Dave Ramsey is a financial powerhouse with strong financial opinions that make him famous for a reason. His show, books, and courses have helped millions get out of debt. His signature “tough love” approach offers a clear path for those struggling financially. But like any major figure, he’s not without critics. Some of his advice sparks debate, even amongst personal finance professionals.
Let’s be clear: Ramsey’s methods definitely work for many people! However, certain pieces of his gospel tend to raise a few eyebrows. It’s always wise to get different perspectives on money management before committing to a plan. Sometimes, blindly following one system, even a generally good one, might not be the best fit for everyone.
So, let’s dive into 15 of Dave Ramsey’s more controversial tips. Whether you agree or not, they can help people take control of their financial independence.
1. Ditch ALL Credit Cards
In his book “The Total Money Makeover,” Ramsey says credit cards are the devil, leading to reckless spending. Cut them up, pay off debt, and become a cash-only convert.
When used responsibly, credit cards offer rewards and purchase protection and help build a credit history that is crucial for major purchases like a home. If you can’t control spending, his temporary card ban might be a necessary reset. However, in the long term, learning self-discipline with responsible use is a more sustainable skill for many.
2. 15-Year Mortgages Are the ONLY Way
Ramsey insists that aggressively paying off your home is non-negotiable. The longer the mortgage, the more interest you waste.
This is a hot take because 30-year mortgages offer lower payments, freeing up cash for investing or emergency funds. Plus, today’s low interest rates make them less daunting. If you want to be debt-free ASAP and can handle the higher payments, it’s a great goal. But don’t let it deter you from homeownership altogether; a more flexible mortgage could be wiser.
3. Never, Ever Cosign Loans
Ramsey says cosigning is setting yourself up for financial ruin. If the borrower defaults, YOU’RE on the hook. Even for loved ones, it’s a terrible idea.
This makes life hard! Sometimes, it’s the only way for young adults with thin credit to get a first apartment or car. Treat this as an absolute last resort. If you cosign, have a legally binding contract with the borrower AND a plan if they fail to pay.
4. College Degrees Are Overrated
According to Ramsey, student loans are crippling, and many degrees don’t guarantee high pay. Trade schools and apprenticeships are smarter paths.
Statistically, college grads earn significantly more over their lifetimes. Plus, some careers REQUIRE degrees. It depends. Blindly getting an expensive degree without a career plan is risky, but so is dismissing higher education entirely. Research potential salaries for your field of interest.
5. Pre-Nups Are For Everyone
Ramsey strongly encourages protecting yourself! Marriages fail, and a pre-nuptial agreement keeps asset division fair in case of divorce.
It feels unromantic and pessimistic to plan for a split before saying, “I do.” Many couples see it as a lack of trust. If there’s a huge imbalance in assets or you own a business, it’s prudent. But it won’t fix communication issues that cause most divorces. Open money talks throughout the marriage are vital.
6. Buying a New Car Is a Financial Disaster
Ramsey says buying a used car is always the better financial choice. New cars lose value the moment you drive off the lot, so buying used is far smarter, even if it’s less glamorous.
There’s something exciting about a brand-new car. Plus, reliability and warranties can be attractive to some buyers. Financially, he’s right. Depreciation is a real cost. However, if you plan to drive a car for 10+ years, prioritize safety, and can afford it, a new one isn’t always a bad decision.
7. Don’t Ever Use Buy Now, Pay Later
He insists that BNPL plans (like Klarna or Afterpay) are just debt traps in disguise, encouraging you to overspend.
BNPLs offer an easy way to spread out payments, interest-free… if you pay on time. This is tempting, especially for needed items. Tread VERY carefully. Late fees can add up fast, and it’s easy to overcommit. Only use it if you’re 100% sure you can repay on schedule.
8. Your Emergency Fund Needs 3 to 6 Months of Expenses
Ramsey’s take: This is non-negotiable for weathering job loss or unexpected bills without going into debt.
Saving that much feels daunting, especially for those on low incomes. And for those with stable jobs, it might seem excessive. Aim for this as a goal. Start smaller if you must. Having something set aside is better than nothing, and that amount can grow over time!
9. “12% Average Returns” On Investments
Ramsey uses this figure when touting his investing philosophy. It’s a way to motivate people to believe in the power of the market over time.
Critics say this is overly optimistic, especially recently. Market fluctuations happen, and past performance doesn’t guarantee the future. Use it as motivation, NOT a guarantee. A more conservative 7-8% estimate when planning for retirement might be wiser long-term.
10. The “Baby Steps” Are the ONLY Path to Wealth
Ramsey’s 7 Baby Steps outlines a strict path: pay off debt, save an emergency fund, invest, etc. There are no shortcuts!
Some find it overly rigid. Life is messy, and setbacks may necessitate deviating from the plan temporarily. The steps themselves are solid! The order might need adjusting based on circumstances (i.e., temporarily matching a 401(k) contribution while also paying some debt).
11. Never Use a Home Equity Line of Credit (HELOC)
Ramsey says HELOCs are too tempting, turning your home into an ATM. This jeopardizes a hard-earned, paid-off house.
Used responsibly, HELOCs offer low-interest funds for renovations, increasing home value, or consolidating high-interest debt. If you lack self-control with debt, he’s right to be wary. But for calculated uses with a strict repayment plan, they’re a tool, not inherently evil.
12. Never Contribute Less Than 15% of Income to Retirement
Ramsey says playing catch-up later is hard. Be aggressive about saving for your future self, even if it means making sacrifices now.
This is tough when wages are low, or debt is crushing. Sometimes, 5% is a major victory to start with. Strive for it! But don’t let perfection be the enemy of the good. Starting somewhere, even small, and gradually increasing contributions is key.
13. Stay Away from Investing in Individual Stocks
Ramsey says it’s too risky for most people. Mutual funds or index funds provide safer diversification and long-term growth.
The potential for higher returns is tempting. Hearing stories of those who ‘beat the market’ fuels interest. For the average investor, he’s right. Individual stock picking takes time and research. But if you’re truly into it and willing to educate yourself, it’s not off the table.
14. Your House Should Cost No More Than 4X Your Income
Ramsey says huge mortgages equate to slavery. Keep housing costs reasonable to avoid being “house poor” with no money for anything else.
In high-cost-of-living areas, this feels near impossible. It severely restricts options for potential homebuyers. As a guideline, it’s wise. Don’t max out what the bank approves you for. Calculate what truly feels AFFORDABLE alongside your other goals.
15. Budgeting Should Be Done on Paper With Envelopes
Ramsey believes that the physical act of allocating cash into envelopes for each spending category creates a tangible connection to your money.
In our digital world, it feels clunky. Many prefer budgeting apps that sync with bank accounts for real-time tracking. If you struggle with overspending, the ‘pain’ of seeing cash dwindle can be a powerful deterrent. But tech-savvy folks can absolutely budget effectively with the right tools.
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We’ve all daydreamed about hitting the jackpot and living like the 1%. But here’s the thing: True wealth is about a lot more than fancy cars and designer labels. It’s about rock-solid security and the freedom to call the shots in your life – something no lottery ticket can guarantee.
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20 Things Poor People Waste Money on, According to Suze Orman
If you’ve ever watched her show, you know Suze Orman pulls no punches. She’s all about calling out bad money choices, urging people to take control of their financial destinies and ditch those pesky spending habits that derail progress. While her advice can be blunt, she aims to empower folks to build wealth and protect their financial futures.
It’s important to note, Suze Orman gets flak sometimes for being too harsh. She’s not shaming people, but highlighting how certain expenses can sabotage big goals like homeownership or a comfortable retirement.
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With an honors degree in financial engineering, Omega Ukama deeply understands finance. Before pursuing journalism, he honed his skills at a private equity firm, giving him invaluable real-world experience. This combination of financial literacy and journalistic flair allows him to translate complex financial matters into clear and concise insights for his readers.
With an honors degree in financial engineering, Omega Ukama deeply understands finance. Before pursuing journalism, he honed his skills at a private equity firm, giving him invaluable real-world experience. This combination of financial literacy and journalistic flair allows him to translate complex financial matters into clear and concise insights for his readers.
