Dave Ramsey approach

[moneysmarts2]

Hi,

Whats your experience or thoughts with the Dave Ramsey approach to investing and debt repayment?

I think the 7 baby steps approach is sensible, however I dont know enough about credit scores (Im from the pacific islands) to understand why alot of people disagree with his stand on credit cards.

 

[RunningBum]

 

[braumeister]

It might be best if you introduced yourself here before throwing questions like this at the forum.

https://www.early-retirement.org/forums/f26/

 

[jr6035]

I do his Everydollar app for budgeting. Works great.

 

[Ready]

From the little amount of time I listened to Dave Ramsey I found his target audience to be people who have little understanding of finances and who get themselves into credit card debt by living above their means, and then look to him for advice on how to get out of the mess they got themselves in.

This forum is focused on early retirement, which generally happens by not doing the above. Most of the members on this forum got here by being responsible with their finances, and so they find Dave’s advice silly and nonsensical, similar to the random stuff that Suze Orman says.

If you have specific questions about your own finances you would be better off posting an introduction and then asking any questions you may have.

 

[disneysteve]

From the little amount of time I listened to Dave Ramsey I found his target audience to be people who have little understanding of finances and who get themselves into credit card debt by living above their means, and then look to him for advice on how to get out of the mess they got themselves in.

This forum is focused on early retirement, which generally happens by not doing the above. Most of the members on this forum got here by being responsible with their finances, and so they find Dave’s advice silly and nonsensical, similar to the random stuff that Suze Orman says.

I generally agree. This forum is not Dave Ramsey's target demographic. That doesn't necessarily mean his advice isn't good; it just doesn't apply to this crowd.

 

[bclover]

From the little amount of time I listened to Dave Ramsey I found his target audience to be people who have little understanding of finances and who get themselves into credit card debt by living above their means, and then look to him for advice on how to get out of the mess they got themselves in.

This forum is focused on early retirement, which generally happens by not doing the above. Most of the members on this forum got here by being responsible with their finances, and so they find Dave’s advice silly and nonsensical, similar to the random stuff that Suze Orman says.

If you have specific questions about your own finances you would be better off posting an introduction and then asking any questions you may have.

pretty much sums it up

 

[RetireBy90]

We took one of his classes at a church we attended for a couple months. My take on his advice to not have any debt is that it is probably good advice for those who have a problem with debt. Much like someone with a liquor problem shouldn’t drink casually. I think he takes the idea of no debt to an extreme, but that is just one opinion.

 

[CardsFan]

I have never listened to Ramsey, but I confess to really liking Suze Orman, about 15 years ago (maybe longer). Today, No.

 

[cooch96]

OP, a high credit score means you will be considered a low risk to lenders. So when you take out a loan, you get more favorable rates (which means you pay less interest on loans such as mortgages). You build a credit score by paying off loans on time. Many folks start building a credit score as young adults with a low limit credit card or car loan. I'm not sure what is considered a high credit score, but the mathematical maximum is 850 so I reckon you're doing relatively well with anything over 700.

 

[Dash man]

Dave Ramsey inspired me to get out of debt and changed the direction of my financial life. But I moved beyond him to learn more about investing and retirement planning. He has his place, but folks here have moved on.

 

[racy]

His target audience are those who got into big trouble with credit cards and debt. So, he preaches that all credit is toxic and should be paid-off ASAP (including mortgages) and then avoided at all costs.
Most here are responsible with credit and money so think his is an extreme view.

 

[always_learning]

I listened to Dave's show for close to 20 years so I'm very familiar with his teachings. I think he has great advice for getting out of debt and budgeting. Investing, not so much.

The credit card issue is more that Dave's target audience are those with debt and who might have trouble controlling spending, hence, the "cut up your cards" mantra.

Credit scores are a necessary evil. A bad score or no score will make it hard (and sometimes impossible) to rent an apartment or house, get a good interest rate on a car loan or mortgage, and it could also lead to higher car insurance rates, higher deposits required for utilities, etc. Also, many employers will check your credit score and a bad or no score will lead to not getting a job offer or even termination (for example, any job where you will be handling money, or even be around money.)

Basically, a good credit score, implies one is 'trustworthy'. One of the easiest ways to get and maintain a good score is through the disciplined use of credit cards.

Essentially, a good credit score makes certain things in life easier and less expensive.

I would suggest that you do some reading on credit scores and how to obtain and maintain a good one. If you are still interested in the Dave Ramsey philosophy, there is a reddit forum dedicated to discussing his teachings, as well as a few Facebook pages. I would also recommend reddit's personalfinance and investing forums to get a more basic understanding of how the credit score and investing on your own works.

 

[JDARNELL]

I think a lot of people on this forum budgeted in some way or the other which is a centerpiece of Dave’s philosophy. We use his EveryDollar app as a place to capture monthly expenses by category and then we transfer them into a custom spreadsheet to compare each month and each year.

Now I have another FIRE buddy that thinks I’m crazy to track anything because inflows are greater than outflows. But some habits are hard to break.

 

[Palmtree]

Dave is absolutely the best coach out there for getting out of debt. I have no doubt that he has educated many thousands, maybe millions, on the best way to get and keep out of debt. His steps are time proven and work.
However, I don't think his advice on investing is one I would recommend. Once you're out debt, I would highly suggest you climb up the ladder a rung and start reading forums like this one and bogleheads.org

 

[mystang52]

Dave is absolutely the best coach out there for getting out of debt. I have no doubt that he has educated many thousands, maybe millions, on the best way to get and keep out of debt. His steps are time proven and work.
However, I don't think his advice on investing is one I would recommend. Once you're out debt, I would highly suggest you climb up the ladder a rung and start reading forums like this one and bogleheads.org

OP: Read this several times. It must be great advice 'coz I was going to write something just like this!

 

[Irishgirlyc58]

Thanks for the chuckle! [emoji12]

 

[ERD50]

I generally agree. This forum is not Dave Ramsey's target demographic. That doesn't necessarily mean his advice isn't good; it just doesn't apply to this crowd.

True, but regardless, it isn't good advice!

Yes, some people need the approach to control spending, but from what I've seen, he never moves them past that.

It's like keeping a kid on training wheels their whole life. All debt is bad! You'll shoot your eye out kid!

After digging deeper, motivated by a poster on another forum that was a DR booster, I came to really, really dislike Dave Ramsey. When it comes to investing, DR is downright disingenuous (I'm being polite) and dangerous. He has to know better than some of the "stuff" he dishes out (uses numerical "average" market returns and compounds that number, rather than using the actual long term returns and deriving a compounded number - it may sound subtle, but it makes a big difference*) so I attribute it to greed. He seems to have a connection to (or actually owns?) some of the commission sales people he directs people to.

*Example, extreme to make it clear: The market goes down 50% year one, and up 50% the next. Average return is 0% (+50% and -50% averaged = 0%). Makes it sound like you are right where you started, at a 0% gain.

But in real life $100 turns to $50 in year one, and 50% up the next year from $50 is $75. So you are down 25%, even though the "average" return was 0%.

If DR doesn't understand that, or he isn't listening to his staff explaining it to him, he has no business giving investment coaching. I don't think he's stupid, so Occam says there is something more devious going on.

-ERD50

 

[Bamaman]

I'm a believer in some of Mr. Ramsey's principles, but others are just so difficult to live through.

Get a load of his house: 13K plus square feet in an incredibly expensive neighborhood
And he paid cash.

https://nypost.com/2021/02/23/dave-ramsey-christian-guru-selling-tennessee-home-for-16m/

He just got through building a beautiful twin 5 story office complex with huge parking garages on I-65 south of Franklin, Tennessee. I wonder if he paid cash?

He's marketing his financial programs through churches yet he recently fired his right hand man for having an extramarital affair and another for having a baby out of wedlock. Litigation is pending with a few ex-employees presently.

And he currently is expanding his operation hiring additional employees.

 

[jollystomper]

Dave Ramsey's approach in terms of getting out of debt and starting savings is appropriate for the majority of people in the U.S. If one looks at the numbers for the "typical" American household in terms of debt, credit card debt, and savings, one can understand his popularity. While I do not agree with his investing advice, I have listened to his shows during long drives, and rare is the caller that asks about investing, they are dealing with spending and debt issues.

Now, little of his approach applies to this "esteemed" group because, frankly, the vast majority of us here are rich. We are likely in the top 5-10% of household net worth/wealth in the U.S. (and likely the top 1-5% in the world). We already have the "basics" of savings (LBYM) and handling debt down pat. Our interest is more in the "what is the bet way to invest/grow/maintain my stash?" realm. In you are in this crowd, there are better resources than Dave Ramsey.

 

[Aerides]

If I were a young twit with debt and no real plans on how to get financially healthy, either Ramsey or Orman would be a helpful guide to get better. But beyond that...

Ramsey's advice also links a religious aspect to finances, which might not appeal to some.

Bottom line, all these folks are here to entertain and make money off their audiences.

 

[ERD50]

Dave Ramsey's approach in terms of getting out of debt and starting savings is appropriate for the majority of people in the U.S. If one looks at the numbers for the "typical" American household in terms of debt, credit card debt, and savings, one can understand his popularity. While I do not agree with his investing advice, I have listened to his shows during long drives, and rare is the caller that asks about investing, they are dealing with spending and debt issues. ....

Yes, but I've listened to his show while in the car, and I feel he gave very bad advice to someone who was in this position.

He is so hard-core on this whole "debt free" mantra (they actually do some sort of chant, like a cult - from his web site: "What is a debt-free scream? - Yes, it’s really a scream. Or a shout, or a chant, or whatever suits your style"), that people make bad decisions to get out of debt "at all costs".

I forget the details, but this couple was so anxious to get out of debt, they sold their home (that they admittedly really couldn't afford) at fire sale prices, just to get out. They bought a much cheaper home in a bad neighborhood with bad schools for their kids, just so they could pay off that mortgage quickly. And some other bad decisions. All this was cheered on, because they were getting out of debt (they only thing that matters to DR).

They should have taken their time to get the top buck for their house, buy a nicer place but still well within their budget with a mortgage payment they could afford. Build up an emergency fund and start a solid, simple investment program.

But no, you just gotta get debt free! I really, really dislike DR, even for the people who need his sort of help.

... Now, little of his approach applies to this "esteemed" group because, frankly, the vast majority of us here are rich. ...

And just because most of us don't need his advice, doesn't mean we can't critique whether it is good advice for the kind of people who do need it (some of us are in the "been there done that" camp). Just because I'm not starving doesn't mean I can't recognize that a starving person is in need of food. It is possible to evaluate things outside of our personal experience.

-ERD50

 

[jollystomper]

Yes, but I've listened to his show while in the car, and I feel he gave very bad advice to someone who was in this position.

Understand, but like any other advisor, he is not going to give perfect advice to every single person, I can find examples like that from any advice giver even ones here . It can be easy to expect perfection from those of differing views .

The funny thing is, in the example you cite, I have known people who have chosen to move back to what others deem as "bad" neighborhoods and found it worthwhile in the long run. Sometimes "bad" was based on the predominant ethnicity in the neighborhood, sometimes the "bad" neighborhood was going through a transition that in 10 years it became a "good" neighborhood.

And just because most of us don't need his advice, doesn't mean we can't critique whether it is good advice for the kind of people who do need it (some of us are in the "been there done that" camp). Just because I'm not starving doesn't mean I can't recognize that a starving person is in need of food. It is possible to evaluate things outside of our personal experience.

True, but I recognize a starving person does not need my steak to start being satisfied, and is better starting out with a level of food they can afford .

 

[disneysteve]

True, but regardless, it isn't good advice!

I was trying to be diplomatic.


I think Dave's advice for getting out of debt - live below your means, cut out all unnecessary spending, prioritize the spending for the money you've got to work with, and put every extra penny toward the debt - is all generally okay (with some exceptions as you've noted).


His investing advice is simply awful, often outright wrong, and dangerous.


If folks are really struggling with budgeting and overspending and debt, his system can and does work, but once you're back on track, you need to move on to much better advice.

 

[ERD50]

Understand, but like any other advisor, he is not going to give perfect advice to every single person, I can find examples like that from any advice giver even ones here . It can be easy to expect perfection from those of differing views .
... .

I'm not holding DR up to the standard of perfection, you are moving the goal posts.

I think much of his advice is just plain BAD, even for (especially for in some cases), his intended audience.

-ERD50