Dave Ramsey and Ramsey Solutions' Financial Advice: 7 Things You Can Ignore

Dave Ramsey is a popular financial guru known for doling out no-nonsense money advice. Since 1992, Ramsey has helped millions of people get out of debt and get right with their money. Ramsey Solutions is a financial education and media company founded by Ramsey that creates books, podcasts, and digital tools designed to help everyday people break free from debt and take control of their money.

While their advice works for many, not all of it is worth following. Here are some of their tips for how to manage your money. You might want to think twice before putting these plans into action.

This one is a tip from Ramsey Solutions. It suggests followers get ahead financially by paying off any and all debt before contributing to their retirement plans.

Some experts have criticized this strategy, saying people who follow it might end up working well into their senior years due to a lack of retirement savings.

By waiting to invest, you rob yourself of time to watch your investments compound. You could be leaving a lot of money on the table for the satisfaction of not paying a few hundred dollars in credit card interest.

Obviously, you should pay off credit card bills and other debts if you can. But you shouldn't ignore planning for your post-working years either.

While Ramsey is a big advocate of saving up until you can pay for things in cash, he does tolerate home mortgage debt.

However, he suggests home borrowers wait until they can make a down payment of at least 20%, and urges them to opt for a 15-year mortgage over a 30-year home loan.

Ramsey's advice requires you to put a lot of money into a down payment and monthly mortgage payments. Many people can't afford to buy a home this way.

Paying your mortgage in full should come before renovation projects, hobbies, family trips, or other nonessential activities, according to Ramsey Solutions. Few people can manage to live this lean.

If you love living frugally and hate debt, maybe it could work. But for most people, the occasional modest vacation or round of public golf is good for the soul and helps you to relax, refresh, and be happier in life.

Ramsey is a big believer in investing money in actively managed funds that deliver consistent returns year over year.

This sounds reasonable, but research has found that over time, passively managed funds that simply track the market outperform actively managed funds that try to beat the market.

Not only do actively managed funds not perform as well, but they also come with higher management fees.

This may be good advice for chronic overspenders, but a sweeping command of "thou shalt not use plastic" isn't necessarily good advice for everyone.

Credit card overuse is a problem in America, with millions of consumers paying high-interest debt. However, those who manage cards responsibly can earn a host of great perks, such as cash back and free travel.

Also, some security experts note that paying for things with credit cards offers some valuable protections in disputes with merchants, and helps to protect you from losing money in instances of fraud.

Many people swear by the "snowball" method, Ramsey's triage process for attacking debts. With this approach, you pay off debts with the smallest balance first while making minimum payments on all other bills.

Then, as each new balance is paid off, you tackle the next-smallest debt using the same method until your slate is wiped clean.

Any approach is better than just ignoring the mounting bills. But using the snowball method isn't usually the cheapest way to tackle credit card bills.

The alternate approach, called the avalanche method, instead focuses on paying off the most expensive (highest-interest) debt first. This approach can save you more money in the long run.

Still, many people prefer the snowball method. It gives you the powerful psychological boost of reducing the number of individual debts you carry, ‌and can generate the feel-good enthusiasm you need to keep going.

Ramsey has some dubious advice on how to tap retirement funds. He suggests drawing down funds at an 8% clip, basing that advice on the belief that you can count on 12% annual growth for your retirement funds.

However, 12% is much higher than the stock market's long-term growth rate of about 10% annually. You are better off working with a financial planner who can provide tailored guidance about when to make withdrawals and for what amount.

Some devoted followers credit Dave Ramsey and Ramsey Solutions with transforming their financial lives. 

However, if these approaches don't resonate with you, there are many other financial experts you can consult, including a good financial advisor.

When you are ready to start investing, these experts can help you craft a plan that will hopefully help you to minimize debt and maximize returns.