Please, I have to respectfully disagree. Dave does offer some good advice for getting out of debt, though, his mantra “debt is dumb” is, well…dumb I think. Anyway, try telling that to any real estate investor, or anyone who has made millions in the bond market.

The one MAJOR thing I disagree with Ramsey about is his whole convoluted take on life insurance. He almost says “term insurance” as though it were obvious. The problem is that math doesn’t support his conclusions.

First off, I did a quick check on vanguard of various growth stock mutual funds and none of them had a long-term track record of producing anything near 10% net of all fees. That’s key. Net of all fees, and Vanguard is cheap on their fees. I also checked with a friend who works with DFA and basically, my friend laughed.

So, I’m not sure if Dave is just looking at the 5 year and figures that you’ll just shuffle around to the best funds every five years (if we could only foretell the future).

So, for example, if you had $100 to spend and bought $250,000 of term insurance for, say even $15 per month, and then invested the rest instead of just buying a good dividend paying whole life policy, your results would look something like this:

Even if you could get 10% net of fees, your $85 per month would yield $113,720 or so after 25 years. Now, here’s where I don’t think Ramsey is being honest with his numbers.

When he tells you whole life has terrible returns, and then he turns to BTID, he conveniently forgets to add in the cost of the term insurance when figuring out the return on investment. So right there, you’re not comparing apples to apples. By the way, your net effective yield is only 5.47% after those 25 years on Ramsey’s investment suggestion and that’s before taxes.

If you have a decent par whole life, do you think your IRR can be between 5% and 6% after 25 years on that whole life? As long as you are buying from an old mutual company, then yes it can.

I think Ramsey gets lost in the numbers either not knowing or not telling his followers that time works against your rate of return on an investment if you have to do this on a monthly basis for 20, 30, or 40 years, but in an insurance policy, your contract is front loaded and then in the later years your cash value swells so you actually end up with a nice IRR and a good return. This is provided you are getting a contract that’s designed for cash value growth.

If you need insurance, you can still blend it with convertible term, but, I guess it depends on what you need the insurance for.