7 Times Dave Ramsey’s Controversial Advice Was Actually Legit

Dave Ramsey is a household name in the world of personal finance. His book “The Total Money Makeover” lays out his plan to help individuals get out of debt and become financially free.

Ramsey sometimes finds himself under fire for his strong personality and controversial ideas. However, if you are looking to get ahead financially, here are some of Ramsey’s ideas that actually hold up to scrutiny.

Ramsey’s advice to live on less than you make is sound. By living within your means, you avoid going into debt.

However, the advice is a bit controversial because living on less than you make can be difficult, especially if you are one of the 78% of Americans who live paycheck to paycheck, according to a survey from Payroll.org

Rather than just focusing on reducing your expenses, you can also work on finding ways to earn extra income. You might get these additional funds through a pay raise or developing a side hustle, for example.

Ramsey teaches seven “baby steps” to financial stability. Step No. 2 is to pay off all your debt except for your house. (That's step No. 6.)

Credit card holders in the U.S. have an average balance of about $6,700 each, according to credit-reporting agency Experian. 

While debt can be useful — especially when buying a home or investing in education — Ramsey is right about trying to get rid of your credit card balance.

With revolving balances, the only winners are the credit card companies. Each year, these lenders make billions of dollars in interest and fees. If you follow Ramsey’s advice, you can get off the credit card merry-go-round and put those dollars back in your own pocket.

Ramsey says that almost all Americans should take Social Security as early as possible, at age 62. Most finance professionals don't agree with this because taking Social Security reduces your monthly benefit for the remainder of your life.

However, Ramsey argues that if you apply for Social Security early, you can invest the money and get a return that's likely to exceed the benefit of waiting to file simply to get a bigger monthly Social Security check.

Ramsey’s advice in that regard might be wise, or it might be foolish. You'll have to decide. However, if you have a terminal illness or have health problems that may shorten your lifespan, Ramsey’s advice to take Social Security early can make sense.

Ramsey’s preferred debt payoff method is the “snowball” method. With this payoff plan, you prioritize your debts by balance, from smallest to largest.

This method is often criticized for not being cost-efficient. Another approach — the “avalanche” method — has you pay off your debts with the highest interest rate first, even if the debts are large. Although this can take longer, it can save you more interest.

However, while Ramsey’s method may not be the most cost-effective approach, it can be extremely motivating. As you see debts disappear, it may inspire you to stick to your plan to eliminate debt.

If you have several debts to pay off, the snowball method can offer a great way to stay motivated in your journey, even if it doesn’t make the most sense in terms of dollars and cents.

Ramsey recommends that your investments be heavily in stocks. This is an aggressive strategy. Ramsey has faith in the stock market and believes it will continue to climb over time.

Nobody can see the future, but history suggests Ramsey could be right. Not taking enough risk can mean slow portfolio growth, which can lead to missing retirement goals. His strategy is a reminder that risk has its place, especially for younger individuals.

Of course, in the final analysis, only you can decide the right level of risk to take with your investments.

Ramsey’s view on credit is a hard “no.” But other experts say Ramsey’s advice to “never” use credit is overstated and often unrealistic for most Americans.

Still, given that Americans owe over $1 trillion dollars in credit card debt, Ramsey may be on to something. Taking a cautious attitude toward credit probably makes sense.

Perhaps rather than swearing off all credit, you can learn to use it responsibly and to your advantage.

Ramsey says that personal finance is 90% behavior and 10% math. Smart money habits are developed over years of purposeful spending and saving.

If you are struggling with money, you may have a behavior issue rather than a math problem. By adjusting your behavior and spending habits, you can take control of your money.

Ramsey’s financial advice often goes against the mainstream. However, whether you love him or hate him, Ramsey does offer at least some sound financial advice.

If you are looking to pay off debt or start investing, Ramsey’s baby steps might offer sound insights that can help you on your financial journey.