‍5 Times Dave Ramsey’s Classic Advice Can Backfire—and What to Do Instead

Dave Ramsey has helped millions escape debt and build better money habits. But once you move beyond damage-control and start optimizing for long-term wealth, several of his “never budge” rules can actually cost you time, money, and peace of mind. Here are five places where a small tweak—or a total 180—can leave you far better off.

1. “You don’t need a credit score.”

• Reality: In today’s world, no credit = bad credit. Mortgage lenders, landlords, insurers, even some employers treat an empty file the same as a blemished one.

• What it can cost: Higher interest rates, bigger security deposits, limited insurance choices. Over a 30-year $300 k mortgage, a 1-point rate bump can bleed $50 k + in extra interest.

• Better approach: Use credit cards like debit cards—auto-pay in full each month, keep utilization below 10 %, and let a healthy score unlock cheaper borrowing and easier approvals.

2. “Pay off every penny of debt before you invest.”

• Reality: Ignoring an employer match or decades of compounding while you attack a 4 % student loan is like turning down a guaranteed raise.

• Smart Middle Ground:
  
  1. Capture all “free money” (401 k match, HSA seed money, etc.).
  2. Knock out high-interest debt (≈8 %+).
  3. Split extra cash between modest investing and accelerated payoff of low-interest loans.
• Result: You still become debt-free, but you don’t arrive there with a zero balance in your retirement account.

3. “Stick with good growth stock mutual funds.”

• Reality: Mutual funds can work, but ETFs usually deliver the same diversification with lower expense ratios, fewer surprise capital-gain distributions, and real-time trading flexibility.

• Numbers: Average U.S. equity mutual-fund expense ratio ≈ 0.50 %. Broad-market ETFs often charge 0.03–0.10 %. On $250 k over 25 years at 7 %, that fee gap can exceed $65 k.

• Action step: Compare any Ramsey-approved fund to a low-cost ETF tracking the same index. If performance is similar, why pay extra?

4. “Plan on a 12 % stock-market return.”

• Reality: The S&P 500’s nominal long-term average is closer to 10 %; the inflation-adjusted figure sits near 7 %. Assuming 12 % can lead you to under-save and overspend.

• Fix: Base projections on 6–8 % before inflation, 4–6 % after. If the market does better, great—you’ll finish ahead of schedule rather than scrambling later.

5. “Use the debt-snowball (smallest balance first).”

• Reality: Quick wins feel good, but letting an 18 % credit-card balance linger while you celebrate a 4 % medical-bill payoff is mathematically brutal.

• Debt-avalanche alternative: Pay minimums on everything, then throw every extra dollar at the highest APR. You’ll be debt-free sooner and keep thousands in interest. Need motivation? Track your total interest saved instead of number of accounts closed.

Bottom line

Ramsey’s framework is fantastic for someone drowning in consumer debt and desperate for simple rules. But once you’re past the crisis stage, one-size-fits-all marching orders can quietly slow your progress. Build credit intentionally, blend investing with low-rate debt payoff, embrace low-cost ETFs, ground your forecasts in realistic returns, and prioritize high-interest balances first. Your future self—and your net worth—will thank you.

‍