Here’s Where I Agree and Disagree With Dave Ramsey

Disclaimer: I am not a financial advisor. You are trading and investing at your own risk and should consult a financial advisor for any investment decisions. Do your own due diligence when considering investing, and information about this Total Money Makeover Review is for education/informational purposes only. This article serves as educational and entertaining content, not investing advice.

You may have heard about Dave Ramsey. I mean, he is sorta famous, just a little bit.

But often recommend people to read Dave Ramsey’s Total Money Makeover.

It’s a book dedicated to helping people improve their financial situation and become financially free. Plus, he gives you a straightforward plan that anyone can follow. What’s not to love?

I’ve been aware of the plan for a while but finally decided to read the book.

So here I am today to discuss the book. But I won’t provide a full-blown Total Money Makeover review or a summary of the book. Instead, I want to discuss some of the advice that I agree and disagree that were discussed in the book.

I recommend you to read the book if you haven’t already and come discuss it with me over on social media after you’ve done so.

Here is what I enjoyed.

Agreements:

We Should Learn More about Money

I agree with this blatantly that I think we should all learn more about money.

Now, I’m not saying everyone should learn how to pick a stock that will go up ten-fold. Instead, I think it’s essential for everyone to learn a bit about how to invest their money, the truth of assets versus liabilities, and how to manage their money, among a few other topics.

These things are essential to know to utilize your earnings and invest over time.

Most of us want the chance to be wealthy, and I would like nearly all of us to be financially secure. Financial advisors may not be able to fully provide that security either, because just like anyone you might meet, not everyone has your best intentions at heart.

Even learning what to look for in a financial advisor could be beneficial to understand whether they stand to earn a lot off of your investments with them.

And as I’ve stated before on the Smart Money Podcast, personal finance isn’t complex, but it does take a little time and curiosity to learn.

Giving a Credit Card to a Teenager is Dangerous

I’m sure not all teenagers would be this dangerous, but there is no doubt some would take advantage of having a credit card.

Imagine the charges that could pile up. That is nothing short of being scary.

There’s grave importance of teaching how to behave with money, and this is at any age. But it’s just with teenagers that some can be very irresponsible and immature. Maybe just one or the other.

With irresponsibility, there can be reckless spending and a ton of interest on payments that cannot be made as a result.

If trying to teach them about money, it’s likely better to open a chequing account with a debit card, as the debit card is used for money in the account, where a credit card is used for money that can be lent.

To me, only when they are responsible with their money and not reckless with spending should they obtain a credit card.

Do not cosign loan/lend money to the family

I’m sure you’ve heard that you shouldn’t lend any money to family or friends. It can create chaos.

Maybe you’ve had to learn the hard way.

In either scenario, money creates problems as much as it can develop solutions.

Think about it this way, let’s say a friend lends you $500 to help you pay your bills as you’re struggling financially. But eventually, you will not be able to pay them back. Would you be able to confront them ever again? Even if they are willing to forgive your debt to you, is the pressure, awkwardness, or shame too much?

I think maybe these types of scenarios will often ruin friendships, which is unfortunate. So unless willing to give a friend or loved one in need money without wanting it back, it could be best to remain supportive in other ways.

As for cosigning a loan, there’s a considerable risk that the consignee takes on. What if the person getting the loan decides to walk away and make no payments? That just screws things up for the consignee, now doesn’t it?

Because the individual who needed the loan disappears and makes no payments, the bank or institution will need some sort of payment?

So that will have to come from the consignee or through the collateral they signed off on when signing the contract.

There is often a significant risk associated with these situations, and in every case, you’re probably better off avoiding signing pen to their paper. If they are hurt by it, you may question, “Is the relationship authentic?”

Maybe it is, but perhaps it isn’t.

Dave’s Stance on College/University

College or university isn’t for everyone. I think that’s pretty clear.

Even if you do consider attending university or college, Dave argues that only for a few careers will the institution you attend matter.

It could be more beneficial to research the tuition costs, scholarships one could earn, and the expenses to attend a particular institution, rather than to attend the Harvard’s or Yale’s of the world.

This is a view I will agree on unless it may be a dream to attend a particular institution or enroll in a program offered only in select locations.

When going to university, people will want to travel to different provinces or states, which is fine, but why go broke for a 4-year program that can be pursued at a cheaper cost elsewhere?

Yes, it can be cheaper to attend university in a different province or state, but that option is entirely up to you.

Plus, consider that the costs to stay outside of the university might be more expensive than staying on campus, yet that just all depends on housing, necessary expenses, and any other costs I’m not considering.

All just something to consider.

Tax Deduction on Interest

This only applies to those in the U.S. or have similar tax laws. I’m referring to how those who have taken out a mortgage can deduct said interest on the mortgage.

Now I just had a look, and within Canada, there are a couple different scenarios where you can deduct the interest. But none are based on a mortgage for a personal home.

The closest would be deducting interest on rental properties.

For other situations, you can learn more here.

Anyways, Dave’s argument was broken down into similar like this.

A financial advisor would recommend their client keep their home mortgage because they can continue receiving a tax deduction. The interest for the year would cost $10,000.

Therefore, they would have a $10,000 deduction on their personal tax returns. Make sense? Okay.

The $10,000 looks pretty worth it because of the deduction, despite paying $10,000.

But let’s say that the client is in the 30% tax bracket. And let’s also state that instead of listening to their advisor, they don’t keep the home mortgage.

If they follow pursuit, they would have an added $10,000 onto their income. However, since they are in the 30% bracket, they would pay an extra $3,000 in taxes.

So, what is more, worth it, to pay $10,000 or $3,000? Well, simple math will tell you that spending less is better. For that, I would agree. Wouldn’t you?

Disagreements:

Credit Cards are Bad

I know I’m not the only one to disagree with Dave’s opinion on credit cards.

I’m sure you’ve seen the photo of Dave holding scissors in his hands, cutting up a credit card.

Credit card debt can be an awful form of debt. The cards can lead people to bad financial decisions, using them to purchase things that they simply cannot afford. If it cannot be paid off immediately, they can make payments over time at a brutal level of interest.

I agree that it can be a wrong financial tool. I disagree with not using them at all. Instead, I think it’s essential to tackle the behaviour towards finances.

After all, credit cards can be good for the offers that they provide. You know, the cashback you can earn, Airmiles points to stack, and now even crypto.

It could be helpful to stop using a credit card for a while. Maybe even the person would find it more beneficial to cut the card up. I wouldn’t judge.

But to be better at money, it seems that it would be beneficial to tackle one’s behaviour towards them instead. Understand why they are making unnecessary payments in the first place and how it can be reduced.

There you’ll find the significant process and likely a better financial situation.

Mutual Funds

You may have heard someone else speak on mutual funds as well. That mutual funds are managed by a portfolio or hedge fund manager, and many cannot beat the market. Mutual funds also have high MERs, high costs to hold the fund.

I won’t do a full-blown breakdown of the differences between a mutual fund and an ETF (only if you’re interested). Instead, I will look at a very brief glimpse.

Fund:  TD U.S. Mid-Cap Growth Class – I  Vanguard Mid-Cap Index Fund ETF Shares (VO)
Price (as of February 18, 2022):$40.53$227.24
MER:2.55%0.04%
Dividend Yield:Unsure1.23%
Yearly Return:-10.48%-10.81%
Return over 5 Years:12.30%13.32%
Return over 10 Years:15.36%13.44%

Typically, ETFs are cheaper to hold, follow the market directly and have better returns due to one’s portfolio. Now you know, don’t take this as financial advice because it really isn’t.

But I know if that traditionally if you can’t beat the market, track it! So while some mutual funds might be significant, they may not be the best investment option out.

So, I’m a prominent endorser of ETFs, being much better than mutual funds for these couple of reasons.

Invest 15% of your income for retirement

I think you can invest whatever amount you want for retirement. The more the better, but I don’t think we should need to maintain just 15%. It’s a good framework, but certainly it should be consulted based on your financial situation.

To save and invest any money is better than none and if one can maintain 15% and just that, awesome.

Final Takeaway:

Photo by Colton Duke on Unsplash

Overall, I enjoyed learning more about Dave Ramsey’s Total Money Makeover and, more importantly, the different baby steps he endorses.

These baby steps may be crucial for people to follow, at least partially, if not entirely. They are an accurate plan for anyone to get financially free and build wealth because many have done it.

While even having a starter emergency fund and eventually a full funded emergency fund can provide some security to the future of tomorrow.

So if you haven’t read it already, I recommend doing so. You can also check out other book reviews and recommendations on the website as well.

But if you have, what do you think about Dave Ramsey’s Total Money Makeover? Do you hate or love it? Let me know on social media!

You’ll also notice there is no longer a comment box feature. I decided to remove them due to the high amount of spam comments I would receive, which, believe me, ended up being a lot in the end.

So if you have any comments, you’re more than welcome to reach out to me via email at [email protected] or the contact us page of the website.

As well, engage with me on the Instagram page to discuss more things about personal finance.

Either way, I look forward to the future!