Dave Ramsey Review: The Pros and Cons of His Financial Advice

“Ramsey is the pro bono financial adviser to millions of Americans who otherwise could never afford one.”

There’s a gap in financial advice. Financial advisors, planners, and money managers don’t typically do a good job of serving the working class. Many people are buried in consumer debt, living paycheck to paycheck. Many may never meet with a financial professional. After all—they lack funds to invest and it doesn’t make sense in their case to pay a fee for advice. These are people who have been largely neglected and forgotten by a financial industry that isn’t compensated to help them.

Enter Dave Ramsey.

But who is Dave Ramsey and how reliable is his financial advice? 

We hope this Dave Ramsey review provides a balanced perspective.

Who is Dave Ramsey?

Dave Ramsey is a financial guru, radio show host, and best-selling author, whose Total Money Makeover is one of the most popular personal finance books of all time. His radio program and podcast are heard by 14 million weekly. And over 5 million people have gone through his Financial Peace University program.

Advice, however, doesn’t have to be correct to be popular!

If you’ve ever been to a Truth Training with Todd Langford—a 3-day deep dive into using Truth Concepts financial calculators with my husband, who developed the Whole Life Insurance Cash Value Calculator—you might know we’re not big Dave Ramsey fans. Dave’s advice doesn’t always make mathematical sense. His recommendations about some products and strategies such as whole life insurance are flat-out flawed.

And yet… it’s hard to throw a stone in a crowd without hitting at least one Dave Ramsey fan. (But please—don’t throw stones!)

Today, we review the pros and cons of Ramsey and his advice. And while we admit there’s plenty to criticize, there’s a lot to appreciate as well.

The Best of the Dave Ramsey Plan

Here are 9 ways Ramsey truly helps his audience:

1. Dave is a debt-busting critic of consumer lifestyles.

Total Money Makeover lays out the foundation of the Dave Ramsey plan.  He writes, “We buy things we don’t need with money we don’t have to impress people we don’t like.” The futility of keeping up with the Joneses is a theme that Ramsey hammers home often, and it’s a point worth making. While we can’t confirm the statement above originated with Ramsey, it’s spot on and painfully true. America’s consumer addiction is killing our future, and it’s a major reason why people aren’t saving more.

dave ramsey advice

2. Dave Ramsey advice is ever-so-needed tough love.

Dave isn’t afraid to tell someone the tough truth about their financial self-sabotage. And, though the Dave Ramsey method of giving financial advice does not include pulling punches he’ll also give his listeners a light at the end of the tunnel.  He gives people hope. This radio show exchange quoted on Politico.com encapsulates Ramsey’s essence:

Chris, 28, is a truck driver and the family breadwinner; his wife is a stay-at-home mom. They have… $14,600 in credit card debt and have borrowed twice that much from their retirement account. They owe $59,000 on an SUV worth $46,000. His annual salary of $60,000 can’t buy a shovel big enough to dig out of the hole.

“The car is gone. It’s insanity… absolutely nuts. It owns you,” Ramsey says in his cigar-smoky southern drawl…. He orders Chris to sell the SUV and the couple’s other vehicle—a paid-off pickup truck with a value of $15,000. He then instructs Chris to take out a $5,000 loan for a clunker to drive while paying down other debts. “You guys are in such bad shape that I’m scared for ya,” Ramsey says. But, he adds encouragingly, all is not lost. “When I was your age, I was going broke and going bankrupt. And I had to start completely over, with little babies, and my marriage was hanging on by a thread. And I was so scared, I couldn’t breathe,” Ramsey says. “You can clean this up, dude, and I can show you how….”

3. The Dave Ramsey plan encourages people to take responsibility for their finances.

Ramsey sees more Americans predisposed to economic dependence—and believes political promises are to blame. Ramsey warns that no political savior—Republican or Democrat—is going to solve all the economic problems or save people from themselves. “I now have to spend more time talking someone into believing they control their own destiny than I used to,” he says.

4. Dave will try to help anyone in any situation.

For three hours every weekday, Dave Ramsey takes calls from people in all kinds of financial turmoil. He’s heard it all: debt collections, repossessions, bankruptcy, foreclosure—Dave will try his best to help absolutely anyone. And much of it is solid advice:

    1. Tell your bill collectors not to call you at work.
    2. Get rid of the fancy truck you can’t afford.
    3. Stop using credit to dine out.
    4. Avoid racking up huge student loans.
    5. Build your emergency fund.
    6. Get a side hustle.
    7. Take responsibility for your decisions.

5. The Dave Ramsey method advocates for gratitude and contentment.

One of the themes of the Dave Ramsey plan is that more “stuff” won’t make you or your family any happier—that you can choose to be happy now. “When you choose gratitude and seek contentment with what you have, you’ll be much happier. Plus, your family (and your bank account) will thank you later.” We’ve got no argument with that!

6. Dave teaches people to give.

Ramsey teaches tithing and giving as a basic step of financial maturity. He inspires his followers to think beyond their own needs and become generous people.

dave ramsey method

7. Dave creates community.

Ramsey followers come together to support each other in reaching goals and celebrating! Attendees of Financial Peace University, a 9-week course, can choose between attending online or finding a local group, typically hosted at a local church. Hashtags such as #DebtFreeCommunity draw together Ramsey fans online.

8. The Dave Ramsey method gets people to take action.

Countless people attribute Dave’s teachings, courses, books and/or community as the spark that led them to “do something” about their credit cards and/or student loans. His advice is clear, simple, and actionable. While many people languish for decades with consumer debt, followers of the Dave Ramsey plan often tackle debt with an impressive vengeance.

9. Who is Dave Ramsey?  He’s anything but boring!

who is dave ramsey

Let’s face it—it’s tough to get the average person to want to learn about personal finance. A recent poll of millennials found that most would rather go to the dentist than meet with a banker. Dave, however, has boomers and millennials flocking to his events. His strong personality and business acumen have made him a celebrity and brought the topic of money to many who may not have listened otherwise. When it comes to inspiring middle and working-class Americans to focus on their finances and eliminate consumer debt, Dave is a master. Most people who take Dave Ramsey advice are much better off than those who follow typical consumer habits. He has undoubtedly saved many from bankruptcy, divorce, and all kinds of suffering. And for that—we are grateful!

Where Dave Ramsey is Wrong – Critical Thinking and Warranted Dave Ramsey Criticism

Once someone has dug themselves out of the proverbial hole, paid off their debts, and established an emergency fund, Ramsey’s advice rapidly becomes less relevant. Speaking from his own experience rather than that of a trained advisor, there are concepts he misses.  Simply put, there are times when he gets it wrong and our Dave Ramsey review would be incomplete without mentioning a few of our bigger problems with Ramsey’s financial counsel.

1. “You’ll earn 12 percent in the stock market.”

Ramsey is known to say. In spite of flack from many corners, including Forbes (“Dave Ramsey’s Plan for 12 Percent Returns is Not Achievable”), Investor Junkie (“Why Dave Ramsey’s 12% Isn’t Reality”), and USNews.com (“Why You Won’t Achieve 12 Percent Returns”), Ramsey has not backed down on his claim. Dave has acknowledged that he is speaking of averaged returns, not actual returns—an important distinction that few of his followers would understand. (Read “CAGR vs Average Growth Rate – Did Your Broker Mislead You?” for more on average returns vs actual or CAGR—Compound Annual Growth Rate).

dave ramsey is wrong

Yet all of his investment projections are calculated using 12 percent… something no financial advisor or planner with integrity would do. It gives investors false hope to tell them they can become millionaires by investing $100 a month, as Ramsey claimed on one show.

2. Problems with Dave Ramsey and his high-fee mutual funds.

Whatever you think of Dave Ramsey, he is a shrewd and savvy businessman. Not only does he motivate people to put all of their investments in mutual funds, but he has an army of advisors (“endorsed local providers”)—who pay him a fee for the privilege—ready and waiting to charge high fees for their recommendations. Oh—and even if the market WAS delivering 12 percent returns? You would earn far less after paying mutual fund costs and fees to Ramsey’s recommended providers. Ramsey mysteriously does not recommend low-fee ETFs.

3. Ramsey does not make room for asset allocation outside the stock market.

problems with dave ramsey

Most people own some stocks, which is fine—as long as they are balanced with other asset classes and especially non-correlated assets that won’t dive when the market does. Ramsey’s recommendation is to put ALL your investment eggs (aside from your emergency fund) in the mutual fund basket.
He recommends four kinds of funds: growth, growth and income, aggressive growth, and international. What’s missing? Everything else. Real estate, bridge loans, life settlements, private or peer lending, investing in oil and gas, business partnerships, cash equivalents, and perhaps a bit of gold as a hedge. Unfortunately, when the stock market crashes—and it will—so will the investment portfolios of Ramsey followers.

4. Dave Ramsey is wrong about whole life insurance.

Dave just flat out doesn’t understand how it works or why it would be a better place for long-term savings than the money market accounts or CDs he recommends for long-term savings. He pretends to be a truth-teller about whole life, but he has said many inaccurate things about it, won’t acknowledge long-term rates of return, and has even given bad advice to liquidate healthy policies.

dave ramsey life insurance advice

Whole life insurance covers you throughout your entire life, which sounds pretty good, right? Wrong,” says Ramsey. “The truth is that you’ll spend a lot more throughout your lifetime on a high premium and may never even see the cash value.”
“Never see the cash value”!? Being that cash value is guaranteed AND guaranteed to increase every year, that statement makes no sense! Like many, Dave doesn’t understand that cash value is the liquid equity of a policy.

The increasing cash value isn’t something you “lose” if you die. Rather, cash value continues to grow and build your death benefit, eventually equaling a policy’s face value (death benefit)—if you live long enough. In the meantime, the cash remains accessible. Of course, whole life policies easily out-earn any guaranteed bank product over the long haul. Additionally, a policy’s face value with proper riders can be used for an insured’s terminal or chronic illness or long-term care bills, which makes whole life an ideal emergency fund and a fantastic way to get your dollars to do multiple jobs. (Oddly, Dave recommends long-term care insurance, which puts premium dollars at risk, rather than whole life with a long-term care rider—a more effective option.) So, is whole life insurance a good investment?

Ramsey correctly identifies that life insurance is not an “investment.” However, that does not mean that whole life insurance is not a valuable asset. Properly understood, it is a savings vehicle and a risk management tool. Whole life actually brings the much-needed balance and stability to many portfolios that Dave’s “mutual-funds-are-all-you-need” investment philosophy, aggressive 12 percent return predictions, and admonition to use only term insurance promise.

5. Dave Ramsey advice ignores opportunity cost.

Ramsey’s shoot-from-the-hip advice often lacks mathematical integrity. One example is his neglect of lost opportunity cost. In a nutshell—when you use money for one purpose, you have to consider what else you might have done with it and what return it could have earned elsewhere. Ramsey’s admonition to “pay off your mortgage early” (one of his 7 “baby steps”) is a perfect example of neglecting opportunity cost.

If you believed you’d earn 12 percent in the stock market, why would you prepay a low-interest mortgage!? You wouldn’t! Even if you could earn 8 percent elsewhere, you would be wise to invest those extra principle payments in a side fund. Before you know it, you’ll have more in your side fund than you owe on your mortgage. (This strategy would actually allow you to pay off your mortgage faster—IF that’s what you wanted.) However… IF you understand opportunity cost—you wouldn’t prepay that mortgage!

You would make minimum payments on your mortgage and focus on growing your investments instead of paying off your house. This is what we recommend and what financial calculators confirm… building assets rather than prepaying low-interest debt.

6. The Dave Ramsey plan does not differentiate between good and bad debt.

To Dave Ramsey, there’s no such thing as “good debt.” Don’t bother challenging this assumption… you’ll be belittled and told that Dave and his associates “have all the data” and you shouldn’t listen to your “broke brother-in-law.” Never mind that none of Ramsey’s followers would have homes to pay off if it wasn’t for their mortgages!

7. Dave Ramsey is wrong to encourage people to simply forget their credit score.

dave ramsey criticism

Ramsey calls your credit score an “I love debt” score. He sees no use for an excellent credit score, since he sees no reason to use credit. His blog reads, “Once you’re out of debt and at peace with your finances, that credit score won’t matter anyway!”Except when it does. If you neglect your credit score, you could sabotage your chances of buying investment real estate or using credit cards to your advantage, for instance, paying off balances monthly and racking up travel miles or cash back as you do. Credit scores do matter. Without credit, you could even end up paying more for car insurance or be required to pay a utility security deposit.

8. The Dave Ramsey method (read style) isn’t for everyone.

Dave sprinkles biblical references throughout his talks and uses the vocabulary of evangelical Christian circles. At the same time, it is not uncommon for Ramsey to use name-calling or even belittle a caller. Between his bouts of financial and motivational advice, he labels people he disagrees with as “idiots” or “morons.” On occasion, his rants turn into harsh, bullying tirades.

9. The debt snowball can be inefficient.

Mathematically, the most efficient way to pay down your debt is by paying off your highest-interest debt first. Ramsey advocates paying off your smallest debt first, then adding what you were paying towards that debt to the payment for your next largest debt. In this way, you eliminate the number of debts you have at a faster rate (even if your total debts aren’t paid faster). Since there is an important psychological benefit to the debt snowball, we’ll give Dave a pass on this one! Just be cautious if your biggest debt is also your highest interest… you wouldn’t want to delay paying that down.

problems with dave ramsey

A Dave Ramsey Review Summary

If you ask what we think of Ramsey’s advice, we’d have to answer with a question… “For who?” While his investment advice can give people false hopes (the 12 percent myth), slow people down (neglect of opportunity cost), and leave them open to risk (no asset allocation), Ramsey provides genuine help and motivation to people living paycheck-to-paycheck, trying to break free from consumer debt.

The bottom line: Ramsey may have done as much as anyone else to motivate Americans to get out of debt and start saving. Ramsey’s advice makes for good radio, but that doesn’t make his investment advice solid. Any competent advisor or fee-based planner could poke holes in Ramsey’s recommendations. Perhaps The Balance says it best… while Ramsey’s talk radio show can provide some “good tips… investors would be wise to understand the difference between entertainment and sound investment practices.”

We agree with this Money.com headline: “Save like Dave Ramsey—just don’t invest like him!” After you DO get out of debt—call Prosperity Thinkers. We can show you much more effective ways to save and invest!

What do you think? Do you agree with our review of the Dave Ramsey pros and cons of his advice? Leave a comment below!

—by Kim Butler and Kate Phillips

40 thoughts on “Dave Ramsey Review: The Pros and Cons of His Financial Advice”

  1. My wife and I completed the Ramsey course over 20 years ago and found it helped increase our discipline around debt management and saving. I just paid for my daughter and new son-in-law to attend DR FP course and they embraced the same fundamentals. I shared this course is a solid Freshman level course and now you have to grow your investing knowledge by learning from others. I feel DR is not strong in investing and growing wealth knowledge.

    1. We’re glad that his program helped! We agree that his debt program can be really useful for establishing discipline.

  2. It’s hard to come by knowledgeable people about this
    subject, however, you seem like you khow what you’re talking
    about! Thanks

  3. watched DR’s show today for a few minutes. Caller was making very bad financial choices and Ramsey belittled and demeaned him. Called him a jerk. Ramsey was the jerk, even admitted he was being sarcastic. A true Christian knows sarcasm directed at another person in belittling way is a sin. Will not watch again because of his arrogant mean behavior

    1. Whether you think Dave can be a little too abrasive at times is needed for some people that don’t get the picture even if he is religious!!

  4. How can someone afford medical school without loans. Working part time is rarely feasible as medical students. I totally DONOT agree with him on subject of no student loans.

    1. Prosperity Thinkers

      You’re right, these days it’s difficult to do school without some type of financial assistance. While college should be a careful choice, loans shouldn’t deter someone who is sure that it’s the right path for them.

  5. I prayed for this program. I purchased it from Goodwill from a glass showcase. I did not follow every step but became debt free in December 2020.

    1. Prosperity Thinkers

      Hi Bernadette,
      We are so happy to hear that you received so much value from this program. If you’d like to chat further about your future financial future we’d be happy to help.
      You can schedule time by
      phone: (877)889-3981 x 108
      email: we*****@Pr****************.com

  6. Jack Fredric Gillespie

    Good Article: Your Cons do not take one common thing into account. The emotional aspect of money. Most people want everything prior earning it. I found Dave Ramsey after I had no debt. I do not use all of his ideas, but his concepts go against all the financial world wants you to follow so they can make money! I know many people that had the bigger house luxury cars and they lost all of it in 2008 because they did not really own those products because the banks contract said otherwise. The concept of dollar cost averaging for investments is the Dave Ramsey plus. The S& P index has generated around 11%-12% annual average returns based on S&P 500 historical data in the last 93 years (1926-2019). People Need to think long term for Dave’s investment concept. Final thought… All debt is bad debt if someone has no money to pay that debt.

    1. Thanks for the contribution, Jack! Some excellent food for thought. Definitely financial corporations have benefitted when people have over-extended themselves… and that is easy to do when emotions are in charge.

  7. Pingback: Did Dave Ramsey’s Plan Help You Get Out of Debt? – DebtFreeSquad

  8. I’m confused on the 12% part. I’m averaging more than 12%, granted my funds are extremely aggressive, but I’ve been getting these returns for the past 5 years

    1. Prosperity Thinkers

      I’m glad you are averaging more than 12%. We find that the up and down nature of the stock market and mutual funds does cause mathematical
      averages that can be that high. The question over time is: at what cost is the loss of principal when it is in a downslide? This is a tough one to answer right now when everything seems to be up. If you are happy with your returns and confident in staying the course, then please do.

      Here is a great article on the Average vs. Actual that you may be interested in: https://prosperitythinkers.com/?s=average+v+actual

  9. People call Dave Ramsey and tell him one little bit if their financial situation and he makes recommendations. Ridiculous! A good advisor will spend several hours collecting information. He is like a doctor that operates without a thorough diagnosis. Total fraud! .

    1. Disagree! He ask all the right questions you just have to honestly answer them.
      Do an experiment… listen to him for one hour and jot down the questions he asks,
      Take those questions and fill in your information, ie how much you make?, debt ect…. when you answer those to dave then ask him any additional information.
      You may be surprised, like they say i’s not Rocket Science. Its numbers and numbers don’t lie.

      1. Prosperity Thinkers

        Numbers may not lie, but they can be misinterpreted! Dave does great work for a lot of people who need to whip their debt into shape… but we don’t always agree with his analysis of opportunity cost or leverage. It’s important to apply the right financial lens to the numbers 🙂

  10. I am so thankful I followed Dave Ramsey advise 15 years ago. During this Covid-19 crisis. I am able to help couple of my neighbors who lost their jobs keep their utilities updated. I am also in PEACE during this crazy time because my 4 walls are covered for the next 6 months (emergency fund baby step 3) and baby step 5( I’m done yay). I am currently working on exercising and toning up until I go back to work 3-6 weeks later (depending)…

  11. I am a Dave Ramsey follower and have the highest respect for his program. I only spent $100 for his classes 10 yrs ago. I didn’t buy anything else. 12 years later, I have no debt and my house is paid off at age of 45. I still have couple of credit cards (gas card) and another card I put my monthly bills on including groceries BUT I pay them off every month and I STILL BUDGET a month ahead. My credit score is still great. So you can still follow his advise and not have your credit score suffer. You just have to be discipline and have self control to make your money behave.

    1. Lydia,
      I’m a Dave Ramsey fan too and these Cons about DR are wrong. I took Peace U the year after I was married with 12K debt and widdle it to Zero. Yes all investment has risk, but to be knowlegable in a some investment starts with a good teacher then become the learned/ wise in investing.
      Liked your statement.

      1. Prosperity Thinkers

        Steve, we’re glad to hear Dave’s advice helped you! While we don’t agree in a one-size fits all approach, Dave’s advice does help people. For those who accomplish a debt-free lifestyle, seeking to protect assets is a great next step!

  12. I know I’m going to get blasted, but my comment is as good of a theory as any others. I personally like some of his ideas and/or advice, but I don’t think you need to belittle people and kick them while they are down.

    I find it interesting that he has nothing on his site about protecting yourself – wills, trusts, end of life docs – like Suze Orman.

    If you could fuse these two together in some ways it would be great. Maybe I have a business idea.

    I wish Suze had a training Bootcamp like DR, I’d probably sign up. I’m not sure about his. I’m interested in helping people, not making him rich or having to pay one more monthly subscription or bilk indebted people out of their hard-earned cash that they already have little of.

    I know his “followers” are not Evangelical Christians, but having been one my entire life, I’ve seen enough “church abuse” by pastors and church leaders to last me a lifetime. We don’t need church folk to “lord over” people we need them to be more compassionate. understanding and “long-suffering”. Of which DR has little of, it would seem. I’m not into the harness for “entertainment” value.

  13. I don’t like his advice about buying a $1000 car and save cash for a new one. If you buy a car for $1000. It has high miles and you could be putting money into it instead of saving to buy one with cash.

    1. I hear you… sometimes “beaters” are way more trouble than they are worth and you’d be better off with payments on a newer, reliable car rather than unexpected mechanic bills!

  14. Dave gave some very sound advise back early in 2000, he kept saying…” buy mutual funds now, it is on sale, if you hesitate you will have missed your chance to build wealth”. We were already debt free, so we thought, why not. We had never dealt with the stock market so it was scary for us, but we did save on a regular basis. We invested and the market kept going down. Very scary, but when it came back up…woo hoo. We were ok before, however, now we are enjoying our retirement worry free. I never once believed his 12%, it just doesn’t happen in today’s world, I think the stock market crashing was just the chance we needed. Also, he can be very mouthy, that is just his way, I look over that because he does help people debt free.

  15. Even though he does have some good advice his cult followers just are frustrating to even waste my time with. Even as any prosperity economics adviser can poke holes all day long in his bad advice that can sabotage wealth building with inefficiencies throughout.

    I know we ought to try and help as many people in as many ways possible and yet a Dave Ramsey Cult follower almost makes it impossible to do so.

    Prosperity Economics requires independent thought and critical thinking. Best line…poplar financial advice doesn’t make it accurate!

  16. Excellent article. Dave Ramsey has helped many people to climb out of the hole with his debt advice, minus a couple of issues you pointed out. I have many friends who are Dave Ramsey followers. For all the good he has done helping people get out from under their debt, anyone following his investment advice is certainly missing many opportunities to diversify their investments and hedge against the next market correction putting 100% of their investments at risk. His one size fits all investment advice financially hurts his loyal followers, and they are very loyal.

  17. Very strong, fact-based column. Agree across the board. The tired “buy term and invest the difference” recommendation is a big Dave Ramsey stand-by, and Suze Orman as well. The biggest problem with that advice, on top of it being ill-advised on its face, is that the vast majority of people in that category won’t invest at all. They will just spend on more stuff.

    1. Thanks Bob! Kim says that is exactly her experience… People may succeed getting out of debt, but they often fail with investing.

      We believe in buying term AND whole life! And yes, ALSO investing. Whole life for liquidity, risk management and virtually guaranteed generational wealth!

  18. Your analysis of his preachings are spot on. His principles are helpful for some, not all and certainly not for all individual scenarios. They neglect a whole lot of important principles in building wealth (not just getting out of debt). Unfortunately, many take his comments as gospel and won’t think deeper and tease out nuances.

    1. Thanks Michael! About “teasing out the nuances…” Perhaps it is a plus to some of that Ramsey’s baby steps are so simple. But a minus that it is a “one-size-fits-all“ plan (that as you say, is very lacking in terms of wealth building!)

  19. While some of his ‘advice’ is useful for some people, he’s misleading millions. And getting wealthy doing it.

    1. Very wealthy. Ramsey has a much more thorough and sophisticated plan for building his own wealth them the advice he doles out!

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