Some financial advisors disagree with the advice given by personalities like Dave Ramsey, either on technical details or broader elements of his approach. I’ve written about this on multiple occasions before (see here, here). Whatever the reason, many advisors dismiss Ramsey’s guidance without considering why the advice is so popular in the first place.
Dave Ramsey has amassed a considerable following among the general public, with many people claiming that his methods have helped them get closer to their financial goals. This suggests that there is something appealing about his approach for many people. In this blog post, we’ll take a closer look at some of the key elements of Ramsey’s financial advice to see what makes it so popular.
Acknowledge That Debt Is a Big Problem for Most Americans
One of the reasons Dave Ramsey’s advice is so popular is that he doesn’t try to sugarcoat the problem of debt. He acknowledges that debt is a big problem for most Americans and doesn’t try to downplay it. This acknowledgment resonates with people because it’s something that they can relate to. Too many financial “experts” act like they’ve never had any problems with debt themselves, which can make it difficult for average people to relate to them. Moreover, many experts may dismiss the challenges people face with debt, and even encourage the use of debt rather than provide advice that helps eliminate the debt many want to get rid of.
Ramsey also offers hope by offering concrete steps that people can take to get out of debt. He gives people a roadmap for getting out of debt – as well as further steps for building wealth – in a highly actionable manner. Essentially, Dave provides a roadmap (i.e., his Baby Steps) that gives people clarity regarding their next step in the process and that provides hope and belief that they can actually achieve their financial goals.
Offers Concrete Steps for Achieving Financial Goals
Another reason Ramsey’s advice is so popular is that he provides concrete steps for achieving financial goals. He doesn’t just tell people what they should do – he tells them how to do it. For example, one of his key pieces of advice is to create a budget. He doesn’t just say “you should create a budget.” He provides specific instructions on how to create a budget that works for you and your family. This level of detail is helpful for people who are trying to get their finances under control but don’t know where to start.
He also provides specific advice on how much you should save each month, how much you should have in an emergency fund, and how to invest for retirement. Again, these are all topics that most financial experts just gloss over without giving any real guidance – or may instead give the ever-popular but oh-so-unhelpful guidance of “it depends.” The level of specificity in Ramsey’s advice is one of the things that sets him apart from other personal finance personalities.
Focus on Behavior Change, Not Just Information Gathering
Finally, one of the things that makes Ramsey’s advice so popular is that he focuses on behavior change, not just information gathering. A lot of times, when people are trying to improve their finances, they think they just need more information. They read books and articles about personal finance, but their behavior doesn’t change. Ramsey understands this and has focused his advice on helping people change their behavior so they can achieve their financial goals.
He does this by providing specific steps that people can take to change their behavior, like creating a budget or starting an emergency fund. He also encourages people to make changes in their behavior gradually so they don’t get overwhelmed and give up. When working through the Baby Steps, you stay focused on a particular area of improvement, rather than trying to do everything at once. This focus on behavior change is one of the things that makes Ramsey’s approach so effective.
Ultimately, if you want to improve your own finances, there’s a lot of good that is offered by a system like Dave Ramsey’s Baby Steps. As you progress on that journey, you will encounter many naysayers who insist the Baby Steps are foolish. The reality, however, is that there’s incredible wisdom embedded in Dave’s Baby Steps.
Critics like to try and pick Dave apart over technicalities or his reliance on rules of thumb, but they are often missing the bigger picture. Dave offers a cohesive framework and plan for action. Many of the “tweaks” critics would like to make to Dave’s approach destroy the cohesiveness of his approach and the clarity that comes with it. That can leave people feeling rudderless and unsure of where to go next. It is often easier to commit to a vow to simply not use debt other than a mortgage, than it is to navigate one’s financial life and wonder if a certain type of credit actually should be used in a given situation.
There’s clarity in simply saying “No” to debt and moving forward. It also helps promote creativity and can channel energy in a positive manner. Instead of simply swiping the credit card and taking on $100 of debt, someone might think to themselves, “I really want this. How can I find $100 to pay for it?” Maybe that means they put in some extra hours at work. Maybe they find some stuff laying around the house they can sell. Whatever the method, simply saying “No” and channeling their energy toward fulfilling their goal is a benefit that is often overlooked. Critics who point out that putting the $100 charge on a credit card could have earned $1 back in rewards are missing the point.
