My guess is that 90 percent of those who saw the title of this article got a smile on their face, nodded their heads and couldn’t wait to open it to see why I think Dave Ramsey is an idiot.
The reason I wrote this piece is because one of the advisors who reads my articles, Thomas De Jong, wrote a nice mini-summary of some of the problems with Dave’s advice. I thought his summary was quite interesting and something you might want to use if you ever have a client suggest to you that Dave actually does know how to give proper financial advice.
To download Thomas’s 17-page summary, please click here
Do I think Dave Ramsey is an idiot?
That’s a tough call. Do I agree with the advice he gives? No. But he’s one of those people who you might describe as “one of the richest idiots I know.” He is a marketing machine, and I’m sure he’s made more money than 99.9 percent of the advisors reading this article, as well as the author of this article.
Is “pay off all your debt” a good idea?
This is Dave’s number one helpful tip for most people who call into his radio show. Is paying off credit card debt at non-deductible interest rates of between 8 percent to 15 percent+ a good idea? Sure, even a real idiot knows that. Is paying off your home loan a good idea —something Dave tells seemingly everyone to do? No. It’s a terrible idea if you have the discipline to use the money you could allocate to pay down the mortgage to grow wealth in a tax-favorable manner somewhere else. Keep in mind that I’ve written two books on mortgage debt.
Do I agree with Dave’s position on college planning?
Not even close.
The following is a quote from his website: “The best way to save for college is with education savings accounts (ESAs) and 529 plans." Need I say more?
Advice for lower-income clients
If you’ve ever listened to Dave’s radio show or taken a close look at his seven steps to financial peace, it’s clear that he is mainly focused on giving advice to lower-income clients who often lack financial discipline. His target audience is largely made up of heavy credit card users who don’t understand the concept of saving. For them, maybe Dave’s advice is not terrible; but for middle-to-upper-income clients, Dave’s advice makes little sense.
Thanks again to Thomas De Jong for allowing me to offer his summary of Dave’s advice to readers.