Is Dave Ramsey Legit? 5 Things I Disagree With as a Lawyer and Investor
Is Dave Ramsey legit? For the most part, yes. He has helped millions of people get their financial life together, and I genuinely respect that. But a handful of the things in his Baby Steps can actually hold certain people back, and there’s one blind spot in his plan that I don’t think anybody else is talking about.
Before you accuse me of being a hater, I want to be clear that I'm actually a huge fan of Ramsey. I watch Rachel Cruze and George Kamel’s Smart Money Happy Hour every single week.
But as a lawyer and an investor myself, I don’t think one-size-fits-all works when it comes to money. So when people ask me “is Dave Ramsey a good financial advisor?” my honest answer is that it depends on who’s following the plan.
His system is fantastic for building momentum and getting out of debt. It’s just that some of his rules can hold you back once you’re ready to actually build wealth. That’s the nuance that gets lost when people treat the Baby Steps as gospel.
So today I’m walking you through the 5 things I disagree with Ramsey about, and I’m saving the biggest one, a blind spot I see as an estate planning lawyer, for last.
This post is all about whether Dave Ramsey is legit, where his advice holds up, and where it might actually cost you.
👉 Grab my free Estate Planning Workbook before we get into it, so you can walk into your first meeting with an estate planning lawyer fully prepared.
So, Is Dave Ramsey Legit?
Yes. And I want to give credit where it's due before I get into my disagreements.
If you're drowning in consumer debt and you have no idea where to start, the Baby Steps work. They’re simple, they build momentum, and they’ve genuinely changed a lot of lives. When someone asks me, "Does Dave Ramsey give good advice?" the debt-payoff part of his plan is exactly what I point to.
My issue isn't with whether the Baby Steps work. It's that they're built as one plan for everybody. And the more financially capable you already are, the more a few of these rules start working against you instead of for you. Here are the 5 things in Dave Ramsey’s financial advice that I'd change.
1. Baby Step 1: The $1,000 Emergency Fund
Let's start with the first Baby Step, and the one that pretty much everyone debates, including Ramsey's own daughter: the $1,000 emergency fund.
Dave has said himself, on camera, that the $1,000 starter fund isn't really enough, and that it was never actually about the $1,000 in the first place. But if that's true, then an HVAC unit going out, a trip to the emergency room, or a car needing a new transmission can wipe out that entire fund in one shot, because $1,000 was never built to handle a real financial emergency.
And look, I get what he's going for. This step is about building momentum and getting people to feel like they've accomplished something right out of the gate, and that has genuinely worked for a lot of people. I'm not going to argue with results.
But when I think about the incredibly smart clients I work with, that $1,000 emergency fund just doesn't do anything for them, because they already know, logically, that $1,000 isn't enough to actually keep them safe on the journey.
Here's what I'd recommend instead: base your starter fund on your highest insurance deductible. That number is different for everyone, so pull up your policies and look at:
Your homeowners or renters insurance deductible
Your auto insurance deductible
Your health insurance deductible
Take the highest of those three and make that your Baby Step 1. That way you know you're actually covered when a major life event hits, instead of it derailing you from your path to building wealth.
2. Baby Step 2: Debt, Credit Cards, and the 401(k) Match
Next up is Baby Step 2, the Debt Snowball, where you pay off all your consumer debts except your mortgage.
I agree that you should focus on paying down your debts. But Dave Ramsey has told people not to take their employer’s 401(k) match until they're done paying off debt, and I think that’s a mistake.
Turning down free money and guaranteed growth from your employer, just to pay off a low-interest loan a little faster, is a decision you never get the chance to go back and undo. You really need your priorities straight here so you’re not setting yourself back for years to come.
Is Dave Ramsey Right About Credit Cards?
This is one of the most common questions I get, so let me be direct. Is Dave Ramsey right about credit cards? Sometimes. His stance is that you should never, ever have one. Cut up the ones you have and never take another one out.
The problem is that this advice assumes everyone has the same lack of control that Dave says he had, so nobody should have a credit card at all.
But there’s an option C. If you’re worried about overspending, you can get a card with a $100 or $200 limit. Those exist. You can build your credit score that way, and I think your score matters a lot more than Dave gives it credit for, especially if you want to buy a home someday.
Now, if you genuinely don't trust yourself to handle even a small credit line like that, then don't do it. I'm not saying everybody can handle debt the way I'm describing. I'm saying a one-size-fits-all rule doesn't serve everybody the same way.
That brings me to my last issue with Baby Step 2, which is paying off all debt no matter what. I think there's such a thing as good debt. If you’re using leverage for something like a real estate investment, and you can genuinely handle the payments, there’s really nothing wrong with carrying that debt.
You have to be incredibly diligent about running the numbers on an investment property, which I won't get into here. But if you truly know what you’re doing, using low-interest debt the right way can accelerate your wealth. And despite Dave claiming that all his millionaire friends didn't use debt to get there, most of the ones I know actually did. They didn’t just save their way to wealth, which brings me to Baby Step 4.
3. Baby Step 4: The 15% Problem and Real Estate vs. Index Funds
In Baby Step 4, Ramsey recommends saving 15% of your gross income into an IRA or 401(k).
Fifteen percent might have made sense as a retirement target decades ago, but I don't think it's enough anymore, especially if you’re mostly investing in index funds. How much you actually need to save depends on the lifestyle you want in retirement and the age you start.
Most people don’t start seriously saving until their early thirties, and when you run the numbers from that age, 15% just doesn’t get you to a fully funded retirement. A number closer to 25% of your gross income is a much more realistic target if you want to maintain your lifestyle once you stop working.
I'm not saying index funds are the wrong asset. I think they're a great, truly passive strategy. But real estate can be a better path for building wealth, if (and this is a big if) you're willing to put in a lot of hard work for at least a decade. And even then, you don't get to retire after that decade. You'll likely spend the next one paying off the debt you took on to get there.
So I actually agree with Dave on one thing here. You should not be listening to the real estate gurus who tell you that you can live off your cash flow within five years. That's usually someone selling you a course, because they realized pretty quickly that they couldn't live off their own cash flow either.
If you don't want to put in that kind of work, and honestly if you're still carrying consumer debt, real estate probably isn't the right move for you anyway. In that case, passively investing in index funds through your IRA or 401(k) is a great approach. And if your employer offers a match, max it out. That's free money.
Why I disagree with Dave on buying real estate in cash
Here's where I really part ways with Dave. He recommends using all cash to invest in real estate, and I think that completely misses the point of what makes real estate work in the first place, because the leverage you get from a mortgage is the exact thing that makes real estate investing accessible to regular people at all.
Think about the math. The median home price in the United States is over $400,000. By the time you've saved $400,000 in cash (and that’s on top of whatever is locked in your IRA or 401(k), because pulling that out early comes with a hefty penalty), you’re most likely in your late fifties or early sixties.
That’s arguably too late to be just starting in real estate, and at that point all you’d have is one investment property, which for a lot of reasons isn’t really worth having on its own.
There’s also a completely different way to think about your retirement number if you’re building wealth through real estate instead of the stock market. With stocks, you’re taught to rely on the 4% rule, which means you need about 25 times your annual expenses saved before you retire. That’s basically what the 15% rule is built on, and as you can tell, it really depends on your age.
Real estate doesn’t work that way, because you’re not slowly selling off pieces of your portfolio to live on. You’re living off the cash flow while you keep the actual asset.
A well-run real estate portfolio can conservatively produce a return on equity somewhere between 6 and 8%, and I like to be conservative. When you run the math, needing around $2.3 million in real estate equity can replace the same income as needing $4.5 million in a stock portfolio. That's about half of what you'd need if you were only relying on the stock market.
And there's one more piece of this that I don't think gets talked about enough.
When you retire off index funds using the 4% rule, you're slowly eating away at your own principal every single year just to generate income. When you retire off real estate, you're living off what the asset produces instead of the asset itself.
So when you pass away, instead of leaving your kids whatever’s left of a stock account you've been drawing down for twenty years, you can leave them an entire portfolio of paid-off properties. Properties that can make them financially independent decades earlier in life than you were.
4. Baby Step 6: Paying Off Your Mortgage Early
Speaking of homes, let’s talk about Baby Step 6, paying off your house early.
Paying off a low-interest mortgage early means giving up a lot of long-term wealth building. If your rate is low and the market does what it has historically done, putting extra money into your mortgage instead of investing it is working against you.
If you have a mortgage sitting at 3, 4, or even 5%, and you take cash you could be investing and use it to pay that mortgage down faster, you’re essentially choosing a guaranteed 4% return over an investment that has historically returned closer to 8 to 10% a year. That feels safe, but really you're just trading a better long-term return for a smaller guaranteed one and calling it safe.
So if your rate is low and you’re still early in your working years, I’d rather see you invest that extra money, let it compound, and pay off the house later, once you’ve actually built the wealth first.
5. The Blind Spot: Estate Planning
This is the one I care about most, and it’s the piece of Dave Ramsey’s financial advice that worries me as a lawyer.
Dave says a living trust only makes sense once you reach a net worth of $10 million, and that you should never put your home in one because it’ll be a hassle to sell. I think that advice is way too broad.
I’m not saying every single homeowner needs a trust. But once you own real estate, a revocable living trust is worth at least a conversation with an estate planning lawyer, and that has nothing to do with your net worth.
Here’s why. If your home is just in your name, it typically has to go through probate when you pass away. If it’s been properly transferred into a revocable living trust, your successor trustee can usually step in and manage it, sell it, or distribute it without waiting on a probate court to appoint someone first.
That saves your family time, keeps things more private, and means someone you actually chose is handling things if you become incapacitated, not a judge.
Now, a trust isn’t the only tool that gets you around probate. Depending on your state, your home might pass through survivorship ownership, a transfer-on-death deed, or what’s sometimes called a Lady Bird deed. Other assets can pass through simple beneficiary designations. Sometimes one of those is simpler and cheaper than a full trust, so it’s not one-size-fits-all here either.
And I’ll give Dave this much. Just signing a trust doesn’t automatically mean your family skips probate. A trust only avoids probate for whatever’s actually been transferred into it. If you sign the paperwork and never retitle your assets, everything left in your own name can still end up right back in probate court.
But saying a revocable living trust makes your home a hassle to sell just isn’t accurate. If you're the trustee, you can typically sell the home without first pulling it out of the trust. You might need some extra paperwork, and refinancing can occasionally add a step, but your house isn’t trapped in there.
The real question was never whether you’re worth ten million dollars. It’s whether a trust makes sense for your property, your family, and what happens if you become incapacitated or you die.
Too many people assume they have plenty of time to figure this out later. From personal experience, I can tell you that people sometimes die a lot earlier than anyone expects. So please don’t rule a trust out just because you haven’t hit some arbitrary net worth number.
So, Do Dave Ramsey’s Baby Steps Work?
For a lot of people, yes. If you’re getting out of debt and building your first bit of financial stability, the Baby Steps are a solid, proven starting point, and I’ll always give Dave credit for that.
But do Dave Ramsey’s Baby Steps work for everyone, at every stage? No. The more capable you are with money, the more you’ll want to customize the plan: a real emergency fund based on your deductibles, taking your full employer match, using good debt intentionally, saving closer to 25%, keeping a low-interest mortgage in place, and taking your estate planning seriously long before you hit some magic net worth number.
If you take one thing away from this post, please make an appointment with an estate planning lawyer. If you’re in New York, that could be me.
👉 Download my free Estate Planning Workbook, so you walk into that meeting fully prepared and know exactly what to ask.
