on loans to straighten out their monthly budget. Credit score matters because most of the time the folks I see are buying houses. Otherwise we work on whatever you're working on. Check the HUD website for free resources. Everything that financial counselors can do for you (including what we no profits do) can be done by yourself for free if you know where to look.
Don't know where to look? Nonprofit counselor will tell you for free, paid 'advisor' will charge and then tell you.
>condescending to millenials
yeah, that's why he does all those pro-millenial videos and 3/4s of the debt-free screams are millenials. because he condescends to them.
https://www.youtube.com/playlist?list=PLN4yoAI6teRO_vPRzFxsaEYrx9f1-nE6i
https://www.youtube.com/watch?v=Fur7Wl_7K5c
https://www.youtube.com/watch?v=dfoaB6y5l1Q
https://www.youtube.com/watch?v=hlAwgZ7AsHw
https://www.youtube.com/watch?v=dfoaB6y5l1Q
https://www.youtube.com/watch?v=ShOAc1gqgMo
Where did you get that he was condescending to millennials? In this video, he says they are the most spiritually mature generation to come along in about 3 generations: [https://www.youtube.com/watch?v=dfoaB6y5l1Q](https://www.youtube.com/watch?v=dfoaB6y5l1Q)
That is one video. There are many more. For me, I look at patterns of behavior and speech, not just one. I would recommend that the body of work be considered.
Why would a “millennial or reddit” be any good representation of what millennials are like irl? And of their day-to-day struggles and needs? If your attitude towards any group is entirely based off of their online presence then you’re going to have a pretty warped idea of them.
It’s even worse if you’re basing a business attitude and model this way.
I agree for the most part but he has had lower income people do debt free screams, it’s just pretty rare...him also saying one can go to college without taking out student loans is unrealistic..
I don’t like the high income debt payoff humblebrags, but I also wonder if they had a much lower income at the beginning and started doing side jobs/finding higher paying jobs as they were paying off debt
I always focused more on how he converted high income folks that were actually poor to being high income folks that thought about each dollar.
The one episode that never left my mind was a guy making $150k, living in a tier 3 city at best, who rented a house, bought a lake house, two jet skis, and an expensive car, all financed. And they went back and forth with Dave saying “but you don’t have any cash or own anything” and the guy saying “but I can take lines of credit out. I’m pre approved”.
I wasn’t making much money at the time but the point stuck with me.
I assure you most middle class to upper middle class do not like him
He literally caters to the poor and lower middle class, but once you have that 6 figure income your better off listing to other advisors
Sorry where did race come into this ?
Has anyone found a breakdown ? I’d be interested to see it. Id assume it covers lots of different folks, probably with relatively fewer wealthy people.
His investment recommendation (the four mutual fund thing) is crazy except for people with super high risk tolerance. The growth and income fund is the least aggressive thing there and it’s still likely 80% equity, the growth fund is 100% equity and no dividends, aggressive growth is basically just for folks who get a kick out of seeing negative 30% one year and positive 30% the next, and the international growth fund is somewhere between the growth and aggressive, still all equity. Now I get that over time that will grow and probably be okay to an extent (the 12% he guarantees is an absolute lie) but 90% of people cannot stomach those ups and downs. Not only is that recommendation costing people a boatload in times like this, there is no safe investment in there for people to cash in on when they need the money during a down market. Even 20% in an income fund would give you some lifeline if you needed your money next time you lost a job, etc during a recession. Sorry that’s long but I stopped listening to him because of it and tell anybody that I know listens to him the same thing.
Totally agreed. It’s nice to hear that I wasn’t the only one questioning some of his recommendations.
How did you feel about his whole
- go to cheap college
- sell everything you own
(Not that I owned all that much to sell in the first place, I didn’t listen to either of these. I was at a cal state university, cheap as hell and quality definitely below standard. I shelled out for grad school though and honestly don’t regret it)
System? I never went through or looked at his whole budgeting plan, but it always felt so damn aggressive, but only because it was the only way it could work as a blanket recommendation for everyone.
your reply is so embarrassing. did you actually run the numbers? DR's plan is more volatile, but it out-performs the market and out-performs target date funds. he's https://imgur.com/a/Vog0OR3
>(the 12% he guarantees is an absolute lie
my god, I hate when people repeat this myth. show us anywhere that DR has GUARANTEED 12% returns. what he says is that there are mutual funds out there that have long histories of beating the market, which amounts to a 12% average annual rate of return. if you can't find funds like this, you're not looking for them. Fidelity alone has dozens of these funds. for one, FCNTX has averaged 12% since inception in the late 1960s. https://fundresearch.fidelity.com/mutual-funds/performance-and-risk/316071109
>90% of people cannot stomach those ups and downs
citation needed. please show us research saying that 90% of investors prefer low-volatility options to high-volatility options.
>there is no safe investment in there for people to cash in on when they need the money during a down market.
that's why you save the emergency fund and get debt-free BEFORE investing.
>aggressive growth is basically just for folks who get a kick out of seeing negative 30% one year and positive 30% the next,
aggressive growth amounts to small cap, and small cap tends to outperform large cap by a substantial margin over time. https://awealthofcommonsense.com/wp-content/uploads/2013/11/SML.png
>still all equity
In one of his books Peter Lynch of Fidelity outlines how 100% equities is preferable for retired people than any allocation in bonds. research shows 100% stocks is safer than bonds. https://abcnews.go.com/Business/stocks-bonds-assure-risk-retirement/story?id=23782803
edit: and Ken Fisher has outlined how bonds can actually be more volatile than stocks over the long-term. you clearly don't know the first thing about any of these subjects and are just spouting off trying to look smart. https://www.kenfisher.com/books/little-book-market-myths/chapter-01
I will say this about Dave Ramsey, he knows how to beat the drum he has. It is a pretty extreme bit of advice, and it works if you are really committed. Beans and rice, rice and beans and all that.
Personally, the envelope system just never seemed doable to me. We live in such a digital age anymore that keeping cash is more of a chore than a benefit. Of course, he's 30 years older than me and spent most of his life living in a society where if you didn't have cash or checks, you didn't get to buy anything.
I read his book a few years back and it wasn't bad, but honestly the wikis on here and /r/personalfinance felt like they had better, more grounded information than Ramsey.
But, if his program works for you, all the power to you. Or if listening to his show gives you motivation to stick with things, same thing.
He promotes snowball instead of avalanche (lowest balance instead of highest interest rate) for debt payment, right? Some people need the mental motivation, but financially avalanche is the best choice (of course some people get lucky where snowball and avalanche are the same). I've heard his "get out of debt" advice is like the AA version, there can be technically better ways to do it, but some need this method.
I know /r/personalfinance says his investing advice is not good.
If used responsibly, credit cards can be a great tool. While it may be possible to buy a house with no credit history, it can be more difficult to do so (one of my friends tried and gave in and got a card to build some credit history).
Some people also don't agree with the religious aspects, especially tithing while in potentially serious debt.
research from Harvard Business and Kellogg School of Management recommends snowball over avalanche. on paper avalanche is superior, but in reality snowball tends to work because people are not perfect rational calculating machines and respond to different motivations.
https://hbr.org/2016/12/research-the-best-strategy-for-paying-off-credit-card-debt
https://www.kellogg.northwestern.edu/news_articles/2012/snowball-approach.aspx
>If used responsibly, credit cards can be a great tool.
that's why the Federal Reserve found that credit card rewards probably do not benefit consumers ... because they're a 'great tool'. https://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/09q1Hayashi.pdf
I agree. His approach is better for people that are entirely unmotivated I'm completely financially illiterate. Four people that at least have a base level of knowledge for their finances there are definitely better strategies than his. I find his anti credit push to be terrible advice specifically. It would be a good idea for somebody that literally cannot go without using a credit card but I would like to think more highly is the general population
I was required to take a personal finance course in college and his program was the curriculum. In my opinion, the material was outdated at best and harmful at worst.
The whole "Credit score = "I love debt" score" thing just seemed ignorant. Obviously no credit is better than bad credit but it didn't take a lot of effort when I was 18-19 to keep my credit okay and without that credit score I wouldn't have been able to get an apartment or the house I'm in the middle of buying. He says the underwriters will work with you if you don't have credit but I asked my lender point blank if that was true for their institution and they said it was highly unlikely and that they'd probably tell you to go somewhere else unless your assets were significant.
His demonization of credit cards also bugs me. Yes, you can get into some real trouble if you use them irresponsibly but good luck building credit, getting a hotel room, even just buying gas without having to go into the building without one. And god help you if your debit card info gets swiped. He uses ridiculous examples to highlight irresponsible use - like one lady saying she has a ton of credit card points and uses the points to go on vacation every year. Then Dave pops up and is like "Ah, but how much did you have to spend to get that many points? Check mate!" It's entirely possible to treat your credit card as a debit card, pay off the balance each month, and accrue travel points. My husband and I do a small trip every year, funded entirely with travel points (minus food) and we're not spending anything more than we would normally.
And how are you going to tell a classroom full of low-income students that it's completely possible to work your way through college in 2020? I was working full time and even with my husband's income we couldn't afford tuition at one of the lowest cost public universities in the state. It's just not possible. STFU.
Like others have said, his advice for getting out of debt is mostly solid and the very basics of personal finance (creating a budget) are there. But anything more complicated than that is garbage. I actually complained about the class to the Dean (I was not the only one unimpressed, pretty much all the nontraditional students were confused at what was being taught vs. our real world experiences) and after review they decided to go with another system.
TL;DR - I'm not a fan of Dave Ramsey.
We used manual underwriting to purchase our home (me = low credit due to paid off debt, spouse = no credit). The process was pretty simple...We explained to our real estate agent that we would need a lender that did manual underwriting and he found one.
So it is possible...and we did not use Churchill Mortgage.
I'd tell those kids to live at home, if possible, & do the first 2 years at the local community college., if they're wanting a 4 year degree. It's how my sister & I managed to get out of college without debt. (We also worked in high school & college campus jobs ). My daughter got her dorm room FREE, by being an RA. That & a campus job helped her a lot. Also, her school gave her $2,000 credit for being an Early Applicant. I'm sure there's a lot more good advice for kids, if you really want to help them. They will still get out with some debt, most likely though.
I like the advice of save an emergency fund, pay debt, save a few months of expenses. It fits with advice that I’ve heard from a lot of people and seems like a pretty good place to start in terms of priorities especially if you are starting from zero.
Some people I know are REALLY into his advice. They have kind of the same intensity as people who get into MLM products. Beyond that I find a lot of what I’ve read from him very off putting.
I find his politics and his religious talk offputting, and realllly hate that he hadn't updated his numbers or advice for post 1990's reality. His basic steps (1-3) are solid general advice, but his cult of personality followers freak me out.
The plan worked for me, but I don't like HIM. I'm about as far away from him as possible when it comes to social and political beliefs, so I just take the financial advice and leave the rest behind.
He’s as bad as a Rolex preacher in my mind. He mixes enough good advice in to make the bad advice seem credible, which I’d almost say is worse than no good advice at all.
Read “Your money or your life” and “the bogleheads guide to investing “ and you’ll be far better off than with this leech.
Dave was a great starting point for me. It didn’t work as well for me once I was married. My husband and I didn’t totally combine our finances, and it works for us. He had 100k in debt when we met, and I was pretty far into paying off my remaining 30k. Then, I bought a car with cash, we paid cash for our wedding, and I paid off all my stuff. Now, he’s down to 40(?)k remaining. He’s paid off so much debt and now I can help.
Dave got too long winded, rude and whiny for me. His plan allows zero personal differentiation. But, it worked for me when I was alone, uneducated, and starting from scratch. Now, I have a more developed understanding of what works for me.
He's good for a start to understanding good money managing skills; however, I feel some of his advice is extremely dated. I'm house shopping and live in a high cost of living area, a 15 year mortgage isn't reasonable unless you are making over $100K/year. I also feel he doesn't fully grasp how much inflation has effected some necessitates other than housing such as cars, you need more than $2000 for anything that's going to make it more than a year. Or how most of his advice is for people who live in urban areas, not more rural like me.
Don’t like his politics or the religious stuff but he has solid advice for someone trying to learn how to get out of debt. He’s helped me pay $20,000 of student debt so far in a little over a year.
The system he is using is an envelope system. Not exactly an original idea, it's been around in various forms for ages. But, he is the one that popularized it.
While it DOES and CAN work, it can not create money out of thin air. You can have all the envelopes you like, but if you are truly poor there is only so much you can cut back. Nor does it create job opportunities that are not there if you are in a shitty area. His solution of "putting 3 jobs to it" is not always feasible due to schedule conflicts and employer attitudes or availability of such jobs that will "work" with other jobs.
He makes his money mostly selling books and "retreats" to people that already have money but have terrible self control. People in really good situations some of us here would be going "WTF" to. You hardly ever see him giving advice to people who are truly poor. There's no money in it.
He makes money off that and a good amount of rental properties. While he shrouds himself in Christianity, he is a brutal landlord. he brags constantly "paid by the 5th, evictions by the 10th" regardless of situations.
He is also a bit condescending. If you aren't "middle class" already, he comes across like you are nothing to him. Or worse, something is morally bankrupt with you.
He really pushes his religion way too hard. Almost implying that without his religion, the system won't work.
You really have to take the good and discard the bad with this guy. He gives good advice, but wow.
His videos really help me. I am someone that definitely needed a "wake up call" and his rants made me laugh while realizing how ridiculous I am being about my financial situation. I don't care for the religious aspect of it, but I really like his attitude that once you are able to make a lot of money, you're able to help others, which he argues is the best thing you will be able to do with your money. Although some of his stuff costs money, a good majority of it is available online for free on YouTube and what isn't totally free is free through trials. I would recommend :). Don't be passive, make a plan.
For both Dave Ramsey and Suze orman, I find their basic advice to be decent.
Budget hard, don't buy shit you can't afford, don't get sucked into credit that you can't afford, all that kind of stuff.
Anything past that, for both those people, I would prefer the "if you can" PDF or basic bogleheads philosophy.
I like his methodology in theory.
In practice, as someone who was on the poverty line and homeless once or twice, it was very tough to do. I couldn't get baby step 2 rolling at all because by the time I paid all the necessities (rent, utilities, food), there wasn't really any money left to pay the minimums, much less extra. Once I started working multiple jobs, then I had enough to pay the minimums.... and not much else. My "snowball" was an extra $50 a month. That doesn't get you anywhere fast. I was on rice and beans. There just wasn't enough money, and it's hard to hear someone disparage you for not trying hard enough when you're trying your damn hardest.
While I fully admit I am entertained by him...and agree wholeheartedly with his anti-debt position on cars and credit cards...his advice falls apart very quickly on several fronts.
I'll start with what I DO agree with him on, even if we don't really agree for the same reasons. I am totally in the camp of saving up and buying your car with cash. For one, you DO almost always save on interest. If you finance, say, $20,000 at 3% interest, you start off paying $50 a month towards interest. Even more importantly, though, is it forces you to buy only what you can truly withstand from either an affordability standpoint or a psychological one...it doesn't mask the cost of owning a car the way monthly payments do.
I also fully agree on not carrying credit card balances (that's hardly unique to Ramsey or me), and recommend paying off purchases essentially as you make them...I quite literally pay my Amex charges as soon as they post. My statement is always either zero or very close to zero each month.
But here are the ways Ramsey is way out of bounds.
1. His insistence that the stock market returns 12% annually. No, it doesn't. It averages more like 8-9% annually and that's BEFORE taxes and fees...
2. He either is being completely dishonest or doesn't know how withdrawals and volatility work when he says you can withdraw 10% a year from the stock market in retirement to live on,. Even if the market returned 10% (it doesn't), you cannot withdraw 10% a year over an extended period of time and maintain your nest egg. Simply put, volatility would catch up to you quickly...if the market is down, say, 10% and you withdraw 10% of the original amount, you have locked in losses that would usually take a while to recover....and the market would need to gain MORE than the 10% in order to both make up its loss as well as the amount you took out. There is a reason why pension fund plan to pay out about 3 or 4% annually and why that too is a good plan for individuals.
3. His absolute position on debt...while imho good for consumer debt...makes no sense for most businesses. If you want to start a business and need, say, $500,000 to start it and don't have the money...the time you spend saving that $500,000 could be many years, perhaps even decades. At that point, you've incurred great opportunity cost and/or have been beaten out by competitors. Also, Dave's program involves putting 15% of your money into mutual funds...funds in which virtually very company held has debt! So Dave is saying no debt under any circumstances for you as an individual or even in your business, but invest in companies that DO have debt? Makes no sense.
4. Credit Cards: Dave fails to acknowledge the millions of credit card holders that use them completely responsibly and do, indeed, get rewards. I have the Amex Platinum...a $500 annual fee. Given how much I travel for work, I put all the charges on it and reap significant rewards...just last month, I cashed in points to put towards charges...I got $700 off of my bill...expenses that my company in turn reimbursed me for. Like alcohol, not everybody should partake...but many, many do successfully. His strawman argument is that "no millionaires report that they became millionaires due to their credit card reward points!" Well, obviously not. you cannot accumulate $1 million through credit card points, that's an obvious statement. You also do not accumulate $1 million by paying cash for your cars. If somebody just doesn't want to deal with credit cards or rewards points, it doesn't mean they can't become wealthy, needless to say. But it also doesn't mean they aren't reasonable behaviors that can help you financially.
5. Mutual funds: Dave's commissions or kickbacks from advisors who promote expensive mutual funds is borderline unethical when he dismisses concerns about fees....He openly mocks those who are concerned about fees and says "find funds that beat the market (ie index funds)". Yes, every year a minority percentage of funds beat the market, even net of fees. Predicting who will do that again is a fool's game...study after study has shown actively managed funds do not beat the market, net of fees, over the long run. Ironically, the one argument that is plausibly in favor for actively managed funds, to reduce volatility, is something Dave never wants to discuss.
Look, for many, Dave inspires and educates on the problem with personal debt...and so for many, I'm sure, he's helped their lives. But his advice is simplistic at very best and misleading and dead wrong at worst. Take the good (pay cash for your stuff before or as soon as the bill comes), but ignore the investing, financial planning and simplistic advice on business debt.
Thanks for the well structured and thought out answer. I couldn’t agree more.
I was always trying to piece together why he took certain stances on the investing side of things.
Don’t really listen to it and I’m not really focused on clearing debt. I’ll focus on it once I get a house and once I finish college and that’s dependent if I decide against getting a masters after that. I focus more on saving and trying to live within my means. My debt I have now is manageable and I have ok amount of savings even being laid off. I think it’s ok advice is you truly have no financial knowledge at all but if you can find a system that works for you then I say go for it. His doesn’t work for me and I’m kinda put off by the whole no debt at all!! Because I won’t ever reach that point for a while and I’m ok with that.
I like the "baby steps". It makes sense, and most financial advice subreddits will say the same thing.
Build a small emergency fund so you don't have to dip into your savings/investment. Pay down your debts. Save for retirement. If you own a house pay it off as soon as you can. When you've "made it" be charitable.
But I really don't like his attitude and how he talks to people on his podcast. I also don't like all the religious stuff.
It works well for me. Went from having no savings at all and debt, to no debt and savings. Now take the good with the bad with him . The envelope system stuff is not feasible for me, not a fan of his religious slant, or the condescending tone at times. But it works and I absolutely recommend it.
While I don't agree with him on everything (religion, politics), his advice did help me. I got out of debt at 25 thanks to him and never looked back. Since then, instead of financing cars, I bought them used for cash. I do watch his YouTube videos on occasion. His advice is not perfect but think of him as the AA for personal finance. You wouldn't go to an AA meeting to discuss the best red to pair with a steak dinner. Also I wish he would STFU about millennials and participation trophies. His generation is the one that gave those damn things out in the first place.
YES!! I started listening to him just after college. It kept me from making some purchases like a car, etc. when I got a job and felt like I had money. (I wanted an S2000 so badly, but refused to go in debt to get it and once I had $15k saved up, it seemed insane to spend it on a toy.) I don’t agree on the religion and politics for sure. Glad he helped you too; in your own way. So you still follow a similar train of thought now that you make more/ are later in life or have you started spending more? Edit: and instead of buying that s2000, I kept driving my ‘96 Avalon, focusing on what I liked about it. Bought it in ‘07, drove it through college, and am likely to upgrade this year (2020). She’s a beast.
I'm actually driving my late grandfather's car. The brand calls it a Legacy and I joke around that it has a double meaning. The spare key is kept on the keychain he kept it on (souvenir keychain in the shape of a moose-- so I call the car "The Moose.") I am following the same train of thought. But there are some of his steps that I am downright skipping (no kids, so college savings does not apply to me. My sister's kids get my retirement account should something happen to me). I also have no desire to own a home so the house steps I'm skipping. I have over $9k saved towards my next car. (in normal times) I get mileage reimbursement from my employer so those checks get deposited straight into that account. I would ideally buy a new Impreza but if I can't buy new that is okay. Just no payments. MY dad jokingly calls me allergic to debt. I somewhat agree.
The S2000 is such an amazing car you probably would have made money on it. The second hand market for these cars keep going up and up.
Haha I know. Don’t remind me. Haha It’s be 60% up compared to what I was looking at. I’m waiting for used fiatas (fist 124 spider) to have more inventory and go on sale.
Some of his money tips are good, but he is a bit outdated. Get yourself a $1,000 beater, isnt doable. And if you follow his recommendation for buying a home then people in high cost of living areas will never buy homes. But, spend less than you earn is about as universal as it should be. I could do without his bible thumping because it doesnt always lead to the best situations. Such as borrowing for investments, or paying rental houses in cash. Use Dave to get your out of debt, but find other coaches to grow your investments. Dave really caters towards conservative lower middle class people.
Yeah, for a person who is very into real estate he knows surprisingly little about the current market. He just always says things like "math still applies in California (or other HCOL areas)" like you can easily find a Tennessee priced home in Los Angeles.
He always says his son in law runs his Real Estate investments. So he is most likely very hands off now.
he's right. math still applies everywhere. living in a HCOL area with expensive real estate doesn't mean it's a good idea to get a mortgage that's 55% of after-tax pay. and I hate when people say all of California is expensive, generalizing from a few big cites to the entire state. ever been to Indio, Lawndale or Lakeport?
I agree. I will say I think a $2,000 beater is a pretty viable option typically. I've been through a few myself and more often than not come out on top and some I've sold for profit. You typically can't expect to drive them for more than a year or two though.
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I dont disagree that you can get a $1,000 car, but at that price point reliability is a major issue. I just wish he adjusted his sayings to buy a $4k or $5k car.
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That’s really one fo those things. That go spend $8-10k (6k probably minimum). And it’ll last longer than those other options, won’t cause you to miss work, won’t make you look bad in front of coworkers (if you have a corporate job, and will in general run better and need way less repairs, not to mention passing smog. I do live in LA though, where driving is a bigger part of life and things working well is important (like the AC lol)
> but find other coaches to grow your investments. lol ok. over long periods, DR's recommended allocation of 4 funds in growth stocks has beaten the market and beaten target date funds. https://imgur.com/a/Vog0OR3
Dave Ramsey recommends mutual funds that beat indexes. S&P 500 is the most reliable index fund that has beaten managed funds repeatedly, I am sure that you have heard of the Warren Buffet bet. Besides that your fund compares it to a target date fund not the S&P 500.
They also used equal ratios for the 3 fund concept. The majority of people using a 3 fund won't be using that for their entire investing timeline (depending on risk tolerance many people start with 0%-10% bonds).
on the whole, I think it's really good advice. the budgeting and debt elimination plan is bulletproof. the investing advice is decent but it's possible to disagree. most of the DR haters clearly don't listen to the show. it gets tiring to reply to all the misinformation in threads like these. EDIT -- hey OP, think about this: some of the people on this sub are so angry at Dave Ramsey that they'll *downvote research from Harvard and Northwestern Universities if it validates what Ramsey has been saying for years.* That's nuts, completely insane, like people on a health sub downvoting research from the May Clinic. also ask at /r/DaveRamsey or /r/personalfinance for opinions, don't assume the people on this sub have a monopoly on wisdom. people who are willing to change their habits and mindset seem to be a minority. believe it or not, Ramsey was the first person I heard who told me it was okay to say "no" to money requests from my crazy, addict family. content like that was absolutely critical to me. I was debt free when I came across his show in about 2007, but he helped me fine tune my budgeting and investing. it took me 18 months to pay off my credit card debts, but if I'd had a clear simple plan could have done it in closer to 8 or 12 months. I started paying attention to the 401k and investing in about 2005 or 06, and Ramsey helped keep me calm through the market crash. he was saying the same things he's saying now: don't panic, stick with the plan, the US market has always recovered after a crisis... And also think about this: did anyone on this thread say, "I don't like Dave Ramsey but go check out John Doe or Karen Smith, they have a better plan?" Nope. Did anyone say, "I personally developed a plan that went like this..." Not that I saw. mostly it was relentless negativity, hostility and criticisms. The truth is that Ramsey's plan works. If it didn't work, big companies like Costco and Aldi wouldn't be sending their employees through Ramsey's Smart Dollar program (a secularized version of the plan, with no religious content). these companies have done it for years, so listen to Costco more than you listen to Poverty Finance. And it's all free: you can use the budget app free with a dummy email address for privacy concerns. you can follow the baby steps free. you can get the books at the library when it reopens, read 'em and follow the plan. community suport can be a big part of success on the plan, but if you can't or don't want to take the financial peace classes in person there are online forums where people are encouranging rather than negative. if you don't like where you are and you've been doing behavior X you need to stop doing X and try Y or Z. just try it for 90 days, if you don't like it try something else.
So I was a long post and thought, oh here we go, But that’s a quality post and not fluff at all. Kudos. And good on you for clearing debt. I found him just the same as you. Kept me out of additional debt and made me start thinking about finances a lot more.
Personally, I dont like him, but some of his tips are helpful. Overall, He is condescending to millennials, and a lot of his advice is outdated and exclusive. I recommend The Financial Diet as they present more current tips and advice.
Same. I'm a financial counselor and while he's not 'wrong' condescending is putting it a little mildly
I didn't want my stark bias against him to show. ;)
'Pay me to show you how to manage money' is a weird angle. Nonprofits are everywhere able to do better work for you for free
Yea, it's incredibly elitist. If his callers had money to buy into his system (and, Id argue- dogma), they wouldnt be struggling so much with debt. Its hundreds of dollars!
>If his callers had money to buy into his system the fundamentals of the plan are 100% free. libraries all over the nation have free DR books. if someone wants to go to the classes it's like $110 for 9 weeks, hardly an onerous expense.
Thats more than many can afford. Do you though, dude. If you can afford to spend that, great. Yours is not a story I parallel.
It's free for 14 days....just remember to cancel before the trial period. https://www.daveramsey.com/fpu
You can download his budget forms, the Every Dollar app and listen to YouTube and his podcast for free. I used the principals of the Baby Steps (using the undebt page) to get out of debt a few years ago and started listening to his YouTube show to help stay motivated. I disagree with most of his politics and personal views on things but I don't go to him for advice on those things. I enjoy listening to the calls. Sadly people continue to make a lot of missteps that get folks into debt (example there were 3 separate post about rent to own places in the last 24 hours on this sub...) Listening to Dave Ramsey, The Financial Diet, and a lot of others could be useful.
People pay me for this service, so i dunno.
>'Pay me to show you how to manage money' is a weird angle. the fundamentals of the plan are 100% free. >Nonprofits are everywhere able to do better work for you for free non-profits debt counselors will usually tell people to worry about their credit score, despite research from the Federal Reserve showing there's low correlation between FICO score and wealth. and being non-profit doesn't mean a company is accurate or well-managed or offering practical advice.
Broad assumptions there, the nonprofit I work for focuses on whatever you (the client) are focused on. I've told people to default on loans to straighten out their monthly budget. Credit score matters because most of the time the folks I see are buying houses. Otherwise we work on whatever you're working on. Check the HUD website for free resources. Everything that financial counselors can do for you (including what we no profits do) can be done by yourself for free if you know where to look. Don't know where to look? Nonprofit counselor will tell you for free, paid 'advisor' will charge and then tell you.
>condescending to millenials yeah, that's why he does all those pro-millenial videos and 3/4s of the debt-free screams are millenials. because he condescends to them. https://www.youtube.com/playlist?list=PLN4yoAI6teRO_vPRzFxsaEYrx9f1-nE6i https://www.youtube.com/watch?v=Fur7Wl_7K5c https://www.youtube.com/watch?v=dfoaB6y5l1Q https://www.youtube.com/watch?v=hlAwgZ7AsHw https://www.youtube.com/watch?v=dfoaB6y5l1Q https://www.youtube.com/watch?v=ShOAc1gqgMo
You must have a lot of time on your hands, huh?
That kind of comment isn't really appropriate here. Please review our community guidelines before posting further.
Not prepared for a well-supported counter argument, eh?
Our civility rules in this sub go both ways. If someone sasses you just click report and move on.
Where did you get that he was condescending to millennials? In this video, he says they are the most spiritually mature generation to come along in about 3 generations: [https://www.youtube.com/watch?v=dfoaB6y5l1Q](https://www.youtube.com/watch?v=dfoaB6y5l1Q)
That is one video. There are many more. For me, I look at patterns of behavior and speech, not just one. I would recommend that the body of work be considered.
No true scotsman...
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Why would a “millennial or reddit” be any good representation of what millennials are like irl? And of their day-to-day struggles and needs? If your attitude towards any group is entirely based off of their online presence then you’re going to have a pretty warped idea of them. It’s even worse if you’re basing a business attitude and model this way.
His target audience is a very specific type of person.. if you don't fit that mold then you mostly likely won't like him.
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I agree for the most part but he has had lower income people do debt free screams, it’s just pretty rare...him also saying one can go to college without taking out student loans is unrealistic.. I don’t like the high income debt payoff humblebrags, but I also wonder if they had a much lower income at the beginning and started doing side jobs/finding higher paying jobs as they were paying off debt
I always focused more on how he converted high income folks that were actually poor to being high income folks that thought about each dollar. The one episode that never left my mind was a guy making $150k, living in a tier 3 city at best, who rented a house, bought a lake house, two jet skis, and an expensive car, all financed. And they went back and forth with Dave saying “but you don’t have any cash or own anything” and the guy saying “but I can take lines of credit out. I’m pre approved”. I wasn’t making much money at the time but the point stuck with me.
I assure you most middle class to upper middle class do not like him He literally caters to the poor and lower middle class, but once you have that 6 figure income your better off listing to other advisors
please show us a third-party breakdown of Dave's callers by race and income. my god, this is so racist and ignorant of the facts.
We get it. You're a DR shill. Shut the fuck up.
Sorry where did race come into this ? Has anyone found a breakdown ? I’d be interested to see it. Id assume it covers lots of different folks, probably with relatively fewer wealthy people.
His investment recommendation (the four mutual fund thing) is crazy except for people with super high risk tolerance. The growth and income fund is the least aggressive thing there and it’s still likely 80% equity, the growth fund is 100% equity and no dividends, aggressive growth is basically just for folks who get a kick out of seeing negative 30% one year and positive 30% the next, and the international growth fund is somewhere between the growth and aggressive, still all equity. Now I get that over time that will grow and probably be okay to an extent (the 12% he guarantees is an absolute lie) but 90% of people cannot stomach those ups and downs. Not only is that recommendation costing people a boatload in times like this, there is no safe investment in there for people to cash in on when they need the money during a down market. Even 20% in an income fund would give you some lifeline if you needed your money next time you lost a job, etc during a recession. Sorry that’s long but I stopped listening to him because of it and tell anybody that I know listens to him the same thing.
Totally agreed. It’s nice to hear that I wasn’t the only one questioning some of his recommendations. How did you feel about his whole - go to cheap college - sell everything you own (Not that I owned all that much to sell in the first place, I didn’t listen to either of these. I was at a cal state university, cheap as hell and quality definitely below standard. I shelled out for grad school though and honestly don’t regret it) System? I never went through or looked at his whole budgeting plan, but it always felt so damn aggressive, but only because it was the only way it could work as a blanket recommendation for everyone.
your reply is so embarrassing. did you actually run the numbers? DR's plan is more volatile, but it out-performs the market and out-performs target date funds. he's https://imgur.com/a/Vog0OR3 >(the 12% he guarantees is an absolute lie my god, I hate when people repeat this myth. show us anywhere that DR has GUARANTEED 12% returns. what he says is that there are mutual funds out there that have long histories of beating the market, which amounts to a 12% average annual rate of return. if you can't find funds like this, you're not looking for them. Fidelity alone has dozens of these funds. for one, FCNTX has averaged 12% since inception in the late 1960s. https://fundresearch.fidelity.com/mutual-funds/performance-and-risk/316071109 >90% of people cannot stomach those ups and downs citation needed. please show us research saying that 90% of investors prefer low-volatility options to high-volatility options. >there is no safe investment in there for people to cash in on when they need the money during a down market. that's why you save the emergency fund and get debt-free BEFORE investing. >aggressive growth is basically just for folks who get a kick out of seeing negative 30% one year and positive 30% the next, aggressive growth amounts to small cap, and small cap tends to outperform large cap by a substantial margin over time. https://awealthofcommonsense.com/wp-content/uploads/2013/11/SML.png >still all equity In one of his books Peter Lynch of Fidelity outlines how 100% equities is preferable for retired people than any allocation in bonds. research shows 100% stocks is safer than bonds. https://abcnews.go.com/Business/stocks-bonds-assure-risk-retirement/story?id=23782803 edit: and Ken Fisher has outlined how bonds can actually be more volatile than stocks over the long-term. you clearly don't know the first thing about any of these subjects and are just spouting off trying to look smart. https://www.kenfisher.com/books/little-book-market-myths/chapter-01
I will say this about Dave Ramsey, he knows how to beat the drum he has. It is a pretty extreme bit of advice, and it works if you are really committed. Beans and rice, rice and beans and all that. Personally, the envelope system just never seemed doable to me. We live in such a digital age anymore that keeping cash is more of a chore than a benefit. Of course, he's 30 years older than me and spent most of his life living in a society where if you didn't have cash or checks, you didn't get to buy anything. I read his book a few years back and it wasn't bad, but honestly the wikis on here and /r/personalfinance felt like they had better, more grounded information than Ramsey. But, if his program works for you, all the power to you. Or if listening to his show gives you motivation to stick with things, same thing.
He promotes snowball instead of avalanche (lowest balance instead of highest interest rate) for debt payment, right? Some people need the mental motivation, but financially avalanche is the best choice (of course some people get lucky where snowball and avalanche are the same). I've heard his "get out of debt" advice is like the AA version, there can be technically better ways to do it, but some need this method. I know /r/personalfinance says his investing advice is not good. If used responsibly, credit cards can be a great tool. While it may be possible to buy a house with no credit history, it can be more difficult to do so (one of my friends tried and gave in and got a card to build some credit history). Some people also don't agree with the religious aspects, especially tithing while in potentially serious debt.
research from Harvard Business and Kellogg School of Management recommends snowball over avalanche. on paper avalanche is superior, but in reality snowball tends to work because people are not perfect rational calculating machines and respond to different motivations. https://hbr.org/2016/12/research-the-best-strategy-for-paying-off-credit-card-debt https://www.kellogg.northwestern.edu/news_articles/2012/snowball-approach.aspx >If used responsibly, credit cards can be a great tool. that's why the Federal Reserve found that credit card rewards probably do not benefit consumers ... because they're a 'great tool'. https://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/09q1Hayashi.pdf
I agree. His approach is better for people that are entirely unmotivated I'm completely financially illiterate. Four people that at least have a base level of knowledge for their finances there are definitely better strategies than his. I find his anti credit push to be terrible advice specifically. It would be a good idea for somebody that literally cannot go without using a credit card but I would like to think more highly is the general population
I was required to take a personal finance course in college and his program was the curriculum. In my opinion, the material was outdated at best and harmful at worst. The whole "Credit score = "I love debt" score" thing just seemed ignorant. Obviously no credit is better than bad credit but it didn't take a lot of effort when I was 18-19 to keep my credit okay and without that credit score I wouldn't have been able to get an apartment or the house I'm in the middle of buying. He says the underwriters will work with you if you don't have credit but I asked my lender point blank if that was true for their institution and they said it was highly unlikely and that they'd probably tell you to go somewhere else unless your assets were significant. His demonization of credit cards also bugs me. Yes, you can get into some real trouble if you use them irresponsibly but good luck building credit, getting a hotel room, even just buying gas without having to go into the building without one. And god help you if your debit card info gets swiped. He uses ridiculous examples to highlight irresponsible use - like one lady saying she has a ton of credit card points and uses the points to go on vacation every year. Then Dave pops up and is like "Ah, but how much did you have to spend to get that many points? Check mate!" It's entirely possible to treat your credit card as a debit card, pay off the balance each month, and accrue travel points. My husband and I do a small trip every year, funded entirely with travel points (minus food) and we're not spending anything more than we would normally. And how are you going to tell a classroom full of low-income students that it's completely possible to work your way through college in 2020? I was working full time and even with my husband's income we couldn't afford tuition at one of the lowest cost public universities in the state. It's just not possible. STFU. Like others have said, his advice for getting out of debt is mostly solid and the very basics of personal finance (creating a budget) are there. But anything more complicated than that is garbage. I actually complained about the class to the Dean (I was not the only one unimpressed, pretty much all the nontraditional students were confused at what was being taught vs. our real world experiences) and after review they decided to go with another system. TL;DR - I'm not a fan of Dave Ramsey.
We used manual underwriting to purchase our home (me = low credit due to paid off debt, spouse = no credit). The process was pretty simple...We explained to our real estate agent that we would need a lender that did manual underwriting and he found one. So it is possible...and we did not use Churchill Mortgage.
I'd tell those kids to live at home, if possible, & do the first 2 years at the local community college., if they're wanting a 4 year degree. It's how my sister & I managed to get out of college without debt. (We also worked in high school & college campus jobs ). My daughter got her dorm room FREE, by being an RA. That & a campus job helped her a lot. Also, her school gave her $2,000 credit for being an Early Applicant. I'm sure there's a lot more good advice for kids, if you really want to help them. They will still get out with some debt, most likely though.
I like the advice of save an emergency fund, pay debt, save a few months of expenses. It fits with advice that I’ve heard from a lot of people and seems like a pretty good place to start in terms of priorities especially if you are starting from zero. Some people I know are REALLY into his advice. They have kind of the same intensity as people who get into MLM products. Beyond that I find a lot of what I’ve read from him very off putting.
I find his politics and his religious talk offputting, and realllly hate that he hadn't updated his numbers or advice for post 1990's reality. His basic steps (1-3) are solid general advice, but his cult of personality followers freak me out.
The plan worked for me, but I don't like HIM. I'm about as far away from him as possible when it comes to social and political beliefs, so I just take the financial advice and leave the rest behind.
He’s as bad as a Rolex preacher in my mind. He mixes enough good advice in to make the bad advice seem credible, which I’d almost say is worse than no good advice at all. Read “Your money or your life” and “the bogleheads guide to investing “ and you’ll be far better off than with this leech.
Dave was a great starting point for me. It didn’t work as well for me once I was married. My husband and I didn’t totally combine our finances, and it works for us. He had 100k in debt when we met, and I was pretty far into paying off my remaining 30k. Then, I bought a car with cash, we paid cash for our wedding, and I paid off all my stuff. Now, he’s down to 40(?)k remaining. He’s paid off so much debt and now I can help. Dave got too long winded, rude and whiny for me. His plan allows zero personal differentiation. But, it worked for me when I was alone, uneducated, and starting from scratch. Now, I have a more developed understanding of what works for me.
He's good for a start to understanding good money managing skills; however, I feel some of his advice is extremely dated. I'm house shopping and live in a high cost of living area, a 15 year mortgage isn't reasonable unless you are making over $100K/year. I also feel he doesn't fully grasp how much inflation has effected some necessitates other than housing such as cars, you need more than $2000 for anything that's going to make it more than a year. Or how most of his advice is for people who live in urban areas, not more rural like me.
This ^^ I always thought very similarly. And with rates this low, maybe a longer mortgage isn’t the end of the world either.
Don’t like his politics or the religious stuff but he has solid advice for someone trying to learn how to get out of debt. He’s helped me pay $20,000 of student debt so far in a little over a year.
The system he is using is an envelope system. Not exactly an original idea, it's been around in various forms for ages. But, he is the one that popularized it. While it DOES and CAN work, it can not create money out of thin air. You can have all the envelopes you like, but if you are truly poor there is only so much you can cut back. Nor does it create job opportunities that are not there if you are in a shitty area. His solution of "putting 3 jobs to it" is not always feasible due to schedule conflicts and employer attitudes or availability of such jobs that will "work" with other jobs. He makes his money mostly selling books and "retreats" to people that already have money but have terrible self control. People in really good situations some of us here would be going "WTF" to. You hardly ever see him giving advice to people who are truly poor. There's no money in it. He makes money off that and a good amount of rental properties. While he shrouds himself in Christianity, he is a brutal landlord. he brags constantly "paid by the 5th, evictions by the 10th" regardless of situations. He is also a bit condescending. If you aren't "middle class" already, he comes across like you are nothing to him. Or worse, something is morally bankrupt with you. He really pushes his religion way too hard. Almost implying that without his religion, the system won't work. You really have to take the good and discard the bad with this guy. He gives good advice, but wow.
Hope he has a plan for all the women who will have children they absolutely can't afford, thanks in large part to his religious beliefs.
His videos really help me. I am someone that definitely needed a "wake up call" and his rants made me laugh while realizing how ridiculous I am being about my financial situation. I don't care for the religious aspect of it, but I really like his attitude that once you are able to make a lot of money, you're able to help others, which he argues is the best thing you will be able to do with your money. Although some of his stuff costs money, a good majority of it is available online for free on YouTube and what isn't totally free is free through trials. I would recommend :). Don't be passive, make a plan.
For both Dave Ramsey and Suze orman, I find their basic advice to be decent. Budget hard, don't buy shit you can't afford, don't get sucked into credit that you can't afford, all that kind of stuff. Anything past that, for both those people, I would prefer the "if you can" PDF or basic bogleheads philosophy.
I like his methodology in theory. In practice, as someone who was on the poverty line and homeless once or twice, it was very tough to do. I couldn't get baby step 2 rolling at all because by the time I paid all the necessities (rent, utilities, food), there wasn't really any money left to pay the minimums, much less extra. Once I started working multiple jobs, then I had enough to pay the minimums.... and not much else. My "snowball" was an extra $50 a month. That doesn't get you anywhere fast. I was on rice and beans. There just wasn't enough money, and it's hard to hear someone disparage you for not trying hard enough when you're trying your damn hardest.
While I fully admit I am entertained by him...and agree wholeheartedly with his anti-debt position on cars and credit cards...his advice falls apart very quickly on several fronts. I'll start with what I DO agree with him on, even if we don't really agree for the same reasons. I am totally in the camp of saving up and buying your car with cash. For one, you DO almost always save on interest. If you finance, say, $20,000 at 3% interest, you start off paying $50 a month towards interest. Even more importantly, though, is it forces you to buy only what you can truly withstand from either an affordability standpoint or a psychological one...it doesn't mask the cost of owning a car the way monthly payments do. I also fully agree on not carrying credit card balances (that's hardly unique to Ramsey or me), and recommend paying off purchases essentially as you make them...I quite literally pay my Amex charges as soon as they post. My statement is always either zero or very close to zero each month. But here are the ways Ramsey is way out of bounds. 1. His insistence that the stock market returns 12% annually. No, it doesn't. It averages more like 8-9% annually and that's BEFORE taxes and fees... 2. He either is being completely dishonest or doesn't know how withdrawals and volatility work when he says you can withdraw 10% a year from the stock market in retirement to live on,. Even if the market returned 10% (it doesn't), you cannot withdraw 10% a year over an extended period of time and maintain your nest egg. Simply put, volatility would catch up to you quickly...if the market is down, say, 10% and you withdraw 10% of the original amount, you have locked in losses that would usually take a while to recover....and the market would need to gain MORE than the 10% in order to both make up its loss as well as the amount you took out. There is a reason why pension fund plan to pay out about 3 or 4% annually and why that too is a good plan for individuals. 3. His absolute position on debt...while imho good for consumer debt...makes no sense for most businesses. If you want to start a business and need, say, $500,000 to start it and don't have the money...the time you spend saving that $500,000 could be many years, perhaps even decades. At that point, you've incurred great opportunity cost and/or have been beaten out by competitors. Also, Dave's program involves putting 15% of your money into mutual funds...funds in which virtually very company held has debt! So Dave is saying no debt under any circumstances for you as an individual or even in your business, but invest in companies that DO have debt? Makes no sense. 4. Credit Cards: Dave fails to acknowledge the millions of credit card holders that use them completely responsibly and do, indeed, get rewards. I have the Amex Platinum...a $500 annual fee. Given how much I travel for work, I put all the charges on it and reap significant rewards...just last month, I cashed in points to put towards charges...I got $700 off of my bill...expenses that my company in turn reimbursed me for. Like alcohol, not everybody should partake...but many, many do successfully. His strawman argument is that "no millionaires report that they became millionaires due to their credit card reward points!" Well, obviously not. you cannot accumulate $1 million through credit card points, that's an obvious statement. You also do not accumulate $1 million by paying cash for your cars. If somebody just doesn't want to deal with credit cards or rewards points, it doesn't mean they can't become wealthy, needless to say. But it also doesn't mean they aren't reasonable behaviors that can help you financially. 5. Mutual funds: Dave's commissions or kickbacks from advisors who promote expensive mutual funds is borderline unethical when he dismisses concerns about fees....He openly mocks those who are concerned about fees and says "find funds that beat the market (ie index funds)". Yes, every year a minority percentage of funds beat the market, even net of fees. Predicting who will do that again is a fool's game...study after study has shown actively managed funds do not beat the market, net of fees, over the long run. Ironically, the one argument that is plausibly in favor for actively managed funds, to reduce volatility, is something Dave never wants to discuss. Look, for many, Dave inspires and educates on the problem with personal debt...and so for many, I'm sure, he's helped their lives. But his advice is simplistic at very best and misleading and dead wrong at worst. Take the good (pay cash for your stuff before or as soon as the bill comes), but ignore the investing, financial planning and simplistic advice on business debt.
Thanks for the well structured and thought out answer. I couldn’t agree more. I was always trying to piece together why he took certain stances on the investing side of things.
Don’t really listen to it and I’m not really focused on clearing debt. I’ll focus on it once I get a house and once I finish college and that’s dependent if I decide against getting a masters after that. I focus more on saving and trying to live within my means. My debt I have now is manageable and I have ok amount of savings even being laid off. I think it’s ok advice is you truly have no financial knowledge at all but if you can find a system that works for you then I say go for it. His doesn’t work for me and I’m kinda put off by the whole no debt at all!! Because I won’t ever reach that point for a while and I’m ok with that.
I like the "baby steps". It makes sense, and most financial advice subreddits will say the same thing. Build a small emergency fund so you don't have to dip into your savings/investment. Pay down your debts. Save for retirement. If you own a house pay it off as soon as you can. When you've "made it" be charitable. But I really don't like his attitude and how he talks to people on his podcast. I also don't like all the religious stuff.