6 Dave Ramsey Financial Myths You Need to Stop Believing (Because He Never Said Them)

Even if you don’t follow Dave Ramsey or listen to his radio show, you probably get some of his financial advice secondhand from online and social media sources that discuss and challenge his financial philosophies. If you think some of the advice you’ve read or heard from these sources seems unrealistic, you may be right, as it may not be accurate or even true.

Is Dave Ramsey really advising people to work 80 hours a week or eat nothing but beans and rice while paying off debt? Let’s take a closer look. Here are six Dave Ramsey financial myths you need to stop believing.

1. Eat only rice and beans

When Ramsey says to eat beans and rice, he doesn’t mean it literally. He uses it as a metaphor for what he calls “broke food,” or the food you should buy if you’re in deep debt or want to pay off your debt quickly. His goal is to stop eating out, cut your grocery budget, and use the money you save to pay off your debt.

Even if you’re not saddled with debt, cutting back on your food budget is a good idea if you’re trying to reach other financial goals. It’s often an easier budget item to cut than housing or transportation, so it’s a great place to look for savings. If your grocery budget is feeling the pinch from inflation, Ramsey recommends cutting back on meat and eating more beans, as they’re a cheap source of protein.

In fact, a Ramsey Solutions study of America’s Cheapest Grocery Stores in 2024 found that WinCo stores are a great place to save money on bulk beans and rice. So maybe Ramsey mentions beans and rice frequently, but he doesn’t think you should adopt a diet of just rice and beans.

2. You have to pay cash for a house

Ramsey’s home buying advice is sometimes taken out of context. Yes, he believes that paying cash is the best way to buy a home. Buying a home with cash can save you tens of thousands of dollars in mortgage interest. However, he’s not saying you should put off buying a home until you can afford it.

Ramsey’s recommended path to homeownership if you can’t afford cash is:

Save enough for a 20% down payment and avoid private mortgage insurance.
Get a 15-year fixed mortgage with payments that don’t exceed 25% of your take-home pay.
Pay off your mortgage as quickly as possible.

According to Ramsey Solutions, a down payment of 5 to 10 percent is acceptable if you’re buying a home for the first time, as long as you understand that a lower down payment means you’ll have to pay for private mortgage insurance in addition to the higher mortgage payment. So while Ramsey says the best-case scenario is to put down 100 percent when buying a home, he doesn’t think it’s the only path to homeownership.

3. A $1,000 fund is enough to cover all your emergencies

Building a $1,000 emergency fund is the first of seven steps Ramsey teaches to get out of debt and regain control of your money. Steps two and three involve paying off your debt and building an emergency fund that covers three to six months of household expenses, in that order.

Ramsey doesn’t believe, and doesn’t tell anyone, that $1,000 is enough to cover all unexpected expenses. The $1,000 emergency fund is meant to serve as a starter emergency fund to help you cover small expenses while you’re paying off debt.

“If you wait until you have $10,000 saved to start getting out of debt, you’ll never get out of debt,” he said. You should build a full emergency fund once you’ve paid off all your debt except your mortgage.

If you follow Ramsey’s steps, there are two scenarios in which you should forgo the startup emergency fund and save as much as you can: when you think you might lose your income, such as if you get laid off, or when you’re expecting a baby.

4. Getting out of debt is a math problem

Ramsey says getting out of debt is a behavioral problem, not a math problem. He believes that “financial change is 80 percent behavioral and 20 percent intellectual.”

So what does he mean by behavioral issues? Ramsey once said in a Facebook post, “Financial success is much more about what you do with your money than it is about what you know about it.” He went on to explain that acquiring knowledge about money is easy. It takes the discipline to take the steps that will change your financial situation.

Ramsey’s philosophy may be right, but the importance of financial education should not be underestimated. The National Financial Educators Council estimates that Americans will lose $388 billion by 2023 due to financial illiteracy.

5. You must work 80 hours a week — forever

No, Ramsey doesn’t want you to work 80 hours a week for the rest of your life. Ramsey’s quip, “If you work like no one else, you can work whenever you want,” was a reprise of his motto from his best-selling book, “Total Money Makeover.”

The most famous motto and quote is: “If you live like no one else, later you can live like no one else.” His point is that if you work hard now to get out of debt and achieve financial freedom, you will have the resources to work as much or as little as you want later.

Ramsey advises anyone looking to get out of debt to generate extra income, whether through a second job or a side hustle. For Ramsey, it’s a short-term sacrifice for a long-term gain. How many hours you work is up to you.

Ramsey suggests creating passive income opportunities to generate extra cash without working more hours. Passive income may require an initial investment of time, but the right opportunity will ultimately require little daily effort to maintain the income stream. Examples of passive income include creating and selling digital products, leasing your car, or earning interest on high-yield savings products.

6. You must pay off your house before you start investing

Ramsey recommends doing a few things before you invest, but paying off your home isn’t one of them. If you have debt other than your mortgage, he advises doing three things before you start investing:

Save for a $1,000 emergency fund.
Get out of debt, except your mortgage.
Build an emergency fund of three to six months of expenses.

When saving for retirement, he recommends investing 15% of your gross income. Ramsey says that 15% will give you enough resources to save for your other financial goals at the same time. That percentage is in line with what many other financial experts recommend for younger investors. The older you start saving for retirement, the higher the percentage of your income you need to save, because your savings won’t have as many years to grow.

Beware of Dave Ramsey’s Financial Myths and Other Financial Misinformation

Here are the six biggest myths and misconceptions about money, according to Dave Ramsey, but there’s a lot of financial misinformation out there online. According to a Nationwide survey, more than 34% of investors ages 18 to 54 have acted on financial information they found online or on social media only to find it was “misleading or inaccurate.”

To avoid a costly financial mistake, you should act only on financial advice provided by people or sources you know and trust, and get the information directly from the source.

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