Thoughts on Dave Ramsey

[Eagle]

Hello!

Just curious on everyone's thoughts on Dave Ramsey overall? Personally, there are some things I agree with and others that I do not....

- 12% rate of return - Dave bases all of his investing advice/projections on this number. Seems unrealistic to me for many reasons.

- No credit cards - Dave preaches don't ever have a credit card. Claims all you need is a debit card. I'm not sure I agree with this. A credit card, paid in full every month that it's used can provide you things such as rewards/points and flexibility with your cash flow.

- No Debt - This part I agree with. It's great to not have debt (I'm almost there except for my house), although a little debt here or there doesn't stress me out too much.

- Baby Steps - Dave is always touting the baby steps as the way to get out of debt and be smarter with your money. I agree with most of them, although I DO NOT agree with draining your E-Fund to 1k to pay down debt. Maybe it's just me, but that seems like a recipe for disaster!

What do you think on the items I listed above?

@cashisking500
Current as of August 2015

U.S. household consumer debt profile:
•Average credit card debt: $15,706
•Average mortgage debt: $156,333
•Average student loan debt: $32,953


Re: 12% rate of return Why does 12% seem unrealistic to you? How have your investments performed in the last year or the last 5-10 years?

Re: No credit cards May not be for everyone. But a large portion of Americans don't handle credit cards responsibly (paying them off every month & only buying what they can afford without paying interest).

Re: No Debt We personally have paid for vehicles, no credit card debt, no student loan debt, and no personal loans...

Re: Baby Steps When we're done with the house we will be free to pursue our goals and dreams more thoroughly. If $1000 is too little for you maybe $2000-$4000 is a better number. The point is to pay down debt quickly and efficiently. Saving for emergencies, budgeting, and being intense is all good advice IMO.

Like Tripods68, we're on Baby Steps 4/5/6. We have read and listened to Total Money Makeover at least a half a dozen times. We've also taken Financial Peace University twice and we're now leading/facilitating the course at our church.

No system is perfect but Dave's system is certainly helpful to many. It helped us pay off our debt $36,000.00 (Car & Furniture), pay for a family vehicle cash, put 20% down on our house, and eventually pay off our home early.

[feh]

Why does 12% seem unrealistic to you?

This is why:

http://www.fool.com/investing/general/2013/06/03/dangerous-retirement-planning-advice-from-financia.aspx

Even if you assume the S&P 500 will continue to perform like it has in the past, he's wrong. Combine that with the fact that folks shouldn't be 100% invested in equities makes the claim even more ridiculous.

If he then directs his listeners to invest in funds for which he is compensated, he isn't merely a charlatan, but a huckster.

[myrdale]

In my opinion, his advice is not one size fits all, nor is it necessarily the best in general, but for 90% of the population, I think it is generally excellent advice.

A chunk of his callers are people who are in over their ears in debt. They aren't the most financially savvy to start with. His steps atleast give them a structure to start with.

I strongly disagree with the idea of only buying a 15 year mortgage. I am of the opinion you should get a 30 year mortgage for the lower payment, and then pay extra every month. I paid my 30 year mortgage off in 9 years, it worked for me.

The thought of investing in 12% return of investment is great except for I can't read the future.

I worship at the alter of FICO. Having 10 credit cards is a bad idea, but 1 or 2 is fine if you control your spending and pay off every month.

Most folks are going to have some debt, the key is to be smart about it. Fore example don't buy a $40k car unless you're making $80k per year.

[pflyers85]

In my opinion, his advice is not one size fits all, nor is it necessarily the best in general, but for 90% of the population, I think it is generally excellent advice.

A chunk of his callers are people who are in over their ears in debt. They aren't the most financially savvy to start with. His steps atleast give them a structure to start with.

I strongly disagree with the idea of only buying a 15 year mortgage. I am of the opinion you should get a 30 year mortgage for the lower payment, and then pay extra every month. I paid my 30 year mortgage off in 9 years, it worked for me.

The thought of investing in 12% return of investment is great except for I can't read the future.

I worship at the alter of FICO. Having 10 credit cards is a bad idea, but 1 or 2 is fine if you control your spending and pay off every month.

Most folks are going to have some debt, the key is to be smart about it. Fore example don't buy a $40k car unless you're making $80k per year.

Again you have to consider his audience and his philosophy that human behavior is nearly as important as the math. Most people go for the 30 year mortgage for the lower payment so they can buy more house than they can really afford.

[Eagle]

Again you have to consider his audience and his philosophy that human behavior is nearly as important as the math. Most people go for the 30 year mortgage for the lower payment so they can buy more house than they can really afford.

Yes, Dave Ramsey is definitely about behavior modification. Most of his audience consists of people who really have no clue how to handle money.

True about 30 year note, we were approved for a home mortgage nearly 180k. We went with a house we bought for 135k and put 20% as a down payment. We plan to pay it off in less than 10 years. We are just about to start year 3.

[Eagle]

This is why:

http://www.fool.com/investing/general/2013/06/03/dangerous-retirement-planning-advice-from-financia.aspx

Even if you assume the S&P 500 will continue to perform like it has in the past, he's wrong. Combine that with the fact that folks shouldn't be 100% invested in equities makes the claim even more ridiculous.

If he then directs his listeners to invest in funds for which he is compensated, he isn't merely a charlatan, but a huckster.

Yes, a lot of people have an issue with Dave's advice on mutual funds. I personally think that 8-10% return is not unrealistic though based on the investments we own.

I guess you'd be a proponent of index fund kind of investments then?

[Weird Tolkienish Figure]

Ramsey is great advice for people in financial trouble. But for people who can handle money better, I do agree that he's a bit limiting.

[feh]

I guess you'd be a proponent of index fund kind of investments then?

Yes, I am a boglehead.

[corn18]

Yes, I am a boglehead.

I'm a Boglehead as well.

[tripods68]

Ramsey is great advice for people in financial trouble. But for people who can handle money better, I do agree that he's a bit limiting.

Both wife and I listen to Davey Ramsey podcast daily and his advice is just not limited to people in financial trouble. His teaching and philosophy are common sense approach to everyday people. If you think you are 'okay' financially, think about how much more you will be wealthy if you incorporate his teaching into your life. What would be the result of that in 10 to 20 years? _____________

Personally I wasn't really a fan of DR until we needed a boost in our finance. We tried and saw the result. In just a few months, we completely paid off our debt, except the mortgage. We also completed our FPU class last week.

DR's investment advice is not the most advance but if you don't know anything about investing, just follow his 4 basic investment principle (Growth, Growth & Income, Aggressive Growth, and International) for the next 20 or 30 years you will have the similar return of an S&P 500 index. Having been around in finance and banking for the last 20 years, I know what's Bu**SH** advice when I see it. If you have no debt and a mortgage by the time you retire, who cares if you don't achieve 12% return as long you regularly maximize your retirement contributions. That's just a bonus.

[pflyers85]

I would agree that Ramsey's wheelhouse is more debt reduction and ultimately elimination of debt than investing. When it comes to the debt and spending side of finances he is one of the best resources out there with a proven system that works. His investing advice is not particularly terrible but I do agree that there is better investing advice out there. Personally I'm not one to subscribe to just one persons school of thought when it comes to money management and wealth building. I just try to gather information from many sources and try to apply it to my sitution to see what is the best direction for me.