Dave Ramsey states his 7 Baby Steps are a proven process for saving money, getting out of debt and building wealth. Oh really? For who? Let’s list his Baby Steps, or B.S. (interpret as you wish) for short:

  • B.S. 1: Save $1,000 to Start an Emergency Fund
  • B.S. 2: Pay off Debt Using the Debt Snowball Method
  • B.S. 3: Save 3–6 Months of Expenses for Emergencies
  • B.S. 4: Invest 15% of Your Household Income Into Roth IRAs and Pre-Tax Retirement Funds
  • B.S. 5: Save for Your Children’s College Fund
  • B.S. 6: Pay off Your Home Early
  • B.S. 7: Build Wealth and Give

On first blush, these concepts seem reasonable. But for whom, do you fit into these steps? Dave makes an awful lot of assumptions to build his following. Let’s break down each step a little further and you’ll see that his approach has contradictions and certainly isn’t the one-size fits all he wants to make it.

B.S. 1: Save $1,000 to Start an Emergency Fund
Save $1,000 as fast as you can! What does $1,000 mean to you? Well, it depends on who you are? To Jeff Bezos, founder of Amazon, $88,000 is the equivalent of spending $1 to the average person. Sure, he’s the richest person on the planet, so maybe not a fair comparison, but hopefully you see the point. The U.S. median household income rose to slightly over $61,000 in 2017. But median means 50% made less than $61,000 and 50% made more. The point is $1,000 is awfully different from various people’s perspective. While starting an Emergency Fund is a great idea, you need to understand what an emergency looks like to YOU!

Dave wants your money step 1: Within B.S. 1 Dave offers a free budget tool but tries to upsell you to his EveryDollar Plus premium tool.

B.S. 2: Pay off Debt Using the Debt Snowball Method
Oh the Debt Snowball Method, brilliant! Let’s gather everyone up and put our list together of our debt (not considering our biggest obligation, our home) and rank that debt from least to most (according to Dave, don’t worry about interest rates). Ready, set, go! Start paying it off! Wow! Dave, come on, why are you treating your disciples like lemmings? So much is wrong with this approach. We see the success stories, but what made these individuals or families successful was personal discipline, but at what cost? If you can’t think for yourself, have tremendous trouble balancing a checkbook then yes, start paying down your debt immediately. But if you have some level of wherewithal, gather your debt obligations (including your home) and be mindful of each obligations interest rate. Simply paying off debt from smallest amount to largest may give you some satisfaction but if I have a massively high-interest rate on a large obligation, to ignore it because I had low-interest rates on smaller obligations makes absolutely no sense! Again, don’t be a lemming, Dave is treating you like you have no ability to gain financial sophistication. Instead of following a generic approach, you should be asking questions of him. The more appropriate and sophisticated approach (which we believe you are capable of understanding) is look at all of your obligations, monthly payments, interest rates, etc. and pay down your debt according to what impacts you positively. Yes, you may retain more obligations in sheer number, but that isn’t necessarily bad. How do you think businesses are run? If you can learn to run your personal finances like a business you will be much more successful than following rolling up a snowball.

Dave wants your money step 2: Within B.S. 2 Dave claims you’ll be debt free before you know it, just pay $129 for his Financial Peace University to accelerate your success.

B.S. 3: Save 3–6 Months of Expenses for Emergencies
Will give Dave a pass on this one. It is generally a good idea to establish an emergency reserve of 3–6 months in the event of the unexpected. This time Dave doesn’t set an amount, so we assume that he is telling you to save an amount relevant to your particular situation.

Dave wants your money step 3: Within B.S. 3 Dave re-offers his free budget tool but again tries to upsell you to his EveryDollar Plus premium tool. Nice!

B.S. 4: Invest 15% of Your Household Income Into Roth IRAs and Pre-Tax Retirement Funds
He doesn’t address it prior, but it certainly feels like Dave suggests you only should begin to contribute to your IRA after you have paid down your debt. Again we totally disagree with this point. Back to running your personal finances like a business, you have to consider the cost/benefit to paying debt and not contributing anything toward your retirement. The power of investing is the effect of compounding, if your debt obligations take years to payoff you are sacrificing an opportunity to earn some return on your money. The longer you take before you start investing the less time you have to realize the power of compounding. Again Dave must assume you lack intelligence. We agree that paying down debt is important but run the calculations, what opportunity cost are you losing out on by not investing any money today. An easy problem to solve for is how much are you paying monthly in interest towards your debt and how much could you be earning in interest by investing. At some amount, these numbers cross and you actually cover your debt interest with your investment return. Sure it is a little more complicated than that, but we trust you get the idea. You want to begin saving and investing as soon as possible, each month that goes by reduces your debt while it increases your investment, eventually leading to investment returns exceeding interest on debt obligations.

Dave wants your money step 4: Within B.S. 4 Dave disguises his money grab by offering to connect you with SmartVestor Pros which are poorly vetted “investment advisers” offering to manage your money. Advisers pay a healthy advertising fee to get referrals from Dave. An all around poor choice for anyone beginning to try and build a retirement portfolio with limited money and investment skill.

B.S. 5: Save for Your Children’s College Fund
Aww, so cute, Dave cares for the children! Unless every snowflake has a child this is only relevant to a subset. Nevertheless, should you have children, yes a 529 plan, ESA or UTMA/UGMA would potentially make sense.

Dave wants your money step 5: We almost thought Dave would finally have a step to just educate his followers, but upon further review, he once again promotes the use of SmartVestor Pros. Why not! If there is an opportunity to make a little money off of Sally or Johnny’s college fund, let’s take it!

B.S. 6: Pay off Your Home Early
A lot of B.S. between the start of this process and addressing what is likely your biggest debt obligation, but Dave finally gets around to bringing up your home. If you can pay off your home early it is a good idea. Groundbreaking news. Unfortunately, that isn’t likely the case for many today, so we continue to recommend you incorporate your mortgage into your total debt review from the onset. Obviously, if you can refinance into a lower interest rate or a shorter term loan, go for it. Be careful of adjustable rates, interest-only, etc. But this shouldn’t be news to anyone. Mortgages are mortgages and more than likely you are going to have to deal with one, so figure out how best to incorporate it into your overall personal financial system. Remember, run your personal finances like a business, you are more capable than Dave wants to give you credit for!

Dave wants your money step 6: Jeez Dave leave some for the rest of us! Once again, Mr. Ramsey has Endorsed Local Providers to help with all your real estate needs. Who doesn’t he know! Stop lining his pockets, you are capable of doing your own, much more credible due diligence to find a real estate agent that will work for you.

B.S. 7: Build Wealth and Give
What a noble cause, after stepping through six steps of B.S. Dave wants you to start sharing your hard earned money with people other than him. Leave a legacy that isn’t just paying Dave for his guidance, start donating. But wait, Dave doesn’t provide any charitable tips, he just jumps right back into sales and marketing with the best gift one could give someone! A Dave Ramsey Starter Kit!

Dave wants your money step 7: What an opportunity, after correcting your life thanks to so much B.S., Dave now wants you to market for him! For just $51.99 you can buy Dave’s #1 bundle: The Starter Special where you can share all the tools to follow his system with your friends.

Setting out to review Dave Ramsey, I thought I’d run into a few areas of disagreement, but generally, I thought, he was trying to do the right thing for people struggling with their number one problem, money. But the more I researched and understood what Dave was really about the more disappointed I was. Here is someone who has pulled the wool over the eyes of many struggling daily with their financial situation. Success stories permeate social media and if you are one of them that can credit Dave’s way for getting you out of debt, congratulations. But ask yourself, if you removed all of the steps and either went at it alone or within a group, was everything you did really a credit to your newly found discipline, a discipline that perhaps wasn’t there initially when you got into debt? Maybe Dave was the crutch that got you on the right track, but I assure you, you accomplished what you did on your own and without Dave, I just hope you didn’t pay him along the way.