Think Dave Ramsey Gives Great Advice? Think Again
houseoflawandorder.com
houseoflawandorder.com
For example:
"Personally, I think the $1,000 emergency fund is just too low. I understand why Dave advocates $1,000–it’s a small sum that most people can save in a short amount of time and is, in many cases, more money than they’ve had in savings ever. But, taken in the context of the next step, which is to pay off all debt using the snowball method, that $1,000 is probably not going to cut it, especially depending on how much debt you have and how long it’s going to take to pay that off."
The emergency fund is NOT for paying off debt it is for unexpected expenses.
Edited: "Her conclusion", I had it as "him" originally.
I could be wrong, but I think the author is a woman.
The point is that the emergency fund is supposed to be sufficient during the entire process of paying off debt, which might be years. If you have more than a $1000 emergency during that time, you have to fall back on credit.
I’d argue the 1000$ number should vary with inflation and cost of living. Having a $2000 or $3000 emergency fund could make sense for a lot of people.
I sat through a Dave Ramsey course several years ago. I don't remember most of the specifics, but I'm pretty sure that the "$1000 emergency fund" is just the _first_ step, for those who don't have _any_ existing savings yet.
Looking things up... yeah, these are the "7 steps" he suggests [0]:
- Step 1 – $1,000 to start an Emergency Fund
- Step 2 – Pay off all debt using the Debt Snowball
- Step 3 – 3 to 6 months of expenses in savings
- Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
- Step 5 – College funding for children
- Step 6 – Pay off home early
- Step 7 – Build wealth and give!
So, the idea is to get _something_ in reserve now, then build up that fund once you've eliminated debt.
I don't agree with Dave Ramsey's investing advice but I 100% agree with his getting out of debt advice. In 2014, I landing a job paying $80,000 a year. At the time I had $30,000 in student loans. I followed Dave Ramsey's advice; I threw nearly all my income at my debt, anywhere from $3000-$3500 a month. It took my a year to finish paying it off. Half way through the process, I had to take a break for two months to replace my car (I got a used Prius for $7000). Through it all what kept me going was listening to his radio program.
Debt it dumb, cash is king.
[0] https://www.daveramsey.com/blog/how-to-choose-the-right-mutu...
Melissa's grievance #2 - She doesn't like that Dave Ramsey reprioritizes charity until you're well out of financial disarray. Melissa thinks you should keep tithing, because blessings can be bought.
Reading what I wrote to myself there sounds like an ungenerous way to describe it, but I can't bring myself to sugar coat it.
What a rough and tumble read that was all together. I'm laughing at myself for how appalled I am that people would just go on the internet and publish bad advice. Some of it isn't even wrong, it's just ham fisted with mittens on.
To be fair, the Bible literally states that God will bless you if you tithe, and curse you if you don't.
I'd throw in a little bit of Jack Bogle, a little bit of Warren Buffet, and a passle of friends on Bogleheads.org. That mix should fit a lot of different situations.
Having an emergency fund is more important than not having one. There are more legit criticisms like Ramsey selling his own mutual funds to readers.
Yeah that's an ad hominem but still come on...
From the article: "With both of us being attorneys..."