Dave Ramsey vs Suze Orman – Which One Is Right?

A fight for the ages. Watch these two personal finance experts duke it out. Okay, just kidding, although that would be a match worth watching. 

Since we are unlikely to ever get these two together to prove their worth in a ring, octagon, or any other fighting arena, we’ll have to settle for letting their advice and personal finance plans duke it out instead. 

But, comparing the two personal finance gurus isn’t exactly an apples-to-apples kind of comparison. They have very different backgrounds, personalities, and views on money and finance. 

So instead of trying to compare apples to oranges, let’s take a look at their most often recurring advice as well as the potential pitfalls of their guidance. 

Who is Dave Ramsey? (Including His Net Worth, and How He Made His Money)

Dave Ramsey is a finance expert who helps people navigate a debt-free life, but he wasn’t always a successful personal finance guru. 

He started out his young life as an avid entrepreneur, even managing to graduate college with zero dollars in debt thanks to selling real estate full-time while attending college. 

With his degree in finance and real estate, he set out to tackle the real estate investing world, and thanks to a few helpful family contacts, by the age of 26 he had $4 million in real estate investments. 

And then the banks called in all of the debt and sent him into bankruptcy. He fought his way back to solvency via selling real estate as a broker and other financial strategies. 

Later, when a member at his church was in a tough spot financially and asked Ramsey for advice, the financial guru we know today was born. 

Now worth more than $200 million, including his personal home worth nearly $5 million, Dave Ramsey has built a profitable personal finance advice business through several books he has written, his radio show, and the personal finance classes he offers. 

Dave’s Advice

1. Save $1,000 for Your Starter Emergency Fund

The first baby step in Dave Ramsey’s financial solution is to start an emergency fund. 

The goal he prescribes for this initial emergency fund is $1000. This fund is designed to be used only in emergencies, i.e. vehicle repairs, medical bills, etc. 

To get started with an emergency fund, you’ll need to first create a budget so that you know how fast you can get to this $1000 mark without compromising your overall financial well-being. And if you need help creating a budget, Dave Ramsey offers solutions for that. 

But why only $1000 for an emergency fund when common advice states you need to save up to 3-6 months’ worth of expenses? Because Dave would like you to first focus on debt repayment.

2. Pay Off All Debt (Except the House) Using the Debt Snowball

Step 2 of Dave’s plan is to work on paying off debt. FYI, Dave abhors debt.

Traditionally the advice for tackling debt is to start with either the highest balances or highest interest rates, and then cascade these payments into your lower balance/interest rate debts. 

But Dave’s advice is the opposite. 

Instead of cascading payments, Dave suggests snowballing payments. This is done by starting with paying off the smallest debt balance first and snowballing the payments to the next lowest, and then the next. 

This part of his advice is the most controversial as it can set up some individuals to pay more interest than they otherwise would have by using a different debt-repayment method. 

And skip paying off the mortgage, that comes later.

3. Save 3–6 Months of Expenses in a Fully Funded Emergency Fund

Once you have your debt paid off, then Dave wants you to return to building that emergency fund.

Looking through your budget, he wants you to come up with a number that amounts to at least three months worth of your living expenses. And then make this your emergency savings goal. 

For example, if you lost your job tomorrow you could still pay your bills for a time without going into debt. 

If you think it might be difficult for you to find a comparable job that might take more than 3 months to get, then you should save more in your emergency fund. Probably closer to 6 months’ worth. You can also check out our Dave Ramsey vs. Robert Kiyosaki: Who Should You Listen To? article if you are interested.

4. Invest 15% of Household Income into Roth IRA’s and Pre-Tax Retirement Plans

Once you have your emergency fund fully established, then it is time to move on to your retirement planning. 

Here Dave recommends that you put aside 15% of your gross income (that’s pre-tax) into a pre-tax retirement plan, i.e. a 401k or Roth IRA. So, if you make $1000 each week before taxes (or anything else) are taken out, then you’ll need to set aside $150 each week. 

It is also important to note that you need to do this for your whole household (i.e. spouse). Otherwise, you could find yourself stuck with increased expenses in retirement.

5. Set Up A College Fund For Your Kids

Once you have your future planned for, it’s time to plan for your children’s futures. Well, if you have children, that is. 

Unless your kids are already grown, Dave wants you to start a college fund for them. College is not cheap after all, the current cost for a 4-year education is over $100,000. And the costs will only continue to rise. 

How much you’ll need to save depends on where you expect them to attend school (in state vs. out of state) and when (i.e. 5 years or 15 years).

To meet your savings goals, Dave Ramsey recommends using a 529 Plan, but there are other options out there.

6. Pay Off Your Home Loan

Earlier, during the paying off your debt step, Dave asks you to ignore the home loan,