Dave Ramsey followers, is the method actually good?

My sister just started the Dave Ramsey baby steps and she won't shut up about it. She's paying off her car loan at 3.9% "with gazelle intensity" instead of investing, and she cut up all her credit cards including one with really good cashback.

I mean, she was in a bad place financially so any plan is better than no plan I guess. But is the Dave Ramsey method actually good advice or is it just good marketing? The debt snowball specifically bugs me -- paying off the smallest debt first regardless of interest rate is mathematically worse than the avalanche method. Right??

Ramsey's advice is excellent for people who are terrible with money and know it. It's mediocre-to-bad for people who are already financially literate.

What he gets right:
- Get out of debt (obviously)
- Build an emergency fund (yes)
- Live below your means (always good)
- The psychological power of quick wins (snowball method)

What he gets wrong:
- Snowball vs avalanche: mathematically, paying highest interest first (avalanche) saves more money. But studies show people stick with snowball better because the quick wins are motivating. So it depends on whether you optimize for math or behavior.
- "Cut up all credit cards": terrible advice for someone who can use them responsibly. 2% cashback is free money if you pay in full monthly. But for someone who carries balances, cutting them up makes sense.
- His investment advice is awful. He recommends actively managed funds with front-end loads. His "12% annual returns" claim is misleading at best.
- No nuance on debt. A 3.9% car loan is cheap debt. Paying it off "with gazelle intensity" instead of investing in a Roth IRA (expected 7-10%) is leaving money on the table.
- He's against all debt including mortgages, which is impractical for most people.

TLDR: Great behavioral framework for people in debt crisis. Bad financial optimization for everyone else.

ok but Dave Ramsey literally saved my life financially. I was $34k in credit card debt making $42k a year and drowning. I tried the "mathematically optimal" approach and kept failing because I never saw progress. The snowball method let me pay off my $800 medical bill in one month and that motivation carried me through.

3 years later, debt free except mortgage. Emergency fund of $12k. Contributing to my 401k.

Is it mathematically perfect? No. Did it work when nothing else did? Yes.

Stop judging people for using the method that actually works for them

Ramsey is a gateway drug for personal finance. Helpful for beginners, harmful if you never graduate from it.

The 12% return thing is indefensible though. He's been pushing that number for decades and it's based on cherry-picked time periods using average (not annualized) returns. Real annualized S&P return is closer to 10% nominal, 7% real. Using 12% to plan retirement is how you end up broke at 75.

I've been following this debate for 20 years and my take is:

Dave Ramsey is a personal finance radio host, not a financial advisor. His show is entertainment with some education mixed in. He gives the same advice to everyone regardless of situation because that's what works on radio -- simple, repeatable rules.

For someone like nikkir03 who was drowning in credit card debt, his program is transformative. The structure, the community (Financial Peace University), the accountability -- it works.

For someone with a 3.9% car loan who's already financially stable? Following his advice to the letter is suboptimal. But your sister is probably better off with a slightly suboptimal plan she follows than a perfect plan she doesn't.

The investment advice though... yeah that's bad. Once she's out of debt, try to steer her toward Bogleheads or this forum for investment guidance. The actively managed fund thing with 5% loads is practically malpractice in 2025.

my wife and i did FPU back in 2019 and it was good for us. we were fighting about money constantly and it gave us a shared framework to work from. the class itself was worth it just for getting on the same page as a couple

we dont follow it to the letter anymore tho. we have credit cards (pay in full), we have a mortgage, and we invest in index funds not his recommended mutual funds. so we kinda graduated from it i guess

also his recommended "investment pros" (SmartVestors) are just financial advisors who pay to be in his network. massive conflict of interest imo

new here but i just want to say the baby steps gave me hope when i had none. i know the math people on here will say avalanche is better and theyre right on paper. but when youre $50k in debt and making $38k you need hope more than you need optimal math

im on baby step 4 now (15% into retirement) and reading this forum to figure out what to actually invest in because yeah the mutual fund recommendations from ramsey are not great from what im learning

so maybe thats the path -- use ramsey to get out of debt, then come here for the investing part?

honestly thats probably the best summary of this whole thread. ramsey for debt, bogleheads for investing. done.

the only thing id add is his take on credit cards is too extreme. if youve proven you can manage debt responsibly theres no reason to leave 2% cashback on the table. but if you KNOW youll carry a balance then yeah, cut em up

I think the thing people miss is that Ramsey is selling a product. The books, the courses, the endorsed local providers... it's a business. That doesn't mean the advice is bad, but keep it in mind when he tells you to buy his stuff.

The baby steps are solid for getting out of debt. The investing advice after that is where it falls apart. Telling people to invest in actively managed funds with 5.75% front loads through his ELPs is genuinely harmful.

my wife listens to his show every day on the way to work and shes gotten way more interested in our finances since she started. so thats a positive i guess? she keeps saying we need to be "gazelle intense" about paying off the car and i just nod along lol

but yeah the 12% return thing bugs me too. thats cherry picking data.

This is the key. His target audience isn't people on finance forums debating optimal strategies. It's people who are drowning and need someone to yell at them to cut up their credit cards.

For that audience, he's probably the best thing out there. For people who are already past that stage, there are better resources.

My brother did FPU and it was the wake up call he needed. Went from 60k in consumer debt to debt free in 3 years. But then he stayed in baby step 3 forever and refused to invest because he "hadn't finished the steps yet." He had like 40k just sitting in a savings account earning nothing for 2 years while the market went up 30%.

That's my problem with Ramsey. The steps are too rigid and people follow them religiously even when it doesn't make sense.

I tried his budgeting app (EveryDollar) and it was terrible. Buggy, slow, and the free version is basically useless. Ended up switching to YNAB which is 100x better.

Never understood why you'd pay for EveryDollar premium when YNAB exists.

ok yeah the ELP thing is bad, I'll give you that. when I finished baby step 3 I almost used one of his endorsed providers but someone on reddit told me to just open a Vanguard account and buy index funds instead. Saved me thousands probably.

so yeah... use his debt advice, ignore his investment advice. thats my takeaway after 3 years.

OP here. This thread blew up more than I expected lol. So it sounds like the consensus is:

1. The baby steps are good for getting out of debt
2. The investing advice is bad
3. The 12% returns claim is misleading
4. The ELP thing is a conflict of interest
5. He's better as motivation than as a financial advisor

I think I'll tell my sister she's doing the right thing with the debt payoff but maybe point her toward this forum for when she gets to the investing part.

Late to this but I want to address the math on the snowball vs avalanche thing since people keep bringing it up.

I ran both methods on a sample debt portfolio ($8k CC at 22%, $15k car at 5.9%, $25k student loans at 6.5%) with $800/mo total payment:

Avalanche: paid off in 47 months, $8,240 total interest
Snowball: paid off in 49 months, $9,180 total interest

Difference: $940 over 4 years. That's real money but its not the massive gap people make it out to be. If snowball keeps you motivated and avalanche doesn't, snowball wins.

been lurking this thread and just wanna say I did the ramsey thing in 2022-2023 and it worked for me. paid off 22k in 14 months. was it optimal? probably not. did it work? yes. thats all that matters imo

now I just do index funds through fidelity and pretend dave ramsey doesnt exist lol

Good analysis. The gap gets bigger with higher interest rate spreads and larger balances, but your point stands for most typical cases.

The real issue with Ramsey isn't snowball vs avalanche. It's the post-debt advice: the loaded mutual funds, the 12% projection, telling people not to get a credit card ever. That stuff actively costs people money.