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Ramseys financial advice is terrible for anyone who knows how to budget and pay bills on time. The worst is his investing advice which just boils down to gettin

Ramseys financial advice is terrible for anyone who knows how to budget and pay bills on time. The worst is his investing advice which just boils down to getting an ira and 401k. He could at least plug vanguard as it’s a great option for retail investors. Regarding debt... his debt snowball only works if there’s enough income to cover it and there are tons of examples where there isn’t. This means people spend every penny they earn paying off small loans only to eventually lose everything when they start on the larger ones. The guy is just a radio personality.

paulpauper 5y ago
Ramsey's success in spite of mediocre/bad/wrong advice is evidence that luck and connections is more important to success than actual merit, at least for him. By being a pioneer of personal finance radio, so by being early he was able to get a large following and be hugely successful without having to have much talent.
cma 5y ago
He tells you if you have any car loan to not contribute to your retirement account until your car loan is paid off, even if your company matches 100%. Insane. You could contribute, get the match, and then take the penalty the next year (or whenever is optimal based on match limit etc., withdrawal requirements, etc.) and dump it into the car loan at that point and still come out far ahead. (edit: replaced mortgage with car loan, as he excludes mortgages from the advice as pointed out below)
- xupybd 5y ago
  Ah no he doesn't, here are the steps from his website. Baby Step 1: Save $1,000 for your starter emergency fund. Baby Step 2: Pay off all debt (except the house) using the debt snowball. Baby Step 3: Save 3–6 months of expenses in a fully funded emergency fund. When you’re working through the first three steps, you simply do them in order. However, people often have questions about Baby Steps 4 through 6. Here’s a quick definition of them: Baby Step 4: Invest 15% of your household income in retirement. Baby Step 5: Save for your children’s college fund. Baby Step 6: Pay off your home early.
- DavidPeiffer 5y ago
  >He tells you if you have any mortgage to not contribute to your retirement account until your mortgage is paid off, even if your company matches 100%. That is entirely incorrect. [1] Baby step #4 is to invest 15% of your household income for retirement. Baby step #6 is to pay off your home early. He does tell you to temporarily stop investing so you can pay more towards you debt. This is sub-optimal. His goal is to get you entirely focused on one thing at a time and go after it with everything you have. [1] https://www.ramseysolutions.com/dave-ramsey-7-baby-steps https://www.ramseysolutions.com/dave-ramsey-7-baby-steps
  - cma 5y ago
    Ok, I forgot he excludes mortgage and chose that as an example as the longest term, lowest interest debt with least depreciation. It's still worth going into almost any other debt to get a large match, often even expensive credit card debt (you may have to skip matching some years when you take a net withdrawal to keep it optimal). Paying off an existing car loan before taking a 100% matching contribution is almost always crazy.
    - xupybd 5y ago
      It is if you have no emotions involved. The people he is trying to help are the kind that struggle to avoid debt due to lack of self control. His method is about creating emotional feedback that keeps people going.
    - DavidPeiffer 5y ago
      I agree the method he presents isn't mathematically optimal. We're also on a forum with many engineers and highly analytical people, which isn't his target audience. To use one of his quotes, "if you cared about being mathematically optimal, you wouldn't be in this mess to begin with!" His target audience is people who are living paycheck to paycheck, routinely taking loans to support a lifestyle they can't afford, and don't see how their spending habits are death by a thousand papercuts to their aspiration of being financially stable. To be clear, I'm not a Dave Ramsey worshiper. I strongly disagree with some of his workplace policies and hope he gets taken to the cleaners with some of the lawsuits currently going through the system. I have listened to his show many times, but don't follow all his advice. I'm not paying my superbly low interest rate mortgage down faster than required. I can't think of anyone responsible for getting more consumer debt eliminated than Dave Ramsey, and that should be commended. The vast majority of people would be far better off following his plan than continuing on their current trajectory. He recently declared war on the time share industry, and I hope he makes waves by throwing his resources behind it. https://youtu.be/o6VNi5hJpiU https://youtu.be/o6VNi5hJpiU
- ryathal 5y ago
  He tells you to do this in the extreme short term. The goal is 18-24 months to pay off debt, not 50-10 years. Ultimately this isn't a huge some of money even if you run it out 30 years. The point is getting out of debt and not going back, on average people don't have the discipline to make the most mathematically optimal moves. The individual isn't winning 9 times out of 10 when they try to leverage debt, most don't have access to things that can actually get a return on the risk of debt.
  - cma 5y ago
    You won't pay off massive low interest student loan debt that quickly, and it is usually a big mistake to give up a free matching contribution just to pay off a little bit more of your student loan.
listless 5y ago
The guy might be an asshole, but his advice is rock solid and it’s worked wonders for me. The thing is, Dave showed up at a time when credit cards were how people lived. Leveraged to the hilt and no savings. He will be the first to say that his advice isn’t genius - it’s pragmatic and simple. Learn to budget. Pay off your debt. Fund your 401K. All of that said, he appears to be a pretty nasty individual. Which is fine. But the unforgivable part is that he does it on the back of Christianity. Absent that variable, he’s just another ruthless businessman.
prestigious 5y ago
I don’t understand how paying off your smaller loans leaves you less able to pay off larger ones?
- Thorrez 5y ago
  I think deelowe's point is that people should pay off higher-interest loans first, not smaller loans first. But I'm not sure if there are many people where the difference between these 2 strategies will be significant.
  - mgkimsal 5y ago
    Agreed, and I do think the psychological impact of people seeing some debt bills go away completely is an emotional boost that helps them keep going. Imagine having bills for $8k, $12k, $6k and $2k. You decide to cut current expenses and take a side job - you're getting serious about this. Getting rid of a $2k bill completely in, say, 4 months, is a decent psychological boost. You might be paying a bit more in interest if the other bills are higher interest rates, but you now have one gone completely. That's bigger progress to many people. I think one of his quotes - or perhaps from someone else - is that you didn't get in to a bad debt situation purely by numbers and math in the first place. There were usually some emotional factors in overspending (and perhaps hiding the debt from family/friends). Trying to ignore the emotional component of getting out of debt is silly, and the 'debt snowball' is simple enough for people to grok and work.
Thorrez 5y ago
>The worst is his investing advice which just boils down to getting an ira and 401k. Why is that bad? Tax-advantaged accounts are much better than non-tax-advantaged accounts if your goal is saving for retirement.

paulpauper 5y ago

Ramsey's success in spite of mediocre/bad/wrong advice is evidence that luck and connections is more important to success than actual merit, at least for him. By being a pioneer of personal finance radio, so by being early he was able to get a large following and be hugely successful without having to have much talent.

cma 5y ago

He tells you if you have any car loan to not contribute to your retirement account until your car loan is paid off, even if your company matches 100%. Insane. You could contribute, get the match, and then take the penalty the next year (or whenever is optimal based on match limit etc., withdrawal requirements, etc.) and dump it into the car loan at that point and still come out far ahead. (edit: replaced mortgage with car loan, as he excludes mortgages from the advice as pointed out below)

xupybd 5y ago
Ah no he doesn't, here are the steps from his website. Baby Step 1: Save $1,000 for your starter emergency fund. Baby Step 2: Pay off all debt (except the house) using the debt snowball. Baby Step 3: Save 3–6 months of expenses in a fully funded emergency fund. When you’re working through the first three steps, you simply do them in order. However, people often have questions about Baby Steps 4 through 6. Here’s a quick definition of them: Baby Step 4: Invest 15% of your household income in retirement. Baby Step 5: Save for your children’s college fund. Baby Step 6: Pay off your home early.
DavidPeiffer 5y ago
>He tells you if you have any mortgage to not contribute to your retirement account until your mortgage is paid off, even if your company matches 100%. That is entirely incorrect. [1] Baby step #4 is to invest 15% of your household income for retirement. Baby step #6 is to pay off your home early. He does tell you to temporarily stop investing so you can pay more towards you debt. This is sub-optimal. His goal is to get you entirely focused on one thing at a time and go after it with everything you have. [1] https://www.ramseysolutions.com/dave-ramsey-7-baby-steps https://www.ramseysolutions.com/dave-ramsey-7-baby-steps
- cma 5y ago
  Ok, I forgot he excludes mortgage and chose that as an example as the longest term, lowest interest debt with least depreciation. It's still worth going into almost any other debt to get a large match, often even expensive credit card debt (you may have to skip matching some years when you take a net withdrawal to keep it optimal). Paying off an existing car loan before taking a 100% matching contribution is almost always crazy.
  - xupybd 5y ago
    It is if you have no emotions involved. The people he is trying to help are the kind that struggle to avoid debt due to lack of self control. His method is about creating emotional feedback that keeps people going.
  - DavidPeiffer 5y ago
    I agree the method he presents isn't mathematically optimal. We're also on a forum with many engineers and highly analytical people, which isn't his target audience. To use one of his quotes, "if you cared about being mathematically optimal, you wouldn't be in this mess to begin with!" His target audience is people who are living paycheck to paycheck, routinely taking loans to support a lifestyle they can't afford, and don't see how their spending habits are death by a thousand papercuts to their aspiration of being financially stable. To be clear, I'm not a Dave Ramsey worshiper. I strongly disagree with some of his workplace policies and hope he gets taken to the cleaners with some of the lawsuits currently going through the system. I have listened to his show many times, but don't follow all his advice. I'm not paying my superbly low interest rate mortgage down faster than required. I can't think of anyone responsible for getting more consumer debt eliminated than Dave Ramsey, and that should be commended. The vast majority of people would be far better off following his plan than continuing on their current trajectory. He recently declared war on the time share industry, and I hope he makes waves by throwing his resources behind it. https://youtu.be/o6VNi5hJpiU https://youtu.be/o6VNi5hJpiU
ryathal 5y ago
He tells you to do this in the extreme short term. The goal is 18-24 months to pay off debt, not 50-10 years. Ultimately this isn't a huge some of money even if you run it out 30 years. The point is getting out of debt and not going back, on average people don't have the discipline to make the most mathematically optimal moves. The individual isn't winning 9 times out of 10 when they try to leverage debt, most don't have access to things that can actually get a return on the risk of debt.
- cma 5y ago
  You won't pay off massive low interest student loan debt that quickly, and it is usually a big mistake to give up a free matching contribution just to pay off a little bit more of your student loan.

listless 5y ago

The guy might be an asshole, but his advice is rock solid and it’s worked wonders for me. The thing is, Dave showed up at a time when credit cards were how people lived. Leveraged to the hilt and no savings. He will be the first to say that his advice isn’t genius - it’s pragmatic and simple. Learn to budget. Pay off your debt. Fund your 401K. All of that said, he appears to be a pretty nasty individual. Which is fine. But the unforgivable part is that he does it on the back of Christianity. Absent that variable, he’s just another ruthless businessman.

prestigious 5y ago

I don’t understand how paying off your smaller loans leaves you less able to pay off larger ones?

Thorrez 5y ago
I think deelowe's point is that people should pay off higher-interest loans first, not smaller loans first. But I'm not sure if there are many people where the difference between these 2 strategies will be significant.
- mgkimsal 5y ago
  Agreed, and I do think the psychological impact of people seeing some debt bills go away completely is an emotional boost that helps them keep going. Imagine having bills for $8k, $12k, $6k and $2k. You decide to cut current expenses and take a side job - you're getting serious about this. Getting rid of a $2k bill completely in, say, 4 months, is a decent psychological boost. You might be paying a bit more in interest if the other bills are higher interest rates, but you now have one gone completely. That's bigger progress to many people. I think one of his quotes - or perhaps from someone else - is that you didn't get in to a bad debt situation purely by numbers and math in the first place. There were usually some emotional factors in overspending (and perhaps hiding the debt from family/friends). Trying to ignore the emotional component of getting out of debt is silly, and the 'debt snowball' is simple enough for people to grok and work.

Thorrez 5y ago

>The worst is his investing advice which just boils down to getting an ira and 401k. Why is that bad? Tax-advantaged accounts are much better than non-tax-advantaged accounts if your goal is saving for retirement.