5 Ways I Disagree with Dave Ramsey

Dave Ramsey ranks among the top-notch personal finance gurus that have helped a lot of individuals get out of debt. Nevertheless, Dave Ramsey has some opinions that I consider outdated for modern society. Let’s dive into five ways my views differ from Dave Ramsey’s own.


View 1: You can receive 12% on your investment

Dave Ramsey wrote an article on 12% returns by taking the average of S&P annual returns from 1923 to 2016 as 12.25%, this has received lots of criticism from financial experts. Robert Berger gave four valid reasons in his US News & World Report article why 12% return is unlikely. Here are the reasons;

  1. The fact that you’re expecting a 12% return on investment can make you take too much risk, which will increase your chances of losing money.
  2. Misleading calculation: Dave Ramsey used average returns, and this does not take market volatility into account.
  3. Trying to yield a 12% may lead you to an investment manager that charges exorbitant investment fees that may not be worth it.
  4. Dave Ramsey advised that you withdraw 8% of your retirement funds to invest and get a 12% profit. Unfortunately, you may run out of cash from your retirement account if you do that.

View 2: You should use the debt snowball method

Dave Ramsey is a believer in the debt snowball method, and he doesn’t hesitate to give advice on it, on every occasion. Dave Ramsey’s central point is that you will become more motivated to pay larger debts when you’ve paid off smaller debts. In his own words, “It’s important to pay your debts in a way that keeps you motivated until you’ve wiped them out.

Of course, paying off small debts help you to be motivated to clear off large debts. As shown a 2012 study by Kellogg School of Management, the research concluded that: “People with large credit-card balances are more likely to pay down their entire debt if they focus first on paying off the cards with the smallest balances — even if that approach doesn’t make the best economic sense.”

But Dave Ramsey believes that this approach works in all instances, which is something that I don’t agree on. When it comes to gazelle intensity, everyone is different. Also, it is not economically advisable to use the snowball method.

Snowball Interest

You will lose thousands of dollars in interest if you use the snowball method to offset your debt. For example, if you owe $13,000 at 2%, $22,000 at 3%, and 40,000 at 12%, and you use the snowball method to pay off your debt, you could lose as much as $12,000 in interest payments.

The best way to pay off your debt is by combining the avalanche method with the snowball method. An app like Savvy Debt Payoff can help you with smarter ways to pay off your debt, as it combines both methods, and tells you where you should put your money each month.

Gazelle Intensity

What motivates everyone is different, some people are very inspired to do anything to get out of debt, while others need an extra push to take the same step. People who are highly motivated don’t need the snowballing method before they make decisions that will help them to get rid of their debt.

View 3: Pay off your house mortgage early

It is a positive thing to pay off your house mortgage early, but Dave Ramsey recommended a way to pay off a mortgage which is somewhat rigid, rather than recommending a flexible way.

An example of where it’s better to not pay your mortgage early is when you have an investment with a guaranteed yield that’s more than the interest on your mortgage loan. In such a situation, you should make minimum payments on your mortgage and make the maximum payment on your investment opportunity.

View 4: There is no such thing as good debt

I believe that not all debt is bad. Unfortunately, Dave Ramsey and I don’t share the same opinion on this.

I believe that there are good debts. Good debts are those you borrow for investments, and the yield from the investment is higher than the interest rate on the debt. For example, I took a loan in college that had a 0% deferred interest rate. I then invested this money into a CD that yielded 5%. This is a good debt.

View 5: Save $1,000 for Your Starter Emergency Fund

If you read the book Baby Steps by Dave Ramsey, you will find out that he recommends saving $1,000 catering for an emergency. While that figure could have helped in the 1990s, when the book was written, it can’t do much in today’s world.

A better way of saving for an emergency is by saving a fixed percentage of your monthly expenses as emergency funds. You can also make it a fixed percentage of your monthly income, whichever suits you better.


Although Dave Ramsey has helped numerous people by giving them life-changing investment advice, I believe that some of his views need to be re-accessed and updated by his team of financial experts.

Biography: Ben Tejes is the Co-Founder and CEO of Ascend Finance and writer for Saved By the Cents with the goal to help people get and stay out of debt. In his free time, he likes to go on adventures with his wife and three young daughters around the bay area.