Unpopular Opinion: Dave Ramsey is Overrated

by | BiggerPockets.com

It seems “you need to read Dave Ramsey” is a cornerstone of financial advice given lately. Because I have not read a basic financial book in a while, I thought I should see what all the hoopla is about. I picked up The Money Answer Book and delved into it, hoping to be enlightened by some Ramsey logic.

First, Dave Ramsey does not seem to be saying anything Suze Orman hasn’t been preaching for 15 years. In fact, this is the same basic information that most conservative financial advisers regurgitate. It isn’t my belief that advice has to be “new” and “edgy” to be worth entertaining. However, I prefer my gurus to be unique in their guidance. It seems odd for someone to be so boisterous about their opinions when it is the same thing a handful of other people are spouting. That being said, I think The Richest Man in Babylon is one of the best financial books ever written. Basics are basics, so I tried to keep an open mind.

Related: The Dave Ramsey Dilemma: Should Real Estate Investors Really Avoid Using Debt?

What is Dave Ramsey’s Advice Good for?

There are some people who absolutely need to read and follow Dave Ramsey’s advice. These are people who have very little financial knowledge or discipline. I was a bankruptcy paralegal for many years. I saw what debt, when used improperly, could do to someone. Ramsey provides solid advice for doing whatever is necessary to increase income, build an emergency fund, and use the snowball method to pay down debt. If someone is unfamiliar with these activities, by all means, read Dave Ramsey—or almost any other conservative financial adviser.

Our society is one that is wrought with consumerism. As I write this, Christmas still lingers in our memories. It sickens me to see people pile on debt to buy mostly useless items—or even worse, the families destroyed with guilt because they can not provide “adequately” for Christmas. If you find yourself drowning in credit card debt, Dave Ramsey is a good place to start to dig yourself out.

Nevertheless, there are several areas in which his advice is lacking.

Everyone is an Idiot (or Moron)

Granted, this is not about his advice, and he may be the smartest person in the world. However, with someone giving subjective guidance, I have a problem with them referring to anyone who disagrees with them as an “idiot” or “moron.” These are opinions about the best course of action. Just because you write a few books and consider yourself an authority, it does not make all other opinions invalid because they contradict yours.

There is No Such Thing as Good Debt

In referencing “good debt” and “…people believe that you receive great benefits by going into debt,” Ramsey writes, “[g]ive me a break! These guys are idiots. What’s more, they are probably broke idiots.”

Those of us in the Rich Dad camp strongly believe in leveraging assets to buy more assets. I understand that some people want to get rid of all debt, and that is a road you are welcome to take, especially as you near retirement. However, if you have $100k, you could buy ONE house for cash and carry no debt, or you could leverage that money and buy FIVE houses, with 20% down, exponentially increasing your income.

There are investors from both sides of this argument, and it is really a matter of personal preference. However, I would not assume the guy that leverages assets is a “broke idiot.”

I also know some people are going to argue how leveraging burned a lot of people in the 2008 crash, which is true. Over-leveraging is a dangerous game, but an income-producing property is still an income-producing property, even in a crash (assuming you still have tenants), if you set it up right in the beginning. Utilizing HELOCs and adjustable rates are what will burn you when the market slides. It all comes down to structuring the deal.


Credit Cards Are the Devil

“Responsible use of credit cards does not exist. There is NO positive side to credit card use.” —Dave Ramsey.

Again, I will point out that I have seen that credit cards, when used improperly, can wreak havoc on a person financially. Growing up, I too was preached at about the evils of credit card use. Not that it matters, but I also believe the introduction of credit cards into the marketplace has been a downfall and large contributor to inflation and the current financial mess our country is in.

On the other hand, credit cards are a part of our society, and more importantly, they are a huge factor in how our credit scores are calculated. You can absolutely use them responsibly and receive great benefit from doing so.

I have recently done a great deal of research on credit scoring and am curious if anyone in the comments would mind chiming in if they have achieved an 800+ credit score with NO credit cards. A mix of credit is necessary to maximize your credit score, and I am not sure it is possible to do so with no revolving debt. I would love to be proven wrong, though.

Related: Dave Ramsey is Wrong: You DON’T Need to Be Debt-Free to Hit Financial Freedom

Of course, Dave Ramsey says, in reference to re-establishing credit after bankruptcy, that you should not re-establish credit (specifically through low limit credit card use) because you should not plan on getting back into debt. Also, mortgage lenders are more likely to lend to you if you avoid credit cards.

It has been my experience that mortgage lenders care about your credit score and your use of credit properly. I have yet to see one scoff at someone for utilizing credit cards, especially when it fattens a borrower’s credit file and score. More importantly, it is almost impossible to qualify for a mortgage if you have made no effort to re-establish your credit.

I could go on and on, but I already feel people picking up their pitchforks. I may just have an aversion to gurus and people who act like they know everything. “Live below your means, save as much money as you can, maximize your 401(k), and carry no debt but your mortgage” is good advice for a lot of people. Certain aspects of that is good advice for everyone. You should absolutely save money and have a financial cushion, but make your money work for you to achieve more than just a frugal life. Also, you must learn how to play the credit game, unless you plan on only surviving on cash for the rest of your life. Living on cash isn’t a bad thing, but it limits your options, especially regarding real estate investing. I won’t even get into the evils of 401(k); that is a completely different discussion.

Most importantly, understand that anyone can write a book and it does not necessarily make them an expert on everyone’s circumstances. Gather tidbits of knowledge from multiple sources and see what works best for you and your situation.

We’re republishing this article to help out our newer readers.

Weigh in: Do you agree with this assessment, or are you a fan of Dave Ramsey’s mantras?


About Author

Leather Nix

As a freelance writer, Leather Nix has written professionally since 2005. Her portfolio includes legal, business, and financial topics, as well as general content for the web and print. Having studied personal finance for over 15 years, Nix seeks to cultivate financial education and bring it to the forefront of mainstream knowledge.


  1. Oh, would I love to delve into the deceptive world of the 401(k) where 30 million Americans each year drink Wall Street’s cool aide and chant; “401(k). 401(k). 401(k). The 401(k) is probably the biggest elephant ever to enter the room where it dominates trillions of Taxpayer wages that allow Wall Street to siphon off obscene amounts for fees yet do not provide Tax Free Income with it comes time for distribution.

        • Joe Tomko

          Elena, if you have a business, start a Profit Sharing Plan. Check with Anderson Advisors (Tacoma & Las Vegas). They helped me to set up mine. I also have a self directed iRA. Cama Plan is my custodian….I highly recommend them. Much better than the ETC custodian I started with. I have no confluct of interest in recommending these two businesses.

        • Elena,
          I have observed at least half a dozen inquiries like yours asking is there a better alternative to the 401(k) especially when “matching funds” are involved.
          My answer is, it depends on individual circumstances but I have seen such an alternative go toe-to-toe with a 401(k) even with 100% matching funds and crush the 401(k) results. Thus, it would seem to merit futher exploration.
          However, for me to explain step-by-step how it works would require a 50-page Booklet which I am in the process of writing.
          Respecting Bigger Pocket’s protocol I do not want to try and slip in an Infomercial in order to make my point.
          Perhaps Bigger Pockets will allow me to write an article about “Alternatives To The 401(k)”.
          Keep in mind that your 401(k) funds typically have two partners beside you; Uncle Sam who will want to collect his share of future “Ordinary Income Taxes” which may be the same as now, better or worse. Even under the highly touted President Ronald Reagan’s halycon days the top tax rate was 50%.
          So, in essence you are gambling that your future retirement fund’s tax rates will be less even though the Federal Government has proven again and again it cannot control it’s spending. What if, when you choose to retire, the Fed has ratchated up the tax rate to 45% or more? The CBO has stated that if the Federal Government doesn’t get its financial affairs in order future top end tax rates could be 88%.
          My alternative addresses this problem squarely by insuring that all of your funds, when distributed while you are living as “retirement Income” or have died, to be “Tax Free”.
          Your 2nd Partner in your 401(k) is Wall Street unless you have chosen to simply let you funds idle in a CD or Money Market Account.
          Again, in essence you are gambling that when you retire your future retirement funds will be at an all time Wall Street “High” as opposed to past years when the S&P 500 for example was down 38% in 2008.
          My alternative addresses this problem squarely by insuring that your funds are not directly invested in, Wall Street, for example an Index Fund and therefore suseptible to down markets.
          By eliminating the “Risk” of downside but always sharing on the upside, you have removed a huge unknown that could haunt you when you choose to retire.
          I hope this helps.

      • James Stines

        I have read a few articles on why the 401(k) is bad, but the numbers don’t always make sense. Like Dave’s advise, it works for some people since they would just not save at all otherwise. My situation is I’m in my 40s, make a good income and my employer matches 100% up to 9% of my gross pay. I can’t find a single investment that gives me a 100% return immediately. On top of that, I can leverage a portion with a low interest loan. Every article on the 401(k) seems to be aimed at low income/young wage earners. I’d like to see another perspective.

        • Katie Rogers

          So lucky you that you happen to have a decent 401(k). Studies say that your experience is not typical. I would still examine the fees and the quality of the offerings.

        • Brian Anderson

          James I could not agree more with your comments. The 401(k) question is situation dependent. The question as investors we should be asking ourselves, whether it is an investment in a stock, property or precious metal, is what is my forecasted return on my investment.

          Your situation is a slam dunk but lets say you work for a Company that matches 50% up to 6% in a traditional 401(k) and you make $100k (just to keep the numbers round). You would have to put $6,000 into your 401(k) and the Company will then drop $3,000 into your account. You will also lower your tax AGI and likely save around $1,200 in current year taxes. Understood that there are management fees, etc but lets say fees at worst net out any gains over time (which is likely way too conservative). Your $6,000 investment made you $4,200 (70%). If you think you could have beaten that with another investment than you choose it otherwise drop it into the 401(k). Diversification is not a bad thing so saying 401(k)s are bad and not analyzing the situation is too close minded.

      • Reggie maggard

        The proofs in the pudding, millionaires just don’t have date statistically. It’s a common theme. Susie Orman started after Dave Ramsey btw. We all know what’s going on here, liberals like debt and suzie and Christians like Ramsey and no debt, and that’s ok. The math is the math. Debt has risk in addition, which is something people always miss. But it’s a free country, so enjoy your debt.

    • Katie Rogers

      Not to mention that studies have found many 401(k)s are low quality. Apart from the hidden fees, there is the problem that often the custodians (I am looking at you, Merrill Lynch) offer only funds that pay the custodian a kickback. These funds also tend to have higher than average expense ratios.

        • Laura Murrill

          I completely agree with the article! Very well said! I just happened to stumble upon this 401k discussion in the comments and it is interesting because my husband and I are in a situation right now where he has enough in his 401k for us to start our real estate investing and potentially turn that small amount of money into our future financial freedom. His father thinks we should keep adding to it, I think we should use it. Any advice here?

        • Adam Zielske

          Curious why all the discouragement on the 401k? With over 15 years studying personal finance, I’d love to understand why you feel this way. Strictly fee related? How would you recommend people save for retirement?

        • Andrew Olmstead

          How is investing in a 401k with a match that provides long term deferral of income taxes not “Smart”? Please expound on your statement why this is a sad thing.

        • Katie Rogers

          Not strictly fee related, but you shouldn’t trivialize the 25-40% erosion of potential value caused by fees. You also did not read carefully. The quality of the funds in 401(k)s tends to be low. I wouldn’t save in a 401(k) unless there was a company match to offset the erosion of value and the low quality. Fact is the government want us to save for retirement, but not save too much or even very much. Otherwise, there would not be such low limits on annual contributions, and the allowable contributions to an IRA would be much higher. Also the assumption behind the deferred tax feature of both 401(k)s and traditional IRA that your income after retirement will be less than during your working years seems reasonable, but does not actually hold up well. You can easily end up owing MORE tax after retirement than before if you bother to actually make the comparison. You see, if you start contributing to a high-quality Roth from the beginning of your working life, your lowest taxes will be at the beginning when your wage is less. By the end of your working life, your average tax rate has been roughly equal to your tax rate midway through your working life. Since you will owe both capital gain tax and deferred income tax on distributions from a 402(k) or a Traditional IRA, your tax can easily be greater than if you had just paid the income tax up front all along. With a Roth, you DO pay up front all along, therefore your distributions after retirement are tax-free including the capital gains.

          The money you save in a 401(k) is not likely to be sufficient, so you will probably have to save for retirement the same way you save for anything else, by living below your means and saving the difference even if you save in a regular savings account, or if you want to buy high quality funds, in a regular brokerage account.

        • Not all 401ks are bad. My company offers both a regular 401k and a Roth 401k option. Several years ago after pressure from employees, they changed up the fund offerings to include low fee index funds. It would be foolish for anyone to turn down investing at least 5% to get the company 5% match.

          If your company has a bad 401k plan, start talking to leadership and getting your coworkers to do the same. I don’t think most companies set out to offer bad plans, they just blindly take the advice the investment companies give them. It doesn’t have to be that way though.

        • Katie Rogers

          As I said IF there is a company match, then a 401(k) will work out okay. Lots of companies do not offer a match. Without the match, most 401(k)s are a bad deal. You are correct that “most companies set out to offer bad plans, they just blindly take the advice the investment companies give them.” And that is a good argument for implementing the fiduciary rule. Investment companies should be held accountable for the advice they give, and their advice should be in the best interests of the client, NOT the investment company.

    • Jesse Smith

      Tom – This is painting with a pretty broad brush. 401(k)’s themselves aren’t bad by themselves. It all depends on what’s being offered as investment options. Many modern plans offer index fund options with very low expense ratios.

      • Thomas Phelan


        My aim is not to try and cut a wide swath with a small scythe, rather to say there is an alternative plan superior to a 401(k). If its is superior why stay with something inferior?

        Your 401(k) future distributions will be taxed plain and simple and at a rate you have no idea of knowing now how high they will be.

        Most 401(k) Owners (investors) have no idea what an IUL No Loss Fund is and their Financial Advisor isn’t about to educate them. Thus they are subject to the whims of Wall Street as evidenced by some of the people in this forum who have loss substantial 401(k) portfolio losses.

        • Thomas Phelan


          Yes and no. Most caps I see are around 13% and there are No Cap IULs.

          Also, take for example the S&P 500 for the last 20-years, there have been fantastic years far above 13% if a Cap is involved. And there have been devastating years where a -38% loss was posted. With a No Loss IUL the investor never dropped below a zero floor.

        • Nick Kosko

          The internal cost of the insurance and the fees inside of an IUL will destroy the cash value once the client gets into their 60’s. The chassis of the IUL is broken. The money being “indexed” isn’t even invested into that fund, and one doesn’t get any dividends that are payed by the companies who’s stocks are in these funds. The insurance companies are simply buying rolling options to cover themselves and that comes at a tremendous cost. Sure, you can make an IUL illustration look good, but they do not become reality. Sadly, the IUL is just anoth r fancy financial product that we don’t need.

  2. Alik Levin

    Rich Dad camper here. Good article. Love your missions of “cultivate financial education and bring it to the forefront of mainstream knowledge.” Tried to pick Ramsey’s audibook with his daughter, quickly put it down. I guess his advice is good to prevent or stop unhealthy financial behavior. His advice is no good to help build wealth though, put it mildly.

  3. Leather Nix

    I know! I think the problem comes down to lack of financial literacy in the first place, and lack of discipline. A lot of people get credit cards and think it’s free money. However, shying away from all debt isn’t the answer. People just need to use it responsibly!

    • Reggie maggard

      Credit cards put people in debt and many times bankruptcy…the numbers don’t correlate with what your saying. People should know the element of risk added going down that path.

      The article sounds like your not happy about his politics and want to stir the pot a bit. I personally don’t consider him a guru bc he is just talking about common sense stuff. The ‘guru’ part is when you try to skirt the system with overlevwraging and credit card tricks.

      • Eric Bruner

        “The article sounds like your not happy about his politics and want to stir the pot a bit.” Where the heck do you get that from!? There’s not in her article that even remotely hints of anything political. Sounds more to me like YOU’RE trying to read something political into this.

    • Actually, I agree totally with what you’ve said here. (As an aside, I think Suze Orman is an idiot, and I’m a CFP with 35 years of investment management experience. It’s amazing how far you can get with blonde hair and a toothy smile.) I don’t really follow Dave Ramsey, but my perception is that he says generally intelligent things for people who have no background or knowledge about personal financial management.
      Leveraging to buy an asset of value that is likely to appreciate over time is likely fine, as long as you’re sure you can cover the debt service regardless of whether the worst case scenario occurs. Quite different from leveraging up for that trip to Cancun.
      Credit cards are fabulous, as long as you have the discipline to use them properly. Who can object to cash back or frequent flyer miles? What’s tragic is the job that parents and educators fail to do by teaching young people how this stuff works, so they can make informed decisions about their financial futures.

        • So, after a zillion comments what have we learned.

          Some people love David Ramsey because he has enriched their lives
          Some people loathe David Ramsey because he has NOT enriched their lives
          Some people love Suzie Orman because he has enriched their lives
          Some people despise Suzie Orman because she has NOT enriched their lives

          Hmmm …

          Some people love David Ramsey
          Some people loathe David Ramsey
          Some people love Suzie Orman
          Some people despise Suzie Orman

    • Gregory Boyer

      Agreed. Credit cards with points programs and paid off each month can bring in free cash in large sums. Especially when used in businesses. Real estate isn’t the only place leverage can be used properly to increase revenue. Ask Dave Ramsey how many of today’s Fortune 500 companies have never used debt or leverage to grow. He could also ask Ray Dalio if Bridgewater uses leverage to increase returns on their hedge fund. I don’t think we could call them idiots.

    • Merle Borowski

      Thank you Leather for the article. Finances to me is a growing and evolving process. I wouldnt expect me as a 20 year old to understand leveraging a real estate property if I didnt understand what a credit score was at the time. I think (from what Ive heard) Dave Ramsey is the very beginning of forming a foundation of understanding finances. However people need to grow on that foundation. For example debt can be very devastating if used improperly. Once you have experience with debt and can manage it then you can learn how it can be a tool. Money in all it forms is a tool. Its neither good or evil, it just is. Making it more then that can close you off to learning. Imagine if when our parents told us the stove was hot and not to touch it remained with us throughout our entire life. We would never ever use a stove because its hot and hot=bad. We grow up and learn how to properly use a stove and that its a tool and yes it can burn you if you’re not careful but can feed you with great dishes like Mac and Cheese! lol! The problem and why I think Dave Ramsey is important is because people in North America have no financial knowledge. We get a paycheque and then we buy stuff. buy a car, house, get credit cards, get pre-approved loan offers and no idea how to make sense of it all. The “good” and “bad” debt that is referred to is how it can benefit you. Good debt- pays you. Bad debt costs you. Your home, car, and other debts can either cost you money or make you money. Its all in how they are used. And in North America most people only understand bad debt. That all we are taught. If you believe all debt is bad and you try to avoid it at all costs then you stop learning. What if I believed that because of 2008 I will lose all my money in the stock market, or I believe all rental properties were bad because of stories I’ve heard of tenants trashing the suites? I shut my brain off to asking questions and learning. I make assumptions based on no information. Maybe after learning and listening I decide that the stock market isnt for me but rental properties are or vice versa then at least I understand things for me. And maybe 5-10 years from now a great opportunity will come my way and because of all I’ve learned I may decide im ready to take a step that I once didnt feel was for me. Instead of avoiding it all together because of assumptions I made without learning first.

    • Michael d Sargent

      leather nix…. question….. what did you mean, its all about how you structure it for using HELOC loans to purchase more property and how it can be the downfall?….. i have about 150,000 in equity i want to take out to make another purchase, so i am very curious….thanks!

    • Donald G McCartney

      As a practicing CPA who deals with the general public, I say “AMEN!” to your comment about lack of financial literacy on the part of the general public. Money and debt are tools, like a saw and hammer. If used properly, they can be very useful. If used improperly, they can do a lot of damage.

      The key is gaining knowledge about how to use the tools effectively. The problem is that our school systems are woefully inadequate at preparing people for this aspect of our lives.

      If the only thing the public hears is constant advertisments saying buy this, buy that… with easy financing, then it’s an easy trap for the uneducated to fall into.

      • Eric J Nelson

        I can see where you’re coming from Marshall, but I would have to disagree that this is an excuse to pick on Ramsey. I don’t see this as a neg piece, but more as an informative piece. I would venture a guess that as BP grows in popularity, you’re going to see more and more people who are familiar with Ramsey’s practices and would possibly be turned away from the BP community and ways of thinking since a lot of what Dave publishes/talks about would go against what you might need to do to get started in real estate. I think Leather does a good job of reminding people that Dave does bring up some great points for getting your finances in order, but if you want to get into the real estate game, a good portion of what he preaches won’t be applicable to some of the BP way of thinking.

      • Ben Sharpe

        I wondered about this as well. Especially if this is a vehicle that you’re going to use for years past the loan period. I think he’s trying to get people to avoid buying new cars regularly which seems to fit his whole model of correcting the consumerism mindset.

  4. Ramsey has always been good for a rather simple and largely undisciplined group that has been trained in basic American values… spend, borrow, spend some more. This is why he has been so successful – there are a lot of those people out there! For those of us on this site, most of us understand the responsible use of credit can be a tool to build, rather than only an irresistable and destructive force.

  5. Oh, and the credit card trick… Have 4-5 credit cards, all of them never exceeding 10% of the credit limit (or 4 under 10%, and one higher if you must). This will maximize the number of points you get in this category (for credit score), if memory serves, this is 30% of your overall score. I just pay them in full monthly. Try to use each card at least once per quarter.

    Also, If you want to pass your impeccable credit score on to your kid who has no credit, add them as an authorized user of your card (no need to inform them of this). You can remove them once the score carries over to them… sorry, I forget how long it takes, but it is something like 2+ months. Make sure the card is younger than they are, or it will be rejected by the credit score computer.

    • Leather Nix

      Yes, I’ve read that having one card report less than 8.99%, instead of all of them reporting zero, will give you a boost in score. You actually get penalized for having everything report zero. I think that stuff is so interesting.

    • Shaquetta Chittams

      I completely agree. This is a wonderful explanation for why DR is a decent starting point but his message seems to be focused on the extreme by completely cutting things out like debt to prevent people from getting back into trouble without actually addressing how their habits got them there in the first place.

  6. Jim Costa

    I haven’t read a Ramsey book but with all the hype over the years I understand the concept and principals he talks about. Basically live below your means and don’t go into debt. For 80% of Americans this is sound advise. People don’t want to take the time/risk/education to do anything else. The other 20% (pulled the number out of my *** but you get the concept) are the risk takers. They are the entrepreneurs that will create the jobs that will invest in real estate and rebuild communities and provide affordable housing. With that said. For those that abide by Ramsey’s rules and live under their means and start putting money away in their 20’s. Don’t buy the new $700 car payment instead put $500 a month away for retirement. If you are diligent with it, You can retire at 65 as a multi millionaire with only single digit returns. Their is nothing wrong with this advise and very doable and comprehensive for the masses. This is a tortoise mentality and few have the patience and discipline. Very few will fail if they follow this advise. Bigger Pockets community is part of the 20%. They are looking for a quicker solution and better mouse trap. Many will find one as I did. You can retire a multi millionaire at 45 or earlier despite never having a paycheck close to 6 figures. Unfortunately those that apply the concepts but don’t follow through or apply them wrong,,over leverage, have a high probability of failure.

    It is also much easier to make money and sell books to an 80% market share. Almost everyone can understand the basic economics of if I make 5K a month, live on 4K and put 1K away. Very few understand the acronyms of LTV, DTV, DTI, PITI, CAP rate, ROI, FICO, ARV, CMA, FMV, HML. IRR, … or do they want to try and figure it out.

    I am also tired of the terminology of good debt and bad debt. I understand bad debt. Their is no good debt , Debt is not good. It’s like saying good cancer. With that said their is good and bad investments. A house for yourself to live in can be both bad debt and a good investment, similar to a savings account. A home you buy to rent or flip is always a bad debt but rather or not it cash flows or makes money will determine if it is a good or bad investment. A good or bad investment is determined by if it grows regardless if you do or add anything else into it just like a stock. You may have to manage or do repairs but if the investment pays for that through cash flow or appreciation or tax benefit, will determine rather it is a good or bad investment.

    • John Barnes

      Just because you and Ramsey say not, there certainly is Good Debt. If you have an asset that has no debt and you put debt on it at 4% and then receive a 12% return elsewhere on that capital, that is Good debt. Get it? Nothing to be tired of here. Just the facts.

      • You nailed it John. We are in an interest rate environment where those with good credit can borrow at 4%. And then lend those cheap funds to the zillions of fix and flippers out there who will pay 12-15% and maybe some points as well. You have to know what you’re doing and what you’re lending on, obviously. But there are enough potential solid borrowers where you can set the LTV and other terms where it would be tough to lose. And of course you can do equity deals with that cheap money yourself as well. So there is definitely “Good debt.”

    • Tom Cyr

      Jim, there are two advanced financial books that demonstrate how debt can do something that nothing else can. I recommend them both. The Debt Millionaire by George Antone and The Value of Debt by Thomas J. Anderson. You’ll learn about a concept called optimal debt ratio and many other concepts that are not used by most investors nor heads of households. May it start a new chapter in your life and business.

    • Joe Tomko

      Jim, if I have an investor loaning me $X, which I can then leverage for a $4X mortgage, I can buy an apartment complex that cash flows to not only pay off my debts, but also put money in my pocket, not only is this a good deal, but it is also good debt. It gets me a cash flowing, equity building asset with none of my own cash, 100% debt.

        • Joe Tomko

          Granted, but I am in the midst of doing just that. One star came to me and I aligned the rest.
          I was fortunate enough to have an investor want to invest in my business. My experiences have given me the wherewithall to decide to leverage that to get into a much bigger deal. I’m now evaluating small apartment complexes to find the right deal. Bottom line, debt is a good tool if used correctly.

      • Walli Haley

        I agree that Dave Ramsey, in his zeal to advise people to pay off all debts, can actually lead people astray. I will use myself as an example. I inherited a fair amount of money in 2010. Unfortunately, I also had quite a bit of debt (student loans and credit card debt). I used a significant portion of my inheritance to pay off some of that debt, rather than doing what I would NOW advise someone to do if they came into a nice amount of money: BUY a cash producing asset (for cash) and use the cash flow to pay off the debt. If I had done that — especially in the real estate market of 2010 in the Denver area, I’d be sitting on a nice asset right now and spinning off a significant amount of cash flow, with my debts long paid off.

  7. Melvin Plummer

    Credit is the greatest privilege this country offers. However, just because you give a person a truck load of bricks doesn’t mean that they can build a house. Similarly, just because you give a person access to credit doesn’t mean that they will master it. For me, credit is for one purpose and one purpose only and that is to make money. For example, you can take a rewards credit card and charge your car insurance, house insurance and most of your monthly expenses on the card then pay it off in full at the end of the month and make money using the card. I’ve been doing that for years and it is so much fun. You can use your credit cards to buy things on Alibaba, Craigslist, garage sales or many other ways, then sell those items for a profit. I think Dave Ramsey’s book is for people who lack financial discipline . People who have financial discipline probably won’t read his book. Credit can make you or break you. If you use it wisely you will have lots of fun. If you misuse or abuse it the banks will come after you with their mouth open fangs locked in place, hissing like a cobra. So be careful and much success!

  8. dave laqua

    i loved my credit cards!!!!! I had a breakfast with a bank vice president last year…he started as a teller when i started buying rental properties 20 years before…..he asked me over breakfast if i needed any money…..i said whats your signature authority ( how much can you personally approve me for) he said 100k. i said ok what do you need for me to get the money and how long- he tells me , 3 years income tax, 3 years P&L, a letter from my accountant and a lien on my home ( which was paid off) and about 10 days……i picked up the phone called my concierge at CHASE and said Ellen whats my line of credit? Ellen says 100k, I said how long to get it to me and she said – if you tell me now i can have it in your account before 3pm….my banking buddy chokes and says Dave we are not Chase…I said I know….but this is unsecured , and I have 30 days to pay it back for nearly free……credit cards are like a weapon…use them right you can nail a big opportunity….use them wrong you drown…….we have bought many many quick high pressure real estate deals using unsecured money- we then paid each and every one off….. what a country we have!

  9. dave laqua

    Oh i forgot ………my buddy buys ALL his things on credit for the frequent flyer miles……holy crap he runs 15 k a month, (sometimes more if he gets a real estate deal) thru his credit card for all his law firm and family bills and pays them off every month- he flies his wife and family free , they go Costa Rica and Japan – multiple times per year…….Credit cards are for people who can master their benefits and avoid the pitfalls …….

  10. Richard Potts

    Ramsey is not overrated. He’s just medicine for a specific illness. Ramsey’s audience is mostly desperate people who are recovering from a lifetime of financial intemperance. These are not people who should be considering the sophisticated financial models you describe.

    Most people’s lives are – in the words of Mr. Money Mustache – “exploding volcanoes of waste” funded by equally egregious exploding volcanoes of debt. USA TODAY just reported that credit card debt has hit a new record high just a few years after our debt-driven financial crisis. Ramsey is spot on about the stupidity of debt

    I was one person who needed Ramsey’s advice. And walking his Baby Steps got my own life in order, and led me eventually to think bigger and to invest carefully – and thus to find Bigger Pockets. And I know personally many more people who need his brand of tough love.

    • Daniel Weaver

      Thanks for this comment. Agree that it is a difference in audience. Dave has a brand to uphold, and his uncompromising and contrary point of view to the rest of society is what is needed for many folks to get the point. A simple message (all debt is bad) is a lot easier to communicate and inspire people to change than a message full of clarifications, nuances, and footnotes (debt is bad except if used for investment, then it is good, unless the investment doesnt cash flow, then it is actually still bad, etc…) So I think Dave’s simple and clear message is good marketing.

      Also, though the advice is not new, he presents solid conservative advice in an entertaining manner, and has helped a lot of people. Debt is kind of like fire – can be used for good, but you better know how to handle it safely, or you would be better off without it.

      Don’t knock it, just chart your own course carefully and take or leave the relevant advice as best applies to your goals, risk tolerance and level of financial knowledge.

    • Joel DeVriendt

      I very much agree that Ramsey is a “specific medicine for specific illness.” While its fact that debt can be leveraged to do great things, making that statement to the wrong audience can be a bad omen… akin to telling a recovering alcoholic that “alcohol is good in moderation.”

    • Tom Cyr

      I heard Dave tell a caller recently that “You didn’t get into this mess by being good at math so don’t expect to get out of debt by being good at math.” My takeaway was that he was classifying his audience. That explains a lot. He does very well with the sector of the culture that needs his instruction. That, unfortunately, is most of society. So he oversimplifies financial concepts and gives them hope that even the simple solution will work for them, if they just apply themselves and stick with the program. Nothing complicated at all about making the magic of compound interest working for or against the one who makes the decisions where to spend the cash.

  11. Adam Schneider

    I loved your article, Leather. That’s so well written. What I appreciate about the Dave Ramseys and Size Ormans of the world is that they discuss finances. Why don’t we learn about finances and econ and balancing checkbooks and building your credit and….when we are in middle school or high school? I love the person who provides the contrarian perspective! Keep it up. Then, let people decide.

  12. It’s important to remember, that Dave Ramsey’s audience is going to have a average household income of around 40K. Their monthly average take home income after taxes is going to be around $2500.

    For a household to pay for housing, food, expenses, car, utilities retirement, etc out of $2500 is cutting it close.

    Without a simple emergency fund, 3-6 months of savings, paid off car and house, etc, Any debt or emergency spending (like car repairs or medical) could wipe out such a household.

    A $2000 credit card debt would be unmanageable.

    When I listen to his advice, you have to remember who is talking to.

  13. Dennis Nemitz

    I separate my money into personal and business (real estate and antiques) even though I understand it is not really separate. I utilize Ramsey for the personal side of my finances, and I utilize Kiyosaki for my business side. It works well for me.

  14. James Free

    Dave Ramsey has his niche, like so many investors. His niche is “people who are not obsessed with building wealth and whose biggest financial struggle is discipline.”

    That is a big, big niche.

    Avoiding debt like the plague is certainly a bad idea if you’re a BiggerPockets person, but most of the world does not consist of BiggerPockets people. It consists of paycheck-to-paycheck people carrying bad debt and lacking discipline.

    Dave Ramsey helps these people a lot.

    If you weigh 300 pounds, talk to the 23-year-old trainer at your local gym. He can help you a lot. But if you play for the Yankees, you need a different level of personal trainer.

    The same holds true in personal financial advice.

    • Michael Boyer

      Funny, same analogy I was thinking of: fitness… Dave helps the severely obese eat less and exercise more.. Basic stuff…..but he is not next level triathlon training or financial cross-fit audience…

      Oddly, there are some striking similarities in the financial and physical fitness in the US (aren’t we like neck and neck with Mexico on leading the globe on obesity; and we have an alarming level of personal debt and folks living paycheck to paycheck)… So we probably need a health version of Dave Ramsey, too.

  15. ryan tatro

    Thank you for a well thought out post. Finally a freelancer with something to say that has insight. I must say since more writers have begun to post on BP that aren’t personally involved in real estate I have been reading less as it is usually meaningless posts that bring nothing to the table. Thanks Leather!

  16. David Etenburn

    I like Dave Ramsey. I also like Robert Kiyosaki. For opposite reasons, as you can imagine.

    Dave Ramsey and his ilk are great for those who are compulsive spenders. Overconsumers. Or those who have more dollars than sense. These gurus take those with that consumer mindset, and point them in the direction to get out and stay out of debt when said debt is focused on stuff. They’re in the rat race and they are content staying there. They may have a nice retirement account and stock portflio, but they will work their entire life to spend and (hopefully) save the Dave Ramsey way.

    Those in the Kiyosaki camp see debt as a tool, enabling them to reach out beyond their own abilities. These people seek teammates; one with time and little money teams up with someone who has money and little time. Both are seeking the goal of escaping the rate race and having this money work for them, rather than working for money. Most of us reading this get it.

    But there are plenty of professionals who make six figures at a job, and fund an IRA, a 401K other investments using ETFs or mutual funds, and see owning a business or investing in real estate as “risky”. So while gurus like Ramsey will get little respect in this blogpost; be assured, their services are desperately needed for many of the masses out there.

      • James Cooper

        Dave is pretty rigid, he advocates to first save $1,000 in an emergency fund. Secondly, use all available money to pay off all of your debt (except for your house, including stop funding retirement even with a company match). Thirdly, when debt is paid off build your emergency fund to 3 to 6 months living expenses. Fourth, Invest 15% of your income into a retirement account. Fifth, start saving for your children’s college. Sixth, accelerate paying off your house. And lastly, invest and donate.

        Dave does advocate investing in a 401(k) plan up to the company match, then a Roth IRA up to the yearly maximum. If a company has no retirement plan then Use a traditional IRA.

        As for Suze Orman, I don’t know because she screams too much for my taste.

        Personally, I would never give up my company match in my 401(k) as it is free money and if my investments never went anywhere I would still be ahead of the game. At my employer I receive 50% match on my first 5% invested which means I make 50% on my money just for belonging! Never give that up.

  17. Kurt Stresau

    Is Dave overrated? Is Suze overrated? Overhyped, perhaps, but not overrated. Remember that these folks are peddling a very important message of conservatism. If I were to espouse the exact same principles, I would make no impact on America because no one knows who I am.

    The value that these folks bring to the table (America’s collective financial savvy) is based on their visibility. If Ramsey were to STOP writing books and putting himself out there, he would fade to obscurity and the message would fade into the mists of history. To keep his message fresh (and to make himself some money) he needs to write new content. Let’s be honest, he’s just going to be repackaging the same philosophy into new (and hopefully entertaining) shiny boxes for the masses to buy. And they NEED to buy it. For their own good, and for the nation’s good.

    As others have estimated, it’s 80%/20%. The 80% need to keep hearing this message. They need Dave, Suze, and anyone else who preaches conservative financial practices to CONTINUE doing so. Keep publishing, keep having speaking events and TV appearances, keep the momentum up and KEEP the message in the public eye. The moment you stop doing those things, the momentum shifts and the 80% begins to drift back towards their bad habits. Fight the good fight, make a few bucks by selling books, and keep a ton of people out of trouble (or help them get out of trouble).

    Would someone who has grown beyond Ramsey (the 20%?) think that he is overhyped? Perhaps. His message isn’t for you. You have grown beyond his simple recommendations. You know everything he knows (even if you have modestly different opinions on certain topics).

    Rather than undermine him and his ilk and call him overrated, let’s instead say “I don’t need what he has to offer since I have grown beyond him, but there’s a whole generation of people who need help that only he and his fellow publicly visible gurus can provide.”

  18. John C.

    I just finished reading book with his daughter and I mustn’t agree with you for the most part.

    His philosophy is for the masses who barely get by. It serves its purpose and does help that population.

    With that said, I don’t know why he and his daughter don’t just have a one page book that contains “just pray and it will come.” Lol

        • John C.

          Yes it was. lol

          It was mainly his daughter telling personal stories related to personal finance, mixed with daddy chiming in every so often and saying effectively “that’s true. She’s telling the truth!”


          And the constant mention that this principle and that idea came from the Bible was laughable in the beginning, but extremely annoying by the 5th page. But it wasn’t an easy read and I kept reading in hopes of something profound.

          But it all amounted to “you have to save money. It’s biblical. Because it says so in the Bible.”

          And then daddy says, “yes it’s true, saving money is biblical. Rachel always saved money like a good Christian.”


  19. Roxanne Pilcher on

    I am glad you wrote this article. Your title intrigued me because I’ve not seen articles that oppose Dave Ramsey. As other readers have commented that many could use his advice but not for real estate investors. I’ve tried to listen to his show with an open mind but I disagree with his stance on credit cards. He stated once that he has no credit score because he has no credit cards but he is also a millionaire. Ramsey and his wife did get into deep financial trouble which is why he takes a hard line against credit cards. So we all have a history and operate from our history. I’ve always been financially responsible with my credit cards but I use my good credit score to my advantage. I am also teaching my son about real estate investing and he has purchased his first home at age 22 which he is turning into a nice rental.
    Again, Dave has his opinions which many church groups follow but I disagree that this produces financial freedom.

  20. Robert Horton

    Dave Ramsey is the financial guru for middle to lower income folks. What he preaches is perfect for that income group. People with upper income will leave money on the table using his advice. And his debt strategy doesn’t pertain to business at all.

    Dave Ramsey has also “branded” his name for different revenue streams…..one is pushing his ELP program for real estate, insurance or tax professionals in your area. Real estate agents pay him a referral fee (he is a licensed broker) for leads generated through his website. They are under the impression he is sending the most qualified agent available in the area….many are, but most have just agreed to pay a referral fee.

  21. Zane M.

    I have to agree with the opinion that Dave Ramsey is needed for some people. I was one of them. I read Rich Dad a long time ago, didn’t have the desire yet to make it and got into credit card debt pretty bad. I watched Ramsey years later, believed what he preached but focused on the first steps before figuring out the next steps. I got out of debt by any means necessary. I got down to the 2 dream vehicles we had and our rental. That’s where I started to stop following Ramsey blindly.

    I had to figure out how to keep everything I really really wanted (the cars and the rental). I re-read Rich Dad (10+ year later) and poof, it started to click.

    I think that Ramsey is a super subset of Robert Kiyosaki. An extremest in a way. There is good debt. Debt that makes you money. I still have “bad” debt to a degree, (my 2 cars) but the cost of getting rid of it subtracts from my potential of investing so right now, it’s acceptable and planned to be paid off much earlier.

  22. Jon Baker

    HI Leather Nix.
    As a person who has coordinated several Dave Ramsey Financial Peace courses I found your article interesting and humbly suggest that you read Financial Peace. I do not agree with everything Dave Ramsey teaches and he does come across arrogantly at times. However, you have to know where Dave comes from to understand his aversion to debt. I’m not overly familiar with Suze Orman so I don’t know where she comes from. Dave didn’t start out just screaming against debt, credit cards, car payments, etc. He got there through life experience. Dave Ramsey did the whole “leveraging your assets to buy more assets” thing and he got burned..badly. His personal story is why he preaches what he preaches. At the age of 26 he had over $4M worth of real estate and a personal net worth of $1M. You can read his story here https://www.daverams,ey.com/careers/about-dave . Due to a lot of leveraged debt he had any loans called due and ended up in a ton of debt with no way to pay for it. Worse than broke, he was 26 and WAY upside down.
    When you understand his perspective, it’s a little easier to understand his point of view. I’m not always a fan of his 25% down real estate for home owners “if they can’t do the 100% down program”. I’m a real estate broker and I know most people would never own a home and therefore miss the appreciation and security homeownership provides. But as far as his biblical admonitions such as “the borrower is slave of the lender”. That is undoubtedly true and is a great warning, not from Dave but from our Creator, that we would all be wise to remember.

    • Leather Nix

      I greatly appreciate your response and will look into Financial Peace. I agree Dave Ramsey has great advice for a good portion of the population. The manner in which he provides that advice definitely swayed my opinion of him though. I am, however, open to reading more. That particular book I picked up was pretty off-putting.

    • We have followed Dave’s principals and are having success at building wealth. The 7 rental properties we own were purchased with cash and we have enough to buy one more. Unfortunately the power plant where I work is shutting down in 140 days so we are not making any large purchases because we may move out of state. Being debt free and having cash in the bank gives us more options to take a job that I want, not one that I need. Having financial peace is amazing.

    • Lauren Althaus

      Thank you for sharing that history John! I felt this was more clickbait than an informed opinion given there is no mention of how his philosophy evolved from over-leveraging real estate.
      Arguing the merits of credit & leverage isn’t mythbusting his approach. You can build wealth & invest both ways; they just require different levels of risk, time & money for success.

  23. Theodore Rivera

    Great article! I believe you covered all aspects of the Dave Ramsey philosophy. Dave Ramsey is a must for a mass portion of the population. It is greatly needed, however it is weak in reference to those who are disciplined and find themselves on the other side of the financial fence.

  24. I teach Dave Ramsey’s FPU class at my church and have been doing so for over 12 years. My wife and I took the Financial Peace University class early in our marriage (20 years ago) and it’s been instrumental to us achieving wealth by following his principles. I agree it would be hard for most to own rental properties if they saved up and paid cash for it all the time. We own rentals and carry mortgages on them, but we follow his other principles about budgeting and saving and investing. As Christians we also tithe 10 percent of our gross income and that’s been a key to our wealth as well. To answer your question, I have no credit cards and haven’t for many years, and my credit score is over 820. So it’s possible. Thanks.

  25. Devin McGowan

    I read his Money Makeover book…it was really hard to get through. I agree with everything in your article, especially about how he likes to use the word “moron” and “idiot.” Personally, I find his writing style and voice to be manipulative. To say good debt is not real is simply a lie. Just because you couldn’t handle it doesn’t mean it doesn’t exist or work for thousands of others. Feel how you feel, but don’t lie and manipulate people to your way of thinking.

    • Leather Nix

      I agree. I especially don’t understand how someone that is supposed to be speaking from a Christian perspective talks down to everyone and call people “idiots.” I don’t care if you’re Christian or not, don’t treat people like they’re stupid.

      • Glen E

        2 points:

        1. In the Introduction of his Total Money Makeover book, Dave Ramsey, speaking of his academic credentials, says, “But the thing that qualifies me most to teach about money is that I have done stupid with zeroes on the end. I have been there, done that. I have a PhD in D.U.M.B.” Ramsey is only calling other people things that he also says about himself.

        Incidentally, in that same paragraph, he goes on to say, “So I know what it is like to be scared and scarred. I know what it is like to have my marriage hanging by a thread because of financial stress. I know what it is like to have my hopes and dreams crushed by my own stupid decisions. That qualifies me uniquely to teach and to love hurting people.” I submit, it is not that Ramsey doesn’t have empathy for people but he actually cares enough to call stupid what it is.

        2. If you don’t think it is Christian to speak of people as being idiots, read the book of Proverbs in the Bible. Proverbs uses the word “fool” to refer to people over 60 times (not to mention occurrences of “fool” in other books in the Bible). If you google the word “fool”, the synonyms it comes up with are: “idiot, ass, blockhead, dunce, dolt, ignoramus, imbecile, cretin, dullard, simpleton, moron, clod”. The Bible speaks to people in such strong terms on purpose, to get people’s attention and say, “don’t be like this!” I suggest that Ramsey is doing the same thing.

        • Leather Nix

          “…whosoever shall say to his brother… Thou fool, shall be in danger of hell fire.” – Matthew 5:22

          I’m not going to get into a religious debate. The fact that we’re trying to lean on the bible to insult people seems like a stretch to me. The bible said I can be mean to you…? Really?

          I was just raised you don’t call people stupid. Seems pretty elementary to me.

        • John C.

          It’s also biblical to sell your daughter to her rapist for 50 sheckels of silver and she can never divorce him. Lol

          And there’s nothing to say “don’t be like this!” about selling your daughter to her rapist.

          Just look it up in the Bible.

        • John C.

          Are we talking about the book that endorses and encourages slavery?

          The book that demands gay people be stoned to death?

          The book that tells you to have absolute faith in an idea or else you’ll be tortured forever and ever?

          The book that has condemned to eternal torture billions of people who never knew about the ideas in that book? People who just happened to be born in a different culture and time? Through no fault of their own?

          That book? Lol

        • Katie Rogers

          The question is not whether you or I or anybody in these threads believe the bible. The point is that RAMSEY says he believes the bible.

          Just because an incident was recorded in the bible does not mean that the bible endorses the incident. In fact, many times the point of the incident is “don’t be like this.” We also have to keep in mind that Hebrew law was written in the context of the Hebrew culture of the time. As time went on, their ideas about God and godliness changed. Broadly, they expanded from a very exclusionary viewpoint to an inclusionary one as in “For God so loved the world…”

          There is also the issue of whether the Bible actually teaches certain questionable ideas, or whether people teach those ideas for their own reasons. Many people have great difficulty separating what the Bible actually says in its totality from what somebody teaches the Bible says often by stringing together verses out of context..

  26. Dustin Humphreys

    I am grateful for Dave Ramsey’s Total Money Makeover. That book, ironically, helped me avoid debt. I read it right after I graduated college at age 22. I had $30,000 in school loans to pay back and needed to figure out how to do that. I was able to understand how to not dig myself a hole through consumer debt. So, I’ve never had any debt in my life except a mortgage and school loans. I started investing in my 401(k), as Dave says, and realized that vehicle sucks. Then, I discovered Rich Dad Poor Dad and started following those types of investors. So, all in all, I have always liked the basic budgeting and no consumer debt principles but really dislike the pushing of the 401k/mutual fund business. I like investing in cash flowing assets. So, to buy a cash flowing asset with debt is a good call in my opinion.

    • David Barrington

      I could not agree more. I discovered Dave Ramsey and read Total Money Makeover when I needed it desperately and it changed my life. The result was that now, 8 years later, I am in a position to invest, and Robert Kiyosaki and Bigger Pockets came along right when I needed them and was ready to hear that message. Both have their place and I agree with those who said that the two are speaking to different audiences, at different phases in their lives. I believe millions of people desperately need Dave Ramsey’s message and I remain a fan and an admirer, and very thankful to him for having the right message for me at the right time.

  27. Ben Travis

    Fair points. I have zero affilitaion with DR methods. But overrated is exaggerated. Everone has their own way of doing it, and it’s based on their core beliefs. You could use the logic of your article to say any succesful financial teacher/investor is overrated relative to said beliefs. Sorry, pet peeve of mine when authors use someone else’s (far more succesful) name in a negative light to brand their blog post. We’re all in this together. And that’s a marketing method well overrated.

  28. I don’t know, I just don’t know. Has anyone done the math yet? What if you didn’t pay interest but did it all cash? What does it look like two years down the road? 10 years down the road? On the Dave Ramsey said it is really good to have a house that is paid for and absolutely no debt ever I do want to financial freedom and I don’t want to be dependent on my job that I currently work to make my wealth. After becoming debt free through Dave Ramsey, I had a lot of disposable income but I also did not see any houses for sale for what my disposable income was. My heart is in the Dave Ramsey camp but my actions leveraged my assets to purchase multiple homes with debt. One thing that remains is I have no anxiety with the Dave plan, just peace. I own it, it’s mine. My decisions aren’t rushed, no late payment problems. It gives me more opportunity to get the tennant I want instead of one to pay the bills. That being said my only debts are for homes. I have no other debt

  29. Gary Breitbord

    Just a quick reply on credit cards. I have had credit cards since 1980. I currently have 5. I have never paid any interest since I use them strictly as a convenience pay method. Not as a debt vehicle. So I have a significant credit line, with minimal outstanding and pay on time. My score is and has been over 800. Never had problems getting RE loans personal or business.

  30. Melvin Plummer on

    Dave Ramsey, like so many others started off at a young age with the goal of becoming financially free. Many people start off with the same goal. Using a healthy credit score, Dave parlayed his real estate and other Investments in an attempt to gain Financial Freedom. Unfortunately, the pendulum swing reversed and his empire crashed. The mental, physical and emotional trauma of the collapse of his finances caused Dave great suffering. The pain was unbearable for him that’s why he is adverse to credit today. However, there was a light at the end of the tunnel for Dave. He wanted to help others. He had no idea that helping others would catapult him to becoming one of the all-time favorite Financial voices of this era. Dave learned that disaster creates the master and was shocked to see so many people needed his advice. Still traumatized by his early Financial troubles, Dave has a morbid fear of credit. Luckily for him, he no longer needs the banks because he has become his own bank.

  31. Reed Huddleston

    Great article! I liked your point on our society being wrought with consumerism which has caused people to drive themselves into debt and that these are the people who need most of Dave Ramseys advise.

    I hear a lot about Dave Ramsey through my Church and people who are fully committed to getting out of debt because that’s what “Dave Ramsey” said to do. It’s refreshing to read this article where light is shed on those who need some of his teaching vs those who it does not apply to at all.

  32. Phl Olinger

    Well I teach his class, so …. this will be fun!
    I always hear from everyone how he is for the…uneducated, the ..unsophisticated the… fill in the blank

    The true bottom line is … It Works
    Why Dave Ramsey works is largely him, his story, and not what he is saying, but his process, and I will explain all of it in detail and leave my personal example below
    1. He is easy to listen to and after listing to about 5 shows of him on the radio, you too can give his advice. He is consistent with his message and very disciplined.
    2. I see you didn’t read his original book so his story is that he was your age, making 250k a year with 4 million in assets and 3 million in debt. His bank got sold off to another bank and his new lender called all of his notes. He eventually lost everything and went bankrupt…. your way! The Sophistocated Way! The Intellectual Way! So he said how can I never be back here, and thus the baby steps.
    3. So he built a brand and a great storyteller. He tells everyone the same financial advice that your grandma or great grandma would tell you with one large twist. This is the first financial Guru (like you said) to recognize that financial decisions aren’t based on math. Masses of people who buy things in America and abroad aren’t going… what are the financial ramifications of this pack of gum on my overall budget… IT IS BASED ON BEHAVIOR… EMOTION… Thus the baby steps are born.
    4. So save 1000, people can do that and it is an easy win. second, pay off debts smallest amount to largest. Thus creating more emotion and positive feelings (pay off $500 credit card, and then the $1200 one) You get slam dunks and immediate feedback of it working, you then snowball those payments into the third debt. People begin to see a light at the end of the tunnel and they start to pare down their budget even more. He is a cheerleader for all of this. Why do people follow him and his advice… IT WORKS!!! People who pay off debt call his radio show and scream “We’re Debt Free!”

    So what is my story of being on dave ramsey for the past 7-8 years…. IT WORKS TREMENDOUSLY! I am not going to lay out detailed financials here not the place, but the needle has moved in the positive direction over 300k.

    so my counters to everyone on here would be…
    1. If debt is awesome, and you know investing… taking out debt to invest in stocks if you are a trader is also smart. When the stock price goes up, get more debt because of the equity and buy more stocks. Oh wait we are talking real estate… so use Dividend-paying stocks.
    2. I know I won’t be rich today, I won’t have the cars, I won’t buy the fancy plane. I am okay with that, but if you ever have to come to my door and ask for money to invest in your development deal….. just keep walking. I know I will have the cash you want. I am tired of people saying that saving and paying for things as you go is stupid… It works.
    3. What everyone misses in the whole underlying theme with Dave Ramsey is that he couples budgeting with this intense boot camp and positive vibe of the debt snowball. My wife and I budgeted intensely for about 3 years to pay off our debt and now we still have a budget but it is a lot loser than when we were getting out of debt. People who know how to budget, know how to make money. It is like riding a bike. If you think you can just debt your way to millions, you will fail, have a hardship, and face challenges. History shows that us “uneducated budgeters” who know how to spend our dollars just sit back and wait for the “sophisticated failure.” It always happens, and if you think you can budget like me… go ahead and start today… I have been doing this for 7 years.

    • Leather Nix

      Great response. I agree, budgeting and eliminating consumer debt are vital to financial health. I don’t doubt the quality of that advice. Of his books, which do you think is most informative? I’m open to reading more. The one I read was just incredibly abrasive and short-sided. Do you have another suggestion?

    • Andrew Lee

      Phil, totally agree with you. As you see above, I also teach Dave Ramsey’s class at my church and have for many years. We are now millionaires in our 40’s from just regular saving and investing and avoiding debt. We’re those “next door millionaires” whom nobody would ever guess. I’m a teacher, for instance. But it does work, you’re right.

    • Christopher Fougere

      I think you need a combination of both. You need hard work and capital and discipline. You can’t start with nothing and expect to become millionaires by borrowing irresponsibly. You need to take calculated risks, leverage when appropriate and hold. My wife and I are borrowing with both hands currently to buy real estate with a very strict ceiling on acquisition price that provides modest cashflow – knowing that when the next crisis occurs, our salaries and/or savings will cover our debt. We contribute the minimum to our 401k to get company match – and instead buy whole life, backdoor roth, and RE – I don’t think Ramsey or Suzie would approve, but we also aren’t on TV preaching to middle america.

      • Leather Nix

        “Calculated risks” is perfect. I agree. I’m not advocating running up a bunch of credit cards on consumables. But taking calculated risks, while you have a financial cushion and are prepared for the downside, makes sense.

  33. Virgil T.

    Thanks for writing this article. I loathe the guy. I retired five years ago from the radio business. His radio show is incredibly repetitive and annoying. I would never have aired it. Essentially it’s one long-winded infomercial. Think opportunity and possibility, not fear.

  34. Michael Boyer

    I enjoy Dave Ramsey and listen to the program (it is rather entertaining and educational).

    That said, I do tend to have couple of variations on his themes.

    For example, he goes on about mutual funds when I wish I could reach through the radio and hand him a John Bogle book on index funds to save his listeners tens of billions in fees and probably boost their returns to boot (the indexes beating most managed funds).

    Similarly, he like real estate but suggests you buy rentals for cash. All fine and dandy but on both coasts and many metro areas that would many many investors could not get into the game until very late and life (and even then might be forking over all or a substantial chunk of their savings). So it is less realistic in much of the US. But he also has a religious angle to his debt free message which I respect (borrow is slave to the lender, etc.).

    But the perfect is the enemy of the good. His advice is geared largely to a less financially literate group with debt issues (a huge demographic) and for them it is probably well suited. I actually like him as an example of marketing and brand building now as well, selling millions of books and, I think, the 3rd most popular radio show in the US. He is more a brand story for me and the topic happens to be personal finance, which I also enjoy.

  35. Aaron Cater

    The Richest Man in Babylon is the most over rated book of all time. If you havent read it let me save you the time, here is the whole book in one sentence. “Save 10% of what you make and invest it.” There, I saved you four hours of your life.

  36. Bob Frazier

    I’m retired, and old enough to have grandparents who lived as adults through the Great Depression. They were part of a forever scarred generation – completely averse to debt and had a deep mistrust of banks.

    Given Dave’s (somewhat similar) experiences, and given the financial situation of most Americans within his readership, I’d say his advice is sound.

    Remember not to think of yourself as to smart to fail, because we never know what’s just around the corner economically. Someone above said it more perfectly; a “specific medicine for specific illness.” And I’d completely agree, most Americans are less than one month away from insolvency – that’s pretty ill.

  37. Michael Swan

    I would agree and add that Ramsey is like the kindergarten of financial planning and what we are doing, if done right is like a masters in graduates school in becoming financially free. I have a mortgage of $330,000 on a $530,000 personal residence and I also have 2.1 million in commercial loan debt on 5 apartment complexes throwing off $160,000 cash flow and exponentially increasing the value by forcing appreciation too. Without this leveraged debt, my dreams would never have come true on an $80,000 combined family W2 earnings living in a pricey area of America, San Diego.


  38. Josh Matthews

    Lots of good, respectful discussion here. I just wanted to point out that while Suze Orman has been preaching her system for 15+ years, Dave Ramsey started his radio program and selling his ‘Financial Peace’ book back in 1992. If it hasn’t been mentioned already, his best known book is ‘The Total Money Makeover’. He can absolutely be abrasive, but that’s many most people need; they need to wake the heck up and get out of their mess. His plan is all about the behavior and not the math. As Dave says: “if we all truly understood and cared about the math, none of us would ever be in debt”.

    Like some others above, I’m also a coordinator for Dave’s FPU program; and I’m not afraid to hear or entertain opposing views on his program. I would just mention a few points to ponder that stand out to me when one says he’s not “sophisticated” or “for everyone”:

    (1) When 50+% of Americans have less than $1000 in savings (39% have ZERO) and 75+% of full-time workers are living paycheck to paycheck, I don’t think trying to knock Dave Ramsey down a notch really helps anything. His advice for these folks is absolutely necessary.

    (2) Leveraging debt with real estate works most of the time for the wise, knowledgable investor who has seen multiple ups and downs. But a true market crash will take most people down hard. Income-producing properties are great; again, as long as you can always make the payments without a tenant. It’s all about your comfortability with this type of debt.

    (3) When my wife and I first started teaching his classes back in 2010, the classes were packed. People were panicked because they “were losing everything”. What struck me is that most of the attendees were in their late 40s to early 60s (my parents’ age) and they were supposed to be headed into retirement, but were instead sitting in a class learning how to grind their way out of all of this debt they had taken on in the form of credit cards, car payments, and college for their grown kids. They were realizing they were going to have to work for another decade. It was sad and eye-opening.

    Fast forward to the last couple years and attendance is way down, since the economy appears to be humming along. Americans are taking on more debt, the reigns are being loosened on mortgage requirements, etc. Not as many people are so concerned with trying to be [consumer] debt-free.

    In the end, yes, every single bit of his advice/teaching is not applicable to EVERYONE… but whose financial advice is? And I think that his basic principles can’t really be considered overrated for anyone.

  39. Bob Langworthy

    Thanks for the great article! I’m a big fan of Dave and believe that his simple advice is good for most people. Where I deviate, however, is with investing in real estate and using credit cards that I pay in full every month:

    1) Our current commercial property (and our future ones) will be bought with a mortgage. I like the cash on cash return that we get.

    2) We use credit cards for business and personal expenses and pay them in full every month. With the frequent flyer miles we’ve made a trip to New Zealand, two trips to Malaysia (all 6 of us) and multiple trips around the country. We also get most of our dress clothes for free with the Banana Republic card.

    The combination of Dave’s conservative approach to spending and saving combined with some solid advice on investing in real estate is what has worked for us.

  40. Joel Gonzalez

    Great advice. My 2 Mentors have been Robert Kiyosaki & Grant Cardone with that combination our real estate portfolio continues to grow. Good Debt is good and Passive income is great. Keep grinding to the top. Great advice. Spot on?

  41. Rachel Deering

    Dave Ramsey irks me too! I took his Financial Peace course years ago and it was very helpful in structuring a budget and discipline and setting up that very important emergency fund. But that’s it. I grew weary of his condescending, holier than thou attitude and can hardly stand to hear his voice anymore. I think that smart investors should have open minds and listen to others throughout their lives. Know-it-alls generally never know it all!

  42. I really enjoyed attending his financial peace university classes ( for a whooping $100). He has solid advice that most Americans need to hear. I didn’t enjoy his books as much as the class. As for the credit cards – we gave them up a year ago and we survived! And so did our credit scores – both a little over 800. I really don’t understand the negativity! But I guess I enjoy learning from a variety of people. I’ve enjoyed reading several financial books written by several authors AND I focus on the positive. i have learned a lot from having an open mind. And although I don’t do debt I welcome mortgages (in case you’re wondering).

    • Leather Nix

      I didn’t intend to be overly negative. I, literally, just set the book down when I wrote the article. The emotion was still pretty raw.

      I really enjoy financial information. I read financial books, and have for years, because I genuinely find the content interesting. (My kids joke that I read tax books for fun.) I grew up poor, so I wasn’t really taught those things. Honestly, I would be open to taking the class. I would hope it would focus more on action steps and less belittling people. That was the feel I got from the book.

      • Yes… I agree name calling really isn’t needed.

        He has helped many people and it saddens me to think this may discourage someone from attending one of his classes.

        Many have mentioned it is basic. And it is. And no if you’ve attended his classes you’re not a ditch digger – most in my class were professionals struggling with student loans.

        However, if you do take the class. I want to warn you – he’s not kind to business owners. As a owner of a service company and a landlord, it was a bit of a downer.

        The class helped us (spouse) to have meaningful money meetings. And I will be forever grateful for that help!!!

        And no! Don’t take all of his advice but most of it is great!!!

  43. Jon Collins

    I actually read a couple of Ramsey’s books and took his Financial Peace University. I agree with some of what he says and some I don’t. What I don’t like is he’d rather see a family have to suffer for years paying off debt than to file bankruptcy and start over. Yet he himself filed bankruptcy. I did ten years ago and it was the best thing I ever could have done. It took a tremendous weight off my shoulders and allowed me to start over. Also I happened to look up this guy Larry Burkett he always mentions. Actually Ramsey is presenting his info almost word for word. Ramsey just marketed it better and has made a ton of money off of it.

    • Leather Nix

      Haha I didn’t realize that. I’ll look up Larry Burkett. I realize his name-calling and abrasive attitude are part of the marketing gimmick to get listeners. I just didn’t like it. But you’re right, he’s made a ton of money off of It!

      And yes, unfortunately, bankruptcy is sometimes necessary. Not sure how he can criticize it when he benefited from it himself.

  44. Tom Keith

    Hi Leather, great article and good feedback as well. I am and have never been a fan of Dave Ramsey primarily due to his overriding. Attitude to people that might not agree with his opinions. To me that is condescending and if an educator or communicator cannot teach without that trait they think too much of themselves or maybe they are afraid of the truth. Everyone has an opinion and those with an open mind can learn something from anyone, good or bad. Once again, loved your piece here and hope to see you at our local REIG Meetup group next Monday evening. Just a small plug!!

  45. Adam Baltuska

    Dude changed our lives profoundly and we are forever grateful. Thinking about the number of people he’s helped, and all the positive impacts rippling through families and over time is humbling.

    Different strokes for different folks though. I think The Beatles are overrated so I’m not telling anyone their unpopular opinion is therefore false. 😉

  46. Kat Horn

    Everyone should read this about Dave Ramsey’s real estate investing past. It is reprinted from a comment on Bigger Pockets from 8 years ago:

    Dave ended up in the dumps along with a few other REI folks I personally know. Before that tax code change. Guys like Dave made their money on selling limited partnerships on insanely over leverage real estate. The limited partners mostly highly paid professionals who needed big tax right offs bought in by paying the monthly mortgage for the owner investor.

    Here is how the investors made the big bucks. First find a totally worthless rental building, the bigger the better. Buy it for what it was worth (just about nothing), next fix the place just enough to make it habitable.
    Next sign leases with folk who were at least breathing, make the rent as high as believable, next go to a lender who was not being properly regulated, was allowed to lend money based on the new value of the building which was now based on a totally rented fully leased building.
    Easy slam dunk deal, the investor is holding $100’s of thousand of borrowed tax free money, and the limited partners paid the mortgage, plus the other expenses involved in the building. The professionals got a huge write off by owning the losses of the building, without being on the mortgage docs or owning the building.
    The investor had easy management, he did not worry about collecting rent, or upkeep as the limited partners paid the freight.
    The tenants never complained as most did not pay the rent anyway.
    But Uncle Sam threw a monkey wrench into the deal. The new tax code disallowed loses from real estate for these professionals who earned above $125k and that is all of them.
    The limited partners stopped paying the mortgage, and walked away free.
    My friend had 2.6 million dollars of mortgages to pay on negative cashflow buildings. He of course also ran away with his credit totally destroyed forever, and the lenders mostly failed.
    This my friends was called the S+L crisis.

      • Terrible business model is certainly one way to put it. If it’s true (which it is the best explanation I’ve seen based on the timing of his epic real estate fail) it also might make one suspect of his scruples and advice.

    • Margaret J.

      Interesting to hear the real story of his real estate dealings. I remember the S&L crisis, although I didn’t understand at all what it meant. Funny thing is, this article caught my eye because I recently went to see Dave Ramsey do a “live” show. Lots of hoopla and when I left I thought…. I didn’t really learn anything new. I didn’t purchase any of his products either, but I still listen to him on the Radio. He just helps reinforce a lot of basics. Robert Kiyosaki and Susie Orman gave me my first lessons about money that I didn’t learn in school. THEN I got into real estate and learned creative financing. You should hear me try to explain to a conventional lender that I bought a property with a Hard Money loan, also wrapped another loan from a 2nd property into that one and the down payment was a lien against a 3rd property I owned free and clear. They made me type up a letter with the details! So yes, I believe in leveraging debt.

      • Kat Horn

        So, here’s Dave, with his shady real estate investing past, turning to Christian counseling and using the bible to make people feel like fools and un-Chrisitian for using leverage. Dave is just a great salesman who found a schtick that works….in this comment thread, you can see the blind devotion. Now Dave is making money hand over fist with his personal finance empire, and invests heavily in real estate in cash. Too bad for the rest of us who can’t afford that luxury and need debt to buy rental properties (99% of us). So thanks Dave, really doing good for the world out there.

        BTW, good luck finding info on Dave’s real estate past. Wikipedia seems to support the S&L crisis involvement:

        Ramsey’s success soon came to an end as the Tax Reform Act of 1986 began to have a negative impact on the real estate business. One of Ramsey’s largest creditors was sold to a larger bank, which began to take a harder look at Ramsey’s borrowing habits. The bank demanded he pay $1.2 million worth of short-term notes within 90 days, forcing him to file for bankruptcy relief. Sixty days later another bank demanded nearly $800,000.

  47. Jamie Markel

    Thank you Leather for the great article. It also enticed great discussion in the comments. I have learned a few things through the personal stories and feedback some have commented to bring into my own life or work towards.

  48. Kevin Enderle

    I’ve been following and listening to Dave Ramsey for a while now. I listen to his show on YouTube. Way I see it is that he gives sound, solid advice that your Grandparents would find totally logical. Generations saved to buy stuff. We stopped doing that and the national debt is now in big numbers with a T on them. Also, Mr. Ramsay did go from a highly leveraged multi million dollar real estate investor to bankrupt, to owning hundreds of millions in Real Estate holdings free and clear…so the guy has been there and done (and is doing) that. Dude knows real estate.

    What I’ve learned from him is that there are two ways to invest in real estate. Both work. You can leverage your way to a portfolio, or you can pay all your debs off, then take your income, buy your first property from income you would have spent on mortgage and cars and all the other crap we finance, then let the cash flow from your investment property buy more properties. Both ways work…both can get you some seriously large portfolios, but only one is likely to survive a severe economic downturn unscathed…and it ain’t leverage.

    As for the people who call in all being folks making $45K a year, that is’t what I’ve heard. While there are certainly plenty of lower income folks who are frankly desperate who call, there are also a surprising number of them who have what would be be considered upper middle class income, some high income earners, and some with VERY substantial incomes. A surprising number of callers are earning solid low to even middle six figures…but they are still paycheck to paycheck. Student loans seem to be the biggest killer amongst people in this income bracket, followed by cars, then credit cards and too much leverage on too much primary house. His advice to those folks is solid and time tested and safe.

    As far as being a real estate investor, he is correct in that if you pay off all your debts including your mortgage, then you all of a sudden have a whole LOT of income to put towards saving to buy income property. Buy said property out of said cash flow and the income from it can add to your income to buy another, rinse/repeat. Think of it as BRRSR (Buy, Refurbish, Rent, Save, Repeat). The idea is to create a property snowball that you own free and clear. with each one adding to your income and your ability to buy more. The difference between that strategy and leverage is that should the economy hiccup (or puke its guts all over the place and go into cardiac arrest), you’ll not only have the income from free and clear assets without loans that can be called, but you’ll have substantial income to save up to get more choice property when people are panicked, things crash and it is cheap.

    I’m personally doing the snowball thing right now after looking at the amount I was leveraged and having a cold chill go up my spine. I see too many signs I was seeing in the mid 2000s. Overheated markets, euphoria, flipping shows everywhere, and super leveraged mortgages (haven’t seen any 120% yet, but it wouldn’t surprise me). 2008 is still fresh in my mind. It stuck me that should something go south, with the amount I was leveraged, I could lose potentially lose everything like so many did back then. So I’m selling my property and debt snowballing with the goal of being completely debt free in 2 years.

    And it is not because I can’t manage the debt, I cashflow nicely…but I simply loath the idea that somebody else has the potential to ruin my life. Income property is supposed to be there for security, not to create worry.

    And, don’t think 2008 won’t happen again…it probably will. That is the other factor that led me to decide to go all in on Ramsey. Frankly, I’m seeing some of the same overheated euphoria in the real estate market today. I heard a local real estate agent who has a talk show on the local radio talking about how people can take advantage of zero down mortgages these days. Are you JOKING? We are going back to the same over leveraged loan programs that I saw back in late 06 and 07 when I saw the writings on the wall. I made moves to become ultra conservative which is why my business survived unscathed.

    To add to the mix, China also scares the living HELL out of me right now. Their utterly insane real estate market and shadow banking crisis are looking pretty terrifying. They make the US banks in 2007 look like the bankers in Mary Poppins.

  49. Chris Virgilio

    Allow me to take a slightly different stance on this article…

    5 years ago, I sat at my eventual wife’s family table at Thanksgiving completely adrift financially. I, like so many Americans (or humans in general) had no financial education or roadmap to follow to have even the most basic concept of debt, emergency funds, insurance, etc. I had no money principles or any concept of what simple steps I could take to set myself up for a killer financial future. It was only when my eventual wife’s cousin mentioned someone named Dave Ramsey, and that he had a great book for figuring some personal financial things out, that I even began to think about my future at all.

    Fast forward five years and we are married, debt free but the house, and about to embark on an amazing wealth building adventure in real estate, all because I read Dave Ramsey’s “The Total Money Makeover”. You see, one thing led to another after I read that book. I am totally the financial nerd in the family, so I couldn’t put the book down. Things began to change rapidly, both in my mind and most importantly in my financial accounts. Finding a daily radio show that talked about easy to understand personal finance advice for three full hours was life changing. It turns out he has been espousing his knowledge much longer than Suze Orman or any of the other names you might hear in this genre. Heck, he INVENTED the genre, and does it with a strong Christian message as well (not being a devote Christian myself, I can’t really speak to the validity of most of it, and I know that evangelical Christianity isn’t everyone’s cup of tea).

    Dave Ramsey’s radio show was where I first heard the name Robert Kiyosaki, and first heard the book title “Rich Dad, Poor Dad”. I raced to amazon to buy my copy and again, mind blown. To make a long story short, Dave Ramsey turned me on to a whole new world of financial thinking, and set a chain of events in motion that has led me here, to a community where people talk about different strategies to grow and build wealth, and why that is important.

    So now let’s circle back to this article. It is of utmost importance to state right off the bat that Americans are severely lacking in financial education. In fact, if you look at some basic stats like nearly 70% of Americans are living paycheck to paycheck and don’t have more than $500 in a savings account it just makes you scratch your head. How can so many of us be so financially illiterate. Look at the college loan bubble or the credit card debt our nation carries, heck even the debt our government carries, and it just makes a person sick. We as a nation are in a huge mess.

    A huge majority of people need these messages. We need to walk before we can run. We need foundation before we can learn to springboard into something better. Dave Ramsey and the like introduce a whole new way of looking at their financial lives and give them hope that there can be something better at the end of their financial journeys. Retirement, after all, is a complete pipe dream for so many.

    I don’t know anything about this author, having not read any of their work before, but I can tell you that I was instantaneously turned off by the immediate realization that they didn’t seem to know anything about Dave Ramsey, and hadn’t even read his signature book, then mentioned Suze Orman in a light that led me to believe that they thought Dave Ramsey just started up recently. The cynical tone and condescending overtures in this article are quite surprising and rarely something that I see here on Bigger Pockets, but if this is the kind of drivel that passes for worthy journalism here on this site, I’m going to have to start searching elsewhere for real estate advice.

    There have already been countless articles and threads on this site about how Dave Ramsey’s investing advice is rather elementary. It is quite obvious that the majority of readers here are just fine with taking out massive amounts of debt, and it’s also sort of implied in articles like this that you SHOULD be fine with leveraging the heck out of your existence. I think this attitude says a lot about how we all need a reality check sometimes and to reevaluate our financial situations. Maybe all of this debt isn’t such a great thing. Maybe some should scale it back a bit. Maybe some people know way more about personal finance than Leather Nix.

    People need a starting point. They need a way to get from drowning in debt to a position where they can even begin to wrap their heads around something like real estate investment. They need warm voices who are welcoming and not totally judgmental to help get them started. This is not the time for harsh, I researched articles that forget just how small of a slice of the larger human experience we real estate fans are. Be humble, show some grace, and consider applying some humility to your mindset before dropping articles that totally crap all over someone who has spent a lifetime helping build financial independence principles across the country, start businesses, raise their family to walk in stronger financial footsteps, and retire with honor and dignity instead of depending on the government feet.

    Remember who you are, and most importantly who you aren’t, before offering criticisms about something you clearly know nothing about in the future, please.

  50. Frank Jones

    The Total Money Makeover was originally published in 2003. Dave Ramsey was preaching his philosophy well before that, He’s been around a long time. Suze Orman, I’m not sure.

    I don’t follow Dave to the letter because I take everyone’s opinion with a grain of salt then form my own because you know what they say about opinions, but I do know his program works. Most people in bad debt situations need to react to Dave’s message like their hair is on fire (or become gazelle intense as he would say) which I believe what he’s trying to inspire.

    Please go back and read his most popular book (by far) then write this article over.

  51. Cole Hittle

    Completely agree on the “idiots” and ” morons” comment you made. I always pick and choose what I want to hear from Ramsey. I attended one of his shows in Indianapolis (Chris Hogan, actually, but the Smart Money tour) and had to listen to how much of an idiot I was for using a credit card for all expenses and having a brand new car. When you set a budget for a credit card just as you would your cash – it works the same…actually better. You are helping your credit score and with the right credit card you earn crazy benefits. I have many family members that may as well be Dave Ramsey’s siblings how much they preach his message and declare they are the smartest with their money (yet none have had any other financial education) that I’ve tried to break this argument down with. Literally with numbers! I PROVED (with numbers – not just a theory) to a relative that spending the same money with a certain credit card after one year gave me back $1000 in cash. That dreaded Christmas spending time for me? Nope…it was all taken care of because of how I set up my personal expenses to run through a credit card.

    My honest opinion is Mr. Ramsey is to assist people getting a budget put together and not accumulating debt on items that are unnecessary. And by unnecessary I mean driving one’s monthly expenses over their monthly income. He can be very helpful – but for people searching for creative financing or have another successful strategy to gain financial freedom probably not so much.

    Glad to see someone say the same things I’ve thought since I was first introduced to his messages.

  52. Joe Thomason

    Great article and great comments. You might could say understanding Dave Ramsay is step 1. Then if you wish to graduate to a bit more advanced way of thinking learn Rich Dad Poor Dad and learn to use some debt cautiously on endeavors that make you money such as real estate or possibly a business. However I’d agree that it’s best to keep your own personal consumer debt to an absolute minimum and preferably zero.

  53. Mary White

    It’s definitely a stretch to judge Dave Ramsey based on one book alone. Yes, he’s an arrogant self promoter, but he has changed the lives of millions on people. His teachings come from a place of experience and also compassion towards people. I’ve heard him tell listeners without credit card debt who hold real estate to snowball their investments and pay them off. That sounds like excellent long term investment advice depending on what kind of investor you are. It’s seems to me that his message is simply not for you. That’s how I feel about his daughter Rachel Cruze. She started giving parenting advice before she had any kids and actually criticized people about their parenting. I don’t believe for a second that she knows anything about the struggles of most people and I’m certainly not listening to her parenting advice…Dave’s teachings are worth listening to, just sort out what doesn’t apply and move on.

  54. James Stines

    I think Dave is good for the right audience. If you suck at finances and you need a strict way back, he’s got the right formula. Also, he may not be preaching something unique, but he is preaching and that is mostly the audience he’s trying to appeal to. Outside of his views on credit cards and investment strategies, he’s helped a lot of people. I personally CANNOT STAND Suze Orman regardless her advice. Her voice makes my teeth hurt.

  55. I’ve listened to Dave on the radio for about 20 years or so, and I even created a board game based on his financial principles and sold it to him (Act Your Wage), which you can buy on his website. So I’d consider myself very well versed in Dave’s messaging. While I don’t agree with everything he says, in general he gives sound conservative advise to his target audience – people in debt. Dave’s target audience is not real estate investors – that would be Robert Kiyosaki and others.

    You said you’d love to be proven wrong regarding your credit score – well I will. I haven’t used a credit card in over 15 years and my credit score is over 800. One of the things Dave talks about that makes you think is how obsessed we are with our credit score. As Dave puts it, it’s not an indicator of how well you’re doing financially, it’s just an indicator of how well you played kissy-face with the banks. You’ve borrowed a bunch of money and paid it off and also paid interest. Dave’s credit score is 0. He said he could get turned down for renting an apartment because his score was 0, but yet he has enough money to buy the whole apartment building. What’s wrong with this picture?

    A couple other points – yes, you can qualify for a mortgage with no credit. You just have to use a lender that does manual underwriting (actually look at your bill payment history with things like rent and utilities, etc). And the one thing that most people don’t factor in with going in debt is RISK. Being leveraged with lots of real estate debt is good when things are cash flowing and going well, but Murphy’s law will sometimes catch up to you and you could lose everything. That’s what happened to Dave when he was in his early 20’s and had a multi-million dollar real estate portfolio. He lost it all and went bankrupt, and decided then and there to never borrow money again. And now he’s much richer than probably 99% of the people on this site.

    • Jiri Vetyska

      Randy, you ask what’s wrong with the picture – Well, nobody has a credit score of 0, only an arrogant self promotor could say that. Credit scores run from 300 – 850. I bet you his score is way up in the 700-800s. That’s just a sleazy salesmanship.
      Second point he is not telling you – he didn’t just acquire millions of dollars of wealth from 0 with his savings philosophy. He’d be poor guy still today. He owns businesses that borrow tons and tons of money, so if you looks at how he got the money, there was a lot of leverage and credit along the way.
      Wo while he may promote that you don’t care about your credit worthiness, his business care too much about their credit score and loans they can take. Don’t let people keep you poor forever, it’s ok to just get by if that is what you want, but if you are serious about being an investor, you will have to know a little bit more than just basic money management.

      • Jiri, I think you are wrong because apparently you can have a credit score of 0 (without being an arrogant self promoter as you said). I haven’t personally researched it, but according to Dave, if you don’t borrow any money for a certain period of time, your score will eventually go to 0. Seems plausible to me. And I’ve never considered him to be sleazy in any way as your described him. He doesn’t come across that way at all to me and millions of other fans.

        And your second point is also wrong, according to him. He has built his fortune on branding himself and his philosophy on his radio show for many years, and building a business of over 600 people and counting around his messaging. He claims he hasn’t borrowed any money (let alone tons and tons of money as you said) for his businesses or personal life since going broke decades ago. You can choose to not believe him, but I do.

        And finally, while I appreciate your concern, I am a full time and “serious investor”, am not “letting people keep me poor forever” and not “just getting by” as you said. I’ve done quite well in my career, thank you. While I realize his advise is repetitive, not rocket science, and basic in nature, I do know “a little bit more than basic money management” like what he teaches. But I still enjoy listening to him from time to time.

  56. Melvin Plummer on

    Many people would argue that there is no such thing as equality. However, when it comes to credit, all human beings are born 100% equal, that is they are born with a zero credit score. Every point that is added to that score is the sole responsibility of the credit file owner. Banks are smart because they know everything about the consumers spending habits and they know how to take advantage of that. A person can bounce a $10 check and the bank will charge them a $36 bounced check fee. That is an enormous profit for the bank because it probably doesn’t take more than three or four dollars to process a bounced check. However, with a little financial savvy, you can outsmart the banks. I have an 850 credit score. I also have 8 credit cards with $313,000 in available credit with a zero balance. Unlike Dave, who has a credit bureau neuroses, I love credit. If I had 100 million in the bank I would still keep my lines of credit and the credit score that I built from zero to 850.

  57. Johnny Wishbone on

    Dave Ramsey takes a lot of crap, for what are arguably nitpicking details. Is the snowball method the absolute fastest way out of debt? No, but I agree with what he says, namely that it’s a psychological problem, not a math problem. Can you use credit cards responsibly? Yes, but most do not and it’s easy to slide into old bad habits.

    Suze Orman and Dave Ramsey have been writing books for almost the same amount of time, so just because Dave is new to you doesn’t mean what he says is Orman’s right alone to preach. I think if I had to choose one of them based on their background I would choose Dave. He made his fortune originally in real estate and lost it all (using your leverage mentality.) He then rebuilt with a more conservative approach and is now a multi-millionaire. Suze Orman’s experience is in the financial services industry, where they preach about buying insurance products (mostly because insurance products have enormous commissions.)

    By the way, a friend of mine at one time had a large portfolio of houses, all leveraged. He ended up losing all of them in 2008-2009 and basically ended up homeless for a time. It’s a risky proposition, and I would argue that the guy with one $100k rental house is on a path to much more sustainable wealth, albeit a slower path.

    Anyway, I agree that “Richest Man In Babylon” is one of the best financial books ever, and I really was inspired by “Rich Dad, Poor Dad.” So I’m not saying Ramsey is my favorite, but one could do a LOT worse than following his advice.

    By the way, my credit score is about 849 and I use credit cards little to not at all.

  58. I agree with many people here, that what Dave talks about is very much needed for a great number of people. He has undoubtedly helped many people improve their financial position and for that, he deserves to be commended. However, i believe his advice is limited in value if you are an individual who is not in dire financial straits, someone who wants to grow his wealth quickly, or someone who wants to retire way before his 60s. Mutual Fund investing, which Dave LOVES, is not the best way to generate cash flow or generational wealth.

    I grew up in a family who eschewed all debt. My parents paid off their house before i was born and always bought cars, other houses, etc., with cash. It wasn’t until I was exposed to Rich Dad Poor Dad that I realized debt is not as simple as No Debt=Good / Debt=Bad. Debt is a tool and like any tool, it can be used constructively or destructively. in the hands of most people, it is unfortunately, a dangerous thing. For those of us who continue our financial education and are prudent with our resources, debt can be a great tool to help build wealth. To discount/dismiss all debt and credit card usage out of hand is, in my opinion, foolish and ignorant.

    Also, I listened to his Financial Peace University audio book on a road trip with my wife. We both struggled with it primarily due to his condescending tone throughout the series. While DR does provide a useful product to many, he is very disparaging to his audience and that was a turn off for us. That and the fact that his voice sounds annoyingly similar to the uber-obnoxious Mark Levin, and I made the decision to never buy his products again.

  59. Roan LaPlante

    I fall on the Dave Ramsey side of the debt question, and I think Robert Kiyosaki, personally, is a lying cretin. But, I know many people who are very successful doing the Rich Dad paradigm, so I try to keep an open mind.

    Certainly, I don’t agree with Dave Ramsey that all debt is always bad. But I do feel that people very often are very poor at assessing the risks and benefits of these debts; far more debt ought to be considered bad debt than currently is by most personal finance people. But student loans, especially loans for medical and law programs, as well as loans for certain types of investments like solar panels, are debts that I would at least sometimes recommend in contrast to Dave Ramsey’s guidance.

    Where you really lost me in your article is in your commentary about the importance of credit, and the role of credit cards in doing so.

    In addition to the potential for default, a poorly discussed flaw of credit cards is the introduction of unnecessary middlemen which increase costs for consumers, at least in the long run. This is the most important reason that I avoid using credit cards wherever possible (I do personally continue to keep one credit card, at least for now, but I use it as scarcely as possible).

    What Dave Ramsey taught me and which I clearly kept in my head — is that good credit is utterly meaningless. As it so happens to have good credit, since I have never taken any debts. But I used to worry about the effects of closing or expanding credit lines on my credit score.

    Ever since Dave explained on the radio that credit score is a measure of how much money you have you paid in interest to banks in the past, I have no longer bothered to worry about credit. Since I am fortunate to have come from a family with no debts and a comfortable amount of funds, I have no need for manipulating my credit at all.

    It is entirely legal and possible to acquire loans without having a credit history. Dave Ramsey discusses this by recommending some companies that provide conventional mortgages for people with no credit history. In addition in real estate, and perhaps some other investment ventures, there are hard money lenders and other types of venture capitalists who are independent and considerably smarter and more flexible than many banks. Probably there are plenty of small, flexible, banks that would give you business loans without having a credit score. Even if you don’t qualify from a bank — which if you have a good idea (or better yet an established young business model) and a reasonable down payment of your own starting capital and a realistic business plan with realistic numbers, if you have these things you WILL qualify for a loan from a small bank, you just haven’t found the bank you will qualify from yet — but even if you don’t get the loan from a banker, it doesn’t mean that you can’t procure a business loan. People pay so much attention to the way inflexible large banks do business that they fail to even conceptualize that what they want to do is possible under different business models (and if they don’t like the way big banks operate, they should also refuse to do business with them and penalize them with their wallets).

    Carrying expenses that you wouldn’t have carried if not for the fact that they affect your credit score and thus your ability to get loans from conventional sources in the future is just completely worthless, and a terrible idea, and you should never do it ever.

  60. Eric Wargo

    I’ve read most of Dave Ramsey’s books, walked through his program, and paid of $90k in consumer debt (as in mortgage not included). Maybe understanding Dave from a different light might help. Feel free to disagree with anything…or everything.

    I felt I was drowning. I wanted to be a missionary oversees but my debt held me down. I have no desire to retire or build wealth so I can live without suffering. Dave helped me with his baby step process but more than that he made me feel I could really get out of the situation I was in….and it worked. Consumer debt can be crippling but not on paper but at a heart level. Dave excels in getting people to make heart decisions and he pushes people at a heart level to help them reach freedom from the weight of finances, which may or may not included debt.

    Dave’s material saved my marriage from fights that I have heard all my married friends fight. Wife and I got on the same page, drew a line in the sand and said what we would allow and what we wouldn’t. Had it not been for Dave we wouldn’t have taken that step.

    Dave states that he is giving the same advise as “your grandmother would give.” So it makes sense you didn’t feel you learned anything new or that is what all recycled information. But being honest, my grandmother nor anyone else mentioned debt could really kill me. I even tried suicide once……I didn’t go through with it in case you were wondering. 😉

    I love the Rich Dad though I’ve only read Rich Dad, Poor Dad out of his overall series. I am investing in real estate now but I’m not putting myself under a weight I can’t carry. I really only believe in asset-based debt. Dave also believes in asset-based debt but he says that its not necessarily debt in the way most people consider it. He can say all debt is bad and be totally right. Are we all lawyers that we need to pick it all apart or seek to understand the principles. I once bought a guitar for $500 on a credit card and chances are I paid about $3000 for that guitar in the long run. Why didn’t I save to buy it cash? Consumer debt isn’t really worth it.

    I call lots of people morons financially but I, like Dave, put myself in that category. Dave has a finance degree and was broke. Made millions, lost millions. I think I will learn from people who have a heart story to tell versus can do some math on paper–every time.

    Thanks for writing the article but I think you miss Dave’s entire point. Best of luck to you and yours.

  61. Melvin Plummer on

    Great story Eric,
    The bottom line is, it’s not really Dave that taught you, Your suffering was your great teacher. The pain of suffering makes you or breaks you. Dave was just there to motivate you at a time when you needed it most. I salute you for devouring that 90k in consumer debt. You do a great job at speaking your truth from the heart. There is an acronym that I helped to create called P.I.N.K.Y.S. – The P is for purpose which means to find your life’s purpose. The I is for integrity which means to live your life with integrity. The N is for nobility which means to live your life in the class of the noble. The K is for kind which means to live your life with kindness. The Y is for yearning which means to yearn for something that is greater than yourself. The S is for Sensibility which simply means to be sensible to trust your intuition or gut feeling. I wish you much success!

  62. Jiri Vetyska

    So I guess the point is, this book is a basic financial planning for regular folks, not investors’ guide. There are plenty of books that investors should read. If you are going to follow the principles in this book, you will not go broke, but you will always be a regular joe employee. When you are ready to become a serious investor, you will have to follow much different rules.

  63. Personally I think you are missing the point of Dave Ramsey’s mission. I have spent years listening to his podcasts, been through his financial classes and read most of his books. While I may not be a 100% tow the line acolyte I do believe his specific method “Baby steps” is pretty authentic and is proven to make millionaires out of those who would have most likely gone through life in debt and would have ultimately failed financially. I firmly believe that if you cannot control your own personal finances then your business endeavors will never be successful. The people that Dave wrote his books for are not real-estate investors or successful money managers, they are average every day people who work 40hr jobs to help someone else’s dream come true and they don’t have the resources or the understanding to see a way out. I bet you would find that those who followed his advice and are now successful in their financial endeavors do leverage their assets and make risky plays in the financial markets for large gains but their personal finances are protected and secure giving them the freedom and peace to pursue their ambitions. A “Dave Ramsey millionaire” may never be the next Warren Buffet but they will also never be among the 99% of this world that are broke and desperate and hopeless.

  64. Simon Lopez

    Good Read

    2015 i closed 4 credit cards and kept 1 for amazon purchase. 2017 Dec my score was 807 and I purchased my first investment house.

    2016 i started using Dave’s “debit only” i miraculously did not purchased any SW paraphernalia, Motorcycles, video, audio or wearable electronics, and my saving acct has been growing. Adding I took his advise and sold all my junk.

    All the financial gurus have both good and bad advice. 2014 Dave Ramsey said dont buy Bitcoin.

    Take what works for you and discard the rest. We should be thankful this information is here for us.

    Happy New year everyone!

  65. Katie Stone

    Fun to read all these comments. We have been Dave Ramsey followers for years- and have read just about every finance book out there. We’ve coordinated Financial Peace University several times. Good, sound advice. Following his principles have let us achieve a high net worth without debt- We have regular jobs and because we’ve followed his plan, we are set to retire at age 50 (in 3 years). We continue to invest in real estate but chose to do so without debt. When the wind blows, we are sleeping soundly.

    • Joe Tomko

      This is a first for me. I’ve never known an investor to use only their own money. I am curious about the investment vehicles you have used and your approach. When did you begin? Please share.

      I’ve recently taken DR’s FPU and apply it to personal life. However, for business, I apply Kiyosaki.

    • Phillip Crandall on

      I second what JOE TOMKO said. I would love to hear how you do your real estate investing without debt. I understand the reason for using debt to invest in real estate and i do use debt to invest. But sometimes i think about how much more cash flow i would have if i didn’t have a mortgage payment.

      I too have gone through Dave Ramseys FPU and using his baby steps i was able to pay off all my stupid debt like the new boat i just had to have right now and a few other things. In doing so my bank account has grown nearly 5 times since then. His program is essential to his target audiance, but just like anything in life you dont stop with just him you must continue to grow your financial education

  66. Scott Schultz

    there is a balance, for most of us we dont have enough debt to be in the drivers seat at the bank like Robert and Kim Kiyosaki do, so we have to protect ourself in the event of a pull back, if you have long term fixed debt with high cashflow, you should be able to get through a rough patch if employment drops off and you have vacancies, that force you to lower rents, but if you are like me, I have 20 single family homes, with commercial debt, that i need to renew every 3 years, so i need a big enough equity position for a value drop so i can still have 20% equity if my note comes due in a low time in values, I saw this happen in 2011-12, people purchased at 80% LTV in 2008&09 then at loan renewal they needed more money to make 20% down, and they lost everything. Just play it safe, because the bankers will give you enough rope to hang yourself.

  67. John Murray

    The problem with 95% of the US population are robots and have trouble thinking for themselves. If you are an employee you are a robot tool making others wealthy. The multimillionaire entrepreneur knows this and capitalizes on the 95% of robot population. We use leverage properly, work hard and smart, learn exponentially and most important develop skills that make us happy. 401K, IRA and other retirement tax deferred conduits make some other entity money other than the worker bee. Insecure employees enable my freedom, insecure employees think about money constantly and compete with other employees serving their corporate masters willfully and passively. Ain’t that America you and me.

  68. Two roads diverge in the wood…
    And one takes you to work and one takes you to home.

    Dave Ramsey’s “Total Money Makeover” world is for you personal life and “Rich Dad Poor Dad” is your business life.
    Most people are not going to build a business, they are going to work for someone else. And they will be better for it. You can give anyone the “Total Money Makeover” and they will be better with every part of their normal life. As for the 401k – my God, 90% of the people that spend their life watching carp like Survivor or Teleonova’s and not interested in reading – will never take the time to learn enough to be successful savvy investors. A 401K reducing their taxable employment income and doing simple mutual funds is the best avenue they have not to screw up.

    Then you go down the other road. You want a business. Everyone I have ever met that has a thriving business, completely separates the two, and is able to use the business to have a better life. Because a business has larger areas of opportunity to lower the tax burden and put the risk on the business, and not your person.

    So while your right, Dave is simple and gives bad advice, but that’s because most of us here on BP are interested in taking ourselves a bit further. We decided to get off Facebook and read a blog in our area of interest. But he is smack dab correct in that your Person should be debt free and safe financially, and Robert is right that your Business should be leverage effectively to take advantage of opportunity to grow the business and do as much as we can to provide passive income through our business deals.

    In a few months, when I finish school, I was going to try and hold an FPU class to help my friends get on track before the next down cycle that is probably coming.

  69. Amber Imburgia

    Dave Ramsey is the best. What percentage of Americans are in debt and feel trapped? Too many to count. It’s nice that he sticks to his values and tries to help many people who would forever be stuck in debt, not realizing there is another option. Being an investor isn’t for everyone. So I think the target audience is a bit different – BP -vs- Dave Ramsey. He is doing a world of good for thousands of individuals and families. Lets stop and celebrate that, instead of bashing it.

  70. Hello, I think there is a need for both Dave Ramsey and Rich Dad camp.

    Dave Ramsey = Plan for age 0 – 30 Provide Great foundation and provide financial security.
    Robert Kiyosaki = Plan for age 25 – death Provide idea so you can achieve financial freedom.

    Dave Ramsey = Follow his plan like a robot. Anyone can do it.
    Robert Kiyosaki = Develop your own plan from “idea”. Not everyone has what it takes to do this.

    If they were selling music:
    Dave Ramsey = You will learn how to play instruments by reading music.
    Robert Kiyosaki = You will learn how to write the music.

    Dave’s plan is a great foundation, and if you follow his instruction, you have a good chance at financial security.

    Robert’s plan provides motivation and some general idea on how to achieve financial freedom.

    They both are great. Your one step closer to your dream when you are subscribing to either of those men’s courses/books.

  71. Nathaniel Cherubini

    @Leather Nix I agree with the basis of your article completely. I was a big Ramsey fan when I was new to financial matters and he definitely serves a purpose for pulling back the curtains for many “new to the game”. Once savvy I would argue that you need to get much deeper than Dave R. or Suzie O. Whether it is Tony Robbins, BP, or whomever is great in your area of interest. I have an 800+ credit score and have over $50K in credit card limits with less than 1% in use. I use a Citi 2% card for EVERY purchase possible and pay it off every two weeks. This last year (2017) I charged over $65K on the credit card and by time Christmas shopping came up I had over $1400 in cash rewards with ZERO interest paid due to not carrying a balance. I also use Acorns spare change app good for another $700 in “spare change” last year for a total of $2K+ of money I didn’t have to “work” for. I used this “EVIL credit card” rewards and spare change for all Christmas shopping and sponsoring three families for Christmas. I could not have done this if I only used cash. Moral of the story is be smart with you money and debt and make sure it is always working for you. I have evolved from a no debt, cash only person to a cash rewards only, leverage person and am in a much better position partly due to this. Thanks for you article!

  72. bryan l.

    I’m with you on this. I hate how Dave Ramsey is always calling others idiots and morons and how he won’t budge one small bit at all on his advice. But, on the other hand, he has to be this way to keep the cash-cow rolling in that he has created. He’s making a ton of money by giving good advice that works well for many people (but not all). But he can’t afford to deviate even one small bit from the message or his empire gets undermined.

  73. Aaron deMontalvo

    First, nearly all the point you make… Dave makes himself! The advice he gives is NOT new and he openly debates the “Rich Dad” process. But people ARE idiots when it comes to personal finance. The proof is out there and I won’t quote it. Debt is a 2-edged sword and has ruined MORE lives than helped. For every person you know who has used debt to build wealth, there are literally dozens who have been stressed or destroyed. True, those who are smart with money and careful with their cash flow (i.e. the Rich Dad process) can be VERY successful. While Dave would discourage leveraging to purchase real estate, he has on multiple occasions emphasized the difference between secured and unsecured debt. Brandon’s books talk in detail about the number of real estate failures. This is who Dave is talking about. IAnd he’s a radio personality. “Personality” being the operative word. People like him because he seems “down to Earth”. Regardless, as with any group of opinions, the truth lies somewhere in the middle: Before you EVER consider leveraging debt to grow wealth, make sure your personal finance and unsecured debt is in order. Do this, and you have the best of both worlds IMO.

  74. Johnny Wishbone on

    I like how he calls people morons. Why is everyone so sensitive these days? They called him asking for his opinion. He usually follows up his insults by saying he’s done way worse in his lifetime than what the caller did. So he does temper it a bit.

  75. Bill Bateman

    Above all else, I think brother Ramsey is a very good salesman and he’s selling a lot of info products. Using polarity in marketing is smart marketing. He irritates me for many of the same reasons he seems to irritate you.

    Also (as a guy who’s sold some whole life insurance for nearly 40 years) I also shake my head when he demonstrates his bias (or ignorance) about cash value life insurance while simultaneously praising having a 6 to 12-month cash emergency fund. I contend there is just no better place for that fund than a good life insurance policy (but I digress).

    To his credit, Dave Ramsey’s sales focus encourages a lot of people to get control of their finances and learn the basics of budgeting and for that alone, I think, he adds value to the discussion of money.

    • Thomas Phelan

      I am not against the Company 401(k) as opposed to not saving anything.

      What I am against is how Wall Street touts it as the “Best Of The Best” Retirement Plans.

      85% of the Fortune 500 top CEOs use LIRP (Life Insurance Retirement Plan) for two major

      1. Wall Street Volatility (RISK) is eliminated. The Investor is subject to ZERO losses. A Company 401(k)
      does not and cannot eliminate Wall Street RISK. Who wants to reach retirement age and find out his/her Company 401(k) investments fell 50% like in 2005 – 2007?

      2. Taxes. A Company 401(k) does not and cannot eliminate unknown future tax rates. A LIRP does. How? Simple, you pay taxes now which are at historical lows. Over the last 100-years the average top tax rate was 53%. Again, who wants to reach retirement age and find out his/her Company 401(k) distributions will be taxes maybe at twice what they are now?

      A LIRP eliminates Wall Street losses while investing in Index Funds like the S&P 500.

      A LIRP eliminates unknown future tax rates.

  76. Alberto Izarraraz

    So i was wondering in terms of debt vs investing what are your thoughts. So in my instance, i have a substainal amount of student loan debt. I think it would be best to invest vs tackling the debt. I’m a bit new to it so I’m wondering about people’s opinions on this matter. I know Ramsey is just get every cent you have and throw it at the student loan debt. Thoughts?

    • Patrick McMahon

      It depends. I have some student loans at 3%. Am I rushing to pay them off? No, because I can make more than 3% in real estate.

      Of course, I am tempted to pay them off so when I apply for a mortgage, my ratios would be better.

      If your “substantial amount of student loan debt” affects your ability to finance purchases, then you may want to tackle it. Are they over 6%? That would make me uncomfortable and I would want to pay off the high-interest ones (assuming they’re at different rates).

      If you have a significant other, that might play into your decision making process, too. For example, my wife is in the Dave Ramsey “all debt is bad” camp and really wants me to pay off the loans, which is an occasional sore spot between us. (I guess I’m lucky that she’s very conservative with debt instead of the opposite). So she would be happy if I paid them off instead of buying another house next year and having that extra rental income.

      You also have to judge how well you’re sleeping at night. That is, if a “substantial amount” of debt causes stress and losing sleep, then it may be worth the peace of mind to pay them off or pay down to a smaller, more manageable amount.

      Last item – if you’re able to itemize, you may be able to deduct student loan interest, so there’s that to consider, too.

  77. Alberto Izarraraz

    So i was wondering in terms of debt vs investing what are your thoughts. So in my instance, i have a substainal amount of student loan debt. I think it would be best to invest vs tackling the debt. I’m a bit new to it so I’m wondering about people’s opinions on this matter. I know Ramsey is just get every cent you have and throw it at the student loan debt. Thoughts?

    • Daniel Kauffman

      I found myself in a similar situation. Obviously you should continue to make your required payments on your student loans because for most people they can’t be forgiven. Dave Ramsey would tell you to use every available dollar that you have to pay down all of your debts including your student loan debt before investing. Your student loans are a guaranteed return. If you pay them down you are guaranteed to reduce your future interest expense based on the payments you make. For most people student loan interest rates are about 5-10% and payback periods are under 10 years. However, there are also tax considerations that may impact your decision. The interest you pay on your student loans may be tax deductible, so your actual interest rate savings might be lower than your loan rate. Alternatively, as I did, you could invest that money with an uncertain return. If you are going to invest your extra money you better make sure that you are going to get a return that is higher than your current student loan interest rates. Especially, because depending on the investment that you make, you might have to pay taxes on the earnings that your investment makes. Finally, there is a lot of uncertainty around the actual returns that you will get. So, while the stock market might historically return 10%, you might get a much lower return during the comparative return period (student loan payback period). The investment that I highly recommend is making any 401K or similar investment in which your employer matches your contribution. This basically ensures a high return to you. After investing the minimum amount in my 401K to get the maximum employer match, I used my remaining extra cash to purchase a cash-flowing investment property.

      • Thomas Phelan

        A LIRP (Life Insurance Retirement Plan) can still crush a Company 401(k) even with 100% “Matching Funds”.

        That’s why 85% of the Fortune 500 top CEOs use a LIRP.

        No, I am not trying to sell you Life Insurance, real estate or Mutual Funds.

  78. Sam Rogers

    I am a big fan of Dave Ramsey, but you have to understand his audience to take some if his advice into context. He is speaking to primarily financially illiterate people, the 99%. If he budges a little on debt, gives them an inch, they will take a mile. Granted, his plan is also very highly risk-averse. If you don’t leverage, there is virtually no risk.

  79. Pradeepan Venukanthan

    Well written post. Loved how you structured it. I totally agree with everything you said. In my opinion everyone should start with fundamentals first it is like a marslow’s pyramid- protect yourself first(insurance etc), manage the debt, save for emergency fund and then finally comes the investment. You need to start ground up and if you do top down is when you end up with debt that you cannot come out of.

    Regarding real estate atleast I would start slow – Buy with own cash with minimal debt as you expand your portfolio then you can use debt/loans to buy properties. Also go by can I pay the mortgage even if the rents dont come in? If the answer is yes then go ahead. Always plan for the worst have more than sufficient contingencies planned in your ROI calculator.

    Have a strong budget – Either you can go “Fire” approach or more sensible way to plan for your budget and stick with it. Allow for some luxuries this way you enjoy your life a bit at the same time not drown in debt. Use tools like mint to plan and track your budget. Only use debt to the extent you have cash to pay for it( but use debt/credit card to earn the points etc). No point in borrowing money which you cant pay or pay interest for it. I sometimes go for credit cards which gives me no interest promotional period which is kind of cool ( but again provided I have cash equivalent for it set aside).

  80. Ryan McEniff

    It’s tough to take a post seriously that criticizes a guy who preaches no debt and paying cash like it’s a bad thing. What an idiot he must be to suggest to live within your means, fund your retirement and pay cash for items rather than credit! How dare he!

    This country would be a lot better off if people took Dave’s advice more seriously than yours, especially because we have about $20,000,000,000,000 in debt.

    Every week I see a new report on how the majority of this nation doesn’t have $1000 in emergency funds. That most people don’t even have a retirement fund. People living paycheck to paycheck.

    There is a very finite amount of people that can go into real estate, most people work paycheck to paycheck, get into debt with credit cards, payday loans, and outrageous car loans.

    I’m not saying Dave himself is a saint, I happen to think some of his products are shady and he did get in trouble for it. But a VAST majority of Americans could use a major dose of Dave’s guidance on finances.

  81. Ramada Evans

    Leather, thank you so very much for this article! I totally agree with you. It is nice to know that someone has an open mind to know the financial inconsistency people can have, or lack of knowledge. It is very important to read or hear from more than one source. No one situation is the same. I do not like Dave Ramsey but I know some live by his words. There is some sound advice, he presents, for some but not always great for how you leverage and grow your dollar. Thanks again.

  82. Scott Saylor

    The thing that is fundamental to this debate is understanding the place that Dave Ramsey fills. Many people need the education that Dave Ramsey provides in order to get to a place where they understand finances in general. Many people don’t know how to help themselves get their money straight. In Dave Ramsey’s credit, have you ever listened to his show and tel people with real estate investments? His advice is to harness real estate investing. But that is only for those that have their finances in check. I seriously doubt spmepne with $50,000 in credit card debt is ready to here how to leverage credit for real estate investing.

    Leather, just a reminder, you are a financial writer and blogger, so arent you on your way to becoming one of those gurus you were downplaying?

  83. Joe Arlt

    Dave Ramsey and Suze Orman serve a purpose for 95% of the population. And from what I’m seeing, that includes 95% of BP readers as well. To the majority of the investing world, “debt” exclusively means debt that you incur yourself. But they’re missing the true power of real estate – which involves Other People’s Debt! That debt creates motivated sellers, who will give you their houses (often for free) if you promise to make the payments on that debt. There will never be a shortage of these people. And there will never be a shortage of buyers who will give you big down payments and monthly payments for the opportunity to buy a house (using the seller’s debt) without qualifying at a bank. I’ve done hundreds of these transactions, and am still doing 1-2 more per week. None of this would be possible without debt. And I haven’t borrowed from a bank in 20 years.

  84. Mike Tremblay

    So yeah, MOST people don’t use credit cards responsibly and thus his advice is maybe not applicable to everyone. But to the MOST people who don’t use credit responsibly most of his advice is awesome! Ten years ago almost exactly my net worth outside of my house was about zero. My small 401k just cancelled out my credit card debt. Took his class…10 yrs later I only owe on my house and home equity loan which I used to buy my first rental. So yeah, I still use debt but the difference is my net worth outside my house has grown significantly…I only use 1 credit card and pay it off each month to maintain my credit score. And I actually have money to invest and am on the path to an early retirement.
    Yeah, all of his advice is common sense…but how many people do you know actually sit down and do all the common sense stuff they do? The $100 I paid for the class forced me to do a whole bunch of common sense stuff that set my family on a much different financial path. So all his advice may not be perfect and you can pick it apart as you wish…but the fact is I think it’s helped a LOT of people, and I teach most of it to my kids.
    Of course, all that being said I grew up in a poor neighborhood in schools that didn’t teach any financial literacy classes even in college. So if you grew up with parents who knew enough to teach you these common sense lessons, or learned them in school…then great! If not, his advice would help most people. I mean read any financial article today on retirement savings of millennials or even people near retirement…look how much they have saved…it’s scary the small amounts they have. Article after article states that MOST people don’t have enough emergency savings to go without ONE paycheck! You don’t think these people could use some common sense advice? Some EXTREME commons sense advice? I know I did.

  85. Chris Ellis

    I agree completely. If you listen to all of Dave’s story…he went broke in real estate. I guess he is just bitter now because of it and is blind to the possibilities. I quit listening because his advice beyond digging out of a hole is generally stupid. It’s funny how the wealthiest people all have huge investments in real estate. But, his appeal is to people digging out of a hole, and his program on that is great. I used it myself after I got burned during the 2008 crash. My problem was getting rentals in poorest parts of town and I had a lot of people skip out when they lost their jobs and leave the houses trashed.

    I’m completely back in the game after paying off some debt and am actually flipping using all cash and then using the profits from a couple flips to buy decent houses for cash and rent them with no loans. It takes a little longer, but if I keep buying a total free and clear property every year, (or better yet, a multifamily like a duplex, or fourplex) I’ll have about 8k per month coming in…and nothing except management company fees (why would I want to do that?), insurance, taxes, repairs, and the occasional empty house to deal with.

    • wil richardson

      your words “I quit listening because his advice beyond digging out of a hole is generally stupid”

      but your practice is following his advice almost exactly

      “…actually flipping using all cash and then using the profits from a couple flips to buy decent houses for cash and rent them with no loans.”

  86. Jean-Thierry Aleman

    I completely agree with the article. When I first started down my path to financial freedom, I was aprox 20k in debt. About 8k in student debt and 12k in credit card debt. I was already furiously paying down my student loans for years but was undisciplined with my credit cards. Dave Ramsey gave me a good foundation which is what I think he is good for. Having said that, I believe once you start to learn and grow and become “bad debt” free, using good debt is absolutely the way to go. Using leverage AKA “good debt” responsibly can empower you to grow your portfolio exponentially.

    Ultimately, it’s up to you to educate yourself and know your specific situation and consider your best path moving forward. And….. DON’T be afraid to make course corrections along the way.

    Remember what @LeatherNix said…… “Gather tidbits of knowledge from multiple sources and see what works best for you and your situation.”

  87. Ian Covington

    I’d say that his advice is solid in many situations. Advice is like the bible, pick and choose what parts that apply to you! We are very fortunate to live at a time where debt is cheap, and others will pay for it, with little risk. That may not always be the case. As debt and outsourcing cost to cover it gets closer, I think Dave’s approach will become more relevant to those in the investor realm. To generate a buck, we’ll need to put more down up front, or get out of the game.

  88. Tom R.

    It wasn’t that long ago that I was terrified of debt. I waited until I was 30 to go to college because I was afraid I wouldn’t be able to pay off the loans. Once I finally went to college and graduated I made double and triple payments to my student loans to avoid paying as much interest as possible. I paid off half of my student loans in less than 3 years. Just over a year ago I read Rich dad Poor dad and decided that more good debt in the form of long term rentals could not only make my loan payments but put me on the path to early retirement. So I stopped making extra payments, cut my expenses and even stopped putting into my 401k which wasn’t performing at all and had a terrible employee match. 4 months later I purchase my first sfr and rented it out. That rental more than pays the interest on my student loans. I am now working on getting my second rental under contract. We have agreed on price and are just haggling over the terms of the contract. This one will be a brrr/ hack. I will live in it while I fix it and move out and rent it when done. Then refinance and repeat. The goal is six figures of rental income by the time im 45. I’ve got 6 more years and im not sure Im going to make it but If Im 10 or 20k short at that time I will still be making enough to retire on and continue purchasing rentals.

  89. wil richardson

    I often read articles rebutting Dave Ramsey because I find the topic interesting. I’m young, found Dave Ramsey methods after college and it helped me pay off my student loans with a vengeance. Now, I make good money and am looking to expand my wealth building potential and in my opinion Dave Ramsey is far to conservative when it comes to “how to” after debt.

    With that said I’m riding the fence here, not picking a side. Your first grief about Dave is that he’s not saying anything “new” and that he is preaching the same thing others have said for 15 years. I think Dave would agree with you, he often speaks about Suze Orman and says all the time he gives “the same advice your grandma would give you.”

    To the same point, however, when I read your article you have done the same exact thing. Your explanation is the same exact basic rebuttal I read all the time (leveraging is an option, credit cards aren’t evil, everyone’s not an idiot for trying, etc). I get it, your not wrong, just hoping to one day open an Dave Ramsey rebuttal that isn’t click bait. My opinion, take it for what is worth, if you are going to write an article to argue a point that millions of people are listen to every day, it should be on a level that targets convincing millions otherwise.

  90. Aaron K.

    I 100% agree with this unpopular opinion Dave advises people to do a lot of questionable things like take a penalty on an IRA to pay down debt or even just invest in mutual funds which the research shows are inferior to ETFs because of fees. If you are in credit card/ consumer debt he might be useful as a hype man but not much beyond that.

  91. Jesse Smith

    Very solid article. I’ve been telling my friends these exact same things for years. Many of them refused to listen to me initially (despite my degree being in Finance, and being a registered investment adviser). Slowly, they have started to realize that Ramsey’s tactics are intentionally narrow-minded to target the least financially savvy people.

    My biggest frustration is that his message has been heralded by many churches as the ONLY way to manage money. People have come to think that Dave’s message is synonymous with Christianity… definitely not the case.

  92. Tom maricle

    I’ve watched Ramsey quite a bit and even took his class with my wife when I was debt free except for a small mortgage. Some of his edicts are not for me but the basics of his teachings are well founded. Have a budget! How can you argue against that? Aggressively attack your debt! Really not a bad idea for a lot of people. Use cash vs credit cards! Well statistically you spend quite a bit more when using credit so that’s pretty sound too.

    I don’t agree with everything he says and I don’t practice even some of the things I agree with but he (and Orman) have helped a lot of people along their way (like thousands) so I hope one day many of us become that over-rated.

  93. Rob D.

    Dave Ramsey’s advice is great for certain people. I call them financial idiots. I don’t mean that in a mean way it’s just simply a cover word for any people who simply have no idea on how to manage their finances. Those are the people who need and should take his advice.
    Once you get past his get out of debt strategy his investing advice is very limited in structure and very optimistic in returns.
    Truthfully I think a lot of people fail his advice because it takes such a huge amount of sacrifice to even get out of debt. There are people who are resigned to the fact they will always be and most likely die in debt.

    What’s really bugs me about his advice is the “use my network” suggestion which isn’t always in the equation.

    My credit ranges from low to mid 800s depending on which credit bureau you look at. I have one credit card that I use for all my monthly expenses gas food home etc purchases. I pay it off when the bill comes due every month. my average balance is about $1400

  94. Tom maricle

    Rob D., I understand what you’re saying but I think it’s a bit insulting to use the term financial idiots. If you graded people on their financial skills by results you’d find that most Americans are D students or worse and that many of those above D have achieved that through the economy’s last 8+ years of huge growth. Really if you made money in the Real Estate or Stock marked over the last 8 years that simply means you had a pulse in those markets as almost everything was heading up.

    I’m a CPA and I took Ramsey’s course with my wife so that we could get ourselves focused on a more aggressive savings and investing plan. I knew a lot of the things that were taught but did learn a few things so in your words I guess I’m just an idiot too.

    I enjoyed the class and feel that the motivation that it provides along with the teachings are well worth the $100 cost. Beyond pure financial teachings they work on the psychological side of getting out of a tight spot and staying out. They give sound advice on how to deal with creditors, insurance, family and temptation. The reason there’s so little focus on where to invest your money is that the basic course is aimed at getting you in the position to have money in the first place.

  95. Anthony Wick

    Dave Ramsey’s books are more about human nature than debt and credit. Therefore, what he writes is correct, as it pertains to what people actually do, not what they should do. This country has $1 bil in credit card debt and another Billion in student loan debt. 90% or more of people should never use a credit card or take out a loan, because they are financial idiots. So, did I just defend Ramsey? Maybe. But, all that being said, I have rental properties and mortgages and cash flow and have leveraged debt. Done right, debt can be fantastic. I’ll take 4% loans all day long and turn that into 10-20% gains.


    I have followed Dave Ramsey for about 15 years now. He principles has made me debt free twice in my life. But at the same token Robert K’s & my Caribbean parents principles of ‘owning realestate/land’ and being a landlord as a side business, has also been a part of my profitable life. LEATHER, to many you may sound like a priviledged child born with a silver spoon in your butt. so be careful on criticizing efforts that has helped individuals using Dave’s christian principles.

  97. Leather Nix

    On the contrary, I was raised in an incredibly poor household. I didn’t have the benefit of family money or money from book sales to fund investments in cash. “Good debt” (and education) were the only way I was able to stop the poverty cycle and give my kids better opportunities.

    I stopped reading and replying to the comments on this article months ago because many people were being hateful…much like yourself…and much like Dave Ramsey.

    When it comes down to it, Ramsey’s abrasive personality was primarily what made me so critical of the message in his book. If you are helping people but also berating them for being stupid, it minimizes your efforts. It isn’t Christian behavior.

    I will agree with many of the posts here that stated Ramsey is good basic knowledge, but not necessarily great investment advice. Maybe Dave Ramsey is an incredible person; maybe he is super Christian; maybe he wasn’t participating in shady deals and that was why he lost his shirt back in the day; maybe he just acts like a giant ass to people to sell books. I don’t know him personally, much like you do not know me. That being said, as much as I appreciate everyone’s advice, I don’t think I need to “be careful” criticizing his books, much like you don’t feel like you need to “be careful” criticizing my article (as well as me, personally). This is what we open ourselves up to when we write in a public forum.

    I appreciate everyone’s positive comments, as well as those that were critical but not insolent. I’m not sure why people can’t have a civilized debate or disagreement, without personally attacking people.

    For those that asked about 401(k), I suggest reading Tony Robbins “Unshakeable” or “Money Master the Game.” There are tons of others, but these are both great at explaining how the fees associated with 401(k)’s vastly erode their growth.

    Happy investing, everyone! Have a great weekend!

  98. Thomas Phelan


    “For those that asked about 401(k), I suggest reading Tony Robbins “Unshakeable” or “Money Master the Game.” There are tons of others, but these are both great at explaining how the fees associated with 401(k)’s vastly erode their growth.”

    This is a great suggestion and if one does take the time to read either of the two Tony Robbins recommended books he/she will find that excessive 401(k) fees, disclosed and hidden, can consume 50% of one’s retirement profits.

    However, even if the were zero management fees I would still not recommend the Company 401(k). Why?

    Because a Taxpayer is gambling his/her future retirement on two unnecessary items that can be removed from the equation: Wall Street Market “Risk” and “Losses” and unknown future tax rates.

    One’s future retirement should not be “taxable” (read the Power Of Zero) and the Taxpayer should be able to calculate zero Wall Street “Losses”.

    Again, this is why 85% of the Fortune 500 top CEOs and the wealthy use the LIRP.

  99. Karl B.

    I was one of those people who thought debt was bad. I didn’t use a credit card – instead I used a debit card. I was seriously 31-years-old (with a low credit score because I really had no credit history) when I got my first credit card. And thank goodness -when I started buying multi-family properties I needed a good credit score to get bank loans.

  100. Thomas Phelan

    I am not qualified to render expert advice on economics but if you believe all forms of “Credit” are evil and unnecessary try living in a country that has no mortgage industry or even financing for autos and trucks.

    In an “ALL CASH” society there are severe repercussions for enforcing no credit, people waits many years to buy a car and decades to save enough to buy a home. This “No credit” philosophy impacts everyone from the person who pounds the nails to strings the electrical wires, to the furniture salesperson to the flooring salesperson. The list is endless.

    My point, using credit can create wealth must faster but it obviously has its risks as well. Just use credit prudently.

  101. Rhonda Wilson

    One great “trick” with credit cards. I made both of my college age kids authorized users on my credit card. I have a pretty high credit limit so this was a lot of money for your typical young adult. When we looked at both of their credit scores they were extremely high – near 800. This was in spite of the fact that they didn’t have significant earnings of their own yet. The fact that they had a high amount of credit available, but didn’t have debt gave them a very high score. This made it extremely easy for them to get credit cards in their own names, to establish bank accounts under ideal terms, etc.

  102. James Bell

    It seems every 6 months bigger pockets publishes an article similar to this one pointing out the errors and bad advise of Dave Ramsey. I “did” Dave Ramsey before I ever heard of Dave Ramsey. I am happy to report that I have just retired at the age of 58, with a net worth of about 6 million. I have no debt, I have more than enough to live out my life, and I can “give like no one else”. If this is bad advise, I’ll gladly take it and give it.

  103. Cody L.

    Dave Ramsey is great for the average non investor who is terrible with personal finances.

    For anyone that already understands finances, or investors, his advise is downright terrible.

    (I don’t even know that he disputes that. You can’t grow a RE empire — if that’s your goal — if debt keeps you up)

  104. Chris DeMello

    100% . I was never a fan of Dave Ramsey. I always taught his advice was very outdated. Today’s world is all about credit and financial leverage. We are all fighting the same battle.. TIME!! Cash is not king! If you want to get out of debt, have a better life and invest before you’re 70 yrs old, i’d highly recommend you learn how to use a credit card and debt smartly!

    I spent 35 yrs of my life with ZERO financial knowledge. As a result I was 35k in debt and 18k in collections and a 500 credit score. My wife and I came across 101 Financial in 2013. That’s where we learned to use a credit card correctly and a debt checking account to leverage our money to get out of debt a lot quicker. We managed to be debt free in less then a year and purchase two homes by 2016. Can you imagine if I followed Dave Ramsey’s course?? How long would you think it would take to pay off my debt and buy two homes? Just does’t make sense to me!

    Great blog Leather. Thank you for sharing!

    • Katie Rogers

      Have you actually read David Ramsey? I just finished Akina’s book sales pitch and it isn’t really all that different.
      Akina says The Four Fundamentals of Personal Finance are:
      Better budgeting
      Smart banking
      Debt elimination
      Credit building

      Dave Ramsey would agree.

  105. Ryan Scott Isacksen

    I agree with your assessment that Ramsey isn’t for everyone. He certainly wouldn’t be someone that the community of investors here would want to rally around.

    People with bad debt problems should follow his advice and get out of debt.
    People that want to be wealthy should follow the advice of someone else.
    We should look at who the person is that we are getting advice from and where they came from.

    I had a guy approach me when I was working in Florida that had his life turned around by religion. He had a scar on his palm from when he broke a bottle while abusing his girlfriend before that happened. He tried to equate it to Jesus’ hand reaching out..

    The Florida guy I am sure transformed himself and it must have been a powerful experience, but not being someone that has drinking, anger, and violence problems, I was not very moved by the gesture.

    Those of us that haven’t gone crazy with debt and mismanage money like Ramsey did will likely not find much value in his message.

  106. Matthew Chalfant

    Dave Ramsey is for the masses and real estate investing is not. He is like an emergency room doctor. If you come to the ER with a sucking chest wound and severe hemorrhaging he will save you for sure. However, once you have recovered, it is time to hit the gym and get stronger. Debt has risks but taking those risks and learning from the pain makes you stronger. Do what Dave Ramsey says and you will survive. Do what Rich Dad Poor Dad teaches and you will thrive.

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