Dave Ramsey is arguably one of the most controversial figures in personal finance today. Most people either love him or hate him. But regardless of the controversy, Dave Ramsey’s principles of personal finance changed my life for the better and I can’t help but be grateful to the man despite how much I find him repulsive as a human being.
I have very mixed feelings about the man.
On the one hand, his advice drastically changed my life and put me on a much better financial foundation.
On the other hand, I think his politics are abysmal and his advice is much too one-size-fits-all and his investing advice is especially terrible.
This post isn’t going to go into detail on the many reasons I have problems with Dave Ramsey.
Instead, I’m going to explain how he changed my life for the better and gave me the financial mindset needed for financial peace.
Let me paint you a picture. I had recently gone through chapter 7 bankruptcy (one reason I related to Dave, since he had also gone through bankruptcy many years ago when he hit rock bottom).
I was delivering pizza for Domino’s with no career prospects ahead of me.
Because I was driving so much I had plenty of time to listen to podcasts. After the bankruptcy, I could no longer use credit cards so I was entirely using debit. Which meant that I had to learn how to budget and live within my means.
Somehow or another I discovered the Dave Ramsey Show and started listening to the podcast every day while I was delivering pizza.
I was hooked. I was completely sold on the idea that the key to building wealth was based on the following Davey Ramsey principles:
- Cash is king. Don’t go into debt to buy something if you can’t afford it in cash. Exceptions are mortgages. But even then, the bigger the down payment, the better.
- Don’t buy stupid shit you don’t need.
- Budgeting is essential. Use zero-based budgeting and give every dollar a purpose (I use YNAB)
- Live like no one else today so you can live like no one else in the future. In other words, make financial sacrifices in the present moment in order to live a life of wealth in the future.
- Millionaires aren’t flashy. They drive used cars, have modest homes, and are generally pretty frugal.
- Saving up an emergency fund is a cornerstone financial goal in order to prevent the perpetual cycle of paycheck-to-paycheck living.
- Being “gazelle intense” when it comes to hitting financial goals fit my financial goals insofar as I would rather live frugally today and improve my financial situation than I would buy the latest Playstation.
- Adults form a plan and stick with it. If your plan is to get out of debt and build up wealth then you should not let a desire for instant gratification get in the way of achieving your goals (unless you have budgeted for such gratification).
- Your income is the primary wealth building tool you have. The fewer payments you are making to banks, the more you are able to invest and save for the future.
- Part and parcel of the previous point is that working to increase your income is one of the most important things you can do. At some point, you can only be so frugal before you need to find ways of bringing in more money to meet your financial goals.
- Keep your housing expenses modest. You don’t need a giant home.
- Personal finance is 80% behavioral and only 20% knowledge. You don’t need to be a financial genius to win with money, you just need to have good habits.
As I was driving around delivering pizza, I listened to untold hours of Dave Ramsey and these lessons began to seep into my brain. Granted, there were many points on which I disagreed with Ramsey (and still do).
The biggest example is that I believe in index funds instead of actively managed mutual funds. My contention is that Dave Ramsey only recommends mutual funds because he wants to sell you on using his advisor services to help you find a good mutual fund. But in my opinion, indexing is the way to go.
Furthermore, I fundamentally disagree with his politics – but I won’t get into that.
His advice is often more sensational than it is pragmatic, especially for low-income earners, and he often relies on a kind of shock-and-shame strategy when it comes to knocking common sense into people.
There are also some nuances I disagree with Dave on such as cutting up credit cards and paying off your mortgage.
However, when you strip away all his controversy, there is certainly much to be learned from his finance philosophy.
Without a doubt, Dave Ramsey changed my life for the better. Inspired by his advice, I taught myself web development skills, which eventually landed me a product manager role in the tech field with a six-figure salary.
Granted, I have not followed his advice to a T and I am still working on improving my financial situation. But I credit Dave Ramsey for giving me the proper mindset when it comes to personal finance and at some core level, I believe he speaks a lot of truth.
When we are evaluating personal finance “gurus,” I think it’s important to be objective and filter through the good and bad, and avoid throwing the baby out with the bathwater.
Just because he might be wrong on some points, doesn’t make all his advice terrible. And while more “expert” finance folks might want more sophisticated financial advice from someone like, e.g., Mr. Money Mustache, Dave Ramsey certainly knows his audience: the broke masses of Americans in debt and living paycheck to paycheck.
So while I believe I have “graduated” from the specifics of Dave Ramsey’s advice. I will always be grateful for his advice for changing my life for the better.