However, from this return you must subtract fees … it has been proven that funds tend to underperform ‘the market’ – long term – by the value of their fees.

And, the Dalbar Study shows that individual investors fare even worse because of their emotionally-driver trading strategies (typically making just 3% over the same period that the market returns >11%).

Ramsey’s notion of 10% – 12%, therefore, is rubbish; you should plan on the worst case 8.5% less the 0.15% Index Fund fee (Warren Buffett says to invest in anything other than a low cost index fund is lunacy, at least for the average investor).

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… I agree; but what sort of goal is “being debt free” … surely that’s a means to an end?

If so, what’s the end?

Chances are the ‘the end’ involves more than being debt free; it involves having a certain passive income by a certain date.

And, chances also are that being totally debt free will be the best way to ensure that you NEVER make it.

Run the numbers on a spreadsheet …

AJC @ 7Million7Yearss last blog post..Rich Dad. Rich Kid?

I’ve gone through his FPU course, and also read his FPU book and TMMO book. With that said, I know I remember in FPU that your point of a 30-something investing only 15% is brought up. There is actually a form he uses, to recommend exactly how much you need to invest based on your age. The Baby Step 4 of 15% is a MINIMUM, but if starting at Age 50 you will obviously have to make more sacrifices in your lifestyle/budget to invest more money than a 25 year old would invest.

Great insightful post. However, just as I agree and disagree with things Dave says, the same also applies to your article.

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The next section you attack his 15% idea, but then don’t ever show any math. Even at 8%, you would save up $1.4million. Don’t hate on Dave for being optimistic with his 12%, realize that you wouldn’t tune in for a pessimist spouting off ROI’s in the 2% range. The $1.4m is WAY more than most people making $50k would ever dream of saving – plus on his path they would have a paid off house, paid for cars, kids they helped through college. You also say that 15% wouldn’t be enough for retirement – in a world where MANY are living on Social Security. Dave’s plan also talks about only using 8% of your savings/year = $110k/year at retirement, work that backwards for 35 years of inflation and it looks like $40k in today’s money. So a person who lives on AND SAVES 15% of their $50k income can’t survive on the equivalent of $40k at retirement? I feel your logic is quite shortsighted.

I rejoice in having crossed paths with DR. I have shared my learning with dozens of people and many of those have drastically changed their lives for the better. For every couple of financial lives he is changing, he is also changing their souls. He is not about turning average Joe’s into Donald Trumps, he is about correcting the course.

I’m not sure if you have read any of his books. In his books he states that his math is wrong on the snowball approach.

Also, “no one” should invest in any fund and just close their eyes for 30 years and hope for the best. You will very likely not make 12% yearly return. However, if you have half a brain, you will likely be able to make small corrections throughout the years that will get you to 12% or higher. Again, in his books, he states to look for funds with 10 year gains of 12% or more and then diversify.