Dave Ramsey – My Thoughts

I’ve been reading a lot about Dave Ramsey in the personal finance blogosphere lately and I thought I would share a few thoughts about him.
For those who aren’t familiar with the name, Ramsey is an American personal finance “guru” who promotes a fairly simple approach to dealing with excessive spending and debt. Dave Ramsey’s methodology is outlined in his financial planning course, Financial Peace University.

Dave Ramsey’s Baby Steps

  1. Make a commitment to get out of debt
  2. Start a cash emergency fund
  3. Pay off debt using a debt snowball
  4. Save 3-6 months of expenses in savings
  5. Save 15% of household income into retirement savings accounts
  6. College funding for children
  7. Pay down mortgage quickly
  8. Build wealth and give

I disagree with Dave Ramsey

Anyone who has been reading this blog can probably figure out that the Ramsey method is not something I would ever use. I don’t have problems with excessive debt or spending, I like my credit card for convenience and never carry a balance. I don’t have a cash emergency fund and have no problem with moving unsecured debt to my home equity line of credit. I also use borrowed money to buy investments. The idea of paying off lower interest debts before higher interest debts makes my blood run cold – however as a certified financial geek who measures his MERs to the nearest thousandth of an inch, even I have to admit that not everyone in the world thinks the same way I do. 🙂

All of these things that I do go against the “Ramsey” way but that’s ok because I’m not in need of any kind of financial rescue. I haven’t always been financially responsible however – my “turn around” occurred about twelve years ago when I finally clued in that I had to spend less than I earn and needed to pay off my debts. Even though I don’t agree with Ramsey’s specific methods, I think that had I been exposed to him before my turnaround, he might have been able to help me, since his fairly basic methods were a huge improvement over how I had been dealing with my finances.

I believe that for a lot of people, Ramsey’s methods can be very beneficial. It doesn’t matter if not every detail is perfectly accurate or maybe doesn’t fit every situation exactly, for someone who is literally drowning in debt and can’t find the way to the surface, Ramsey might just be their saviour.

Here is a great series on Dave Ramsey and his financial methods by the M-Network:

More information

A plan to be debt free – Learn how to pay off your debts.