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Why I Think You Should NOT Trust Dave Ramsey

Note: Some of these statements are not facts, just opinions. I have backed up my claims to other articles and research. But in the end, these are mostly my opinions.

Dave Ramsey cannot be trustedDave Ramsey is one of the most well known personal finance advocates out there today. But there are many things that Dave Ramsey advocates for and endorses that absolutely bother me to my core. Now I usually don’t intervene in matters like this, but I feel as if it is necessary. Ramsey is issuing advice to millions of people that trust him. Advice that I believe is unethical or just plain wrong. There are hundred of reasons I think Dave Ramsey should not be trusted, but I will give you the highlights of Dave Ramsey’s bad advice.

Dave Ramsey’s Bad Investing Advice

12% Stock Returns

Dave Ramsey has claimed time and time again about the glamorous 12% average returns from mutual funds. Sure, this is possible. It’s also possible the Keebler Elves are real and make cookies in the trees of Morocco.

Obviously the former is the most probable outcome. But it doesn’t mean expecting a 12% ROI is realistic.

Ramsey claims these 12% calculations are “based on the history of the S&P 500.” But he claims the S&P 500 goes back to 1929, when really it was introduced in 1957 as a market index. It’s hard to confirm this because the first publication from the S&P 500 was in 1957. But hey….. whatever.

The fact is that the math does not really add up as Ramsey’s claims.Dave Ramsey bad advice

As you can see, the math really only adds up to about 10%. But you are still lucky to get that. That would be beating the S&P 500 average annual returns of 9.8%. Majority of investors fail to beat the S&P 500. Warren Buffet says that 90% invested into the S&P 500 and 10% treasuries would beat most investors needs.

Dave Ramsey’s math comes from average annual returns which is not how you are supposed to calculate returns. Just like every other finance expert, returns are calculated through compounding.

REITs, commonly referred as risky investments, have 11.8% average annual return. REITs are known to have some of the highest dividend payouts as well. It’s almost at that 12%, but Ramsey teaches that you have higher yields with just mutual funds…..

And this is just the first example of Dave Ramsey’s bad advice.

Risky Investments

One of the reasons I think Dave Ramsey should not be trusted is his view on investments.

For a simple investing plan, Dave Ramsey suggests putting a portion or all of 15% of your income into accounts like a 401(k), Roth IRA or a 403(b). I agree that these are great investment plans and should not be ignored. But they do have significant disadvantages that I will explain in a second.

But if you want to invest like Dave Ramsey, Ramsey recommends only investing in stock-only mutual funds. Mutual funds are great options too, but it lacks the diversification that investors ultimately talk about. Especially stock-only mutual funds.

The problem with 401(k)s, 403(b), and stock-only mutual funds is that if the market takes a downturn, so does your investment. Roth IRAs on the other hand have multiple concerns regarded the prepaid taxes you pay on them. You can’t touch the money for a long period of time without being penalized (unless you qualify) and you may end up with less money than you started with. So contrary to popular belief, these investment accounts are not risk free.

Ramsey, why do you not teach your viewers about safer investments? For example, some of the safest investments include:

Certificate of Deposit – These are federally insured time deposits with banks. You put your specified money into one of these accounts for a specified time and don’t withdraw until maturity. The time periods are not that long (you could get a CD that matures in a month). And the rates can be found around 3%. More than often the larger the time period, the higher the interest rates.

Treasury Securities – Treasury bonds (T-bonds), treasury bills (T-bills), and treasury notes (T-notes) are great safe investments. Why are they so great? The United States government and the Game of Thrones Lannisters have one thing in common, they always pay their debts.

T-bonds pay out interest semi-annually. T-bills are sold at a discount from face value. T-notes also pay out interest interest every six months and at maturity like T-bonds. But they have lower maturity rates.

Money Market Accounts– Money market accounts are awesome. They are relatively liquid, earn high yields, and are FDIC-insured.

Government Bond Funds– Government bond funds are mutual funds as well. But they are invested in debt funds issued by the U.S. like T-bills and T-notes.

These are all great, safe investment options. Dave Ramsey gives the terrible advice to not invest in these options and only invest in mutual funds. 

ETFs and high-dividend stocks are also great, relatively safe options when it comes to investing!

I’m not saying mutual funds are unsafe. Mutual funds are relatively safe investments. What I am saying is that Dave Ramsey must think you’re stupid and you can’t invest your money for yourself.

You can! With some education of course.

But trust me, I’ll help you out! 

Dave Ramsey on Personal Finance

Credit Cards

Another reason why I believe Dave Ramsey is untrustworthy is because his view on credit cards. Dave Ramsey advises people to never use credit cards. He goes as far to say There’s no such thing as credit card rewards

Come on now! You can’t really believe that, can you Dave?

Credit cards can really hurt people if they are not careful with them. And i’m not trying to belittle Dave on the importance of responsible credit card usage either. But telling people to never use credit cards and that credit card rewards are not real, is just not true.

If you know you can be responsible with a credit card, you should get one. Otherwise you should stay away from credit cards.

Credit card debit is very serious and can make situations worse. But responsible use of a credit card can be great news for you. There are credit cards out there that have great reward programs for people who use them.

Dave Ramsey maybe thinks all Americans are stupid and irresponsible. I don’t know. 

I wonder if he thinks he is able to use a credit card?

Pay Off Your Smallest Debt First

With Dave Ramsey’s “Debt Snowball Method”, Ramsey tells viewers to pay off your smallest debt first. Why you may ask?

Ramsey says, The point of the debt snowball is changing behavior. These little wins will give you a confidence boost, you’ll see that the plan is working, and you’ll stick to it.

Not all Debt is Because of Your Behavior

First off, debt is not all because of behavior. Not everybody gets into debt because of their behavior.

What about that family who has very expensive medical bills. Is this family in debt because of their behavior choices?

Or the individual with a massive student loan debt. Did this person make a bad decision to go to college and pay for it the only way they could?

Sometimes our choices do get the best of us. But that’s not always the case.

Pay Off the Highest Interest Debt First.

You need to pay off your debt that has the highest interest rate. Dave Ramsey thinks that the small victories of paying off a debt will give people more confidence and assurance to further pursue paying off their debts. Sure, that is one way to look at it.

I’ve created some Excel worksheets to show how dangerous high interest rate can actually be.

Scenario: It takes you ten years to reach your last un-paid debt. Using the Dave Ramsey method, you have your smallest debt interest debt first, leaving you with your most expensive debt last. $20,000 at 26%.

Dave Ramsey bad advice


Using my method, you start at the highest debt with the highest interest rate. This leaves you with your lowest debt amount and lowest interest rate. $2,000 at 3%.

Dave Ramsey bad advice

Just with one of your debts, you would have accumulated over $180,000 in interest over 10 years vs. my $687 in interest over 10 years.

This may seem like an exaggeration for some of you. But even on a smaller scale, (interest wise or debt wise) paying off your smallest debt first can really hurt you. The longer you wait and focus on small debt and low interest rate debts, the higher debts with higher interest rates are gonna really hurt you. You will end up paying more money when using Dave Ramsey’s method.

Have $1000 for Emergency Savings Fund

If you are in debt, Dave Ramsey recommends you have $1,000 in a emergency savings fund.

Not more, not less, $1,000.

The idea is simple. If you are in debt and an emergency happens, what’s the issue with more debt? You’ve been going all this time in debt anyway!

The issue is that you would have to borrow more money, landing your deeper in debt. You could be in more debt than what you initially started with. Or you could be set back to however much debt you were initially in. Or it could just be a huge setback, which causes you to lose more.


For most cases, emergencies are unexpected and costly events. Here are some examples of emergencies:

Serious injury to you or a family member

Death in the family

Natural disaster

House fire


Paying a bail

Paying for a lawyer

You get fired from your job


All of these are unexpected events that happen every day. And they can cost you a lot of money.

That’s why it’s a good idea to save more money just in case any of these events were to happen. If you don’t have enough money in the event of an emergency, you would have to take out a loan. Or just borrowing money in some form.

And then you could be in worse debt than you would have been if you have had just saved more money.


Dave Ramsey’s Endorsements 

This is the main reason why I think that you should not trust Dave Ramsey. Because of his past and the his nature of business, I do not trust anything advertised by Ramsey on any of Dave Ramsey’s platforms.

I’m going to show you some of the Endorsements that Dave Ramsey has approved of. You be the judge if Dave Ramsey has been endorsing shady and/or risky companies.


PerkStreet Financial was a checking account and debit card provider operating from 2008 to 2013. This exclusively online bank reeled in customers by offering cash back from using their debit card. Some rewards paid out ranged from 5% cash back to waived monthly maintenance fees just by using the card during the month. 

Ramsey started endorsing PerkStreet in 2010. Ramsey would go on advertising PerkStreet for roughly 3 years. This endorsement influenced his audience into banking and investing in PerkStreet Financial. But the company did prove to be too good to be true when it finally ceased operations in 2013 due to financial troubles. 

After their closure, consumers and investors were extremely upset with Dave Ramsey. And rightfully so too. Being FDIC insured, customers received all of their money back up to $250,000. For accounts over $250,000, that money went bye-bye. Investors lost all of their money they had tied up with the company. And PerkStreet had to forfeit over a million dollars in un-paid rewards.


An ELP stands for an “Endorsed Local Provider”. ELP is a Dave Ramsey Term by the way.

Dave Ramsey recommends his viewers to get a good financial adviser from a recommendation from close family members or friends. Apparently this is how the Ponzi Scheme expert Bernie Madoff got a lot of his investors as well. But what if you don’t have any recommendations or are unsure for an ELP?

Well Ramsey can set you up with one! With his cut of a fee of course. Oh, and not to mention the cut he gets from “ELPs” to join his network. Pretty good win-win for Ramsey if I might say so.

How do you know this is really a trustworthy adviser other than Dave Ramsey says they are……. You don’t really.


Here is what I recommend. You should get a financial adviser for your investment and finance matters. But you don’t NEED an adviser.

With the correct amount of information, research, and experience, I believe you can invest on your own. Make sure you do know what you’re doing though. With stocks for example, you should be able to read and understand a company’s 10k, quarterly statements, and balance sheets. Know what the company does, what their plans are, where they are financially, and what are they working on right now. Get to know basic stock market terminology like bull and bear market, ask and bid price, beta, volatility, blue chip stock, and arbitrage.

An awesome website I use to learn additional stock information is SeekingAlpha. You can follow stocks, news updates, read informative articles, and read what other users think about a stock and articles.

I will share more financial information as time goes on.

For now, please do not trade on margin, leverage, borrow, or take loans out for stocks. Especially when you are new to investing, in debt, or in financial trouble.

Other Thoughts

Upon research on Dave Ramsey’s current endorsements called “Dave Recommends”, there are currently endorsements that I do not think are trustworthy. From the 10 endorsements he offers, rates 1 of them is rated 2 stars while another endorsement is rated 1 star! There are also some endorsements that aren’t ranked, so they do not count.

Unfortunately I could not find a list of past endorsements that Dave Ramsey has endorsed. Well except for PerkStreet.

To me, it’s pretty obvious that Dave Ramsey is only endorsing these products for money. I do not believe that these are his actual and real opinion on these products and services. 


  1. Liz

    A comment on the 1K emergency fund, that is just too start your savings; he does recommend in his steps 3-6 months emergency fund after you pay off your debt. Can/should this be done parallel to paying off debt? I would argue yes it can, and should.

    While I’m not the biggest Dave Ramsey fan, his core principles of not carrying debt, contributing savings and investments, and giving back are all common elements I see in the PF threads I chose to follow.

    • gurualex

      Thank you for your comment Liz. I’m sorry if I was not clear enough on this. Yes he does say you should have a 3-6 month emergency after you pay off your debt. But I would disagree with having only 1k for an emergency fund while in debt. I don’t think that a single 26 year old and a family of 5 with a shared income should both have only 1k in savings. Simply having another $1,000 in savings could save you from taking out a loan. I like to stress that personal finance is not cut and dry. Humans are not homogeneous and everyone is different. Different people need different things. Thanks again for your feedback!

  2. Abigail @ipickuppennies

    “The United States Government and the Game of Thrones Lannisters have one thing in common, they always pay their debts.” Hee hee, nice one!

    The endorsements are what make me the most wary, but I’ve long disagreed with the debt snowball too. That said, you have to do what works for human psychology, and the snowball does work for a lot of people. I think the idea being that most of the smaller debts can be eradicated in a year or two, so the high-interest debt isn’t sticking around as long. Still, on a purely mathematical sense, it’s definitely bad advice. As is not having a credit card — especially if you’re only going to have $1,000 in an emergency fund.

    • gurualex

      I’m glad you liked my metaphor. Ha!

      But i’m glad your brought this point up about the debt snowball. The debt snowball method can definitely work for some people. I also think tackling the debt that is going to cost you the most money in the long term first is a great way to go. But I guess my point here is that personal finance is not black and white. There are multiple ways to go about doing things that may work best for certain people.

      Dave Ramsey sees it more as his way or the highway, which I don’t agree with.

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