I, for one, love reading a good personal finance book. Back in the day, when I first picked up The Total Money Makeover, I vowed to follow Dave Ramsey’s advice to the letter.
Through personal finance books, I learned how to pay off my debt faster, the importance of saving for an emergency, and why I needed to start saving for retirement now. Over the years, however, I’ve also learned that clinging on to every piece of advice that “finance gurus” throw out can backfire.
Here are three personal finance gurus who have recently come under fire.
Dave Ramsey
Dave Ramsey has been criticized for his “oversimplified investing advice.” Ramsey advises his clients and readers to assume they’ll get a 12 percent annual return on investments when saving for retirement. He originally claims that the annual return of the stock market has been 12 percent since 1926, even after adjusting for inflation. (He has since changed the language on his website to say 12 percent without saying anything about inflation.)
This advice has caused a stir among financial advisers claiming that Ramsey’s advice is far from accurate.
Robert Kiyosaki
I was completely consumed reading Kiyosaki’s book, Rich Dad, Poor Dad. Kiyosaki has a unique perspective when it comes to personal finance. Some of his most controversial pieces of advice are: your home isn’t an asset, and you should leverage debt to grow your riches.
It seemed that Kiyosaki’s debt leveraging was working quite well — until he had to file bankruptcy for his company. After a court ruling in 2012, one of Kiyosaki’s companies, Rich Global LLC, was ordered to pay the Learning Annex nearly 24 million dollars. That’s when the Rich Dad, Poor Dad author was forced to file bankruptcy for that company.
Leverage can grow your wealth, but you are also increasing the risk of losing everything. It doesn’t work for every situation!
Suze Orman
I have to admit I’ve never been able to read one of Suze Orman’s books all the way through. Nevertheless, she’s still seen as a financial goddess by her followers. She preaches financial advice, yet her special prepaid card is far from ideal.
“The Approved Card” by Suze Orman is meant for those who have too low of a credit score to get a regular checking account and can’t deposit $1,000 a month for the lower-fee Green Dot Card. The Approved Card charges users a hefty $3 purchase fee, $3 monthly maintenance fee, and $2 ATM fee. Great deal, right?
The Bottom Line
Have these “finance gurus” helped millions of people climb out of debt, save for retirement, and learn personal finance basics? Undoubtedly. Could people get hurt following every single advice from gurus? Absolutely.
You can pick up a few nuggets of wisdom from all three of these finance gurus. That doesn’t mean you need to follow all of their advice to the letter. Remember to follow finance basics and formulate your own plan. Everyone’s financial situation is different, and you should always take financial advice with a grain of salt.
What do you think of “finance gurus”? Have they helped or hindered your journey to financial independence?
{ read the comments below or add one }
I listen to Dave Ramsey and find the majority of his advice to be pretty straightforward, but he loses me when he starts in with the religion, or the insistence that couples must be legally married to stand a snowball’s chance of success. Still, listening to some of the callers makes me realize that I’m not that bad off in comparison!
Will it hurt your credit score if you cancel your credit cards?
I remember reading an interview of Robert Kyosaki in Money magazine years ago. Turns out he was a total scam. The characters in his books, including “Rich Dad” were made up and didn’t exist. Every investment he claimed to have made did not exist. He had lied about his own past… At that time, the only investment he had ever made was the nice house he was living in which was located in Arizona. He also owned a very nice car. When challenged on all these points (and others) by the interviewer, he became angry and defensive but in the end admitted to his misleading ways. I am amazed people consider him an “investment guru”. I talked to a person that went to one of investment seminars. She said after talking about his fabricated past for an hour, the only advice he gave was “buy low and sell high” and then walked off the stage. The attendees (who were sitting there with notebooks open ready to take notes) were stunned and felt ripped off.
I’m a big believer in finding what works for you. I can’t stand Ramsey’s blind preaching about snowball debt payoff… with someone who has a majority of student loan debt in a loan with a much higher interest rate than my other loans, the snowball method would actually have me pay much more interest to pay off my debt!
I think many personal finance gurus have great advice. We all just need to remember that they’re human, too. There is no perfect plan for everyone, each person needs their own customized game plan when it comes to finances. With that being said, pf gurus still have a lot to offer. It doesn’t hurt to listen to them. It hurts when you follow them unquestioningly.
Well said. Listening unquestioningly or without taking your personal situation into consideration are what get you in trouble.
I really, really dislike Dave Ramsey. I find that he can be inspirational, but I have the same issues as you do with him.
I do like Suze Orman though. I find her refreshing, like the Jillian Michaels of finance. Her book “Young, Broke, and Fabulous” was a must read for me when I was younger and attempting to understand investments.
I used to read Orman’s books and watch her TV show. When she came out promoting a debit card riddled with fees, I bailed on her. I have no problem with someone making a living and earning money promoting a product, but when something is riddled with fees, is it really a good thing? It would have been nice to see her stand up the debit card firm and make them take away some of the fees to make the card more affordable for users.
Loved most of the ideas in Rich Dar Poor Dad and Ramsey’s books. Sure, you need to weed out the ‘bad’ advice (or what doesn’t work for you), but a lot of the stuff there is actually common sense. I don’t have any ‘idols’ and don’t follow their advice to the letter. I read anything various books and get the good ideas from them.
This article is right on! Almost everyone has some nugget of advise, others just don’t make any sense. Suze and Dave are great for the beginner but experience and education but one must make their own decisions. For instance, Dave encourages working on the smallest balance verses the highest interest rate. The reasoning is good in this need immediate satisfaction culture. However, for the more mature person, highest interest makes more sense. One the other hand, one with a lot of debt may not be all that mature. -AJ
This is a weird combo but my favorite two financial guys are..
Dave Ramsey – because I like his advise of PAY CASH for things and I like how he breaks things into small steps that any one can do.
Ramit Sethi – I like that he has a mentality of abundace. His idea of automating finance and optimizing spending.
I love Ramit. He is my new favorite and his down to earth and realistic ideas have really helped my improve my life.
Their advice is good to follow, but read between the lines and try to have some gut feeling, while not taking excessive risks.
One thing I don’t understand, is why are some people finding it so difficult to get a traditional bank account? I had a savings account when I was 16, got a checking account when I turned 18… I can never get approved for credit b/c I have little credit history (go figure), but getting bank accounts has never been a problem. Has something changed in recent years where banks are cracking down on applications? (Honest question, I really don’t know).
Anyway, these prepaid debit cards just seem like terrible ideas that make it even harder for the underemployed and working class to save and get ahead/reach their financial goals. All the “small” fees eat away at any extra money that could go towards paying down debt, bills, or savings. As for the card mentioned in the article… a $3 fee for every purchase!? 0.o That is outrageous!
When I recently got a second/part time job, they were pushing a company sponsored prepaid debit card at orientation as an alternative to direct deposit. The fees where not nearly as bad as the “The Approved Card” but still, direct deposit is free and my bank doesn’t nickel and dime me for holding my money. You would think it would be the other way around, I really don’t see why the prepaid cards and being unbanked is so popular w/ the new generation (geeze, I must be getting old! :P)
Thanks for the article, I check the site everyday. I agree with the above posters that listening to the financial gurus’ for another perspective is fine, but people also need to do their own research and decide for themselves based on their own life circumstances.
I am in my 20s and I had no idea about the popularity of these pre-paid cards
I don’t understand that either so don’t feel old 🙂
You’re absolutely right about banks/credit unions being cheaper than those types of cards. While volunteering as a Financial Literacy teacher, however, I found the main reason a lot of students won’t use banks is that a) family members or friends have been burned with fees and warned them they will only get ripped off if they use them and/or b) they’ve personally had a bad experience with one. Also some people can’t open accounts at banks – they are declined when they try because many financial institutions won’t touch them if they closed an account at their own (or even another bank!) but they owed late fees when they closed the account and they didn’t pay.
Banks won’t open an account for someone who is on Cheksystems. If you are on Cheksystem it means you committed some type of account fraud, or you were overdrawn for so long that the bank finally closed your account and wrote off the debt.
If you apply for a bank account and are turned down due to Cheksystems, the bank is required to give you info on how to contact Cheksystems. You would then find out what bank put a flag on you, correct the problem with the bank, and then be eligible to open an account.
Honestly though, most of these people know why they are flagged and don’t bother to pay back the previous bank.
And of course there are those who, like someone else said, is afraid of bank fees. Most banks offer a free account these days, which if you are careful to read the fee schedule, will allow you to bank without being dinged with fees.
Ah, thanks for the responses!
Dave Ramsey for me all the way. I have listened to him since 2005 almost every morning on my podcasting app. I have said it before, but we (wife and I) have been strongly on his plan since Spring of 2007. Not one month has gone by without a budget. I am a school teacher with $20,000 in the bank, and a net worth of over $200,000 (most of it in Roth IRA) all before the age of 40.
We paid cash for our last 3 cars.
But more than financial advice, he has change mine and many others’ lives in other ways too. Starting businesses, losing weight, recommended and published great books (Start and Quitter by Jon Acuff are both great), and just lead happier lives.
And these happier lives start with “financial peace”. Remember, the number one cause of divorce is money problems. Want to fix society and education and broken homes and a lot of other things…have financial peace. Create a budget as a plan to get there.
Hi Phil,
I agree with you! Dave Ramsey has changed our lives for the better. I am so thankful that I came across him before I got my first real job because I would have made the “normal” mistakes. Because of him we are debt free and we have two good cars parked in our driveway. we are working on an emergency fund and we are frugal and can see the bigger picture when the sacrifices are difficult.
However, there are a few things that make me a bit uneasy and I would love your opinion.
1) having no credit at all and doing a manual underwriting for a mortgage. I pay CC in full and honestly try to not use them all together. I am scared of having absolutely no credit (just for the purpose of buying a house)…I am afraid the manual underwriting won’t work or that all we can come up with is 10-15% for a downpayment.
2) I am doing baby step 3 and 4 at the same time. I feel that if I wait too much for retirement I will miss the employer match and something will always come up that it is more important than that. Money comes out and I don’t even know it and it makes me feel at piece that retirement saving are at least happening slowly.
3) Getting a financial expert for investments. I am not there yet but I feel a bit uneasy with this but is not like I know any better. Plan to dig this aspect out when I finish my emergency fund.
Any thoughts? (I am almost 29 btw)
One of my opinions is that you are doing really well. Congrats.
1) I remember you might have asked this question before, but I don’t know much about whether you should have “credit”. Me, I just quit using credit, but I did refinance my house twice, and there were no credit issues. Also, when you go to get a mortgage, you can always say, “We are debt free and have $5000 in the bank.” You are then less risk to the bank, and will get a better interest rate. Dave might say, “Don’t worship at the altar of the FICO score.” Really, I wouldn’t worry about your credit cards. Don’t close them, but don’t use them either. Just put them away, or better yet, cut them up. You will have a history of using them, and paying them off. Problem solved.
2) I did what you are doing…which is invest while saving up my emergency fund. I did not like that I would lose the opportunity to put into my ROTH. That being said, I kind of wish I did what he said to do. There was a time where one car was dying, and we wiped out our slowly-growing emergency plan to buy a newer car. I felt really depressed to start over on the emergency plan. Had I built it up quicker, and then started saving for the car, it would have felt different, even if I hadn’t invested for 1 year.
3) I just invest in the Dow Industrial 500 for now. This summer I will spread out my investments more.
I think these gurus prey on the poor and inexperienced, or un-educated, in the financial world. They may be good for the most elementary and basic saving and budgeting ideas, but after that they are useless.
They all got rich dispensing the drivel they do, and to me it seems like exploitation. Once they get into investment ideas, then they are dangerous. They all have endorsements, which makes them richer, and reduces their objectivity.
Unfortunately, they will always have an audience.
Sorry Steve…I just don’t concur with your statement. Now had you something that harsh about real estate agents, I would agree wholeheartedly…making $12,000 in commission on the sale of a house without having a college education.
I think you’re spot on Alexa. Many of them have offered some good advice, but you really shouldn’t follow them to the letter. I would say that picking things that apply to you from whomever you choose to follow is better than following to the letter on each.