When we started our journey towards financial freedom in 2015, Dave Ramsey was one of the first people we ‘met’ that helped us get our act together. Now, we’re DEBT FREE and we’ve paid off  $130,912 worth of debt! Full disclosure, we did this without following Dave Ramsey’s “7 Baby Steps” or many of his other suggestions.

If you’re a die-hard Dave Ramsey fan and came here with a pitchfork in hand — set it aside and just hear us out for a moment…

Listen, The Total Money Makeover and Financial Peace University have helped a lot of people get out of debt over the last 20 years or so, and that is an amazing accomplishment. As we learned more about personal finance, we noticed that many people believe Dave’s way is the only way to reach financial freedom.

Don’t get me wrong, he does make good points at times, but we think it’s pretty misleading to suggest his way as the only way. This is especially true since Dave didn’t even build his own net-worth by strictly following his 7 baby steps.

Now that we’re more involved in the personal finance space, we get a ton of questions on a daily basis and one of them is:

“Do you guys follow Dave Ramsey’s 7 Baby Steps?”

Here’s the short answer: Nope.

Here’s the slightly longer version:

Emergencies are rarely less than $1,000.

Baby Step #1 directs you to build up a $1,000 emergency fund, so that’s what we did — at first. We held a $1,000 emergency fund for 2 years before we eventually decided to increase it to cover at least 3 – 6 months of our expenses.

Why’d we do that?

We increased it because our definition of an emergency changed. In our view, blown tires, leaking faucets, and other small expenses are not emergencies — they’re nuisances. True emergencies are things such as a sudden job loss/career change, getting extremely sick or being an unpaid military member during a government shutdown.

Our rent alone was more than $1,000 (thanks, California) so increasing our emergency fund was a no-brainer.

I also want to point out the fact that 78% of American households live paycheck to paycheck. We actually lived that way for a while so we definitely understand how important it is to have an adequate emergency fund in place. If you don’t, emergencies suddenly turn into more debt.

We still use credit cards.

Yep! We still use our credit cards, even after living in an RV for 9 months in order to pay them all off. This is directly counter to Dave Ramsey’s advice of performing a plas-ectomy and cutting them all up, but it works for us.

“DJ & Dannie, why on earth would you guys do that?”

Well, we changed the way that we use our credit cards. Instead of using them to increase our monthly spending, we follow a strict budget and use them for our monthly spending. By doing this, we’re able to take advantage of various incentives while using the money we’ve already allocated to spend either way.

We believe that this is a form of responsible credit card usage because you can benefit from cash-back rewards and discounts while sticking to the same budget that you set out for yourself. You just have to develop the discipline necessary to stay out of trouble! (We used rewards points to pay for most of our vacation trip to Mexico, so that was worth it!)

If you’re going to take this approach then you have to promise to always pay your balance in full each month so that you avoid paying any interest. If you’re not going to do that then you should just avoid using credit cards altogether.

We have high credit scores & a house.

Or maybe we have a house because we have high credit scores? 🤷🏽‍♂️

Once the utilization of our credit card accounts dropped from nearly-maxed out to 0%, our credit scores sky-rocketed! This is largely due to the way credit scores are calculated. This fact helped out a lot whenever we decided to buy our first home.

Yes, we bought a house before we finished paying off our debt. We live in an area where rent prices are close to or exceed the total cost of owning a home. It made sense for us to buy now and stop wasting money on rent because we don’t have the luxury of moving to another state to lower our housing costs. I’m in the military, with limited base options, so we’re pretty much locked into our area for a while.

If our circumstances were different, we’d probably make different choices, but Dave’s advice doesn’t take individual situations into consideration. His advice assumes one solution for everyone, and according to him, our only choice would be to rent — no matter what the circumstances are.

– Nah.

Compound interest is your friend.

Albert Einstein is believed to have said, “Compound interest is the 8th wonder of the world. He who understands it earns it… He who doesn’t — pays it.” I love this quote because it sums up exactly how we feel about investing.

The problem we have with Dave’s advice is that he tells everyone that they shouldn’t invest at all while paying off debt. We followed this advice for most of our journey, but when we started learning more about the world of FIRE (which is a whole series in itself), we realized that we needed to start taking advantage of compound interest as early as possible.

Dave Ramsey assumes that everyone will work until they retire somewhere between ages 63 – 70…

We don’t want to wait THAT long to retire. I’d much rather reduce our debt, reduce our monthly expenses, increase our savings rate and increase our investing. Doing all of these things will get us much closer to a point where our investment accounts will produce enough passive income to cover our monthly expenses and early retirement will be an actual possibility!

Personal finance is not “One size fits all”.

At the end of the day, it didn’t matter how much we loved Dave Ramsey. We realized that his advice just wasn’t quite cutting it for us anymore and we needed to broaden our horizons in order to build our own financial plan. The guys over at Choose FI did an amazing podcast episode on, “Why everyone needs Dave Ramsey and why you should ignore him”.

I loved this episode because they likened his advice to the “kindergarten of personal finance“. He provides the basics and a structured approach for people that really need it. The only problem is that there isn’t much left for those of us that want a little bit more than the ‘one size fits all’ advice he often offers.

These days, we’re piecing together our own university-level personal finance program by combining the information and approaches of several voices in the personal finance space, such as Suze Orman, Mr. Money Mustache, Making Sense of Cents, Budgets Are Sexy, Afford Anything, Choose FI — and the list goes on and on.

In all, the biggest lesson we’ve learned during our financial journey so far is that you have to do what is truly best for YOU. We love sharing our experiences even if we don’t have all of the answers (and we’ll never pretend that we do). We’re still learning as we go and we hope that you’ll continue to do the same!

$tay Wealthy Friends

— Dj