Is Dave Ramsey’s Advice Right for You?

by Will Lipovsky · 13 comments


Dave Ramsey is a sensation in the world of personal finance. He may even be the most popular financial guru of our time. He has had several TV shows, he’s a best-selling author, he’s created classes that are now taught all across the country, and he has his own radio show too. When a man has these kinds of credentials, we must all see if his advice is right for us.

I first heard of Dave Ramsey from my parents. They were about to enroll in his series of in-person classes called ‘Financial Peace University’, where there would be live instruction at their church each week for about 3 months. The classes were about everything from creating an emergency fund to paying for the children’s college education.

The course also came with a series of CDs to listen to on your own. Mom and I took a road trip from Nebraska to Arizona one time, and the CDs were in the car so I figured I’d listen. I got hooked on Dave then.

His advice covered the basics and his Southern twang made me feel like the information was even more basic. He spoke of having more money than you could possibly spend. He infamously uses a 12% rate of return on the stock market. Many people scoff at it, but the S&P 500 did average a nearly 12% return since inception, and there are a handful of mutual funds that have matched that. I can see why Dave has become so popular.

I listened to Dave’s radio podcast for months thereafter. It was all good stuff but pretty soon I felt like I knew it all. I could answer the caller’s question about as fast as Dave. I also grew tired of people complaining about their debt situations. It’s fine if you’re in debt. People mess up. But no one needs to complain about it. Just do something to get rid of it.

get out of debtI branched out from Dave. I found Suze Orman and Clark Howard. Suze is cool. Clark is super-savvy and his practical advice feels ever-so-empowering.

As I sought advice from other personal finance gurus, I hadn’t forgotten Dave. I did begin to question his way of thinking a bit, mainly in relation to credit cards. He says never to use them. He advises people to cut up their credit cards and pay cash for everything. In a digital world where credit reports matter… this is bad advice.

I know why he does it. Because many people get themselves in trouble with credit card debt. I’ve come to the conclusion that credit cards aren’t inherently evil though, so there’s no need to turn away from them.

I personally like credit cards because they help boost my credit score. This will make getting a mortgage much easier and much cheaper. I also get cash rewards. It’s not life-changing money but a few extra hundred bucks per year can cover my annual shoe budget. Paying with a credit card also offers benefits like purchase protection, free rental car insurance, free credit checks, and other perks. Combined, these can really add up.

People will find it hard to get a mortgage by listening to Dave Ramsey to the tee. Many more will find it harder to get refunds on purchases, get a car loan, etc. Credit is the closest thing we have to a financial report card, and having a blank report can make life much less convenient.

Personally, I don’t listen to Dave anymore. For the most part, his advice is sound. He’s helped lots of people get out of debt. But asking everyone to turn away from credit cards and use cash instead? No thanks. Some countries like Denmark, Sweden, and others are nearing a cashless society already. Going cashless is cheaper for the government, it reduces theft, it’s easier to track your income/expenses and you can use a mobile wallet such as Apple Pay. If it’s up to me, our own government could stop producing paper bills and coins right now. What will you do if you are strictly using cash then?

How to Find the Right Financial Advice for You

This begs the question though, how do you find the right financial advice for you? Here are a few areas where help is available.

Self-Learning: Blogs and Books

One way to start finding the right financial advice for you is to start with self-learning. The Internet is full of blogs about finances (including this one). There are also plenty of books and other publications that tackle money issues. You can find valuable information when you educate yourself about how money works.

If you decide to go this route, it’s important to start out with where you are now. What do you already know? What are your current goals? If you are still in debt, it makes sense to follow an expert who can help you stay motivated to pay off your loans. For those who want to learn more about investing, you might read what successful investors have done in the past.

It’s also a good idea to search out differing opinions. While you might be drawn to one philosophy, that doesn’t mean it is the answer in every situation. Read opposing opinions and ideas so you can get a feel for what might work best for you in the long run. You can pick and choose ideas that resonate with you, or that work best for you at a specific time.

At the very least, gaining a basic knowledge of how money works, and gaining a basic understanding can help you move forward.

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Working with a Financial Advisor

No matter how much you have read, and how much you think you know, getting a professional opinion can be a smart move for your finances. Working with a financial advisor can be a good way to make a plan for the future. A financial advisor has an outside eye that can be helpful to you as you create a long-term approach to your money.

Choosing the right advisor is an important part of this process. First, you want someone who understands you. Many financial advisors are willing to offer a free initial consultation of 30 to 60 minutes. Does the financial advisor ask you questions about your lifestyle and your goals? You want someone who can tailor a plan for you, based on your individual expectations and objectives, rather than being completely formulaic.

It’s also a good idea to understand how your financial advisor gets paid. You might be in trouble if your advisor is paid on commission. While that doesn’t mean that all commission-based financial planners are bad, you do need to be aware of potential conflicts of interest. Someone who is paid based on assets under management, or who charges a flat fee or hourly rate, might make more sense for you, depending on your goals.

Carefully think about what you want to happen in your life. Anytime you look for advice or ideas, it should start from where you are now, and where you want to go.

But let’s get back to Dave Ramsey. What do you think of him?

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  • steveark says:

    You aren’t wrong, but I don’t think Dave is either. His targets are out of control spenders with debt issues for the most part. Common sense people with impulse control, like you and me, don’t need his help, you will and I have ended up with more money than we can spend because we don’t spend as much as other people and generally earn more. Credit cards are a convenience for common sense people with impulse control but they are like a hand grenade to Dave’s target audience. I think there is room for his strict rules when dealing with out of control spending addicts and for looser rules for those of us that were born good with money or have learned it over time. But you have to give Dave credit, he’s saved lots of people from debt and probably kept many families together by reducing the stress money was putting on marriages. I still listen to him.

    • David@MoneyNing.com says:

      I’ve been listening to some of his shows through his YouTube video clips. I can see why he’s become such a big name in the space. He’s helped many people, that’s for sure.

  • Laurie says:

    We completed the Homeschool high school course with my kids and a friend, and I think Dave’s advice is very good, especially for financial novices. His message about debt is spot on. I think one of the major reasons he frowns on credit cards is that most people are more likely to buy stuff they don’t need with credit cards. People tend to spend less of their money if they are using cold hard cash to pay for it. More thought is put into assessing the need for the purchase with cash vs. just swiping the card. Find a fabulous pair of shoes for $150? Got plastic – no problem. Someone might think twice if paying with cash and spend $75 on another pair instead. The cash back amount on the credit card doesn’t make up that difference.

    • David@MoneyNing.com says:

      Good argument Laurie. Research does show that people spend 30% more with credit cards. Still, using plastic can work for some people. It might even help a select few ultra savers spend a bit more!

  • Danny Lee says:

    Dave Ramsey impacted my views on personal finance a lot in my early 20s. He teaches basic concepts, but a lot of people have never learned even that. I don’t agree with everything he teaches, but I too understand why he teaches what he does.

    • David@MoneyNing.com says:

      The basics are incredibly important, and Dave Ramsey does a great job drilling those concepts in our heads. We’ve got to give him that.

  • Kathryn @ Making Your Money Matter says:

    I totally agree with you on Dave Ramsey. He’s awesome and has helped so many people to get out of debt and face the reality of their finances…however, I’m really not his biggest fan. I think it’s a good start, but I also don’t like his “us vs. them” mentality that everyone that disagrees with his advice is broke and stupid. Not true, Dave! Not, true! There are lots of other ways to do things, and using credit cards can be very beneficial (I myself have never paid more than probably $100 in credit card interest and fees and have made thousands of dollars in rewards). He covers the basics of personal finance, but everyone would benefit greatly by using his information as a starting point and educating themselves more based on a variety of expert information to make sure they really understand finances.

    • David@MoneyNing.com says:

      Cheers for another person who uses credit cards to their advantage! I get a check every couple months and it’s free money!

  • Natasha says:

    Cash reward credit cards – like the CCs that offer cash back when you spend and pay off the balance – can be extremely beneficial to responsible owners. Only paying in cash 100% of the time just isn’t feasible for everyone.

    I do agree with Dave in his thoughts about not looking at life insurance as an investment though. Too often people mistake life insurance as a vehicle for making money. Life insurance isn’t for the living, it’s for those one leaves behind when they die. Life insurance is extremely important, but it’s not the right product for making money – it’s income replacement.

    • David@MoneyNing.com says:

      Cash back is awesome. I still don’t get why many of my friends still pay cash or use cards that give them what’s effectively one percent back. I keep trying to tell them to switch but I’m not always successful.

      One day they’ll see the light!

  • freebird says:

    My take is that financial advice is akin to medical advice– it all depends upon the individual and the specific situation. You won’t find an effective universal cure-all.

    That said, I think Dave’s stance would be the best approach for most people most of the time. Some make the analogy between credit cards and painkillers, and for an unfortunately large minority a small taste rapidly escalates to breaking bad. For the majority total abstinence isn’t necessary, but I’d say very few of us build our wealth based solely upon leverage. So avoiding debt isn’t likely to cost you your fortune.

    As for cash versus credit, it’s not paper vs plastic that’s the issue. What matters is how money and value travel in time. If you pay your obligations without delay, it doesn’t matter whether it’s handing over paper notes, online bill pay, or bitcoin– this is what Dave says you should do. The idea is to space out your large purchases over long periods of time, but make all your payments in one lump sum. Don’t do the opposite because spreading your payments incurs charges that are eye-watering.

    BTW I am not a fan of Dave because I hear he has accepted sponsorships from companies whose businesses conflict with Dave’s fundamental message.

    • David@MoneyNing.com says:

      I love this advice: “… space out your large purchases over long periods of time, but make all your payments in one lump sum. Don’t do the opposite because spreading your payments incurs charges that are eye-watering.”

      Many will question the specifics, but there’s no doubt Dave Ramsey has helped a ton of people get out of debt. We should at least applaud that.

      • Argie says:

        My parents fought over money issues all the time. What I learned from them was not good at all for my financial health. Years later, when I attended Financial Peace University at our church, it was looking like my only option was bankruptcy, and now I’m doing fine financially. It was like going on a money diet, following his advice. I did cut up 12 credit cards and used only cash, all along wishing I had known his advice when young. Today I have one credit card that I pay off every month, and I keep an emergency fund that has helped me replace my roof, redo my house’s electrical system, and buy a new fridge, all with no drama or panic. Kudos to Dave. Not everyone needs his advice, but I sure did.

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