Dave Ramsey’s been a prominent voice in the personal finance space for over 20 years. Much of his advice is solid. But particular pieces of Dave’s advice can be damaging to your long-term financial well-being and enjoyment of life. I Googled “Dave Ramsey is wrong” and guess how many results I got? Over 3 million! Apparently, I’m not the only one to disagree with Dave Ramey. But I will always do so respectfully.
I have a history with Dave
I got my start in financial coaching because of Dave. I taught his Financial Peace University as a volunteer for my church for 10 years! After five years, I completed his Certified Financial Counselor training and met him in person. (He’s much nicer than he comes across on his radio show!)
After I started coaching people on a regular basis, I realized that many of them had a tough time sticking with Dave’s methods. I began to experiment and tweak things for my clients. I dove deep into behavioral finance and the psychology of money, incorporating it into my coaching.
Eventually, I dropped my association with Dave and his organization. Why? There are two reasons: 1.) People either loved Dave, hated Dave, or didn’t know him. 2.) My clients are hiring ME, not Dave. They want to know about my methods and how I can help them! As I grew as a coach over the past 15 years, I realized that I don’t have to follow someone’s teachings and methodology to the letter. (And you don’t either!)
Now, let’s talk about the specific areas where I disagree with Dave Ramey.
Disagreement 1: You have to use “Gazelle Intensity” to get out of debt
Dave advocates getting extreme, cutting your spending to the bone, working overtime or a second job, and “selling so much stuff, the kids think they’re next.” The problem? Most people don’t have the stamina to do that for months or even years at a time. They burn out and abandon their efforts altogether.
How do I know this? Quite a few of my early coaching clients were “dropouts” of Dave’s Financial Peace University. They tried to sprint out of debt like a gazelle running from a cheetah and exhausted themselves.
When it comes to debt, I find that treating it like a marathon, not a sprint, is the best way to go. Create a balanced plan to pay off debt while enjoying life. Refinance your debt to accelerate the process. Just make sure you correct the underlying mindset and habits that got you into debt in the first place!
Disagreement 2: Never use credit cards
Dave Ramsey doesn’t want you to use credit cards at all! He doesn’t think that anyone can use them responsibly. Yes, some people get out of control and should avoid them entirely.
Many money-smart folks use credit cards to their advantage to purchase with 0% for X months, or to earn cash back and other rewards. My husband and I use credit cards and pay them in full monthly. My husband even put our new roof on his credit card a few years ago! He paid in full before the interest hit and cashed out his points to get several hundred dollars of Amazon gift cards.
Credit cards provide higher levels fraud protection than debit cards, and, of course, cash can be stolen. Think about it. When you use a credit card, it’s the bank’s money. If there’s a fraudulent charge, the bank immediately springs into action to resolve it. My bank even proactively calls me when a charge seems out of the ordinary. When you use a debit card, a frudulent charge comes out of your account. You’re out that money until the bank helps you recover it.
You’re a grown adult, you can decide for yourself if and when you’ll use a credit card!
Disagreement 3: Put $1,000 in your emergency savings, then focus on paying off debt
This has been Dave Ramsey’s Baby Step 1 to financial peace for over 20 years. He says to put $1,000 in your emergency savings account, then focus on paying off your non-mortgage debt. I don’t know about you, but I’m lucky if my financial emergency is only $1,000! This is NOT enough for your mini-emergency fund. I recommend that my clients have a minimum of one month of their household expenses in savings before tackling any debt. Since most of my clients are making six-figures, this mini-emergency fund is using $10,000 or more.
Disagreement 4: Stop contributing to retirement while paying off your non-mortgage debt
Dave recommends putting all your muscle into paying off debt, which includes temporarily stopping retirement contributions. I strongly disagree with Dave Ramsey on this one! If your company matches, you’re forfeiting FREE money. Plus, even small contributions compound to large amounts over time. Don’t believe me? Check out this article and graph from Vanguard which illustrates how you can invest less money but have more to spend in retirement IF you start early!
My clients don’t have to choose between debt payoff and retirement investing. I help them find ways to redirect spending away from things that really aren’t important to them so we have more than enough for their goals. Even if your cash flow is tight, I still recommend contributing the amount needed to capture your employer’s match, or a minimum of 5% while paying off your debt.
Disagreement 5: Never buy a new car unless you’re a millionaire
Dave Ramsey wants you to buy used cars until you reach millionaire status. I get that he doesn’t want people to finance brand-new cars with payments they can barely afford. I don’t either! But I’ve found a great way to purchase brand-new cars at a great price. How?
I pay cash for my cars, I drive them for a long time, and I buy them at the end of the model year when next year’s cars are arriving on the lot. I recenlty did this with my first luxury car, an Alfa Romeo Giulia! (Gasp! Don’t worry Dave, my net worth is in the millions, so even by your rules, I’m allowed.) The other benefit to buying new is the manufacturer’s warranty which can save you big bucks!
Here’s the bottom line: Don’t blindly follow ANY financial guru or expert verbatim!
Listen, learn, and take what works for you. I am so grateful for the Christine Luken fans out there! But I never want blind followers who are “Christine Luken Fanatics.” Plus, I am constantly growing and evolving in my knowledge and experience with money. I don’t just disagree with Dave Ramsey! Sometimes I even disagree with previous versions of myself. None of us “experts” have all the answers for every person and every situation, so it’s wise to remember that.
Listen to the full podcast episode, I Disagree with Dave Ramsey, on your favorite platform!
I am older than Dave and was doing money smart while he was going broke the first time. But while I have similar differences with his methods I do give him a lot of credit for helping save a lot of marriages and bankruptcies. I think there are serial spenders who have to go cold turkey on credit and go full gazelle or they just won’t change their bad money habits. But they aren’t you and they aren’t me. I use credit cards all the time yet in my 45 years of using them I have yet to fail to pay them in full each month. I also prefer index funds to actively managed funds. It was nice that you respectfully disagreed, the world could use a lot more of that! Great post.
Thanks, Steve! Yes, people who are in crisis probably do need Dave’s extreme measures if they want to avoid bankruptcy.