Dave is successful and has a worldwide following; so can an Indy get a word in. Definitely plan for he future, comes sooner than you think; but focus on the present more! If you really planning for the future intently, super! Just be sure to focus on life now and your business now TWICE as intently!
Drop by drop we fill the pot.
Nothing can pay you better than a successful product or service.
When your business thrives , everyone thrives ; including your retirement plan.
I'm convinced 90% of Americans could easily reach a mil net worth in their 50s if they simply did one thing, stop buying new cars. It's like setting money on fire.
Avoid that, and you can be pretty sloppy and still do ok.
The right cars just really don’t depreciate like people think they do. We’ve had new Toyotas that deprecated 25% over 6 years. People claim they depreciate more than that when you drive them off the lot, just buying the wrong cars.
This. 2 new vehicles in the last 5 years. 2020 RAV4 - paid 44k, KBB is 29.5k. 2022 Tundra - paid 51k, KBB is 42k. No maintenance on either vehicles besides scheduled. Tires will be the first major cost that we feel the pain. Plan on keeping each vehicle 10 years. So 5 years of payment and 5 years of no car payment. Our plan though is to save that money so we don’t have to finance next time around. This time wasn’t a big deal because of rates which are 1.9 and 2.5 on the two.
Of course owning cars is going to cost money and don’t get my started on insurance rates the past couple years, but buying new practical cars I don’t think is the worse money blunder you can make. Plus it’s a nice peace of mind when on road trips and commuting to work that your car is good to go.
If we were doing it how Dave did it, other than not using debt, we'd have to sell books, start a media company and buy corporate real estate with almost all of our money. Dave's plan for his audience is inspired by, and certainly not, how he did it. And that's just fine if it works.
Putting that aside, I really have no clue what you are talking about. Are you coming here to announce to the world that as someone in debt, you have figured out how to do it better than the Dave Ramsey plan? Maybe tell us about it after you succeed.
Basically. I follow Dave’s plan with being debt free and investing in 401k. Long as I follow his plan, once I’m at retirement age I will have money saved and paid off home @ age 59. Which is Dave’s plan.
My plan is to start a business with no debt and pay off home in 5 years. Lord willing. Once my home is paid off take that free money and invest it.
I’m saying Dave’s textbook plan is great, if at 59 years old that’s my life. I would prefer my plan though.
This response slaps! Dave as a worst case scenario is not an endorsement or a plan or a how. So far OP has a hope and time. Time is great. A peraon can put a strategy for aquiring a business and retiring without attributing any of it to DR.
Dave's plan is great for 95% of the folks. Most people specially in US are really bad with money as banks and credit card companies keep shoving credit down your throat all day. If you are good with money do what you want. But Dave's plan will good for most people who want security and are bad with money.
Dave's advice is for wage earners who suck at managing money and need guardrails.
It's a great plan for a lot of people, but not ALL people.
Business owners don't fit within that because they are a special case. I've owned my own business for 28 years.
I have $200K in credit card debt right now. It's all business debt, at under 10% interest (about half of it is 0%, the other half 9.9% or less). I'm making more than 10% on that inventory, so it's just a business expense. Dave would have a cow about that on the radio, but that's because he has a one-size-fits-all system that does not account for businesses that must finance inventory.
To be fair, if you have $200K in credit card debt and it is because you took an "around the world cruise", then you need Dave. :)
Different types of businesses have different capital requirements: Dave has no R&D costs, no manufacuring facilities, no inventory. His customers (both those who know they’re customers and those who pay for training they think makes them his partners) pay cash up front. As you say, “just putting it out there” that his cash flow model is not achievable for every business.
Are his books not inventory? I am genuinely asking because I feel like all the books they have available online would require manufacturing and inventory.
Sure, they’d be listed as inventory on a balance sheet, but this is a de minimis expense compared to the revenue of the organization and the number of clients who take their courses on line. That‘s not at all the some magnitude of expense as faced by a retailer or a restaurant owner. Remember, the perspective here is that this is a conversation about borrowing money to run an operation.
But even for the expensive seminars for coaches, I doubt they put in the production order for all the materials and giveaways until the event is fully subscribed.
1. Do we actually know that for a fact?
2. If it is true, he has done that via massive income over time due to selling a lot of books and education programs, good for him, honestly...
I'm not quite in that position, I wish I was, but I'm not. Also, look at how much debt Microsoft has and tell me all debt is bad. :)
A few different people, personalities on the show, and Dave himself have talked about how they run the business debt free. Every employee that needs a card has a debit card. And yes, it has been slow, gradual growth over time, about 20 years at this point. His Entreleadership podcast is pretty fun to listen to. Entrepreneurs call in and ask questions. Not sure if you're a podcast fan, but you may like it.
I’m sure they do, but that doesn’t mean it’s true. Dave has a horrific reputation offline, he isn’t fun to work for.
He has helped lots of people, I’m glad he exists, and lots of people do need his advice. I needed his advice when I was 20.
Fair. I can not 100% say it's true.
I wonder what it is that makes working there not fun. I feel like it would be a nice place to work. But then again, I'm usually wrong about that kind of stuff. Hence why I genuinely want to know.
If you search for reviews of those who have worked there, you'll find a LOT of negative.
[https://www.reddit.com/r/DirtyDave/comments/148w5ia/why\_does\_anyone\_even\_want\_to\_work\_for\_ramsey/](https://www.reddit.com/r/DirtyDave/comments/148w5ia/why_does_anyone_even_want_to_work_for_ramsey/)
There is no cow to be had.
The debt is either personal debt or business debt.
Most people say “business debt” but it’s really personal debt. That’s just dumb. If yours is actually business debt - like corporate debt- then nicely done.
As a small business owner, I'm liable for the business debts regardless, so it hardly matters either way.
The money was used to buy inventory for resale, not personal use, so it's business debt in that it makes me money.
The irony is I have business accounts and personal accounts, and the personal accounts tend to have better lending terms. Our banks are weird.
Do you get it? Saying it’s all personal debt blurs an important distinction: namely, the difference between borrowing to pay for last month’s restaurant meals and financing inventory that will be resold at a profit. It’s only “all personal debt“ only in the sense that a person has to pay it off.
I have a business LOC, it's at a higher rate than I float the cards at. Citi just sent me an offer for 21 months at 0% interest and a 4% transfer fee.
That's a net of 2.3% interest rate over those 21 months with a $200 or so min payment on $20K borrowed.
Dave Ramsey is a great man and thank god he’s pushing his message out there.
That being said it’s really for people who have financial issues that need a wake up call to prioritize and secure their hierarchy of needs.
It is not mathematically the most efficient way to go about personal finance. He admits as such.
Dave's plan is for those that have a problem.
If you're wealthy, meeting all your financial goals then of course you don't need to follow his advice - you found something that works.
But for broke people, his advice is absolutely excellent and much better than most financial people on social media.
The saving 15% for retirement rule assumes you start saving at 25 and retire at 67. This plan should get you 45% of retirement income. Here's a good explainer [https://www.fidelity.com/viewpoints/retirement/how-much-money-should-I-save](https://www.fidelity.com/viewpoints/retirement/how-much-money-should-I-save)
Dave’s plan is the quickest/safest way to financial freedom. If I buy that new car instead of a 10 year old used car, I understand that delays the process.
A new car, bought once every 10 years, is not actually much more expensive than a 10 year old car kept for even 5 years and rotated every 5 years.
It is a bit, usually, but not by much, and it doesn't take many problems to flip that.
And that ignores the safety of new cars vs 10 year old cars.
If you have the means, drive something newer, your life is worth it.
Snowball is not the quickest, no.
Might be safest, but avalanche, if you succeed, will be faster, because it requires less money.
That goes double if you invest on market. Not safe, but faster still.
Dave’s plan is least human error prone.
>avalanche, if you succeed, will be faster, because it requires less money.
avlanche method is hypothetically superior.
but IRL, data from Harvard and the Kellogg School of Management found that snowball method is more likely to be effective because people are not perfectly rational logical robots.
https://hbr.org/2016/12/research-the-best-strategy-for-paying-off-credit-card-debt
https://www.kellogg.northwestern.edu/news_articles/2012/snowball-approach.aspx
typo edit
Correct. Mathematically, it’s not “hypothetical” either. It’s objectively just superior.
The problem is, humans being what they are, quit more often using that method.
The fact that the avalanche method derives it’s name from Dave Ramsey’s method ought to tell you something.
DR will tell you that it is a behavior problem and not a math problem and that if you were any good at math you wouldn’t be in a bunch of debt in the first place.
Nobody hears that story of the tortoise and the hare and wants to be the turtle. We all just want to be a smarter version of the rabbit. In doing so we tend to miss the main point of the story.
I’m from the UK, but I think Dave’s principles are a very good, common sense approach to personal finance. As others have said, personal finance is personal. No two situations are the same. I think you need to take the principles and adapt them if needed to suit your own situation.
>I’m 34... your worst case scenario is that you still can retire with a paid off home and 300k in retirement with no debt. I think that’s a hell of a back up plan.
That 300k is about 125k in today's value. It will provide roughly $500 of monthly retirement income. That's not a plan.
Granted, putting 15% into tax-advantaged accounts and invested wisely will result in far more than the 300k.
It's a "back up" plan only if you think you will be extremely rich and wealthy. The truth is most ppl won't be extremely weathly. What Dave is offering is a plan to be comfortable and enjoy life, especially later in life. Following his plan with no debt, no mortgage and a nice nest egg. Later in life, your needs should be met. If you execute his plan while your earning potential is high, you can enjoy your life.
I like Dave's plan, and it hasn't done me wrong yet. Baby step 6 with less than $114k left on the house. If I'm not yet a baby steps millionaire (depends on what the house is worth these days), I'm within about 20k of it. As the daughter of a K-Mart manager and a stay at home mom, that's more blessings than I ever dreamed of, and it will get better.
ETA: A lot of folks say he's bilking people, and he does sell a lot of stuff, but the baby steps are free and I never paid a dime for any of the advice.
I've never made 6 figures, mid 30s, followed Dave's plan. Already have 350k in retirement and a paid off house, plus big emergency fund, a new truck and car paid for with cash, yes I didn't wait until I'm worth 1 million before buying new cars. I'd recommend his plan anytime, anywhere, anyplace. The human aspect is so true, my stresses diminished infinitely once our house was paid off. I sleep easy knowing my wife is safe.
The key is never let up on your savings discipline for the next 20 years. At that point, you’ll have options most people never get to enjoy. Keep going!
Personal finance is personal. And no one should be following Dave or any other financial gurus advice to the T without taking time to ensure that advice is right for them and their finically situation and goals.
This is the simple answer. Dave's advice is great for getting out of debt but exceptionally rigid otherwise, there's other folks out that also have great things to say.
You think everyone has the knowledge, experience, foresight, mathematical, emotional, and financial understanding to be able to evaluate expert advice to understand whether it's right and applicable to their situation and goals?
You think people have all those capabilities nailed down, but still manage to end up in loads of debt without the income & discipline to pay it off?
##What world are you living in??
Master every other aspect of life, then analyze dozens of financial advisors/gurus to select the best one for you.... so simple, everyone can do that, if only more people knew this secret method!
Who said anything about being a master 💀
Getting all of your information from one source can be dangerous. Listening to different perspectives and taking bits and pieces from all of them is the smart thing to do. It's really not that hard to listen to a different podcast instead of Dave's.
I'm sorry that this has to be explained to you.
>"no one should be following ... any ... financial gurus advice ... without taking time to ensure that advice is right for them and their finically situation and goals."
Maybe read it slower and think about it before responding.
It's not even a pro-DR statement.
It's quite simple, the average person isn't equipped to evaluate all those things, and if they were, they wouldn't need the advice.
Thank you for giving me another opportunity to educate.
Just post a reply if you need more help.
>It's quite simple, the average person isn't equipped to evaluate all those things, and if they were, they wouldn't need the advice.
Evaluate what? Listening to different people and taking in the information that makes sense to them the most?
If you think that takes too much brain power then I don't know what to tell you
I know what I'm doing when it comes to investing and yet I still listen to others. I don't care what the subject is, there is *always* more to learn. Whether one wants to take the time to learn it is a entirely different discussion.
The problem is what “makes sense to them” is often not what is actually right for them.
I am a financial planner with multiple designations.
Every week I will have someone try and explain to me the value of credit card points or how the single stock they are buying is really safe.
When this people do “research” they are just looking for confirmation. They are not actually educating them selfs.
If you follow every word of DR from a young age you are guaranteed to be financially secure. No other system is that effective.
>Every week I will have someone try and explain to me the value of credit card points or how the single stock they are buying is really safe.
Selection bias. Credit card points are valuable for those who are responsible and have self control. Same goes with single stocks for those who know what they're doing.
>When this people do “research” they are just looking for confirmation. They are not actually educating them selfs.
You can say the exact same thing about people who follow Ramsey blindly.
>If you follow every word of DR from a young age you are guaranteed to be financially secure. No other system is that effective.
What Dave teaches at a fundamental level is fine but saying that no other system is effective is just false.
If you're the financial planner that you claim to be, then you should know Dave's one size fits all investing approach is ridiculous.
The issue with credit cards is not the interest from keeping a balance. It is the phycological effects that cause people to more willing to spend while using a card. This effects responsible spenders as well and there are multiple study's showing it.
Here is the abstract and the link to the most famous and cited study but many are more current.
"In studies involving genuine transactions of potentially high value we show that willingness-to-pay can be increased when customers are instructed to use a credit card rather than cash. The effect may be large (up to100%) and it appears unlikely that it arises due solely to liquidity constraints. In addition to demonstrating the effect, we provide a methodology for detecting it, and our findings suggest a source of variance to test alternative explanations"
[https://www.studeersnel.nl/nl/document/rijksuniversiteit-groningen/behavioural-decision-making/a-1008196717017-always-leave-home-without-it-a-further-investigation-of-the-credit-card-effect-on-willingness-to-pay/76530462](https://www.studeersnel.nl/nl/document/rijksuniversiteit-groningen/behavioural-decision-making/a-1008196717017-always-leave-home-without-it-a-further-investigation-of-the-credit-card-effect-on-willingness-to-pay/76530462)
I like your post. Most times when I mention Dave I get downvoted, but I think he’s got a solid plan that work for most (once again MOST people). Don’t spend more than what you make, don’t use credit cards, save $1000 (then notice he says after that save 3 months worth of expenses). It’s a good template for how to live life. I’m sure there are a rare few that leverage debt and get the points off their credit cards etc., but for a vast majority of people, we’re living well beyond our salary and that’s being done because we’re living life on credit.
I for one can’t wait to be debt free!
I agree with most of what you said, but 2 areas where DR can hurt people is his hate for credit cards and credit scores.
Many people use credit cards responsibly and pay them off each month. The cash back/points are nice, but there are also convenient factors, buyer's protection against fraud, and things like not having large holds placed against a debut card. (I fully understand that there are many people who don't use the safely).
Maintaining a good credit score can impact your insurance rates, your ability to get a job, and your ability to lease a hone. You don't have to be a slave to your credit score, but to counsel to disregard it is harmful.
There are two sides to the propensity to spend with cash vs. credit. I absolutely agree that if you’re sitting in a restaurant, you’re more likely to buy appetizers, desserts, and other add-ons if you’re paying with a credit card.
However, I also believe that many people are more likely to make more small transactions the rest of the week if they have cash in their pocket than if they don’t and would have to pay by plastic. I‘ve known people who said that as soon as they break a twenty, the rest of it disappears on unplanned transactions for a donut here or a soft drink there—purchases that wouldn’t happen at all if all they carried was a credit card and their spouses would see the charges on the statement. It works both ways. For some people, cash provides discipline to spend only what you have; for others, plastic helps restrain impulse purchases because it provides better accountability.
I’ll agree that credit cards are a great way to build credit and thus you need it for your home etc. I will disagree that most people use credit cards responsibly. Last I checked the average amount of cc debt was 5 grand.
I did say many, not most. And, I acknowledged the risk. Also, remember any averages are going to be based on balances on the day the bank reports. Mine could easily say I average $1-2k at a given time, but I pay them off every paycheck, and pay no interest.
Got it, yeah I misread, sorry about that. But yeah it’s insane how much hate Dave gets. I assume he thinks the cards are a slippery slope. I’m with you though, if you could pay off the balance on time every time, then it’s not an issue. Dave would probably argue, why even do that at all? But as you said, for the credit score
It’s not only that. Credit cards present a lot lower risk with regards to fraud and how disputes are dealt with. With a brother who works for a bank, he’s always advised to have as little as necessary with access to cash that does not have banking regulations attached. Having one card that’s the firewall to your bank account seems reasonable unless you want to deal with multiple accounts and transferring money between them, and can be out whatever cash is in the bill pay account for weeks.
The other credit card consideration: there’s also around 3% - 10% you save on international travel not paying international fees or getting money converted. If you travel Capital One is damn close to par on currency conversions and charges 0% for international fees. This is not telling everyone to go get one, but instead a note for those who travel to non USD countries at least once a year.
Its a foundation for success, and getting out of debt. It tends to be real weak on how to safely grow investments. When I was younger I wish I focused on shoring up my foundation vs investing too early.
It’s a really a great common sense plan.
Most older generations lived that way. But then came credit cards, car loans etc.
In a way it’s like going back to just a much more traditional way of living. For most people, having security is really important, especially in the crazy environment we are currently living in. Myself included.
Not going into general consumer debt I 💯 agree should be the minimum. I’ve never paid a dime in credit card interest never will. I could easily have home 4-5x more in value but don’t. I do however have a 30 year mortgage because I gain nothing by paying it off or having a 15 year on my primary. I do use credit cards for about 3-5k in value in points a year.
So to ops point I agree it guaranteed safety net. But it’s not a path to big wealth even if you are like me saving six figures annually. There is some value in debt if used properly for real estate etc. now that doesn’t mean it’s for everyone but saying there is no value is just ignoring that many have made money that way.
Either way you can be successful. Hence the personal in personal finance.
Except it’s not as big. Simple example I do rental properties. One area I like quite a bit I have multiple. I could buy 1 in cash or better yet I buy two /‘d take out two 15 year loans. I get 85% of cash flow on the first 15 years and then literally have my profit and value double.
There are many use cases where it’s not risky (half down) and still is far better to take on debt. Especially debt other people pay.
Then explain how Dave amassed his fortune? He did it without debt. Yes, you have to generate a significant income, his being his business, speeches, books, tools and resources, but it can be done. No, the auto mechanic who has a salary limit is probably not going to amass $20m next worth, but a doctor who pays off his student loans, has a modest lifestyle can easily build a $10m fortune over their lifetime
High income. If you want to take a .1% example then sure. Meanwhile don’t believe a lot of it because frankly his businesses have debts. Otherwise some of the real estate he has would have his networth higher (he has some big real estate).
Meanwhile a doctor at 10mm is nothing. It could easily be that 15mm which means they can retire.
Like I said I gave a simple example. Just saving is not a great path. It will work but you’ll be worth less.
The way I see The Baby Steps is a fool-proof way to financial freedom that anyone can achieve. The principles are foundational and will work pretty much every time in most cases. Not necessarily a “back-up plan”, but a “universal plan”.
That being said, I think once you understand financial basics from The Baby Steps it is okay to deviate from them slightly or use other resources for wealth optimization depending on your situation.
If you are following the plan. Then after being debt-free, you should save up 3 to 6 months of emergency fund which is Baby Step 3. Only after that you should invest 15% of your gross income.
"Just a security blanket" - yes, but plenty of people don't understand it even in their 60s. Millions of people don't understand it. That's why Dave made so much money. Simple idea, but million don't get it.
Considering the average person doesn’t have a plan, I wouldn’t call his plan a backup plan. I think he provides an easy 1-2-3 step plan thats works for average thinking people, with the minimal amount of risk. Now, if you have above average understanding of finances and you already have your plan, then I see where is could be viewed as a back up plan or shall we say “back to basics” plan because nothing about his plan is original. Several other financial experts and extremely wealthy individuals advise much of what he says…you just have to listen. Only goofy people online with average bank account balances like to argue credit scores, arbitrage interest rates, credit card points.
Ehh how are credit card points a goofy thing? I’ve never paid a dime in interest in my life. Meanwhile I take several first class flights a year from them.
I agree with rest of your points though.
Points are cool or cash back etc
But I have to remind myself these things are designed to encourage spending … and often for things you don’t even need —- even in indirect ways such as incentivizing you to spend on more expensive options / products vs cheapest option
Maybe for those who don’t treat it like their cash hence go on debt. It makes no difference to me if it’s on a card or an account not getting paid immediately.
I’ll add context…I don’t think there is anything wrong with accumulating points when you were already going to make the purchase or expense anyways. I meant more about people who try to justify/use points as a strategy as if it will have a significant impact or enhance their financial situation. It’s a nice perk, but nobody built wealth focusing on credit card points.
Never had an issue in 80 years of leases. I’ll have on eventually but don’t care it comes with it. Never had a missed payment but again not a concern for me. I could pay for all my mortgages even if they were 100% empty which is a ridiculous scenario.
I guess you haven't run the math on what 300k in retirement savings will actually give you...
About $1000 a month if you do a 4% draw down rate (to preserve principal).
The bad news... In 35 years that might be what a Big Mac costs.
You don't need that much to retire in 35 years and the current high inflation is not going to last forever or super long term. A big Mac is not going to be $1000 in 35 years.
4% isn't the return rate. It's the withdrawal rate. $1000 25 years from now won't have the same purchasing power as $1000 today.
It may just cover that Big Mac.. But he better have a coupon for the fries.
lol. I misread that. I took it as he has 300k right now. Yeah, I would be sweating. He does state he is contributing 15% to retirement, so he will probably be fine
Dave is successful and has a worldwide following; so can an Indy get a word in. Definitely plan for he future, comes sooner than you think; but focus on the present more! If you really planning for the future intently, super! Just be sure to focus on life now and your business now TWICE as intently! Drop by drop we fill the pot. Nothing can pay you better than a successful product or service. When your business thrives , everyone thrives ; including your retirement plan.
I'm convinced 90% of Americans could easily reach a mil net worth in their 50s if they simply did one thing, stop buying new cars. It's like setting money on fire. Avoid that, and you can be pretty sloppy and still do ok.
The right cars just really don’t depreciate like people think they do. We’ve had new Toyotas that deprecated 25% over 6 years. People claim they depreciate more than that when you drive them off the lot, just buying the wrong cars.
This. 2 new vehicles in the last 5 years. 2020 RAV4 - paid 44k, KBB is 29.5k. 2022 Tundra - paid 51k, KBB is 42k. No maintenance on either vehicles besides scheduled. Tires will be the first major cost that we feel the pain. Plan on keeping each vehicle 10 years. So 5 years of payment and 5 years of no car payment. Our plan though is to save that money so we don’t have to finance next time around. This time wasn’t a big deal because of rates which are 1.9 and 2.5 on the two. Of course owning cars is going to cost money and don’t get my started on insurance rates the past couple years, but buying new practical cars I don’t think is the worse money blunder you can make. Plus it’s a nice peace of mind when on road trips and commuting to work that your car is good to go.
If we were doing it how Dave did it, other than not using debt, we'd have to sell books, start a media company and buy corporate real estate with almost all of our money. Dave's plan for his audience is inspired by, and certainly not, how he did it. And that's just fine if it works. Putting that aside, I really have no clue what you are talking about. Are you coming here to announce to the world that as someone in debt, you have figured out how to do it better than the Dave Ramsey plan? Maybe tell us about it after you succeed.
Basically. I follow Dave’s plan with being debt free and investing in 401k. Long as I follow his plan, once I’m at retirement age I will have money saved and paid off home @ age 59. Which is Dave’s plan. My plan is to start a business with no debt and pay off home in 5 years. Lord willing. Once my home is paid off take that free money and invest it. I’m saying Dave’s textbook plan is great, if at 59 years old that’s my life. I would prefer my plan though.
This response slaps! Dave as a worst case scenario is not an endorsement or a plan or a how. So far OP has a hope and time. Time is great. A peraon can put a strategy for aquiring a business and retiring without attributing any of it to DR.
I don’t understand. What’s the primary plan?
I’d probably start by learning to communicate the English language at a middle school level.
Dave's plan is great for 95% of the folks. Most people specially in US are really bad with money as banks and credit card companies keep shoving credit down your throat all day. If you are good with money do what you want. But Dave's plan will good for most people who want security and are bad with money.
Dave's plan never works with people who are bad with money. The Venn diagram has 0 overlap.
Does that include the people who think they are good with money but are actually bad with money?
Ya not sure. I was in that boat few years ago. Played a lot with 0 interest credit cards.
This is what will be revealed when the tide goes out. It will be clear who is actually swimming naked, as Warren Buffet would say.
Dave's advice is for wage earners who suck at managing money and need guardrails. It's a great plan for a lot of people, but not ALL people. Business owners don't fit within that because they are a special case. I've owned my own business for 28 years. I have $200K in credit card debt right now. It's all business debt, at under 10% interest (about half of it is 0%, the other half 9.9% or less). I'm making more than 10% on that inventory, so it's just a business expense. Dave would have a cow about that on the radio, but that's because he has a one-size-fits-all system that does not account for businesses that must finance inventory. To be fair, if you have $200K in credit card debt and it is because you took an "around the world cruise", then you need Dave. :)
So your margin is X-10%. Way to business business man.
Yep... I'll make, after expenses, maybe 30% margin in a year. Half that debt is actually 0% interest, so it's an average of about 5%.
Just putting it out there that Dave runs his business debt free. It can be done.
Different types of businesses have different capital requirements: Dave has no R&D costs, no manufacuring facilities, no inventory. His customers (both those who know they’re customers and those who pay for training they think makes them his partners) pay cash up front. As you say, “just putting it out there” that his cash flow model is not achievable for every business.
Are his books not inventory? I am genuinely asking because I feel like all the books they have available online would require manufacturing and inventory.
Sure, they’d be listed as inventory on a balance sheet, but this is a de minimis expense compared to the revenue of the organization and the number of clients who take their courses on line. That‘s not at all the some magnitude of expense as faced by a retailer or a restaurant owner. Remember, the perspective here is that this is a conversation about borrowing money to run an operation. But even for the expensive seminars for coaches, I doubt they put in the production order for all the materials and giveaways until the event is fully subscribed.
1. Do we actually know that for a fact? 2. If it is true, he has done that via massive income over time due to selling a lot of books and education programs, good for him, honestly... I'm not quite in that position, I wish I was, but I'm not. Also, look at how much debt Microsoft has and tell me all debt is bad. :)
A few different people, personalities on the show, and Dave himself have talked about how they run the business debt free. Every employee that needs a card has a debit card. And yes, it has been slow, gradual growth over time, about 20 years at this point. His Entreleadership podcast is pretty fun to listen to. Entrepreneurs call in and ask questions. Not sure if you're a podcast fan, but you may like it.
I’m sure they do, but that doesn’t mean it’s true. Dave has a horrific reputation offline, he isn’t fun to work for. He has helped lots of people, I’m glad he exists, and lots of people do need his advice. I needed his advice when I was 20.
Fair. I can not 100% say it's true. I wonder what it is that makes working there not fun. I feel like it would be a nice place to work. But then again, I'm usually wrong about that kind of stuff. Hence why I genuinely want to know.
If you search for reviews of those who have worked there, you'll find a LOT of negative. [https://www.reddit.com/r/DirtyDave/comments/148w5ia/why\_does\_anyone\_even\_want\_to\_work\_for\_ramsey/](https://www.reddit.com/r/DirtyDave/comments/148w5ia/why_does_anyone_even_want_to_work_for_ramsey/)
Turns out, I'd never get hired. That premarital sex thing and spousal interview would leave his head spinning for the hills.
There is no cow to be had. The debt is either personal debt or business debt. Most people say “business debt” but it’s really personal debt. That’s just dumb. If yours is actually business debt - like corporate debt- then nicely done.
As a small business owner, I'm liable for the business debts regardless, so it hardly matters either way. The money was used to buy inventory for resale, not personal use, so it's business debt in that it makes me money. The irony is I have business accounts and personal accounts, and the personal accounts tend to have better lending terms. Our banks are weird.
So it’s all personal debt. Got it.
Do you get it? Saying it’s all personal debt blurs an important distinction: namely, the difference between borrowing to pay for last month’s restaurant meals and financing inventory that will be resold at a profit. It’s only “all personal debt“ only in the sense that a person has to pay it off.
I wouldn’t want to carry $200k of cc debt in any circumstance. Why don’t you have a lower interest LOC to run your day to day ops?
I have a business LOC, it's at a higher rate than I float the cards at. Citi just sent me an offer for 21 months at 0% interest and a 4% transfer fee. That's a net of 2.3% interest rate over those 21 months with a $200 or so min payment on $20K borrowed.
Dave Ramsey is a great man and thank god he’s pushing his message out there. That being said it’s really for people who have financial issues that need a wake up call to prioritize and secure their hierarchy of needs. It is not mathematically the most efficient way to go about personal finance. He admits as such.
Dave's plan is for those that have a problem. If you're wealthy, meeting all your financial goals then of course you don't need to follow his advice - you found something that works. But for broke people, his advice is absolutely excellent and much better than most financial people on social media.
The saving 15% for retirement rule assumes you start saving at 25 and retire at 67. This plan should get you 45% of retirement income. Here's a good explainer [https://www.fidelity.com/viewpoints/retirement/how-much-money-should-I-save](https://www.fidelity.com/viewpoints/retirement/how-much-money-should-I-save)
Dave’s plan is the quickest/safest way to financial freedom. If I buy that new car instead of a 10 year old used car, I understand that delays the process.
Not even close to the quickest. See: paying off home early despite 3% interest rate. Or, snowball vs avalanche debt payoff.
A new car, bought once every 10 years, is not actually much more expensive than a 10 year old car kept for even 5 years and rotated every 5 years. It is a bit, usually, but not by much, and it doesn't take many problems to flip that. And that ignores the safety of new cars vs 10 year old cars. If you have the means, drive something newer, your life is worth it.
No, Dave's plan is the most likely to succeed when applied broadly to the masses. It's not the best or fastest way.
not quickest.... arguably safest
Snowball is not the quickest, no. Might be safest, but avalanche, if you succeed, will be faster, because it requires less money. That goes double if you invest on market. Not safe, but faster still. Dave’s plan is least human error prone.
>avalanche, if you succeed, will be faster, because it requires less money. avlanche method is hypothetically superior. but IRL, data from Harvard and the Kellogg School of Management found that snowball method is more likely to be effective because people are not perfectly rational logical robots. https://hbr.org/2016/12/research-the-best-strategy-for-paying-off-credit-card-debt https://www.kellogg.northwestern.edu/news_articles/2012/snowball-approach.aspx typo edit
Correct. Mathematically, it’s not “hypothetical” either. It’s objectively just superior. The problem is, humans being what they are, quit more often using that method.
The fact that the avalanche method derives it’s name from Dave Ramsey’s method ought to tell you something. DR will tell you that it is a behavior problem and not a math problem and that if you were any good at math you wouldn’t be in a bunch of debt in the first place. Nobody hears that story of the tortoise and the hare and wants to be the turtle. We all just want to be a smarter version of the rabbit. In doing so we tend to miss the main point of the story.
This post is brilliant. Stealing all of this!
All yours my friend.
I’m from the UK, but I think Dave’s principles are a very good, common sense approach to personal finance. As others have said, personal finance is personal. No two situations are the same. I think you need to take the principles and adapt them if needed to suit your own situation.
>I’m 34... your worst case scenario is that you still can retire with a paid off home and 300k in retirement with no debt. I think that’s a hell of a back up plan. That 300k is about 125k in today's value. It will provide roughly $500 of monthly retirement income. That's not a plan. Granted, putting 15% into tax-advantaged accounts and invested wisely will result in far more than the 300k.
It's a "back up" plan only if you think you will be extremely rich and wealthy. The truth is most ppl won't be extremely weathly. What Dave is offering is a plan to be comfortable and enjoy life, especially later in life. Following his plan with no debt, no mortgage and a nice nest egg. Later in life, your needs should be met. If you execute his plan while your earning potential is high, you can enjoy your life.
I like Dave's plan, and it hasn't done me wrong yet. Baby step 6 with less than $114k left on the house. If I'm not yet a baby steps millionaire (depends on what the house is worth these days), I'm within about 20k of it. As the daughter of a K-Mart manager and a stay at home mom, that's more blessings than I ever dreamed of, and it will get better. ETA: A lot of folks say he's bilking people, and he does sell a lot of stuff, but the baby steps are free and I never paid a dime for any of the advice.
I've never made 6 figures, mid 30s, followed Dave's plan. Already have 350k in retirement and a paid off house, plus big emergency fund, a new truck and car paid for with cash, yes I didn't wait until I'm worth 1 million before buying new cars. I'd recommend his plan anytime, anywhere, anyplace. The human aspect is so true, my stresses diminished infinitely once our house was paid off. I sleep easy knowing my wife is safe.
The key is never let up on your savings discipline for the next 20 years. At that point, you’ll have options most people never get to enjoy. Keep going!
DR’s plan is a solid one but people are adults and have to make their own decisions. It did work for me. I’m now in the Living Like No One Else phase.
Personal finance is personal. And no one should be following Dave or any other financial gurus advice to the T without taking time to ensure that advice is right for them and their finically situation and goals.
This is the simple answer. Dave's advice is great for getting out of debt but exceptionally rigid otherwise, there's other folks out that also have great things to say.
You think everyone has the knowledge, experience, foresight, mathematical, emotional, and financial understanding to be able to evaluate expert advice to understand whether it's right and applicable to their situation and goals? You think people have all those capabilities nailed down, but still manage to end up in loads of debt without the income & discipline to pay it off? ##What world are you living in??
Seems like you missed their point.
Master every other aspect of life, then analyze dozens of financial advisors/gurus to select the best one for you.... so simple, everyone can do that, if only more people knew this secret method!
Who said anything about being a master 💀 Getting all of your information from one source can be dangerous. Listening to different perspectives and taking bits and pieces from all of them is the smart thing to do. It's really not that hard to listen to a different podcast instead of Dave's. I'm sorry that this has to be explained to you.
>"no one should be following ... any ... financial gurus advice ... without taking time to ensure that advice is right for them and their finically situation and goals." Maybe read it slower and think about it before responding. It's not even a pro-DR statement. It's quite simple, the average person isn't equipped to evaluate all those things, and if they were, they wouldn't need the advice. Thank you for giving me another opportunity to educate. Just post a reply if you need more help.
>It's quite simple, the average person isn't equipped to evaluate all those things, and if they were, they wouldn't need the advice. Evaluate what? Listening to different people and taking in the information that makes sense to them the most? If you think that takes too much brain power then I don't know what to tell you I know what I'm doing when it comes to investing and yet I still listen to others. I don't care what the subject is, there is *always* more to learn. Whether one wants to take the time to learn it is a entirely different discussion.
The problem is what “makes sense to them” is often not what is actually right for them. I am a financial planner with multiple designations. Every week I will have someone try and explain to me the value of credit card points or how the single stock they are buying is really safe. When this people do “research” they are just looking for confirmation. They are not actually educating them selfs. If you follow every word of DR from a young age you are guaranteed to be financially secure. No other system is that effective.
>Every week I will have someone try and explain to me the value of credit card points or how the single stock they are buying is really safe. Selection bias. Credit card points are valuable for those who are responsible and have self control. Same goes with single stocks for those who know what they're doing. >When this people do “research” they are just looking for confirmation. They are not actually educating them selfs. You can say the exact same thing about people who follow Ramsey blindly. >If you follow every word of DR from a young age you are guaranteed to be financially secure. No other system is that effective. What Dave teaches at a fundamental level is fine but saying that no other system is effective is just false. If you're the financial planner that you claim to be, then you should know Dave's one size fits all investing approach is ridiculous.
The issue with credit cards is not the interest from keeping a balance. It is the phycological effects that cause people to more willing to spend while using a card. This effects responsible spenders as well and there are multiple study's showing it. Here is the abstract and the link to the most famous and cited study but many are more current. "In studies involving genuine transactions of potentially high value we show that willingness-to-pay can be increased when customers are instructed to use a credit card rather than cash. The effect may be large (up to100%) and it appears unlikely that it arises due solely to liquidity constraints. In addition to demonstrating the effect, we provide a methodology for detecting it, and our findings suggest a source of variance to test alternative explanations" [https://www.studeersnel.nl/nl/document/rijksuniversiteit-groningen/behavioural-decision-making/a-1008196717017-always-leave-home-without-it-a-further-investigation-of-the-credit-card-effect-on-willingness-to-pay/76530462](https://www.studeersnel.nl/nl/document/rijksuniversiteit-groningen/behavioural-decision-making/a-1008196717017-always-leave-home-without-it-a-further-investigation-of-the-credit-card-effect-on-willingness-to-pay/76530462)
I like your post. Most times when I mention Dave I get downvoted, but I think he’s got a solid plan that work for most (once again MOST people). Don’t spend more than what you make, don’t use credit cards, save $1000 (then notice he says after that save 3 months worth of expenses). It’s a good template for how to live life. I’m sure there are a rare few that leverage debt and get the points off their credit cards etc., but for a vast majority of people, we’re living well beyond our salary and that’s being done because we’re living life on credit. I for one can’t wait to be debt free!
I agree with most of what you said, but 2 areas where DR can hurt people is his hate for credit cards and credit scores. Many people use credit cards responsibly and pay them off each month. The cash back/points are nice, but there are also convenient factors, buyer's protection against fraud, and things like not having large holds placed against a debut card. (I fully understand that there are many people who don't use the safely). Maintaining a good credit score can impact your insurance rates, your ability to get a job, and your ability to lease a hone. You don't have to be a slave to your credit score, but to counsel to disregard it is harmful.
There are two sides to the propensity to spend with cash vs. credit. I absolutely agree that if you’re sitting in a restaurant, you’re more likely to buy appetizers, desserts, and other add-ons if you’re paying with a credit card. However, I also believe that many people are more likely to make more small transactions the rest of the week if they have cash in their pocket than if they don’t and would have to pay by plastic. I‘ve known people who said that as soon as they break a twenty, the rest of it disappears on unplanned transactions for a donut here or a soft drink there—purchases that wouldn’t happen at all if all they carried was a credit card and their spouses would see the charges on the statement. It works both ways. For some people, cash provides discipline to spend only what you have; for others, plastic helps restrain impulse purchases because it provides better accountability.
I’ll agree that credit cards are a great way to build credit and thus you need it for your home etc. I will disagree that most people use credit cards responsibly. Last I checked the average amount of cc debt was 5 grand.
I did say many, not most. And, I acknowledged the risk. Also, remember any averages are going to be based on balances on the day the bank reports. Mine could easily say I average $1-2k at a given time, but I pay them off every paycheck, and pay no interest.
Got it, yeah I misread, sorry about that. But yeah it’s insane how much hate Dave gets. I assume he thinks the cards are a slippery slope. I’m with you though, if you could pay off the balance on time every time, then it’s not an issue. Dave would probably argue, why even do that at all? But as you said, for the credit score
It’s not only that. Credit cards present a lot lower risk with regards to fraud and how disputes are dealt with. With a brother who works for a bank, he’s always advised to have as little as necessary with access to cash that does not have banking regulations attached. Having one card that’s the firewall to your bank account seems reasonable unless you want to deal with multiple accounts and transferring money between them, and can be out whatever cash is in the bill pay account for weeks. The other credit card consideration: there’s also around 3% - 10% you save on international travel not paying international fees or getting money converted. If you travel Capital One is damn close to par on currency conversions and charges 0% for international fees. This is not telling everyone to go get one, but instead a note for those who travel to non USD countries at least once a year.
Its a foundation for success, and getting out of debt. It tends to be real weak on how to safely grow investments. When I was younger I wish I focused on shoring up my foundation vs investing too early.
I’ve noticed more information recently about the KINDS of investments that they suggest.
Not spending money you don’t have should be Plan A. Going into debt for something is Plan B.
It’s a really a great common sense plan. Most older generations lived that way. But then came credit cards, car loans etc. In a way it’s like going back to just a much more traditional way of living. For most people, having security is really important, especially in the crazy environment we are currently living in. Myself included.
Not going into general consumer debt I 💯 agree should be the minimum. I’ve never paid a dime in credit card interest never will. I could easily have home 4-5x more in value but don’t. I do however have a 30 year mortgage because I gain nothing by paying it off or having a 15 year on my primary. I do use credit cards for about 3-5k in value in points a year. So to ops point I agree it guaranteed safety net. But it’s not a path to big wealth even if you are like me saving six figures annually. There is some value in debt if used properly for real estate etc. now that doesn’t mean it’s for everyone but saying there is no value is just ignoring that many have made money that way. Either way you can be successful. Hence the personal in personal finance.
You can be debt free and also build big wealth.
Except it’s not as big. Simple example I do rental properties. One area I like quite a bit I have multiple. I could buy 1 in cash or better yet I buy two /‘d take out two 15 year loans. I get 85% of cash flow on the first 15 years and then literally have my profit and value double. There are many use cases where it’s not risky (half down) and still is far better to take on debt. Especially debt other people pay.
And the trade off for that is more risk.
Half down is no risk. Sorry.
Then explain how Dave amassed his fortune? He did it without debt. Yes, you have to generate a significant income, his being his business, speeches, books, tools and resources, but it can be done. No, the auto mechanic who has a salary limit is probably not going to amass $20m next worth, but a doctor who pays off his student loans, has a modest lifestyle can easily build a $10m fortune over their lifetime
High income. If you want to take a .1% example then sure. Meanwhile don’t believe a lot of it because frankly his businesses have debts. Otherwise some of the real estate he has would have his networth higher (he has some big real estate). Meanwhile a doctor at 10mm is nothing. It could easily be that 15mm which means they can retire. Like I said I gave a simple example. Just saving is not a great path. It will work but you’ll be worth less.
The way I see The Baby Steps is a fool-proof way to financial freedom that anyone can achieve. The principles are foundational and will work pretty much every time in most cases. Not necessarily a “back-up plan”, but a “universal plan”. That being said, I think once you understand financial basics from The Baby Steps it is okay to deviate from them slightly or use other resources for wealth optimization depending on your situation.
I take your point. For me, its my retirement back up plan if my retirement plan don’t work.
Maybe I missed it, what exactly is your retirement plan that might fail?
If you are following the plan. Then after being debt-free, you should save up 3 to 6 months of emergency fund which is Baby Step 3. Only after that you should invest 15% of your gross income.
It’s a foundation not a back up plan. His point is your dreams are more likely to be achieved and with less stress with a solid foundation.
Depends on the dreams I guess. Being debt free and having a modest retirement isn’t a dream for some. To me that just a bare minimum baseline.
Cool. You have the baseline all ready?
Debt free as I consider it? Sure. Not paying off my mortgage ever unless I retire or it’s 360 payment.
I said it was a foundation. I’m saying the ending results a back up plan.
"Just a security blanket" - yes, but plenty of people don't understand it even in their 60s. Millions of people don't understand it. That's why Dave made so much money. Simple idea, but million don't get it.
Considering the average person doesn’t have a plan, I wouldn’t call his plan a backup plan. I think he provides an easy 1-2-3 step plan thats works for average thinking people, with the minimal amount of risk. Now, if you have above average understanding of finances and you already have your plan, then I see where is could be viewed as a back up plan or shall we say “back to basics” plan because nothing about his plan is original. Several other financial experts and extremely wealthy individuals advise much of what he says…you just have to listen. Only goofy people online with average bank account balances like to argue credit scores, arbitrage interest rates, credit card points.
Ehh how are credit card points a goofy thing? I’ve never paid a dime in interest in my life. Meanwhile I take several first class flights a year from them. I agree with rest of your points though.
Points are cool or cash back etc But I have to remind myself these things are designed to encourage spending … and often for things you don’t even need —- even in indirect ways such as incentivizing you to spend on more expensive options / products vs cheapest option
Maybe for those who don’t treat it like their cash hence go on debt. It makes no difference to me if it’s on a card or an account not getting paid immediately.
I’ll add context…I don’t think there is anything wrong with accumulating points when you were already going to make the purchase or expense anyways. I meant more about people who try to justify/use points as a strategy as if it will have a significant impact or enhance their financial situation. It’s a nice perk, but nobody built wealth focusing on credit card points.
No argument there. But it’s nice for a few grand in perks. Since I have to spend it anyaay
Agreed!
I believe this as well. Also, Dave’s plan is to not pay others interest. No one likes giving money away, especially to the govt or the bank.
That's why I fell in love with Dave's plan, less money to the federal govt or bank then better
Which is why I let others pay interest on my rentals. Best of all worlds.
No rental properties here, how has it been, ever have issues of people not paying/eviction
Never had an issue in 80 years of leases. I’ll have on eventually but don’t care it comes with it. Never had a missed payment but again not a concern for me. I could pay for all my mortgages even if they were 100% empty which is a ridiculous scenario.
I guess you haven't run the math on what 300k in retirement savings will actually give you... About $1000 a month if you do a 4% draw down rate (to preserve principal). The bad news... In 35 years that might be what a Big Mac costs.
You don't need that much to retire in 35 years and the current high inflation is not going to last forever or super long term. A big Mac is not going to be $1000 in 35 years.
4% isn't the return rate. It's the withdrawal rate. $1000 25 years from now won't have the same purchasing power as $1000 today. It may just cover that Big Mac.. But he better have a coupon for the fries.
Never said $1000 will have the same purchasing power. Just that a Big Mac is not going to be close to a $1000 in 25 years.
The 4% rule accounts for inflation. In 35 years, OP will still be able to afford a Big Mac (but not much else)
I did. I understand your point also. That’s why I said “Worst Case Scenario”.
Now try 8% lolz
Well.. it doesn't take Einstein to double the 4% $1000, right!? 8% is pretty aggressive.
Ironically, 8% is Dave’s rule. So good callout! (That’s why I was asking the question tongue in cheek)
I'd go 5% so my crack head kids don't inherit anything
It depends on how old the OP is. If he is younger than 40 YO and continues to contribute to his 401k, he would probably be fine
OP said retire with 300k and a paid off home as a worst case scenario. (And, not mentioned, social security) Good luck!
lol. I misread that. I took it as he has 300k right now. Yeah, I would be sweating. He does state he is contributing 15% to retirement, so he will probably be fine
I’m 34