How I Disagree with Dave Ramsey

Some days I love Dave Ramsey and others, well, not so much! I think Dave Ramsey has a great plan for most people, but, as with everything, it is not a good plan for everybody.

One of the things I tend to disagree with is never using credit. If you are good with credit then having a credit card will help you. Pay it off every month and you will get rewards (1-5% of what you spend) and the safety of not having to carry cash with you. A stolen credit card can be cancelled and the charges taken off (it will be a pain in your side, but it can be done); stolen cash is gone for good. That said, if you are bad with credit, even a little bit, then you should stay away!

Another Dave Ramsey disagreement I have is with how to pay down your bills. For many people the debt snowball is the way to go, but not always! The more financially sound method is highest interest rate first. If you do not need the mental boost of paying off an account and instead are a “big picture” kind of person who is looking at your entire debt being reduced then you will save more money by using the highest interest first method. Or, you could use debt consolidation so you are paying down one account instead of all the little ones. I used debt consolidation on my student loans and it saved me quite a bit in interest!

One other small gripe I have with Dave Ramsey is his ability to find people in financial pickles that have a larger than average income. It’s nice to hear about those folks who paid down 100K of debt in a year and a half, but it is simply not attainable by a family bringing in 25K a year.

I was listening to Dave Ramsey and a man was telling a story of how he was considering bankruptcy. Dave asked how much he owed and he told him $32,000 and he made $17,000 a year. I don’t know if Mr. Ramsey was having a bad day or what, but he laughed and said “a debt of only $32,000 was not worth claiming bankruptcy over”.

He told him to “just get another job” (the man worked 40 hours per week, but only made $17,000 a year). I felt bad for the crying man on the phone. He was being told his problems were not as bad as the previous caller, who was $200K in debt and made $150K a year. The feeling was “suck it up and deal with it you don’t owe that much”. If the man did manage to find another job (more than likely another minimum wage job) and used all of his post tax income towards his debt then it would take him two years and one month of working 80 hour weeks. Not to mention that living off of $17K a year is pretty tough. There are basic needs that need to be met and that is hard to do with $17K.

Being in debt is serious and it’s a difficult situation to be in. That is true if you are Donald Trump claiming millions in bankruptcy for the third time or if you are a a minimum wage worker who owes $17K. Being debt free is a wonderful goal and one you can attain! Just take it one day at a time and if you are overwhelmed please get help.

{ 19 comments… read them below or add one }

1 Olivia April 15, 2011 at 8:41 am

I agree with your first two points completely! I also feel that it is sometimes appropriate to start saving for retirement before paying off your debts. However, I strongly disagree with your feelings about the man with $32,000 of debt. I do not believe that that amount is worth filing bankruptcy and destroying your credit over. What happens when you want to buy a house someday??? First of all, the man should be ACTIVELY looking for a higher-paying job. It may take several months, but a grown, hardworking adult should be able to make at least $10-$15 an hour if they keep looking. Plus, a second job is not unreasonable. Say he finds a job making $10 an hour AND a 20-hour part-time job also making $10 an hour. Well, that puts him up to $31,000 a year. If he puts $5000 a year towards the debt, he will be paid off in just 6 years and a little. Plus, within that six years he may get a raise or find an even higher paying job. Sixty hours a week may not be fun, but it is definitely worth it to keep out of financial ruin. He is the one who racked up the debt, so he should be responsible enough to pay it off.


2 Heidi April 16, 2011 at 1:55 am

Agreed – I am not advocating bankruptcy for the man. I just don’t like DR’s condescending attitude toward him. And, although he may have done it to himself, 17K would be hard to live off of so I would have to see his personal situation to know what to say. Most minimum wage jobs do not have health care and one health prob could easily rack up 32K. Not that you shouldn’t pay your bills, but the bankruptcy law isn’t only for rich people like Dave Ramsey and Donald Trump! If the man was truly trying and was living frugally (and I have never heard a man cry like that on the phone – he knew he was in trouble) then maybe it was a good option for him.

You did forget interest in your scenario. If it was a health bill through a hospital then you can usually argue the interest as long as you are paying so he wouldn’t have to worry about it, but if it was a credit card then the $5000 extra would barely cover the interest of a 15% card (which would be a very low rate for a person who was in debt – cards tend to increase the rate very quickly once you get behind). After 6 years of paying $5000 he would still owe $30249 (at 15%). And, all of that is after he finds a new higher paid full-time job and a second higher paid part-time job and works 60 hour weeks continually for the 6 years.

It can be done, I just think that an overwhelmed person crying on the phone deserves a little more respect than DR gave him. I don’t think there is a one size fits all package for everybody.


3 Michelle Hall April 15, 2011 at 8:52 am

Great points! Those who understand that credit cards are not your ticket to a spending spree would miss out on valuable rewards if they used cash only! Keep a budget, stay within it, and you can use credit cards wisely.


4 Heidi April 16, 2011 at 2:01 am

We do not get much back from our cards, but the little we do is still worth it to me!


5 Loretta April 15, 2011 at 8:08 pm

That last bit is why I don’t like Dave Ramsey at all, the little guy is looked down upon and pretty much laughed at. I’m sorry, debt is debt and not everyone has a six figure income – in fact, most of the people that need help make less than 50,000 a year. Dave Ramsey needs a big fat dose of reality!


6 Heidi April 16, 2011 at 2:17 am

The funny thing is I love helping people who have lower/normal incomes. Those people need to learn how to live with what they have and especially they need to learn how to ENJOY LIFE with the income they have! I have a harder time feeling sorry for the ones who have a much higher than average income simply because I feel they don’t fully appreciate what they have. Not everybody who has a higher income is like that! The ones on the debt shows seem to tend to be though.


7 Alexis Of NorthOnHarper April 19, 2011 at 3:31 pm

I completely agree with you on the first 2 pts. But the first is a case by case situation.
I can use a credit card and pay it off at the end of each month. Some people can’t. They just lack the will power. And often that is the case when you are dealing with people who are living well beyond their means. In those cases mastering no credit card is probably a good place to start. Once good habits are developed you can introduce other elements (ie using a credit card & paying it off every month).


8 Heidi April 21, 2011 at 12:22 am

Absolutely! If you cannot use a credit card wisely (pay it off every month) then you need to stay away.


9 l April 20, 2011 at 2:31 am

I think you must not be listening to Dave on a regular basis, or missing a point or two. You have to keep in mind, his advice is for people who can’t figure this crap out on their own – and have obviously been irresponsible with money.
Point 1: He does say, If you are responsible with credit cards and pay them off every month, they can be a good thing, but the average American is not responsible.
Point 2: most debt consolidation firms cannot get as good a reduction in fees as you can get on your own. Why? most of these firms are owned by credit card companies. Did you know Capital One owns 7 consolidation firms? – as for the snowball, it’s a mathematical equation, while it doesn’t make sense to pay smallest to largest, in reality, when it comes to compound interest it is faster, because as you move up the snowball you are paying a larger chunk of principal than you would be saving on the smaller interest rates.
point 3: I feel for the guy, but I have one of those minim wage jobs making $14,000 a year and I was $30,000 in the hole. I took a second job, yes it sucks working two jobs – and at one point I worked three. But I paid mine down and now I’m working one full time and one part time job. As tough as it is and yes emotional strain, it can be done with tough love.
Do I agree with his – worse off than the previous caller? NO. That would be my big flaw with Dave. It should not be about the highest $ amount in debt. But I do agree, he shouldn’t ruin his future by filing bankruptcy on twice his annual pay.
If you really want to bash – savings, and debt reduction – listen to Susie Ormon for a couple weeks. Your stomach will twist in knots.


10 Heidi April 21, 2011 at 12:50 am

I have only ever heard him say to pay only in cash, but I guess I could be wrong – I’ve read his books, but do not listen to his program except on occasion. Debt consolidation is a case by case type of thing. The debt snowball is actually slower than highest interest rate first. It is not faster. Let’s say you owe $10000 at a 5% rate and $20000 at a 15% rate and you ave $1000 a month to pay toward your debts (including your minimum payments). Using debt snowball you will pay $38,000 to pay down that debt. The first card will be paid off at month 19 and the second at month 38. Using highest interest rate you will pay $36,000 to pay down that debt. The first card will be paid off at month 28 and the second at month 36.

I think some people need debt snowball and others would gladly wait an extra 9 months to pay off the first amount in order to save themselves $2000. It is also interesting to note that in the first situation they have to wait another 19 months before they pay off the second card, but in the second situation they pay it off in only 8. I’m not saying he is wrong – I am saying people deserve to be told their options and choose on their own 🙂

I’ve heard the “his advice is for people who can’t figure this crap out on their own” argument before and on the surface it sounds right. But, the people who come to him are trying to turn their financial situation around so giving them “dumbed down” financial advice, especially advice that could cost them even more money, is kinda doing them a disservice. I’m not saying jump right into percentages, retirement funds, and stocks like many of the financial advisors – I do like that he gives steps for people in trouble. I am saying that the pay down your debt step should include both methods of paying it down. Let them know that they will be spending more money to pay it down that way and that they will have to wait longer to get rid of the debt. Many may still choose to use the debt snowball method, but let them get to choose.

I still can’t comment on the guys situation. Everybody is different. He may have had health problems, he may have had a family member with health problems, he may have been trying to find a job for months, or he may have been the laziest person in the world (although judging from his sobbing I think he at least understood the gravity of his situation). Unless I knew details I just can’t “judge” him – and honestly, I wouldn’t judge him after I knew details, but I could at least give my honest opinion at that point.

I’ve read quite a bit of Suze Orman’s stuff too. She, like Dave Ramsey, has things I agree with and things I don’t. She likes to plan for the worst and has a habit of talking towards people who already have savings, but I think a lot of her advice is pretty sound. What advice of hers do you dislike the most? Maybe I should use her in my next post! 🙂


11 Kim aka April 30, 2011 at 9:52 am

Great article Heidi! I, too, agree and disagree with things Dave Ramsey says. I like to use credit cards that offer rewards, but one must be disciplined to pay them off every month.


12 Heidi May 1, 2011 at 2:26 am

Thanks for stopping by Kim 🙂 Credit cards can really be nice if you pay them off each month! It makes my live so much easier.


13 Brent August 16, 2011 at 11:26 pm

Interesting take on some of Dave’s stances. I am one of the financial counselors that gets referrals from Dave Ramsey, so I deal with these issues and real people as a reality every week. His system has worked for me as well as millions of others. I can assure you that not everyone who comes to me for financial coaching has 6 figures. Most people can’t handle credit and most people are in debt. In your freedom be careful to not cause others who are weaker to stumble.


14 Heidi August 17, 2011 at 2:50 am

I think financial counselors are a wonderful way for people to get personalized advice and so anybody who is going to one is already on the right track. Where I disagree with Dave is certainly not with the idea that you should go to a financial counselor. I feel everyone’s circumstance is different and deserves an individual look.


15 Lim November 3, 2011 at 6:28 am

Hello Heidi,

I am not a fan of Dave but i got an information that was gathered over the web.He look nice anyways.He is a American financial author,maybe a good one but he’s not perfect.



16 Migs from Mens Wedding Rings December 14, 2011 at 6:56 am

Dave has a great plan i guess,he maybe un perfect but he looks good anyways.


17 Heidi December 17, 2011 at 11:52 pm

It’s a great plan for most people. Nobody is perfect and that is the way it should be!


18 Nicole December 14, 2011 at 12:42 pm

The best solution is really to try to live within your means. If you have to share the place with somebody to help pay rent or live with your parents, if they’ll take you, then do it.


19 Heidi December 17, 2011 at 11:47 pm

I totally agree 🙂


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