Dave Ramsey: Financial Planning Guru … or Charlatan?

Love him or not, Dave Ramsey is a financial planning phenomenon.

Consider his popularity: Ramsey’s syndicated radio program, The Dave Ramsey Show, is heard on over 325 radio stations throughout the United States and Canada. Besides being a radio personality, he’s written almost 15 books, three of which have been on the New York Times Bestseller list. More recently, Ramsey’s also launched a popular show on the Fox Business Network, The Dave Ramsey Show. And yes, he’s a semi-regular on Oprah 😉

Ramsey’s core message is consistent. More than anything, he evangelizes his seven steps to financial independence:

1. Start an emergency fund
2. Pay off all consumer debt from smallest balance to largest
3. Three to six months of expenses in savings
4. Invest 15% of household income into Roth IRAs and pre-tax retirement accounts
5. College funding for children
6. Pay off home early
7. Build wealth by investing

Simple, no? And yet, many find Ramsey’s advice simplistic, misguided, or just wrong. Ignoring conventional wisdom on many topics, he draws upon his personal experiences to craft financial and life advice that’s often, to say the least, controversial.

So where do I stand?

I’ll surprise some with this, but I’d say I agree with about 90% of what Ramsey talks about. While he sometimes strays too far from what he knows best — human psychology — I still feel that Ramsey offers an incredibly valuable service to his listeners. While we pride ourselves here for going “beyond common sense”, we shouldn’t forget those just starting the personal finance journey. Kudos to Ramsey for seeing this group’s need for straight advice and the honor in serving them.

In this show, I’d like to take some of Ramsey’s thoughts and processes, expand on them a bit, and even go a little farther in depth than he does on some investing topics. I’ll share my feelings on his steps to financial independence, his approach to investing, the difference between risk tolerance and risk capacity, the emotions associated with investing, and some of the benefits of saving for retirement early.

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