Tori Dunlap Says Dave Ramsey’s Top Rule for Investing Could Cost You Millions — What To Do Instead
Written by
Laura Bogart
Edited by
Kristen Mae
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It’s no secret that there’s no love lost between Tori Dunlap and Dave Ramsey. Indeed, Dunlap has devoted considerable energy to challenging some of the core principles of Ramsey’s personal finance philosophy.
While acknowledging that some of Ramsey’s advice has helped people, Dunlap strongly disagrees with some of his stances on debt and investing — namely, that if you have any kind of debt, including student loan debt, you shouldn’t be investing.
In a post for Her First 100K, Dunlap explained that Ramsey’s stance shows a lack of awareness around student loan debt and, worse, that his advice could be costing people millions of dollars: “We get it — Dave is the ‘all debt is bad debt’ guy. I can’t blame him for staying on message. Unfortunately, this is an area where he’s woefully out of touch.”
Why does Dunlap believe Ramsey is out of touch? And what does she suggest you do instead to potentially build wealth while managing debt?
You Need Time on Your Side To Invest
According to Dunlap, one of the biggest errors in Ramsey’s logic is the assumption that student loan debt can be paid off in just a couple of years early in someone’s life or career, freeing them up to focus on investing for the rest of their lives.
Unfortunately, college costs have skyrocketed as wages have remained stagnant by comparison, making it harder than ever to pay back student loans. Worse, many young borrowers don’t fully understand what they’re signing up for when they take out education loans, leaving them vulnerable to take on even more debt at higher interest rates than they should.
At the same time, time is one of the greatest assets an investor has for building wealth, in no small part because of the power of compound interest.
“Here’s the deal: Most student loans can’t be paid off in a couple of years,” Dunlap told viewers in a TikTok on the topic. “Most student loans take years, if not decades, to pay off. And when it comes to investing, you need time on your side to allow compound interest to work harder for you.”
In other words, Ramsey’s advice could cause people to miss out on years–if not decades–of potential market growth.
A More Moderate Approach
Since Dunlap rejects Ramsey’s all-or-nothing approach, it makes sense that she advocates for a more balanced strategy. She acknowledges that borrowers with loan interest rates over 7% should focus on paying off that debt before investing.
However, Dunlap notes that if your loan interest rate is lower than the historical average return of the stock market, it makes mathematical sense to invest while making loan payments. She explained this approach in a Her First 100K article:
“We use the 7% rule because even at the most conservative estimates, the annual rate of return of the stock market averages 7%. When you are not investing and instead, paying off lower interest debt, you’re not using your money most efficiently.”
Become a Smart Investor While Learning To Pay Down Debt
When you’re saddled with student loan debt — especially a six-figure balance — it’s easy to feel like a financial failure, like you’ll never be able to get ahead. But Dunlap wants you to know that you don’t have to deprive yourself or forgo your ambitions until you’re completely debt-free. Whether you’re in a position to start investing right away or you’ve got to focus on knocking out high-interest loans first, you can start building good investing habits now.
On the Her First 100K website, Dunlap outlines investing essentials, such as avoiding trendy, high-risk investments and staying consistent with your strategy. Investing can be accessible to everyone, not just the people who are debt-free; it’s for anyone who wants to grow their wealth over time.
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