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In my quest for seeking out money mentors, I naturally checked out Dave because so many people swear by him, but man, I just can’t. I bet some of you LOVE this guy and you’re going to send me ranty emails about being ungrateful or unGodful or whatever, but hear me out.
Religion and Money Aren’t Topics I Want to Explore Together
I understand the connection between money and religion – both boil down to values and how we contextualize the choices in our lives. So if you’re a person of faith, I can understand why Dave Ramsey might resonate so well. He talks a lot about God, Jesus and his podcast can sound very much like a sermon.
But if you’re someone who just just wants the straight up money coaching, the constant references to religion are distracting and almost alienating. So the first thing to know about Mr Ramsey is that if you’re not a Christian, you’re really not his target audience.
Dave Ramsey’s Advice Doesn’t Make Financial Sense
I also take issue with his idea of paying off your home as a sound financial tactic (at least for those of us living in America). If you are living here, you have an amazing opportunity to write off the interest you pay on your mortgage. That’s a huge tax advantage that I think is worth leveraging, especially given how low mortgage rates have been over the last 10 years. Meanwhile, those funds that you’re not putting toward the capital of your home could be better used making 7% or more in index funds.
Pay down a 4% tax-deductible mortgage or invest in an index fund with 7% (or more) in returns – which do you think is going to get you to financial freedom quicker? I know there are some cases where paying down a mortgage makes sense, but for most Americans, that money will work harder in other places.
I also feel like tying up too much of your net worth in your home can be a very risky investment. Homes have little liquidity unless you borrow against it, so if all your money eggs are in your home basket and the market tanks – you’ve got problems if you need to sell.
Finally, while I do think paying off your debt is important, I think prioritizing paying off the higher interest debt rather than the small debt makes a bit more sense. I can understand the psychological benefits to seeing small debts go away, but the higher interest stuff is still out there snowballing at a much faster rate.
Personally, I’d rather focus on avoiding an avalanche that might take me out rather than the little hand-size snowballs that might ruin a good hair day at worst.
Anyway, I’m not a financial expert by ANY means, but those are my thoughts.