Why You Should Use the Dave Ramsey Method (2024)

FAQs

Does the Dave Ramsey method really work? ›

Do Dave Ramsey's Baby Steps Work? They can, but they might not be for everyone. Ramsey's steps are sound and logical, but they rely on some best-case scenarios. Not everyone makes enough money to save 15% for retirement while also saving for college and paying the mortgage early.

Eliminate Debt Before You Invest

The No. 1 rule of the Ramsey investing philosophy is not to invest a dime — at least not until you eliminate all of your toxic debt, which he considers to be pretty much everything but your mortgage.

There's an 80-20 rule for money Dave Ramsey teaches which says managing your finances is 80 percent behavior and 20 percent knowledge. This 80-20 rule also applies to constructing a healthy life. Personal wellness is 80 percent behavior and 20 percent knowledge.

They say that Ramsey's "debt-free" mantra is outdated and neglects the value of self-care. Others say his homebuying tips aren't realistic amid skyrocketing prices.

Dave Ramsey's financial philosophy centers on staying out of debt and building savings. When it comes to paying off debt, Ramsey preaches the debt snowball method. The snowball method involves paying off your smallest debts first and then moving on to your biggest debts.

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

There are three basic reasons to save money. First, we save for an emergency fund. Second, we save for purchases. Third, we save for wealth building.

What is Dave Ramsey's summary? ›

Key Takeaways. Dave Ramsey is a well-known financial guru and author with a nationally syndicated radio show and other media presence. Before becoming a financial pundit, Ramsey saw both early success and bankruptcy. Ramsey employs Christian values to help convey his message of financial prudence and saving.

For the ten thousand millionaires we surveyed, it was the point in time when the person woke up and realized they could become wealthy and could set out on a sacrificial plan to get there. They may have been coasting along, investing and living frugally, but then they became very intensely goal-focused.

According to the Ramsey Solutions post, the recommendation is to invest 15% of your household income for retirement. The article uses the example of a household income which is $80,000 annually. Based on these earnings, each year you need to invest $12,000 towards your retirement savings.

In a series of tweets, Ramsey suggested budgeting for food, utilities, shelter and transportation — in that specific order. “I call these budget categories the 'Four Walls.

As a general rule of thumb, many financial experts recommend setting aside 3-6 months' worth of living expenses. So if you generally spend $2,000 per month on rent, utilities, food, gas, healthcare, and other necessities, you should try to save between $6,000 and $12,000.

Financial guru Dave Ramsey said retirees with a $1 million all-stock portfolio can withdraw 8% a year and blasted retirement researchers as goobers and nerds. Planning experts have panned Ramsey's advice as dangerous and mathematically wrong.

Figuring out how much house you can afford

For starters, Ramsey says a mortgage payment should be no more than 25% of your take-home pay. "If your payment is more than that, you'll end up being house poor," he wrote. "We want you to own your house, not have a house that owns you."

At the age of 26, Dave Ramsey's real estate portfolio was worth $4 million, and his net worth was just over $1 million. 6As of 2021, his net worth is around $200 million.