I’m a CFP: 7 Reasons You Should Listen to Dave Ramsey’s Advice on Paying Down Debt
Written by
Laura Beck
Edited by
Levi Leidy
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While financial experts often disagree on debt management strategies, two certified financial planners (CFPs) weigh in on why many of Dave Ramsey’s core principles for debt elimination have merit — with some important caveats.
Here are several reasons people should take heed of Ramsey’s advice on paying down debt.
The Power of Having a Plan
Creating a structured approach is essential, according to Stephen Kates, certified financial planner (CFP) and principal financial analyst for RetireGuide.com.
“Understanding how much debt you have, how much it is costing you in interest payments, and outlining a budget to establish your resources to combat that debt are the foundational elements necessary to take action,” he noted.
The Psychology of Small Wins
Eric Kriste, founding principal and wealth manager for Savvy Advisors, explained why the snowball method can work psychologically.
“You’re going to start to knock out the smallest debts first, regardless of the interest rate, and you’re going to start to take those wins,” Kriste said. “It just helps psychologically, it feels like you’re getting closer and closer because you’ll have also less responsibility.”
The Budget Blueprint
Both experts emphasized the importance of budgeting.
“When you’re trying to allocate specific… every dollar has a job,” Kriste remarked. “Whether folks follow something called the envelope method, or the zero budget… you want to make sure that you’re allocating a job to each dollar.”
The Retirement Question
On Ramsey’s advice to pause retirement investments, Kriste stated a key exception.
“If you have a 401(k) plan and your employer is doing a match, I would probably still move forward and at least put enough towards a 401(k) or some other type of retirement plan where your employer is giving you a match,” he said.
The Modern Envelope System
While Kates pointed out that “the envelope system is not compatible with consumers living in 2024.”
Kriste suggested a modern adaptation: “A lot of people don’t have cash anymore… but it’s going back to either using an application or a spreadsheet… creating some sort of job for every dollar.”
High-Interest Considerations
Both experts suggest flexibility with the snowball method when dealing with significantly higher interest rates.
“If you have a bunch that are in the mid-fours, five, 6% — they’re all relatively close… but if you have a bunch of 6% and you get this one 15% loan standing out there, you know, that’s a sizable difference,” Kriste explained.
The Vehicle Decision
While Ramsey strongly advocates selling cars to eliminate payments, Kriste offered a more nuanced take.
“Maybe you can downsize a vehicle… but I think this is one of the tougher ones to overcome, especially when you have other responsibilities,” Kriste said.
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