Why Dave Ramsey is the Best Financial Guru
Dave’s seemingly targets people who are interested in finance and financial freedom. But his niche is even smaller than that. He is well known for his investing and financial advice for all types of people. He focuses on one group specifically. That is the group who wanders through hell trying to get out. Basically, the people who want to be financially free yet have no idea what they are doing.
There are a lot of different types of financial gurus and groups. Everything from The Debt Collective to the FIRE program. Each has its benefits and drawbacks, just like anything else. It all depends on your level of risk and your financial goal.
Dave focuses on a group that wants to achieve basic financial freedom but gets discourages easily. They want to get out of the hell of the rat race but can’t find their way. To experienced investors or financial experts, Dave’s advice is very beginner or actually just bad advice. But that is purposeful, he is not targeting those groups of people.
No credit cards
One point Dave likes to make is no credit cards. He doesn’t believe that your credit score is that important. I disagree with him on this point as your credit is important not only for loans but also for background checks. Credit cards are a two-way street, they can severely help you by getting low-interest loans. But they can also equally hurt you.
So you must think about his target audience here. He is targeting the people who if they did have a credit card, would be racking up debt like crazy. Paying 25% APY. Now, what’s worse, not having a credit score or being thousands in debt with an interest rate of 25%?
The point is he is targeting the ones who struggle to understand the complexities of finance. For many it is quite simple, they know how to properly use a credit card, but for others not so much. So he simplifies it for you so you are on a path toward financial freedom. Basically you can’t be in credit card debt if you don’t have a credit card. Then once you gain the knowledge you need, and dig yourself out of your hole, you can finally pick up a credit card.
This is what separates Dave from other financial gurus. Everyone else, including myself, would say “get a credit card, don’t rack up debt with a 25% yield on the card”. Easier said than done. Me, I can’t imagine having a balance on my credit card. But for most Americans, it is quite common. Americans have a collective credit card debt of $925 Billion. So in most cases, the best advice is no credit cards.
High Interest vs Low Nominal Debt
Another point of contention of his is that you should pay off debts with the smallest nominal amount first. In ‘advanced’ financial literacy, it says to pay off your debts with the highest interest first, then your next highest, and so on. This will lead to the most amount of money saved in the long run. The most efficient plan. With Dave’s snowball plan you will end up paying more. So why would he promote this strategy if you end up paying more?
Well, once again it is his target audience that we need to focus on. Anyone who knows economics would know to pay off higher-interest debts first. But the people he targets are not well versed in economics and the high-interest debt first plan is a long and tedious path. That is a difficult path to stay consistent with especially because of its delayed gratification. They need to be quickly and repeatedly rewarded for positive financial behavior. They lose motivation quickly if they don’t see results immediately.
Dave’s does exactly this. It is called the snowball effect because it rewards you quickly for making the correct financial decision. Thus reinforcing the ideas of financial freedom. His plan isn’t about paying off debt (although that is a positive consequence) it is about making good financial habits. Most people don’t struggle to find the most optimal way to pay off debt, they struggle to pay it off entirely.
Again you can see the separation between Dave and others in his field. He is almost promoting the complete opposite ideas. But he is not, just targeting a different, larger audience.
Best Financial Guru
In the end, he’s just a financial habit guru. He doesn’t have the optimal investing plan. Nor the best advice on maximizing returns. But that’s not his goal. There are so many people you can look to for that. Instead, he targets people who want to make good financial habits but have no idea what they are doing and struggle to keep motivated through their financial journey. I mean he literally calls his beginner financial advice The 7 Baby Steps. It is crystal clear who his target audience is at this point.
That’s an important note to make, that his target audience struggles to keep motivated. That is the problem with ‘advanced’ financial plans is that the gratification is delayed. It is hard to weather through the storm when you don’t see a way out for a while. In the long run, the ones who are financially literate know we will get out, but for others that can be difficult to see. We love instant gratification and Dave shows you how to get that and still achieve a level of financial freedom. That’s why he is the best financial guru.
So if you disagree with Dave about his advice, that is completely understandable. But that doesn’t mean it’s bad advice, it just means it isn’t for you. He isn’t targeting you and you should instead find a path that fits your needs.