In the guru business what matters most is not always the advice you give but whether it gets people to take action.

As for personal finance gurus, there are two individuals that stand out when it comes to getting others to take action:

I have a lot of respect for both. That respect comes from their ability to transform others relationship with money.

Many have read Dave Ramsey’s The Total Money Makeover and used the advice to change their life. Likewise many have found themselves sucked into the Mr. Money Mustache (MMM) blog and when they came up for air their future had changed.

Personal finance is a long game. You’re going to be managing money the rest of your life. Having someone on your side helps sustain the motivation.

Both Dave Ramey & MMM have their different methods of managing money.

Today I wanted to compare and contrast some of their core philosophies. The goal here isn’t to decide who is better. Instead,  my aim is to help you realize that no financial guru has all the answers.

One of the biggest benefits to becoming educated in personal finance is being able to form your own opinions and beliefs. Then, using your education to form a plan that’s best for you.

With that mindset, let’s dive into the philosophies of two influential personal finance gurus Dave Ramsey and Mr. Money Mustache.

Starting With The End In Mind

Dave Ramsey wants you to “live like no one else today, so later you can live like no one else.” Ramsey’s goal is to get you out of debt, building wealth, so as he says you can “live and give like no one else.”

At it’s core, MMM is an early retirement blog. The blog encourages a very high savings rate to build wealth and retire quickly. As MMM has outlined many can do this within a much shorter timeline than they think. The goal is to get to a point where you’re not optimizing your life for money but optimizing for your happiness.

Debt Snowball vs. A Swarm Of Bees

While MMM is an early retirement blog, he still discusses how to get out of debt. In his view, always pay the higher interest rate first.

Dave Ramsey is famous for his baby steps. In the baby steps, Dave advises his debt snowball method which has you paying the lowest balance first.

Growth Mutual Funds vs. Index Funds

As a  “classically trained financial planner” the biggest bone I have to pick with Dave Ramsey is his investing advice. Ramsey advises using growth stock mutual funds. In the right growth stock mutual fund, he says you can average 12%.

The 12% return to me is mathematically insane. To base your financial future on returning 12% to me is a big mistake.

MMM is an index fund investor. Like myself, he recommends Vanguard, as well as Betterment for others (which uses index funds).

His philosophy is to worry most about your savings rate. This will be the true indicator of your wealth.


3-6 Month Emergency Fund vs. Safety Margin

Dave Ramsey promotes a 3-6 month emergency fund.

MMM has promoted a lower emergency fund, often just a few thousand dollars. Which would be about 2 months of expenses for himself.

He has discussed the idea of having open a home equity line with a $0 balance. This gives him access to cash at a low rate just in case something were to happen. Furthermore, this puts the greatest amount of money to work as an investment. For the average reader of MMM, this strategy can work. For the average American, who isn’t so good at not using all available debt, this can be dangerous.

Save For College vs. Self Responsibility

In Baby Step # 5, Ramsey advises you to start saving for college. It’s at this point you’ve paid off all your debts and are investing 15% of your income.

In a Washington Post interview, MMM was asked about saving for college.

His response:

This comes down to the savings issue again. People often read these interviews and fixate on the fact that we only spend $25,000 per year. But we actually earn more than that in retirement income. Even if we didn’t, as an early retiree you have a heap of invested money that you can cash out and use for anything you like.

Teaching your kids how to live efficiently, choose the right university and earn money on their own will really help, too, since the same education can vary in cost by a factor of 10, depending on how you go about getting it.

I also hope to teach my son how to start a small business in high school so he feels in control of his own earnings from early in life. Thanks to the Internet, it is drastically easier for a young person to do something like software development or selling things online. As a side benefit, being an entrepreneur ends up being more educational than the formal education itself.

My Take

When I’m discussing personal finance with friends and family I have at times recommended both.

If someone still has non-mortgage debt, I’ll recommend them to read The Total Money Makeover. I find what this person is struggling with is typically focus. For this person, the clarity of The Baby Steps are powerful.

I always add a line about the investing advice of Ramsey. My standard line, “His investing advice is terrible. Once you build a three month emergency fund, (baby step # 3), read a book like The Boglehead’s Guide to Investing.

As for Mr. Money Mustache, much of the advice I agree with. You can debate the details such as a lower emergency fund or college savings.

Where the MMM blog does well is opening you up to the idea of saving 50% or more savings rate. As important,  how to get to that point without sacrificing your current quality of life.

I get the most positive feedback when I send someone to his blog when they’re already doing well in their career. The MMM blog has a way of helping someone rethink whether they’re on a path that makes them happy.

At the end of the day, what’s important is developing your own values and beliefs. Following someone’s advice in 100% of cases never makes sense.

Your situation is unique. Your goals are unique.

You want to get to a point where you’re forming your own opinions. Where you can act on advice because you know it’s best, not because someone told you.