By Roland McIntyre, CFP®
As a sophomore in college, I vividly remember the excitement of buying my first Dave Ramsey book, “The Money Answer Book,” from the Lifeway Christian Bookstore in downtown Nashville. Located near the TSU Avon Williams campus, the bookstore was a haven for those seeking spiritual and personal growth guidance. Ramsey’s book, with its simple yet powerful message of financial freedom, resonated with me deeply. I went on to devour more of his books, listen to his radio show, and watch his YouTube channel. I was particularly drawn to “Every Day Millionaires” by Chris Hogan, a former member of the Dave Ramsey network, which highlighted the humor and entertainment value Ramsey brought to his “baby steps formula.”
Ramsey’s approach to financial literacy has undoubtedly helped millions of Americans. His emphasis on budgeting, debt elimination, and saving has transformed countless lives. However, as I’ve matured in my understanding of finance, I’ve begun to question some aspects of his teachings, particularly concerning their impact on Black Americans, specifically Black Boomers approaching retirement.
The Problem with “Freedom” and Slavery Metaphors
One of my primary concerns is Ramsey’s use of the word “slave” as a biblical reference and his reliance on slavery metaphors when discussing debt. While his intention may be to emphasize the importance of financial freedom and financial independence, his language can be insensitive and even harmful, particularly for Black Americans who carry the legacy of slavery. I was extremely uncomfortable with him watch him carry chains on stage for his financial peace university course which is used in several black churches across the country. I’m being too sensitive, some would say, and I just can’t believe it’s only me out here seeing good intention buy bad delivery of his debt-free message.
Questionable Investment Advice
Ramsey’s investment advice, particularly his recommended retirement withdrawal rates and his aversion to debt, has also been questioned by many financial advisors. His insistence on shaming callers who have made financial mistakes can be discouraging and counterproductive. This approach can create a sense of fear and judgment around seeking professional financial guidance, which may be particularly detrimental to Black Americans who may already face systemic barriers to accessing financial services.
The “Fiduciary” Dilemma
A significant concern is the potential conflict of interest for SmartVestor Pro advisors, who are part of the Dave Ramsey network. These coaches and advisors are required to adhere to Ramsey’s best practices, which may not always align with the fiduciary duty to act in the client’s best interest. This raises questions about whether these advisors can truly prioritize their clients’ needs above Ramsey’s prescribed methodologies.
The Impact of Political Views
Another point of contention is how Ramsey’s political views often influence his financial advice. For example, his stance on student loans may have led many Black listeners to miss out on debt consolidation, student loan forbearance, and forgiveness programs. Considering the disproportionate student loan burden faced by Black Americans, this advice could have significant long-term financial consequences. A study by the Brookings Institution found that Black college graduates owe an average of $52,726 in student loan debt, nearly twice the amount owed by white graduates ($28,006). This disparity is exacerbated by the racial wealth gap, making it even harder for Black borrowers to repay their loans and build wealth.
Similarly, Ramsey’s long-standing advice to avoid investing until all debts are paid off (except for the mortgage) could have caused many to miss out on the bull market run of the last 10-15 years. This advice, while well-intentioned, may have hindered the wealth-building potential of many Black Americans, including Black Boomers nearing retirement. Had they invested earlier, they could have potentially benefited from significant market growth and accumulated greater retirement savings.
The Advisor Gap
It’s important to note that a 2023 study by Allianz Life revealed that only 36% of Black Americans work with a financial advisor, compared to 54% of white Americans. This disparity can be attributed to various factors, including historical mistrust of financial institutions, lack of access to qualified advisors, and the perception that financial advisors are only for the wealthy. Could it be that Ramsey’s influential voice, with its emphasis on self-reliance and disdain for financial advisors, further contributes to this gap?
Conversely, research from Northwestern Mutual’s 2024 Planning & Progress Study shows that Americans with a financial advisor expect to retire two years earlier and feel significantly more confident about their financial preparedness for the future. This highlights the potential benefits of seeking professional financial guidance.
Alternative Resources for Black Investors
Fortunately, there are resources specifically designed to empower Black investors. Organizations like the Association of African American Financial Advisors (AAAA) and use XYPN’s find an advisor tool to filter for African American Certified Financial Planners.
Conclusion
Dave Ramsey’s teachings have undeniable value in helping people get out of debt. However, his methods may not be suitable for everyone, and his political views can sometimes lead to financial advice that is detrimental, particularly for Black Americans. As a Black financial planner, I believe it’s crucial to have a nuanced discussion about Ramsey’s impact on the Black community, especially as Black Boomers approach retirement.
Disclaimer: This article is based on my personal opinion and experience and is not intended as investment advice.