3 Reasons Dave Ramsey’s Advice Might Be Wrong for You

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dave-ramseys-adviceNo, Dave Ramsey’s Financial Advice ISN’T Right for Everyone—

Dave Ramsey is a big name in personal finance, particularly in frugal circles. However, your finances are a big part of your future and it’s important to be careful about the advice you choose to follow. While many of Dave Ramsey’s principles are solid, following some of his advice actually helped get us out of $80,000 in debt we accumulated when we both lost our jobs while in the middle of a house remodel.

But there are some bits of advice that may not fit in your life. And it is my opinion there are many techniques staying debt free and frugal.  We found it best to look at Dave Ramsey’s Advice and other financial advisers and pull out the nuggets which would get and keep us on the right track.

Consider these ideas as you plan your financial future. Even the best advice is rarely one size fits all!

Credit Cards Aren’t Evil

Dave Ramsey’s books take a fairly extreme position on credit cards: do not ever use them and do not even keep them around. He advises only to use Debit Cards, if necessary. For some people, this can be good advice— mostly people who know that they cannot avoid the temptation of available credit and will spend money they don’t have. However, if you have enough self-control to use credit cards properly and stick to your budget, they can actually be a great financial tool.

Personally, I like they rewards we receive by using our rewards credit card. And since we pay off our bill monthly this is like free money.

You Need More Than a $1000 Emergency Fund

A big part of the Dave Ramsey financial plan is saving an emergency fund of $1000 as quickly as possible and then using every bit of money available to pay down debt. However, you may find that this advice simply is impractical for you, especially if you have a family. If you have a family to take care of, an emergency fund of $1000 may not get you far at all if emergency strikes.

Also read: How to Dig Yourself Out of Debt Using the Snowball Method

Instead, think about how much of an emergency fund would be practical for your family’s needs and then set up a plan to put money aside for it every week. You can then use leftover money to pay down debts.

Focus More on Retirement Funds

Another bit of questionable advice from Dave Ramsey focuses on paying off debt instead of contributing to your retirement fund. Of course paying off debt is important—no one’s arguing that! But it may not be wise to pay off debt at the expense of your retirement account.

Many employers match contributions to your retirement plan up to a specific percentage. If you do not take advantage of this and instead use all of your money to pay off debt, you are essentially throwing away free money from your employer. A more moderate view of debt and retirement savings may be a better way to go.

His Math Can Be Dodgy

Some of the concepts presented by Dave Ramsey seem like common sense, but they may seem that way because they are based on inaccurate statistics. In terms of retirement planning, Ramsey refers to a 12% return on stocks. This type of return is considered unrealistic by most financial advisors, and basing your savings on this plan may cause you to save less than you actually need. Similarly, Ramsey recommends planning on using 8% of your retirement fund per year in retirement. Financial analysts note that this rate of spending may lead to a depletion of your retirement fund.

Getting your finances in order should be a main priority for you. But don’t feel like you have to stick to the advice of one financial expert or adviser. Do your research, consult multiple sources, and protect the money that you work hard for.

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  1. Rosie says

    I agree with most of what you have said. I belong to groups that follow Dave Ramsey. Some people get so mad if you don’t agree with him 100 percent. I want yo say don’t drink the cool aid.

    • jlpenner says

      LOl… yeah. I do think he has great advice. Just not ALL of it works for everybody. (but you could probably say that of anything) :)

  2. Melissa says

    I have to disagree with this article about using credit cards. Credit cards are not a “tool” and you should never buy things that you do not have the money for upfront. It’s better to go without than to possibly go into debt. Why would you want to rely on the credit card companies anyway? We have been debt free for 1 year now using Dave’s methods. At age 40 with 2 adult kids grown now, it’s been a stellar year for our family and my husband and I can enjoy our life debt free!!!!

    • jlpenner says

      In our situation, we still use credit cards sometimes AND we have the money in the bank. For me, it’s easier to track business and personal expensive with them. But I realize this is not the case for everyone.

      As I said in the article, I personally have used Dave’s methods and think many of them are great. But nothing is ever one size fits all.

      • says

        While I believe most people don’t have the resolve to use credit cards and then immediately pay off the balance, I actually agree with you on this point. I use my credit card then come home and pay the bill immediately for the same reasons. It’s easier to track my business expenses this way. I typically only do this with business expenses.

  3. Tosin says

    He actually says to get an emergency fund of 1000 within the first month and then after that, one is to make their emergency fund what they would need to survive for 6months without pay. So as a college student, i can survive on 150 a month since i dont have to pay rent. so I will multiply that by 6. So then, my emergency found will need 900.

    I am not done reading his book but I think you should go through it again.

    • jlpenner says

      Hi Tosin- Dave actually says to stop saving in you emergency fund once you reach $1000 if you are still in debt. Once out of debt he recommends a 6 month fund.

  4. Hj says

    I think before you decide to bash on someone who has done so much with helping guide so many people to become debt free, you should get your story straight on Ramsey’s way of teaching how to save and spend….

  5. Mila says

    It’s my understanding you need a credit card to rent a car or a room. So, I would think everyone needs at least one.
    I am loving the cash back incentive that my Discover card has and I always pay it off monthly. The percentage you can make, on the money you are spending anyway, is 1-2% higher than the interest you would make keeping that money in the bank. So, if you can handle paying them off monthly, why would you not use them?

  6. emiy says

    Just want to throw my two cents in proving your point. We are in debt, we had our emergency $1000 fund. My husband’s cancer didn’t wait until we were out of debt to show up. He hasn’t worked in 8 months. $1000 didn’t last us two weeks of that 8 months, no matter how frugal we tried to be. Going to doctor’s appointments constantly, leaves little time to coupon and uses a ton of gas. At one time we had $70 in copays for prescriptions which bringing in $0 that’s a big chunk of that $1000.

  7. Just sayin. says

    I appreciate DR. but you are so right!! He also recommends people put 100% down on homes. LOL. Or get a 15-year only. I know thats smart but its not always practicle for everyone either. For example kids do much better (in school and in life generally) in a home rather than apartment, and waiting to afford a 15 year or a 100% down isn’t always possible for 20 and 30 year olds! Fact is, he really favors high income people for his program. If someone calls who is an average income earner (less than $45) asking for advice, his advice is “you have an income problem” and hangs up on them. I have yet to hear an average wage earner yelling “freedom!” on his airwaves. So while I appreciate the overall message and movement A LOT…. he’s far from being correct in his approaches to people.

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