Why I Dislike Dave Ramsey's Advice | Millionaire's Opinion

What I like about Dave Ramsey and what I dislike!

Ryan Pineda

December 2, 2021

This guru is going to be difficult to talk about because he is so beloved by so many people and he has changed so many lives, but there are many things I just cannot agree with. That guru is Dave Ramsey. Many of my friends love Dave Ramsey. He's helped him get out of debt. He has helped them change their lives. He's helped teach them how to budget. He has done amazing things and changed a ton of lives. I think his advice is great for many people, but there are a lot of people who should never listen to him at all. So I agree with some of the things he teaches and I disagree with others. 

Let's start off with the things that I agree with. 

  1. Getting out of bad debt

Notice the key word is bad debt. Not all debt is bad debt. Bad debt would include credit cards, car payments, or anything that doesn't make you money. Good debt for me would be real estate that cash flows and makes me money. It could even be debt on a business that I know gives me a return and makes me money. So I agree you should get out of bad debt. 

  1. His philosophy on saving

Everyone needs to save money. You have to live below your income so that you can grow your wealth. Too many people are living paycheck to paycheck because they don't know how to save money. So I'm a firm believer in taking money off the top of your income and putting it in your savings. That way you have the rest to work with. You learn to adjust with less. You may have to drastically change your lifestyle to make it happen.

You may need a smaller house. You may need a worse car, but you can totally live on less if you make the right choices. That is the key to saving. 

  1. The emergency fund

That goes hand in hand with savings because you cannot create an emergency fund unless you are saving money. So many people get caught with their pants down because they have an emergency and they have no way to pay for it. That just makes them take out more bad debt and it just keeps on spiraling and the interest accrues and they never get out. So building up an emergency fund or just reserves is a great thing that everyone should implement. 

  1. As a Christian, I agree with his philosophy on tithing and giving to God

I think the very first things you should take off of your income are your tithe to God, then your savings. Then the rest is what you live on. I know there's a lot of Christians out there who think that tithing isn't required anymore. I don't agree with that. We can talk all day outside of YouTube about faith, but that is one thing I can't get behind. I'm a firm believer in giving not only to God, to the church, but to other people as well. 

I think most people can get behind those ideas. They make sense. They're just tough to do. 

Let's talk about the things I dislike and the list is long. So I'm going to try and keep this to the main things. 

  1. I dislike his philosophy on credit cards

He believes that no one should have a credit card at all. I think that's just completely ridiculous. A credit card is great for building up your credit score. If you used a credit card and pay it off every month, it wouldn't cost you anything and it would help build up your score. The ability to get points with a credit card is huge also. For all my companies, we spend over a million dollars every year and we also get 2% cash back on our credit cards. So if I used a debit card instead of a credit card, I'd be leaving over $20,000 on the table doing absolutely nothing other than which piece of plastic I choose to use. I don't know about you, but I think that's a lot of money and it takes no extra work for me. So anytime I can make more money by doing the same thing, I'm going to do it every time.

Credit cards are great for the flexibility they give you in your business. Maybe your deal hasn't closed yet. Maybe you've got some accounts receivables that are still coming, but you still have products and things you need to buy right now. Well, if you didn't have a credit card, your business might die. So being able to use credit to keep your business going is a huge deal. I don't know any business owners or successful businesses that don't utilize credit cards. It's almost impossible. 

I understand why he teaches no credit cards. Most people who are in his programs lack the discipline to use them properly. If they have access to credit, they're going to use it. He wants to remove all temptation to use the credit. I get it. But if you have any type of discipline, a credit card is an amazing tool to use.

  1. He thinks all debt is bad 

That couldn't be further from the truth. Let's talk about business debt. Every company you see on wall street takes out debt. That's the reason they got to be as big as they have. Nobody has built a huge giant business, just strictly only funding it with their own cash. It's impossible. You have to use other people's money at some point. That's why companies have IPO's. That's why they go public. Our whole economy is based on debt. Every dollar that you have in your bank account is actually debt from the US government. A lot of people think that the government just prints money and they put it out there, but they're actually borrowing money and putting it out there.

All those trillions of dollars that the US talks about being in debt is from themselves. It's from the money that they are lending out to everyone else. So our whole economy revolves around debt. If there was no debt, there would be no economy. There would be no financial prosperity. There would be no YouTube. There would be nothing. So to say, all debt is bad. Makes absolutely no sense because our economy is built on debt. 

  1. Real estate debt

So let's talk about his philosophies on a primary residence. He thinks you should buy it all cash, but if you can't, then you should be putting 20% down and getting a 15 year mortgage. For most people that's unattainable. The very first house I bought, I got a 30 year mortgage, a 3.5% down FHA loan. I'm a firm believer in putting as little down as possible. I want to keep all my cash and I want it moving. I don't want to put 20% down and then just let it sit there. I'm trying to increase the velocity of money. 

The other part of that is I prefer a 30 year loan. I understand that getting a 15 year loan will help it get paid down quicker. You'll start paying down more principal. The interest rate will be lower, but even with the 30 year loan, you can still pay it down faster if you want. You just now have the option and the interest difference isn't that much. So I just prefer the flexibility of a 30 year loan and being able to pay it down if I choose.

So I disagree with him about your primary residence, but I really disagree with him on rental properties. He believes that you should not buy a rental property unless you pay all cash for it. I think that's the stupidest thing ever. It completely gets rid of the best part of real estate, which is leverage. 

Let's go back to the FHA loan example, 10 years ago let's say you bought a home for $150,000 with an FHA loan. You put 3.5% down. So you're into it for about $5,000. You invested $5,000 to own $150,000 property. This is assuming you didn't even get a good deal. You might've got a property for $150,000. That's worth $200,000. Now 10 years from now, that property is worth $300,000. If you'd have bought that in 2010 and you're looking at it now, it has doubled.

For $5,000, you gain all of that appreciation. If you choose to sell your $5,000 has now turned into $150,000. Plus all the principal pay down you've had since then. If you listen to Dave and you didn't have the money to buy back, then you would not own that property. You would not be $150,000 richer today. 

So once again, leverage is the key and it's the same principle when it applies to buying rental properties. The more properties that I can own that cash flow and make me money every month, the richer I will become because 30 years down the road, they're going to be completely paid off. I'm going to have made all the cash flow throughout those years and I'm going to have a bunch of properties and be really wealthy. 

If I were to only buy properties cash, how many would I really own? It's going to take me a long time to save up $100,000. Once I buy that one, my $200,000 is stuck. Now, I have to save up $200,000 again. That takes me 10 years. Now that same house is worth $400,000. Now I've got to save up more money. You're just chasing inflation. It's stupid. Even if I stayed disciplined and I continued to buy properties, I might own three properties by the time I retired. That doesn't excite me. What excites me is buying a bunch of properties these next bunch of years and owning a hundred when I retire. The beauty is that those same hundred properties are now fully paid off. When I'm retired, I would much rather own a hundred free and clear properties than three. So obviously you can tell, I hate that advice. 

There are other things that I agree with and other things that I disagree with, these are the main ones that stuck out to me. I think Dave is a great guy. He has helped so many people. He's helped a lot of people that I personally know, and he has impacted way more lives than I have. So I'm not hating on him by any means. What I will say is he's not the right person for everyone. If you want to live a basic life, the majority of your life, and then be somewhat comfy down the road. Great. It's good advice. 

But if you're trying to get wealthy now and be super wealthy down the road, his advice ain't going to get you there. There's absolutely no way. In order to fuel growth, you are going to have to take on debt to do it. Whether it's through real estate, whether it's through your business, whatever it ends up being, you need debt to accelerate your growth. So it just depends what lifestyle you're trying to live. 

All debt is risky. Even if you have a cash flowing rental property, it's still risky. The Tenant could stop paying, they could trash the property. Anything can happen. But look, nothing great in life came without risk. You're going to have to take a risk if you want to achieve something great. 

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