Five Ways I Disagree With Dave Ramsey

ttmmDuring the month of July, I conducted a very detailed discussion of Dave Ramsey’s The Total Money Makeover. During the process, I realized that on most issues, I agreed fully with Dave.

To a degree, this put a damper on the book club. It’s always interesting when there’s disagreement, after all, if everyone conducts themselves in a mature fashion.

(Perhaps this means I should have a book club on Rich Dad, Poor Dad…)

Anyway, after the book club finished, a reader wrote in and asked me that very question. You agree with Dave Ramsey so much. Where do you disagree with him?

I spent some time thinking about that question and came up with five strong principles where my perspective on personal finance disagrees with Dave’s. It’s worth nothing that these are merely five points in comparison to dozens where I do agree with him – there’s a lot more that he says that’s spot on than things I disagree with.

Let’s dig in.

A 12% annual rate of return in stocks is not realistic.
If you look at the amazing run of the stock market from 1980 to 2000 – the years when Dave was actually figuring out his financial state – it’s easy to see where his concept of a 12% annual rate of return comes from. The stock market actually did return 12% or so a year.

During that timeframe, the baby boomers were putting tons of money into the stock market – an unprecedented flood of new investors. And as with any market, if demand goes up, so do prices.

Today, though, boomers are starting to retire and many others have moved – or are moving – their investments into something more conservative than stocks. The demand is slipping a little bit, so prices are adjusting accordingly. They’ll still go up (because more investors all over the globe are getting in than getting out), but the people getting out is going from a trickle to a big stream – and will gradually become a flood.

The 1980 to 2000 bull market is gone and is not going to return any time soon. Sure, you can still earn a nice, healthy return in stocks, but a much more reasonable estimate is Warren Buffett’s long term prediction that stocks will return about 7% annually.

So what’s the big deal? Much of Ramsey’s investing advice revolves around the idea that investing in stocks will return you 12% annually. It won’t. You can still build up the kind of nest egg he talks about, but you have to invest more yourself. The market won’t do that much work for you any more – and if you expect the market to return 12% for you on average over a very long period, you’re in for a very nasty surprise down the road.

Personal responsibility is the problem, not credit cards.
Dave is pretty much a credit card absolutist – cut ‘em up and get rid of ‘em. For people who have problems with credit cards, it’s not bad advice.

However, he goes too far, stating unequivocally that credit cards are bad and that people should live without them. This flies in the face of his usual message, which is that personal responsibility is what really matters.

A personally responsible person – one who does not carry a balance on their cards – can use credit cards as tools. Over the past three years, my wife and I have saved about $500 using our Target Visa without buying a frivolous thing with it – just food and household supplies, which we could easily buy with cash. Instead, each month the statement comes in and we just send out a check. Then, every few months, we get a 10% off card, which enables us to take a shopping trip at Target and get 10% off our total bill. We make an effort to save larger purchases until we have such a discount.

I could tell a very similar story about our Citi Driver’s Edge card, which provided us with about $700 cash to help with a recent auto repair. All we did is use the card on gas and minor auto expenses and pay off the balance each month.

If you’re personally responsible, you can handle your urges and keep the spending on such cards down to the staples. That means you’re never carrying a balance – no interest payments – while also building up a strong credit rating, which helps with your insurance rates.

Credit cards aren’t the problem when it comes to credit card debt – personal responsibility is.

A $1,000 emergency fund is enough if you’re paying off credit card debt.
One of the big parts of the Dave Ramsey plan is that one should save up a $1,000 emergency fund, then turn all extra money towards paying off debts. This is a great way to get rid of those debts as fast as possible, of course.

Dave’s argument is that the $1,000 emergency fund is more than enough to take care of most of life’s problems and that you can negotiate your way out of the rest. I disagree with that – many events that would require me to turn to my emergency fund would go far beyond that $1,000 level.

How exactly, pray tell, can one negotiate themselves out of a job loss in a tight job market, or barter when it comes to a broken arm?

Instead of just stopping when hitting that $1,000 emergency fund, I suggest setting up an automatic savings plan, dumping $25 a week into the emergency fund (or $50 if you can swing it), then forgetting about it. Use everything else that’s left to hit the debt hard and let that emergency fund slowly build.

Why do this? Here’s an example. Let’s say you set up that savings plan to sock away $50 a week, then you start whacking at your debt as hard as you can. Six months later, you lose your job. You turn to your emergency fund. Thanks to your savings, you have $2,300 there, enough to keep the bills paid for two months or so. Without that plan, you only have $1,000 – things aren’t going to go nearly as well.

If everything goes perfectly, Dave’s plan is better.

But when in life does everything go perfectly? That’s the point of an emergency fund. Fund it appropriately, and you’ll always be glad you did.

“Growth” mutual funds are not the be-all end-all of investments.
Whenever Dave talks about specific stock investments, he always mentions putting his money into a “growth” mutual fund. There are two problems with this.

One, it’s not diversified. Buying nothing but growth stocks makes your investments less diverse. Quite often, growth stock funds are very heavy into a few specific “hot” sectors – and when those sectors go cold, ouch. Growth mutual funds didn’t do very well in 2001 after the dot-com bubble burst, for example.

Two, an ordinary “mutual fund” charges a lot of fees. Invest instead in a low-cost index fund. An index fund is basically an automatically-managed mutual fund, one that operates according to some publicly-defined easy-to-follow rules instead of relying on the research of a team of fund managers. You can get similar returns with an index fund without the huge fees (which many mutual funds take to pay the salaries of the fund managers and pay for advertising).

What’s a better solution? If you’re investing in stocks, buy a very broadly based low cost index fund. You won’t ride the bull markets quite as strongly, but you won’t fall nearly as far during down markets or changing market conditions. More importantly, you won’t be paying huge fees to ride the roller coaster – index funds are pretty cost-effective.

Before you put big money into the stock market, at the very least, read more than one voice on stock investing. In fact, read as many voices as possible. You’ll find that diversity is good and low costs are even better.

Do not cut your retirement savings during the initial push to pay off debt.
One final piece of Dave’s advice that really bothers me is that he suggests people trim their retirement savings during their initial push to pay off their debt, even if it means foregoing matching from employers.

To me, this is simply throwing money away. No matter how bad your situation, refusing to get an immediate 50% or 100% return on your money – risk free – is a bad idea.

No matter what, if your employer offers matching funds on your retirement accounts, invest at least enough to get all of the matching they’re offering. You’ll never, ever regret it – it’s basically free money that enables your retirement savings to grow much more quickly than if you turned away.

Sure, it means that you’ll pay off debt a little more slowly. What you’ll gain, though, is a lot of free money for retirement from your employer. Never turn that down, no matter what.

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  1. KC says:

    I’m glad you mentioned the mutual funds thing. That always bothered me about Dave. To me mutual funds are one of the worst investments you can make. They cost too much. Sure, many of use don’t have the choice in our 401ks, but for your personal savings and a Roth IRA you do have choices. Index funds are a far better deal and always outperform mutual funds. Read John Bogle’s The Little Book of Common Sense Investing. It’s about 200 very small pages and makes absolute sense. If you want more read the Boglehead’s Guide to Investing.

  2. Melanie says:

    Yay – you brought up so many of the points I disagree with Dave Ramsey as well.

    I like alot of what he has to say, but the most important thing that I agree with you on is your point on “personal responsibility”. It isn’t always feasible to get get rid of credit cards all together. What is important is to learn personal responsibility in all aspects of your finances and use your credit cards wisely. If you can’t control yourself with credit cards then you won’t succeed in other areas either.

  3. Jeremy says:

    To KC: Index funds are mutual funds. The distinction you are trying to make is between active and passive mutual funds (with passive usually meaning indexed), and I definitely agree with you there.

    To Trent: I’m pretty sure that when Dave Ramsey recommends “growth funds,” he does not mean “growth stocks” as defined by P/E or some other measure. When applied to mutual funds, “growth” simply means stock-heavy. Vanguard’s Total Stock Market Index fund, for example, would be considered a growth fund.

    That said, a stock-heavy portfolio is also not the be-all end-all of investments. Whether that is appropriate for any individual investor obviously depends on goals and time horizon.

  4. Trent–totally agree on stock market returns and the $1000 emergency fund.

    It’s tough medicine to tell people that the primary way they’ll need to accumulate serious savings is through contributions, not so much through returns. I like Dave Ramsey and the advice he provides, but sometimes he DOES sound a lot like a cheerleader for Wall Street, which I think it dangerous advice given that so many of his readers and fans are on the financial ropes.

    On the $1000 em, I’ve always thought of that recommendation as way to light. The ultimate way to eliminate credit cards is to learn to live without them, and that’s best accomplished with a much larger em (3-6 months of living expenses) that way you’re self-financed in nearly any emergency. Only when you not longer need the cash access from credit cards can you truly get rid of the them.

    It’s the well proven adage that the only way to get rid of a bad habit is to replace it with a good one. In this case, cash is the good habit, credit is the bad one. Develop the good habit, and the bad one will probably go away with far less effort.

  5. Stacy says:

    I agree with your points. To the credit card conversation, I would add that they offer consumer protections that debit cards simply don’t. To me that far outweighs any rewards programs offered.

    And second, even if you never borrow again, you have to recognize that credit scores are used everywhere. Right or wrong, that is simply a fact. And you don’t have to “worship at the alter of the great FICO” to understand this. Use a regular credit card in a responsible way, pay it off each month, so you can at least have an active credit report. Your score is used by insurance companies, potential employers, landlords and others.

  6. T'Pol says:

    I have been a credit card user for the last 20 years and I have never carried a balance and paid a penny of interest or a late fee. One terrible customer for the bank you might say. I took advantage of all the offerings that suited my NEEDs and saved quiet a bit of money over several years so, no I will not cut up my credit cards (I have only two, btw).

  7. Adam says:

    Trent, I so agree with you on the 12% thing! When you watch his websites “video” on “free cars” and it assumes 12% returns in the short-medium term stock market (never mind long term) it drives me bananas. All through his book there are 12% returns noted. The Total Money Makeover needs a 2009 makeover to adjust all his points and graphs for 7% returns.

    The $1000 emergency fund should be boosted to $2000 I believe, and for sure people should just reduce their 401k to get the employer match. I know he’s all about “gazelle” intensity but foregoing retirement savings for a year or 3 means huge money 25-30 years down the road.

    And its nearly impossible to travel without a credit card, as booking hotel rooms, flights, rental cars on a debit card means you can get holds placed on your account for deposits that take away your access to cash. Nevermind how people could do this before debit cards were linked to Visa/MC, you simply couldn’t.

    Great article!

  8. Dedicated says:

    100% in agreement with you. Hopefully D.R.’s fan club folks don’t bash you for your opinions. After all, I believe the majority are Christians. :-)

    Personal responsibility is key to anyones success, whether in money, love, work or life.

  9. ChrisB says:

    I *completely* agree with you on points 1, 2 and 3 in particular… Dave says that the market has returned 12% over its lifetime… where does he get that? Bogle crunches the numbers in one of his books, and it’s clear that the market has *not* returned 12% over its lifetime.

    I also agree with you on credit cards… I think addiction is a helpful analogy… if you are addicted to spending, then you *should* cut up your credit cards, but if not… be responsible.

    And I strongly agree on Dave’s investment advice… index funds all the way! Larry Swedroe relates a fascinating fact in his “The Successful Investor Today”… the top-performing diversified U.S. stock fund in the 1970′s was the 44 Wall Street Fund; if I came along in 1979 and followed Dave’s advice (a good growth stock mutual fund with at least a 5 year track record), this fund would look pretty compelling! But over the following decade, 44 Wall Street was the *worst* peforming fund! In fact, studies have shown that the *only* statistically reliable predictor of future performance is *expense ratio*… past performance is virtually meaningless. As I said… index funds. :-)

    Excellent post, Trent.

  10. Donna says:

    I’ve always been annoyed at the $1k EF idea. It’s a fine starting point, but like anyone who owns a home, that 1k isn’t going to go very far if you need to replace something major before you get your debt paid off. Or keep food on your table if you lose your job suddenly (as many people in this current economy have done!) I think at least one months expenses should be the goal, and putting a little aside each week is a good plan too. Dave’s very black & white about things–there seems to be very little gray and that is what makes it difficult for a lot of people to get behind his plan.

  11. Sharon says:

    I think that the $1000 amount was started in the nineties or earlier, so it should be increased. When I set up my emergency fund a few years ago, a thousand seemed like a HUGE amount of money and I imagine it feels that way for most in-trouble folks.
    The only time I would reccomend cutting the matched part of retirement is if the budget is bleeding red ink. Once the red ink goes away, the retirement deductions need to come back.
    And I saw someone compare the relationship people have with credit cards to alcohol. Some can drink responsibily, some will binge badly, and some can never go near the stuff without ruining their life.

  12. Kenny Johnson says:

    Just a quick defense of the $1,000 EF. Dave pushes for quick payoff of debt. He calls it ‘Gazelle intensity’ and he expects most people to be out of debt within a year. Now some people have much higher debt and couldn’t do that no matter how intense they are in paying it down. But I think Dave’s advice was always meant to be KISS. It’s an easy formula, but I expected that he was talking to someone face to face (and no one was recording it) and the person had debt that would take them 3 years to pay off, he’d agree that $1000 isn’t enough. He’d also probably agree that’s it’s not enough if you live in higher cost of living places like LA or NY.

    With that said, I like Trent’s plan.

    As for the 12% return — Dave’s not the only one using that number. What’s the reality then? What’s the average returns since it’s lifetime? In the last 30 years?

  13. Mike Piper says:

    Thank goodness.

    To me, once Dave starts talking about investing, people need to stop listening.

    He’s great for advice on how to get out of debt. I just wish he would keep it to that (or take the time to learn a little more about other topics).

  14. Strick says:

    1 – 12% stock return – given he only uses growth funds, I don’t see a problem with him guessing a 12% ‘average’ over some other number. What scares me is that he translates that to advice on the radio to the retirees that one can assume 4% inflation and thus an 8% withdraw rate is OK. Even if his growth stocks average 12% over 30 years, the high volatility of these funds make a 8% withdraw rate ridiculously risky. I would think having all your money in growth funds and drawing 8%/year over the past 10 years would have destroyed a lot of retirement funds.

    2 – can’t agree with you here. Given Ramsey’s plan focuses so much on getting people out of debt trouble, I think his focus audience would probably be best to forgo the credit cards. (I don’t blame legalized alcohol for the drunks of the world, but I’d think a recovering alcoholic would do best without a full liquid cabinet in their house).
    I am a little surprised that Dave’s attitude toward credit card companies doesn’t lead to him cutting out those VISA/MAstercard check cards as well (they do profit off of those things through merchant transaction fees, and if they are so evil why support them?)

    3, 4, & 5 – Pretty much agree with Trent.

    Ramsey’s blame yourself, get fired up, rip off the band-aid and get yourself in good financial shape as quickly as possible is definitely the value of his book/radio show. The investment type advice he should really leave to others.

  15. Dishes and Laundry says:

    If you are desperately ill, it is better, IMO to use all your income to make your life bearable than to keep socking it away in the not very likely event that you will make it to retirement. Not having to worry about bills coming in, or whether you can afford takeout when your sick is worth a slightly less certain retirement.

  16. guinness416 says:

    Yikes, Strick. Your point number 1 rgearding his radio advice is alarming and makes Trent’s (and all the other people doing it) rebuttal all the more important.

    Did these “gurus” have this level of fact-checking and critique before the advent of moneyblogs and their commenters? It’s a very good thing.

  17. Nelson says:

    “Let’s say you set up that savings plan to sock away $50 a week, then you start whacking at your debt as hard as you can. Six months later, you lose your job. You turn to your emergency fund. Thanks to your savings, you have $2,300 there…”

    $50 a week doesn’t work out to $2300 after 6 months. It does work out to $1300, so I’d hope it’s a typo.

  18. Kara says:

    I totally agree with you, especially on #2 and #3. This black & white mindset of DR’s is why I simply can’t get behind any of the rest of what he says.

    Like it or not, without a credit rating, it’s hard to get a job, insurance, an apartment, a mortgage, even rent a car. His insistence that credit scores are unnecessary is simply stubborn blindness to the realities of life today.

    As far as the $1000 EF – the last time I had to get my car repaired, it was far more than $1000. (And I don’t drive a fancy import car, either, but it is older and being nursed along to last as long as possible.) If I only had $1000 in my EF and/or no credit card to help with the situation, I’d have been screwed. My daily commute to work is 12 miles and there’s no public transportation available.

    People talk DR to me all the time and I just shake my head. I’m sure he has some valid information to share, but the absolutist view negates any good information, IMO.

  19. His thoughts on tithing creep me out because his supporting arguments are 100% based in bible stuff, and makes it sound like god has WAY too much in common with the mafia: it’s protection money, as in, god will stop protecting you if you stop giving.

    “If you can’t live on 90% of your income, then you can’t live on 100% either”. With the way the economy has hit my business, rent & utilities account for 50-70% of my fluctuating income. I’d say that 10% can be very make-or-break about half the time these days, and I don’t think my situation is particularly unusual.

  20. Debbie M says:

    I agree with your comments except I think the $1,000 emergency fund is fine. That still seems like a lot of money to people who aren’t used to saving–if you make the number too big, more people are likely to give up before they really start.

    Also that fund would cover a lot of things that people with no savings are used to thinking of as emergencies, so once their first emergency hits and they can just pay for it without any problem, they will be hooked forever on having an emergency fund.

    That said, if you’re talking about a couple instead of one person, and if home ownership or children are involved, then maybe I agree with you after all.

  21. craig says:

    the reason that you will never see better returns on your money, is because you are investing only in index funds. Index funds seak to match the performnace of whatever it is that they are indexing. There are plenty of activley managed mutual funds that consistently beat the performnace of the “index” without charging high fees. Index funds are for lazy investors – with a little work you can do much better! Now, if you want to simply park your money somewhere and never pay attention to it again, index funds are the way to go…

  22. ChrisB says:

    @craig (#21): there may be plenty of actively managed funds that beat their index this year, but there aren’t many that beat their index over several years, and there are practically none that beat their index over 20+ years. Look at the 3rd ‘graph in my comment #9: past performance is *no* guarantee of future results… it’s not just legalese, it’s the truth, as history has demonstrated.

    The paradox of index investing is that by shooting for merely average, the index investor ends up with *above* average results when compared to her peers.

  23. kim says:

    We have just started to follow what I have dubbed as “modified Dave Ramsey”. First we’re saving up an 8 month emergency fund (thanks Suze Orman). Then we will pay off our small credit card debt, then our student loan. Once we pay off the car in six months, that money will become a replacement fund – not part of the snowball. No more auto loans for us. Then we will pay off our mortgage. We currently save 16% in 401K and would not dream of derailing that, so it stays. Any of my extra income will go towards college the whole time. Our mortgage will go next after the student loan. I estimate this being a ten year process. The year after we finish, we start 8 straight years of college payments. In 18 short years we can live on pennies!

  24. Mrs. Micah says:

    Nelson, not a typo or math problem on Trent’s part, you just misread what he wrote.

    Instead of just stopping when hitting that $1,000 emergency fund, I suggest setting up an automatic savings plan.

    His math assumes that you already have the $1000 EF in place and then keep saving beyond that vs. stopping when you’ve got $1000 socked away.

    Great post, Trent. (I’d love to see that Rich Dad, Poor Dad book club, lol!) I think Dave Ramsey has a lot to offer, but there are a number of little things about his program that bother me, greatest among them being the 12% expectation. Assuming that you’ll get 12% is like assuming that homes are automatically a good investment and all the other investing nonsense that’s passed off as common knowledge.

  25. kim says:

    Another vote for a Rich Dad Poor Dad book club!

  26. Marsha says:

    Kim, I like your concept of “modified Dave Ramsey.” I think this discussion (and others we’ve had here, too) just go to show that personal finance decisions are so, well, personal and individualistic. It’s hard to give one-size-fits-all advice.

    I don’t think DR’s advice works as well when the economy is tanking. And as best as I can tell, the economy is tanking in different degrees around the country.

  27. Retirement Savior says:

    That’s definitely right. $1,000 is nowhere near enough if you are going to be unemployed for several months, which is happening a lot more often in this economy.

    Dave also doesn’t seem to consider that growth mutual funds (and any other stock funds) may well have drawdowns of 50-60% at some point, and if you really need the money it may not all be there for you. Each person should tailor their risk to their own appetites and time horizons.

  28. tentaculistic says:

    When I got my MBA, we did most of our investment classes assuming 12% rate of return – has to do with average over the life of the market. However, most of us were canny enough to realize that “average” and “likely in the immediate future” were two very different things, so when we did the applied projects for our own budgets, we applied much lower rates of return. Turns out, not quite low enough for the recent depression, but enh, I’m still buying, prices are low and I have a long time to retirement, I can be a bit reckless.

  29. Anne says:

    Dave should stop short of investment advice, as neither he doesn’t have a license. The EF is way too low; it’s hard to convince people that they have to save their way out of debt; having a savings account prevents getting deeper into debt. Credit cards: I agree w/you about responsible use; however, the people he talks to have not used them responsibly; hence, his mantra.

  30. On the $1000 em, that may be OK if you’re credit card debt is under $10,000, your cars are late model and not likely to crap out, and you have a reasonable chance of paying off your debt in a few months.

    But if your cc’s (and other debt) are in the tens of thousands–where many people’s are–it’ll take years to get out of debt, you’ll have to be prepared to cover emergencies for the long haul. $1000 won’t cover a transmission replacement, let alone an extended job loss. $1000 just isn’t that much money anymore.

  31. Maya says:

    @ MoneyMateKate: I definitely understand how hard tithing can be.

    I haven’t read Dave Ramsey’s book, but I hope that Dave isn’t suggesting that tithing or giving to charity is “protection money.”

    I’m a Christian and I believe that God values our motive for giving more than the actual amount we put in a plate or on a check. That’s why the Bible says (to paraphrase): The Lord loves a cheerful giver.

    No one should give simply out of fear of losing God’s love, or fear of bad karma, etc. As U2′s singer Bono once said: “The God I know isn’t short on cash.”

    I can’t buy my way into heaven and I can’t pay for a perfect life here on Earth. Good things happened to me before I gave my first dollar to anyone. And good things will continue happening even if I never give away another dollar.

    I think one of the main purposes of giving is to remind us that even if we may feel poor, we are still very valuable to others who could benefit from our money, time, talents or other resources.

  32. I disagree with the $1k Emergency Fund also. For some folks, myself included, $1000 would not even cover my mortgage for one month.
    - SingleGuyMoney

  33. Andi says:

    I would be willing to argue that the $1000 emergency fund is possible to get by with while you’re working your way out of debt. My husband and I have been paying on debt for the last 2.5 years (over $120,000 paid to date and our take home is not amazing – mostly farm debt) and we only have $1000 in our EF AND we’ve had several “emergencies” in those 2.5 years – replaced a computer that crashed and was necessary for business, had a pregnancy with complications , car problems, replaced a dishwasher and a washing machine. During that entire time, we have yet to touch our emergency fund. What we have found is that when something breaks or life changes, our definition of a real emergency changes and we have found other ways to pay for things – mostly by waiting a few months to save up or preparing some ahead of time. When we knew I was going to be home on bedrest, we made minimum payments for several months on debt and stockpiled cash. We also cut lifestyle even more for the short term. I think from what I’ve read of Ramsey, he would agree if you think your job is in jeopardy or some other emergency is coming, start saving now to prepare.

    Another comment on credit cards – we cut ours up after starting the FPU class. We had used ours responsibly for several years – never were late, always paid off the balance. What we found was the balance was always a little higher than what we expected from small purchases here and there and it was a stretch to make sure it was paid. What a relief to finally be rid of them. We have never had problems with our debit card. I also find that if I pay cash for things like groceries, I’m much more deliberate about what I put in my cart – do you know how embarrassing it would be to tell the clerk to put something back because I didn’t have enough money with me – it takes discipline.

    By now, I’m starting to sound like a Ramsey disciple – I’m not – but taking the class was a life changing expereince for my husband and I. We tweak it to fit our experiences – but the thought of not owing the bank anything and being able to farm without worrying about making that next payment to bank is what has motivated us during the last three years. To know that when we sell cattle, half of that income isn’t automatically gone or watching my husband get up early (at 4) many mornings in a row trying to figure out where that next payment is coming from .. . Try to tell me debt is good.

    The borrower is slave to the lender is so very true.

  34. I think the $1000 EF is for people who have high interest debt (ie credit cards). Of course $1k isn’t going to cover much but if you are keeping high interest debt in order to have a larger EF then it is expensive because of the interest!

  35. Bill says:

    @31 Maya
    I am not Christian or even religious. However I do listen to Dave Ramsey daily. Often I bite my tongue but he never brings up tithing till the caller does then he always says it is not a salvation issue. He personally says he tithed in and out of bankruptcy. He quotes a conversation with an elderly woman who condemns him for not having enough faith and he responds that was all he had left.

    Personally I could care less, but he does deserve a fair quote, the “tithe is protection money” is completely wrong.

  36. Bonnie says:

    #19 MoneyMateKate – Why do Dave’s comments on tithing bother you so much? Dave himself is Christian and believes in tithing. Since he started out in the Christian market, a large core of his audience also believes in tithing. If you’re not Christian or Jewish, tithing is simply not applicable to you. It’s not good or bad or cringe-worthy. It’s simply NOT APPLICABLE. I really think you’re confusing whatever other people have said about tithing with Dave Ramsey’s stance. He’s never said anything remotely sounding like the “tithe is protection money”. Stop projecting your issues with TBN onto Dave Ramsey. They’re not the same.

    Trent, I agree with many of your disagreements. However, I think we should all recognize that, aside from scientific researchers, most people write books because they want to sell as many as possible. So, many authors generalize their topic quite a bit. For example, I live in a very high cost of living area, so the $1000 EF would be way too low for me. I recognize that he’s probably generalizing on that one, but that the point of having some level of funded EF before digging into debt applies to everyone. Regarding the 12% annualized rate of return, that part of the book just shows how outdated the book is. At the time he was writing it, 12% was reasonable.

    On mutual funds, Dave doesn’t advocate picking one growth fund and holding it til it dies. He specifies 25% aggressive growth, 25% growth, 25% international, and 25% growth-and-income. For people in their 20s, 30s, and 40s, with a 20-30 year time horizon, that’s not unreasonable, but is probably also riskier than the average investor’s risk tolerance. How any individual invests should always depend on their risk tolerance because it’s that person that needs to sleep well at night. Regarding actively-managed vs. passively-managed funds, I don’t think Dave specifies which he prefers. You can find actively-managed and passively-managed (i.e. index) funds in all four of the categories he recommends. Passively-managed is much more practical for your average do-it-yourself investor, however, because most people don’t want to bother with monitoring the fund manager of an actively-managed fund.

  37. ML says:

    Trent, I like the deconstruction of Dave Ramsey. I think it would be interesting to give the same treatment to other popular financial ‘experts’ such as David Bach and Suze Orman.

  38. Doug says:

    RE: $1000 emergency fund: I believe that Dave does state you and your spouse have to be on the same page with the amount of the emergency fund. He also states that if you are in a position where your income is not stable (commission sales, for example), you should increase the size of the fund.

    The emergency fund is designed to stop you from using credit cards whenever there’s an emergency, and also to help you reevaluate what constitutes an “emergency.” 25% off at Kohl’s is not an emergency. But many spenders will say “I save so much money! And I need new clothes anyways!” or words to that effect.

    RE: Tithing: Dave has never said that tithing is “protection money.” The tithe is something to help turn an individual into a giving person. And Dave has never mentioned tithing unless the caller does first.

    RE: Rich Dad Poor Dad: Oh, please, no. I’ve read it, and there’s no real, solid advice in it. “Make your assets provide more money than your liabilities.” Okay, how? “Well, your assets are things that earn you money . . . .” No, I asked how! “My corporation bought me my $400 golf driver!” Great, now you give us illegal tax advice . . . .

    Please, do NOT use that book!

  39. Kelly says:

    I think the advice Dave Ramsey gives has to be taken in context.

    I read his book and attended his live conference and I take him more as a motivator. He does give some sound financial advice, but his real goal is to motivate people to take control of their finances.

    With this in mind, I think the $1,000 em could be higher, but as he says, a car repair is often not an emergency…I know I drive a 14 year old car and live in a 44 year old house, I have to budget for the repairs these will require because I know repairs are coming. I also think the $1,000 em is meant to be a quick first step that people can reach quickly to give themselves confidence that they can do this. He obviously doesn’t think this is wholly adequate since he then instructs people to fully fund the em after credit cards.

    Second, like others have already mentioned, for many listening to Ramsey, they have already shown poor restraint when it comes to credit card usage, and sometimes avoidance is best solution.

    Third, the retirement funding has been the one that I debated multiple times when my wife and I first started and I think everyone should make this decision on their own. We ultimately did not contribute to my 401(k) for about a year while we got ‘gazelle intense’ towards paying off credit cards. We did however start contributing before paying off student loans (which will take about 2-1/2 years). The reason we did this was that the credit card debt had started to suffocate us and we needed to relieve ourselves of it as quickly as possible and that emotional relief was well worth any matching 401(k) dollars we missed out on.

    All in all though, he ultimately provides a clear goal that someone can follow and will result in a positive outcome. I do think modifications to the plan could create a better outcome, but they would often ruin the simplicity that I think he is aiming for…just my two cents.

  40. Dave says:

    I love this article because it questions the norm. It gets annoying when people continuously praise those who are usually right. Well, not everyone is right in every situation and that is OKAY. There is nothing wrong with being wrong or different. Thanks for pointing out the flaws in Dave Ramsey’s argument while still letting your readers know you still believe in much he says. Just because someone is usually right, doesn’t mean they always are.

    Dave
    LifeExcursion

  41. Joel says:

    I agree with #39,Kelly. Dave’s point on the credit cards is that, first, many people out there don’t handle them with restraint and second, using a credit card, whether we admit to it or not (regardless of how ‘fundamental’ it is to our lives) is really buying something you really don’t own with money you don’t have. Although some of the steps in his plan can be modified, many of his principles are sound. For example, a $1000 EF is too low for my circumstances. So, I’m making it $3000. A change of $2,000 but the same concept.

  42. Joel says:

    To #40, Dave – It gets annoying when people continuously praise those who are usually right? Well, if they’re right then they should be praised. lol Maybe you meant it gets annoying when people continuously praise those who think they are right?

  43. I can think of a lot more than five ways that I disagree with Mr. Ramsey, but you touch on some good ones.

    Credit cards can be a profitable aspect of your life if you use them correctly. To swear them off is to cut yourself off from a potential source of income.

    Also, I have always heard that you need a minimum of three months expenses in your emergency fund, with the optimum level being six months.

    I’m not here to bash the guy because he’s very successful, I just think some of his strategies are off-target.

  44. Shelly says:

    I strongly agree with your opinion on credit cards. My husband and I have one card each, which we use for all of our purchases. We have never seen our credit cards as an opportunity to buy things we can’t afford — we just use them as an alternative to cash and pay the statement balance off in full each month. This allows us the convenience of plastic and the benefit of rewards.

    The key is the mindset. I don’t even know what the credit limit is on my card, and while I could easily look it up, I don’t care to — I know it’s higher than any amount I’d reasonably spend in a month, so there’s no need for me to know it.

  45. Amy says:

    I agree with almost everything you’ve written here, but I think it’s important to recognize that very few employers are likely to have matching funds on personal retirement accounts these days. From 1996-2002 I worked for a labor union which had the best benefits around from what I saw, and even we did not have matching funds on our personal retirement accounts.

    Further, with the way the economy has been lately, wouldn’t this be one of the first things an employer gets rid of rather than laying employees off? So I would think that even those few remaining employers who were matching contributions have since stopped. If you belong to a labor union, at least the employer would have to first negotiate any such changes to your terms and conditions of employment — but almost any other employer could cut this benefit out at will and instantly, I would think.

    I agree with you that stopping retirement savings completely to pay down debt is a bad idea, but I do think any talk of “matching contributions” to voluntary retirement funds needs to acknowledge that it’s not so common anymore. I can’t remember the last job I had with that kind of benefit.

  46. Little House says:

    I only recently heard of Dave Ramsey (I’ve been living under a financial rock), and I think you’re right about a few of these things, such as needing more than $1,000 in an emergency fund and that it’s unlikely to profit 12% on stocks. I also agree that people need to use their credit cards to build their credit (as long as they pay them off each month), even if they’ve recently paid down their debt.

    However, is Dave Ramsey’s book outdated? Maybe he needs to revise it for the next decade to better resolve these outdated issues.

    -Little House

  47. craig says:

    Amy #45: I am not sure what industry you are in, but the 401k match is very common. Benefits that Unions have negotiated in the past are way out of whack with reality (a main reason that so many companies with unions are going out of business or moving jobs to non union places) and are no longer the norm.
    For most people, having a 401k match is an important part of their benefit package.

  48. Bill in Houston says:

    I have a few points to make regarding Trent’s comments:

    First, you may disagree with the 12% figure Ramsey wrote, but you have to realize that the book came out in February 2007 when the market had been booming. Historically (from a 2007 timeframe) it was accurate, and easy to predict forward based on market behavior. We had no idea that stock markets would have suffered so in the past year.

    Second, You only need one credit card. Keep a zero monthly balance on it, but use it for one small purchase a month. I buy coffee at Costco with my American Express. No credit cards (if you aren’t making payments on anything) means no credit calculation and this can hurt you.

    Third, regarding the emergency fund… this book was written in 2007. This would be like me making predictions on last Saturday’s Texas A&M football game. It was valid advice for a person in a stable job in a strong economy. The emergency fund would pay for a major repair or an appliance replacement or pay my medical insurance deductible. It is a cache for an emergency that should allow you to pay off other debt. You’re saving $38.46 a week for six months to create this. Depending on your debt load this is easily done… in a strong economy.

    Fourth, I agree with you about the index funds. Dad was a stock broker for decades and this was his advice.

    Lastly, if you are kicking in ten percent of your income to retirement and there’s a company match, there are few if any companies that match that high. Drop your contribution to the maximum matched level. Most companies match five percent. If you’re lucky enough to have a company that matches 100% of that five percent immediately (my company does), then you get a 100% return immediately. I just re-read what you wrote and you matched what I just said. So, back on my head!

  49. Bill (48)–At a recent televised town hall meeting he was again stumping growth funds, but not mentioning 12%, saying “America’s on sale” (due to the market slide).

    I have issues with such pronouncements, but Dave Ramsey has written a book with a tremendous number of recommendations, many of them bankable, but some that we might not agree with–and that’s OK. Maybe more important is that he’s got us thinking about these things.

    If any of us were to write a book offering advice, others would similarly poke holes in what we’ve written, it’s just human nature. On balance however, we have to tip our hats to what he’s written. His book and his public speaches are being quoted and analyzed all over the place, and that means something positive, even if we disagree with certain details.

  50. Evangeline says:

    This is what I ‘got’ from Mr. Ramsey’s book: 1) Take responsibility for your mistakes, 2) Once you are sick and tired of being broke, you will finally have the determination to break free of the cycle, 3) The process isn’t easy but definitely worth it, 5) you have to use a lot of common sense and have a very thick skin to get through it and 6) protect yourself and family by having an emergency fund and retirement plans in place. My advice would be that once you are fed up with the debt nightmare, take stock of your situation and apply the principles that make sense to you. My own financial plan is a hybrid of many different plans that make me comfortable.

  51. And now my reflection on your five points of disagreement:

    1. 12% can unrealistic and I agree that he may have been basing this on a specific 20-year-period. However, I think the stock market has averaged 11.6% for the past 75 years or so at ten-year periods. In any case, I have always looked at that with a degree of skepticism.

    2. Yes, personal responsibility is the problem and Dave Ramsey acknowledges that. But his plan also involves never going back in to debt and if you follow that principle, having a credit card is absolutely pointless. Debit cards are just as safe, provided you use them like a credit card (ie. use them as a credit card in the checkout line instead of entering your PIN).

    3. The $1000 emergency fund is not a complete fund and Dave states as much. It is for those little emergencies. He has repeatedly told people on his show that if you have a baby on the way or a potential lay off on the horizon, that you should stop Baby Step 2 and save up more money. Once those potential emergencies are in the clear, then you can go back to Baby Step 2.

    4. While Dave Ramsey doesn’t talk much about it, he does have people he endorses to help with investing and he usually recommends people whose payment is commission based rather than fee based. Also, he recommends that you not just invest in growth funds, but others as well. If you take his Financial Peace University course, he has a whole class on this kind of investing where he explains it all.

    5. Actually, Dave only recommends this if you can be debt free within about one year and a half, which the average for most people on his plan. If not, he will recommend that people at least invest in the match. That was in his book “The Total Money Makeover.” It really depends on the individual. I remember he had one caller who had 1 million in retirement saved, was in his early 50s, had a six-figure income, and about 200K in debt. He was nervous about stopping his contributions for a year or two and Dave responded by saying, “well, you have a million dollars.”

    The Baby Steps that Dave recommends are really a template for your financial goals. This does not mean they will work for you in that order. In my case, I have to save up to buy a home, but that isn’t listed on his steps (usually around steps 3 and 4).

    Anyway, I understand your criticism and I think they are valid concerns. I personally am considering just saving up my full emergency fund and going back to the debt payments because the monthly payment is low and my job situation isn’t exactly stable (although no potential layoffs are on the horizon).

  52. Jennifer says:

    Very good points! I used DR’s snowball to get in better financial standing and there were several times the $1,000 fell short! Love your blog:)

  53. Georgia says:

    I guess from all these comments that I am pretty rich in some ways. I am retired, have @ $2k a month in income, good health insurance, own my home (a 43 y/o dbl wide trailer, and $10k in a savings account. I do not do stock investing at all and never have. My 503b has only $75k in it, but it is withing $4k of where I was before I started withdrawing. I am saving one retirement check each month.

    But we were in cc debt at least $34k at one time. It took 15 years and me working 2-3 jobs to get it done. I have frozen my credit and do not need it anymore. I’m 72, debt free, and see no need for it.

    However, I do have 2 cc’s that I use for almost everything I can think of. But I have the money budgeted each month to cover them. I paid the cc companies plenty in previous years, but in the last 5 years I have not paid them a cent in interest and they have paid me almost $1,700. Good return to me.

    I have never trusted or used debit cards. I see they might be better now that they can be used as cc’s, but I won’t bother to change. I am using their money each month and getting paid for it. It’s a win-win situation for me.

    We were lower middle class most of the time, others times very low class (working for a farmer, home provided, and $50 a week income.) I also tithed almost this whole time and try to do more now. It is a “thank you” for the blessing of living in this country of opportunities if we look for them.

  54. Gina says:

    Perhaps the lessened impact of 1k shows how our money has eroded and the impact of the housing bubble instead of looking like inadequate advice.

  55. Aaron says:

    Well I can say that I have taken Dave Ramsey principles and they have worked for me. I paid off $29,500 dollars in debt in 9 months using his plan with a low 70k income, which I tell you is not easy but sometimes winning is not easy. He has also got millions of people out of debt with his plan so it does have a proven track record. The reason he states that you should stop your retirement(for a short time) is that if you are trying to do multiple things your focus is diminished, and his system is meant for intense focus on one area, not trying to do everything at once. And if you think credit cards are good, just ask the people that have had their rates jacked in the past year also you spend 12-18% more using a credit card than you do with cash…plus you cannot go in debt with cash. But all I can say doing his system the last year I have not worried about the economy like people struggling who decided to live beyond their means.

  56. Des says:

    Here’s what I don’t get: The same blog that advocates investing in index funds (because statistically they outperform actively managed funds) also advocates using a credit card rather than using cash even though studies have shown that people spend more when using plastic.

    So, on the one hand you say “I can beat the odds” and on the other hand you say “No one can beat the odds.”

  57. steve says:

    You *could* easily buy that stuff at Target with cash, but, realistically, would you? If you just had a stack of 20s in an envelope would you be so willing to buy the stuff? Just asking.

  58. Nick says:

    If it weren’t for Dave Ramsey’s class, my wife and I would still be in poor financial shape.

  59. Hibryd says:

    Wow, I agree with a LOT of the comments here.

    If you need to get out of debt and get your financial ass whipped into shape, Dave Ramsey is good for that. He’s a superb brow-beater.

    If you’re out of debt and want to move on with your life, Dave Ramsey is not good for that. He lives in a black and white fantasy world where the same rules are applicable for everyone all the time.

    You want to know why he keeps saying “mutual funds mutual funds mutual funds” on his show and (unlike Orman) *never* mentions index funds and never warns people away from high-cost funds with load fees? Because financial advisors pay him big, big bucks to be listed as an “Dave Ramsey Endorsed Local Provider”. He makes a lot of money funneling his audience through brokers with high-cost products.

    If he cared about his audience he wouldn’t keep talking about “good” mutual funds that “return 12% annually” and then drop another commercial for his ELPs. I’ll give credit to Orman: she may have tons of products to her name, but she doesn’t council people away from index funds for kickbacks.

  60. Wellington Grey says:

    Very good points all. I’m a Dave fan, but I also disagree with him on a few points. The 12% growth is one of them, but also because he really leans on exponential growth, often advising people to save for their retirement until they’re *75*! I don’t think most people want to keep working for 10 more years than they have to. Besides, when you’re 75, there’s not much you can do with a million dollars besides spend it on your medical care.

  61. JP says:

    Dave says first to save 1000 emergency and then get out of debt.But you guys failed to read all his steps because he advises to go back after getting out of debt and build your emergency fund to 6-9 months. Also, he advises not use credit cards because many studies show that people spend 15 to 20 percent more than when they use cash. Before disagreeing with him I suggest to get all the facts first.

  62. christine says:

    The author makes several assumptions about Dave that are simply not his view. $1k is simply an immediate first step. Regarding the broken arm? Part of Dave’s plan includes health coverage. You are either buying it, already have it, or set up an HSA. Caring for health isn’t an emergency. Re: credit cards. The industry is pretty evil all together. If you want to contribute to it, use CCs. People spend 18% more on plastic, including debit cards – which is why Dave recommends green cash money. Weird, but after 4 years, yeah – it works for us. We spend less, and more intentionally with cash. Plus, you are automatically 2 months ahead once you adjust to cash spending. Instead of catching up on last months expenses (on your statement), you are putting cash in envelopes for NEXT month’s bills. Pretty big psychological difference – it puts you in control of your money. You make some interesting points worth considering, about investing and retirement funding. Still, Dave’s 7 steps, WORK. If you do them. One thing you both probably agree on that is fundamental, people have to live below their means – whether they use cash or plastic. Thanks.

  63. Cherie says:

    The author never went into bankruptcy. He advocates the use of credit cards. Dave Ramsey in his class
    “Financial Peace University” which is a thirteen week class I took in my church, points out that in 1970 15% of Americans had plastic. I guess the author is too young to remember lay-aways. That is how my Mom got my school clothes, or she made them. Also studies were done where MRIs were done to people making cash transactions, and it registered as pain…not with credit cards. And it’s worth saving up, using cash, and no, you don’t need credit cards…there was a time they didn’t even exist, and we did just fine, thank-you. It’s a known fact that you spend more…that’s why McDonald’s takes plastic..they did studies and found that the average cash transaction was $4…and the plastic transaction was $7…I find that Dave’s plan works, and his envelope system is what both of my Grandmothers used…they lived through the Depression. A lot of people are really sold on debt, that it’s okay…someone out there is living La Dolce Vita from them, and it seems that it doesn’t even bother them!Sad…

  64. Salas says:

    Here’s how you make 12% in the market:

    VZ
    TOT
    PFE
    MCD
    DD

    spread your money out evenly over the 5 above investments and you will get more than 12% on your money and your initial priciple will be safe, although it could move a little, but has down side protection with defensive stocks.

    The portfolio above avoids volatile financials and tech stocks. It’s not sexy, but it’s solid and steady.

  65. Credit Girl says:

    If you’re dying for some more of Dave Ramsey’s advice, I recommend this article. Enjoy!
    http://www.gobankingrates.com/savings-account/dave-ramsey-baby-steps-overview/

  66. Tim Rosen says:

    Trent brings up some valid points. It is important to note that one challenge an author has in writing a work on recovery or remedies, is that he/she cannot speak to every personality type and appease every opinion. He or she can present “A” plan, but it does not imply that it is “The” plan.
    When endeavoring to make any lasting change, whether it is weight lose, breaking an addiction, or getting out of debt,there must First be a change in beliefs. If someone believes a credit card is still a means to obtain things they otherwise cannot afford, their actions will follow their beliefs, regardless of their efforts to snowball their payments.

  67. Laundry Lady says:

    I understand Trent’s reasons for discouraging people from cutting down on their retirement savings. But it is difficult to keep stomaching interest compounding on debt while your 401K money makes such discouraging drops in the market. Our student loan debt is at 6.8%. I think my husband’s 401K is earning 7% or less. I feel like we’ll barely break even at this point. My husband has a match on his 401K contributions, but we are still considering cutting back. Not because we don’t believe in saving for retirement, but because we can’t afford to pay our bills now. These are not debt bills or poor decision bills, just simply daily living bills. We have a daughter that I stay at home with and unfortunately the kind of work I do doesn’t pay enough to even justify the expenses of me returning to work. Freeing up more money every month by making fewer 401K contributions seems to be our only option right now.

  68. Great piece!

    I find it quite interesting that you rarely ever hear the two words “compound loss” uttered by the financial industry and it’s gurus like Ramsey. If more people had had safeguards in place to eliminate their exposure to the destabilizing and debilitating effects of compound loss, we would all be a lot better off.

    Thank you for your continuing contributions to keeping people well informed.

  69. Steve in W MA says:

    My foundational assumption regarding retirement savings or investments is that you need to *save* enough to retire on and not rely on investment return to get you there. Relying on projected investment returns, particularly in the current climate, amounts to wishful thinking. Save 30% of the money you make throughout your career, once your career is established.

    When you have significant cash money accrued you can think about doing things like outright purchase of rental real estate, which can provide about a 7% annual cash inflow compared to your initial investment.

    Do not rely on the stock market, which is essentially relying on the fortunes of businesses that you do not even partially control. Rely on your own savings and on business investments that you have direct operational control of.

  70. Aaron says:

    @Laundry Lady,

    Let’s say hypothetically the match from your employer is a meager 20%. In my experience, if a match is provided, that’s the lowest match I’ve seen.

    Let’s say the funds offered by your employer’s 401k stink to high heaven, and you literally get 0% return.

    Where should the smart money go? Paying down a 7% student debt loan, or putting money into the 401k?

    It’s STILL the 401k. Why? Simple: you’re getting a 20% tax-advantaged return vs. saving 6.8% interest minus a tax deduction if you itemize. That’s why Trent, rightfully, says you should never turn down a match. You could even make a reasonable argument to go further into credit card debt in order to get at least the match, if the match is higher than credit card interest rates, although I wouldn’t recommend it.

    It’s one thing if you can’t pay your bills, it might make sense to cut back to just get the max match you can. If you’re gonna have to cut more than that, I’d recommend to cut back other expenses if at all possible before turning down that free money. Heck, even work another job if need be, because if working that extra job doesn’t seem worth it, would it be if whatever it would pay would be 20% higher in this case?

    Food for thought….

  71. Steve in W MA says:

    Regarding the credit card debate and the “fact” that people spend 20% more on their credit cards than they would in cash–I agree, and my evidence is my long experience working in retail. Without a doubt, the largest tickets and the ones that are most “of the moment/spontaneous” are those run up by people bearing credit cards.

    I attribute this to the fact that with a credit card there is no physical, tangible or visible limit or indication of how much money you have available to spend, and anything up to your credit limit is fair game when purchasing
    with a credit card.

    In general, I find that people are much much more careful and less impulsive when spending their *cash* in the store than when they are using their credit cards. This may have to do with the fact that most people don’t carry $400 in cash with them at all times so there is a physical, visible limit to how much “money” they feel is available when spending cash.

    All of that being said, I be;lieve that this only applies to people who don’t make their spending decisions based upon a predetermined budget. People who have a predetermined budget spend much more conservatively and strategically than people who are just out shopping “for fun” and without a preset spending target. The customers who come up and pay with a cash *from an envelope* are uncommon and they are not frequent customers, largely because I believe that what the business I work is sells is largely discretionary items and people who are on a cash envelope system often have their discretionary spending in tight control.

    I believe the same is true of those who have tight budget controls but use their credit cards as a means of payment.

  72. Steve in W MA says:

    If you are going to put money in the market,perhaps in a period before you have accumulated enough for making direct investments in businesses you control, I would have no qualms about doing something like either indexing the whole market or building a portfolio like Salas’s in comment #64—investing in divident paying stocks of companies who provide a wide range of largely essential, everyday, economic services and goods.

  73. Dawn K. says:

    re #57 Steve:

    We’re considering getting a Target card, and utilizing it in the similar ways that Trent talks about.

    For us, there are many staples that are cheapest/best choice for our family at Target…specifically diapers and formula for our baby. If I’m buying these items anyway, I might as well earn rewards on them.

    While I do admit there is temptation for a new shirt or an extra snack while I walk the aisles, just because I am carrying plastic does not mean I’m going to give in.

    I focus on the fact that the sooner we pay off debt (and not buy extras) the sooner I can stay home with my children. Much more rewarding than a candy bar or new shirt. It merely boils down to personal responsibility and stick-to-it-ness.

  74. Sara says:

    Starting Oct 17th, 2010 the Target store card will also get you a 5 discount on all purchases. I believe that this is going to take the place of the 10% discount rewards.

  75. Christian in IL says:

    Trent raises some excellent points here. However above all I think Dave Ramsey is trying to illustrate how “behavioral” personal finance has become. He’s basically saying, that for most, a change of behavior is (towards money) is required before a change in saving, spending or investing can occur. That’s what resonated with me. I’m glad that 12% annual returns was taken to task. In the last 10yrs the S&P 500 has returned essentially nothing and markets are more correlated now than they have ever been; which makes the case for index investing all the more appealing rather than “actively managed.” Does anyone know if Dave has recently changed any of his investing recommendations? Investors would’ve done quite well having been in Bond Funds over the past 10yrs as opposed to Stock funds.

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