Dave Ramsey money advice that's bad

[lorraineb]

I started another thread on the good advice that Dave Ramsey gives that is good, but I also know that a lot of people disagree with a lot of the advice that he does give. What advice that he gives do you think is bad money advice?

[sarah]

His investment advice. His 12% in this economy is ridiculous.

[disneysteve]

He puts nearly all investment money in stocks regardless of your age. Whether you are 20 and just starting out or 64 and ready to retire he advises you split your money between 4 funds - growth, aggressive growth, growth and income, and international growth.

He says to not use credit cards. Credit cards are just a financial tool. Properly used they can be very advantageous.

He believes pretty much all debt is bad with the exception of a modest mortgage.

[Wino]

He puts nearly all investment money in stocks regardless of your age. Whether you are 20 and just starting out or 64 and ready to retire he advises you split your money between 4 funds - growth, aggressive growth, growth and income, and international growth.

Not quite. He also recommends real estate if one is so inclined. You did peg his mutual fund split correctly.

I agree in principle with that one part, though: You should continue to invest and not merely protect until you're at least 75 or 80, rather than going heavily into bonds and such when you're approaching "retirement age." I have my actuarial tables set up assuming I'll live to be 100. The men in my family are very long-lived when they are not overweight or smokers. I am neither, so I hope to see the north side of 90. If I were to protect based on my passing at 80 or 85, I would likely not have enough money to go skydiving when I reach 90.

[jeffrey]

I think he misses the mark entirely when it comes to credit score advice -- this coming from the experience of not having a credit score for a time upon returning to the US. I also don't understand why he says that you can have a "credit score of 0" when that doesn't exist...

[bjl584]

His advice on investments and credit cards are the two big ones.

[MonkeyMama]

Investments and credit score advice - both already mentioned.

I guess beyond that, getting nit picky about utilizing credit cards for rewards or 0% debt for arbitrage. This is not a huge pet peeve of mine because I think it's find advice for his demographic, and I know that's his point.

I do sometimes absolutely cringe at his tax or legal advice. He says some *really* stupid things, at times. I don't remember anything specific...

[disneysteve]

I do sometimes absolutely cringe at his tax or legal advice. He says some *really* stupid things, at times. I don't remember anything specific...

Numerous times I have heard him give advice that was wrong. I don't mean a difference of opinion but factually incorrect - just plain old wrong. It makes me wish I could pick up the phone and call and correct him, but since I'm listening to a recorded podcast that wouldn't do much good.

[shaggy]

I haven't listened to him in years, but IIRC he recommends using commissioned brokers for investments, and a high withdrawal rate after retirement.

[dczech09]

There are some technical things where his advice definitely does not work well. Obviously his 12% return is perhaps a little rosy, and his 8% investment withdraw rate is awfully high.

His strong point is helping people get out of debt.

Really the way that I look at it- Dave Ramsey is a motivational speaker, not so much a financial expert. While he does know his stuff, his material is mainly focused on motivating people to pay off debt, save for emergencies, build wealth, and give. He is a great at motivating people, although his technical advice may be a little off the pulse of reality.

I would not say that his advice is necessarily irresponsible. As he says quite often, he wants people to look in to things themselves and not do something just because he said it. He tells people not to invest a certain way (or at all) just because he said it; he wants people to form their own opinions.

[kalikala1980]

I love listening to his radio show. One thing that I disagree with is stop saving for retirement completely even when you get an employer match which is free money.

[LivingAlmostLarge]

Stopping employer match while getting out of debt.

Expecting everyone to have a big shovel but what happens if debt is big and shovel is tiny? That you can't sell much or throw more at problem?

Is $1k really enough for an emergency fund? What happens if your mortgage is way more than that and you lose a job? I wonder if larger fund is needed depending on how much you make?

Finally 15 year mortgages just isn't going to happen in some places. I wonder if he realizes how expensive some areas are? And if you aren't overbuying per se it's not a bad idea to get a 30 year fixed?

[disneysteve]

Finally 15 year mortgages just isn't going to happen in some places. I wonder if he realizes how expensive some areas are?

I'm quite sure he realizes that.

I think what many people don't realize is that not everyone is destined to be a homeowner. Not everyone can afford to be a homeowner. I know. It's the "American Dream" but it often turns into a nightmare when people are spending 40% or 50% or more of their income to get that home. Folks who do that really tie their hands financially speaking and make it very difficult to get ahead, save for retirement, college for the kids, etc.

Besides, if everyone in the country lived by the same guidelines, housing costs wouldn't have skyrocketed out of control because there wouldn't have been anyone willing to pay those prices.

[Bob B.]

DR recommends paying off debt least balance first, rather than greatest interest rate first.

That's not really "bad" advice. It's probably good advice for some people who have a great deal of CC debt on many cards, at least in the first stages of payoff. Seeing CC balances disappear more quickly can be motivating.

But, for people who are motivated by spending the least amount on total interest, pay off CC debt by greatest interest rate first.