plonkee money an english-er's thoughts on personal finance

October 25, 2007

dave ramsey gives bad advice

Filed under: investment — plonkee @ 12:00 pm

Funnily enough, Dave Ramsey isn’t big in the UK. I doubt that many people have ever heard of him, I certainly hadn’t before I started reading personal finance blogs. As you might have guessed by my response to the meme, if I were debt free… I’m not really a fan. I don’t think his advice is usually bad or anything, but it doesn’t always make the greatest sense and it’s really aimed at a different market to me.

Whilst perusing the dollar stretcher, I came across this nugget of annoyance, should the engaged buy or rent (beware, the caller’s accent is quite strong).

Why did this annoy me? Well there are a few minor irritants: Dave assumes that the caller isn’t living with his fiancee and has a pretty traditional relationship set up and he doesn’t tailor his advice based on their specific circumstances (they have a large deposit). This is less than ideal because the answer to any personal finance question is ‘it depends’. But I can set that aside, after all I don’t really expect him to delve deeply in a conversation that lasts a few minutes.

No, the suggestion that Dave makes is that they wait until they’ve been married a year before buying a house and that they put the deposit money in a mutual fund – all $60,000 of it. I almost couldn’t believe it when I heard this, I had to rewind just to make sure I hadn’t misunderstood.

Folks, a mutual fund is a good place for an investment that you don’t need to touch for at least 5-10 years. If you’re planning on buying a house in the next couple of years, a savings account is a good place for your deposit. A mutual fund is a terrible place for your deposit. Over a one year period there is a more than reasonable chance that you could lose money.

Dave Ramsey, you sir, are a fool, an utter fool.

Edited to add: Apparently I misheard (for which I will blame the unfamiliar accents) and the money was already in a mutual fund, although the synopsis didn’t reflect that.  The synopsis has been changed thanks to Chris Thomas and as much as I can, I take back all insults above.

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