Dave Ramsey vs. Suze Orman: Find the right method for your personal finances

Dave Ramsey vs. Suze Orman: Find the right method for your personal finances

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Neither Dave Ramsey’s Financial Peace or Suze Orman’s Financial Guidebook is the winner when it comes to your personal finances and debt payoff method. Each process brings many pros and cons but each is proven to help you achieve financial freedom and your personal finance goals.

While I have separate guides to Ramsey and Orman’s methods, having a comparison is essential to making an informed decision when determining your approach to taking back control of your finances.

Personal Finance Plan

While each financial expert has their merits, it’s important to look at their plans on how to start a budget along with how to stay financially clear.

Neither financial guru is much help without a plan. Ramsey has influenced many Christian organizations to implement his program, Financial Peace, while Orman relies on her brand and expertise to drive her own Financial Guidebook to her listeners.

Each plan shows clear steps to achieve financial freedom, Ramsey’s being slightly clearer than Orman’s, however, one could argue, Orman’s might save you more in the long run.

Dave Ramsey’s Financial Peace

Dave Ramsey’s Financial Peace plan spells out set guidelines on how you should tackle your personal finances in about 7 steps.

  1. Start a $1,000 emergency fund
  2. Apply the Debt Snowball method to payoff debt
  3. Save for 3-6 months living expenses
  4. Save 15% for retirement
  5. Start saving for children’s college funds
  6. Give 10% of your income
  7. Pay off your mortgage early

Many supporters of Ramsey refer to many of the steps as his Baby Steps to achieving your financial freedom.

As stated, Ramsey’s approach is very structured and definite in its explanations. Financial Peace has set goals and can give you a percentage or definite number when approaching your money saving goals.

Suze Orman’s Financial Guidebook

Suze Orman’s Financial Guidebook is a bit more vague and numerous in her steps in achieving your financial freedom. With 9 steps, the Financial Guidebook allows you to have a bit more wiggle room when it comes to how much and how to save money.

  1. Save at your pace
  2. Have consistency and strong-will
  3. Invest in a Roth IRA
  4. Automatic payments to retirement, emergency and saving accounts
  5. Get the most out of your employer’s 401K match program
  6. Invest in stocks (100-your age=% suggested)
  7. Pay one more mortgage payment each year
  8. Put $50 more into the insurance
  9. Designate your financial accounts to dependents

While most of Orman’s steps seem vague, Financial Guidebook asks you to put away more substantial amounts compared to Ramsey’s Financial Peace.

Orman also relies more heavily on accounts you don’t necessarily have ready access to, such as a Roth IRA or your 401K. Her approach is more interested in building wealth rather than paying off any debt or building your disposable income.

Debt Payoff Method

Debt payoff is a major concern when it comes to financial freedom. Many people start to seriously look into their personal finances to get out of debt and become debt free.

Each debt payoff method has effective results and follows a similar method in attacking debt, however, the approach is where the differences lie with each personal finance expert.

Dave Ramsey’s Debt Snowball Method

To start, Dave Ramsey’s Financial Peace Plan has you determine all of your debt and rank them from lowest to highest amount due. This is all debt, excluding your mortgage, so your auto loans, credit debt, and student loans are included.

Next, Ramsey will have you start attacking your lowest debt with the minimum payment with any extra amount you are able to add on.

Once you finish with the lowest debt, you will apply your lowest debt’s minimum payment towards your next lowest debt. You will continue this process until you no longer have any debt.

Suze Orman’s Debt Avalanche Method

Suze Orman’s Financial Guidebook also has you tally up your debt, excluding your mortgage. The extra step in Orman’s Debt Avalanche method is to also determine each card or loan’s interest rate.

Once you have all of your debt accounted for, Orman has you arrange each debt by the highest interest rate to the lowest. Instead of attacking your debt by the amount on the debt, you will start with the highest interest rate and make your way down. I would suggest starting with the higher amount of debt if any are the same rate.

After you finish with your highest card, you will attack your next debt with the previous’ minimum payment.

Emergency Funds

Both personal finance gurus have different approaches to creating an emergency fund. These approaches differ in the timing of when they suggest when to start an emergency fund as well as how much to save.

Dave Ramsey: $1,000, 3-6 months

Ramsey suggests in Financial Peace to start with a $1,000 emergency fund. If you can’t reach $1,000, reach for $500 at least in case anything comes up while paying off your debt.

In addition to this $1,000 emergency fund, Ramsey’s Financial Peace program will have you save anywhere from 3 to 6 months for expenses in case of any layoffs or monumental expenses. This emergency fund starts after all of your debt has been paid. You should be saving once you have a clear idea of what you are expected to pay for your living expenses without the threat of credit expenses and being able to live within your means.

Suze Orman: 8-12 months

Orman’s Financial Guidebook doesn’t specify when to start your emergency fund, only to save at your own pace and stay strong-willed while you are working at paying off your debt and contributing to your other funds as well.

The Financial Guidebook also suggests you save for a higher and longer period of time. Keep in mind, Orman’s finance goal for you is to save and put more money aside and into compounding accounts. In the end, if you are still saving and stashing away money, you will have more money at the end of any unexpected circumstances.

Credit Cards

In today’s culture, it seems preposterous that anyone would not have a credit card, let alone a zero balance on all of them.

The idea is getting less preposterous as people continuously find ways to achieve financial freedom and reach their personal finance goals of being debt-free.

It’s helpful to know that while families and individuals may be debt-free, they most likely do have a credit score. While some critics might say you no longer truly need one, it’s important to keep an eye and develop a credit history for mortgages and higher value loans.

Dave Ramsey: Con

Dave Ramsey is in the negative about having any credit cards. They pose a potential for debt to spike again in your life and thus, shouldn’t remain in your life.

If you find yourself relying on credit cards in your everyday purchases rather than relying on them in emergency situations, you might consider heeding Ramsey’s point of view. Until you’ve paid and can handle credit cards responsibly, you need to maintain a distance from them.

Suze Orman: Pro

Suze Orman’s approach to credit cards is positive but only if they can be used in a responsible manner.

While the debt Avalanche Method mainly focuses on the interest rate of the debt, if you don’t have much of a balance and good credit, you are more likely to have a favorable interest rate. Once you have most of your debt paid off, you might consider having a credit card for emergencies if you can find a card with a reasonable and low-interest rate.

Personal Finance Approach

The way each of these moguls approach their personal finance methods plays a big part in their success.

Both of these approaches might be the deciding factor as to why you try a particular personal finance method. You might like one over the other for their approach but practically, it might be easier for you to go through another’s program.

Dave Ramsey: Psychological

Financial Peace utilizes a psychological approach. It’s more about finding the best solutions to your life to attack your debt and stabilize your budget. Ramsey doesn’t look at the numbers you need to complete the process, both in terms of debt or amount of savings.

Ramsey seems to focus on keeping you on track to achieve financial freedom in the easiest process and amount of steps possible.

Suze Orman: Practicality

On the flip side, Financial Guidebook looks at the dollar or percentage amounts to make Orman’s process work.

Orman first looks at the interest that is accruing on each debt along with the savings or investments you can contribute to your future self. The practical and numeric approach to the Debt Avalanche and Financial Guidebook appeals to money-saving individuals but might mean you have to be more self-disciplined to accomplish the personal finance goals.

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