Finance

Dave Ramsey’s 4 Tips You Should Stop Following in 2023

A person with facial hair is counting bills at the kitchen table with a neutral expression on his face.

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Make sure you’re listening to the right financial advice this year.


Key points

  • Many people reevaluate their financial situation at the start of a new year.
  • If you’ve been following Dave Ramsey’s advice, there’s some advice you should stop listening to.
  • This includes paying off your mortgage early and avoiding credit cards.

Dave Ramsey is a well-known financial expert and has some great advice, including his suggestions on which retirement account to invest in and why you should avoid taking out a new car loan.

But Ramsay also gave some very Bad advice. And if you’re thinking about how to manage your finances in the coming year, here are four of Ramsey’s suggestions you should stop listening to ASAP.

1. Don’t worry about your credit score

Ramsey has repeatedly said that you shouldn’t worry about your credit score. Basically, he believes that only people who have a lot of debt have good credit and that it is better to stay away from borrowing.

There are several problems with this advice. First, you’ll probably need to borrow money for a while—for example, to buy a house. And while Ramsey said lenders will do “traditional underwriting” and look beyond your credit, that’s not always the case.

Your credit score is also important for other things, such as renting an apartment or getting affordable insurance. You have to worry about it, and if you’re listening to Ramsey and not paying attention to whether or not your credit score is good, you should stop following this advice right now and start working on earning a score that opens doors for you.

2. Avoid credit cards

Ramsey also says you should never use credit cards, and instead opt for a debit card or cash. This is also a bad move.

Credit cards help you build credit. They can also give you the opportunity to be rewarded for spending that you would have done no matter what. By paying off your balance in full, you can earn hundreds or even thousands of dollars a year in additional credit card rewards.

It’s also easier to rent a car or hotel with a credit card than a debit card because you’re not forced to tie up actual money when you make a deposit. Unless you have proven in the past that you are completely irresponsible in your use of credit and you have no confidence in yourself that you will not have a huge amount that you will not be able to pay back, you should have a credit card.

3. Pay off your mortgage early

Ramsey advised paying cash for your home if possible, or taking out a 15-year mortgage if you can’t. He also suggested that it makes sense to pay off your home loan early.

This is bad advice. A mortgage is one of the most affordable loans, and the interest on it can be tax deductible if you itemize. You should get a 30 year mortgage and not pay even $1 extra on it. Instead, you should invest the extra money you would otherwise use to pay off a loan at an interest rate below what you can probably earn by investing in a safe S&P 500 index fund.

4. Invest in mutual funds

Ultimately, Ramsey said you should opt for mutual funds over ETFs. And advises actively managed funds.

This makes no sense. You’ll pay higher fees and have more restrictions and, in many cases, fewer options. ETFs that track market indexes tend to be the best bet for most investors.

You should stop following all these tips in 2023 as it can help you be in a better financial position in the long run.

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