Dave Ramsey Responds To $1,000 Emergency Fund Not Being Enough In 2023 

Agree. Eventually they should adjust that for inflation as the 1k doesn’t have the same buying power as when they started preaching this. That being said, I know they like to keep their message simple

@@toddh2000 Yeah they have addressed this before - I don't think they will ever adjust it. Maybe if Rachel takes over she will change things, who knows.

😊

Now a days the emergency fund's $7,000 at the extreme least. Not exaggerating either.

Exactly, If only more people understood this

Yes! Dave has mentioned this too. It’s really life-changing to just learn how to adopt a saver mindset instead of just bleeding money between paydays like I used to do.

Yes it's about creating a small goal to demonstrate that it can be done, its to motivate your self

Agreed.

Yeah its more of a safety net.

If you would have adjusted Dave's advice for inflation you would have had enough 😂

@@thedopplereffect00 Laughing at a dog with a tumor - I'd be ashamed.

@@Tank-vi2dv I was laughing at Dave's bad advice.

@@thedopplereffect00 No you weren't - you were being a troll. Stop it.

Yep

Obviously you are both healthy and able to work

How much was your income?

@@Mary-t2uwe’ll be healthy and able to work lmao sounds like a skill issue

My wife and I had $2,800 left to paid the debt after monthly expenses. @@JstShadowH

I pity Americans. A tooth ache is totally covered by our health insurance. Wouldn't have to cough up a cent. When will you all learn to vote for someone who brings in healthcare for all citizens. Imagine what you could achieve with a population that is healthy and looked after.

Lol yeah idk why people are so upset about that particular step. It's not that deep. If it works for you, fine. If not, do your own plan

Yeah, building up a 3 month emergency fund while paying minimum payments on debt. After building up that reserve I am paying the debt off. This feels better for me and works also perfectly fine...

​@stefandebruijn6559 that's what I did too.

So many people act like they need his permission or blessing before they do something different. Dave's plan obviously works for many people so there's no way he's going to start making exceptions or the whole thing breaks down. But again, why does it matter to so many people if Dave won't budge on his principles? Just go do your own variation.

😂

The trouble is that when callers already have more than that, say $5000, they are told to use up $4000 of it to pay down their debt so they're left with only $1000. So it's not about $1000 being a psychological first step; it's a religious fixation on $1000 as a magic number.

@@megalodon1726 The key is to not get into debt in the first place so you don't have to give up that $4000. Problem is people are entitled nowadays thinking they deserve everything

@@artandarchitecture6399 The best defence is always prevention as for example losing weight is more difficult than gaining weight. You can't cure stupid

​@@megalodon1726 I hear what you are saying. However, paying off that $4000 in debt psychologically is a win too. So, although it is scary, getting that win and feeling momentum propels most people forward. When I was coaching, I would tell my clients that they didn't have to reduce their savings immediately. I would tell them to first make a budget and start paying down the debt. In the end, there were some who felt that momentum and felt good about taking that $4000 (or whatever it was for them) and putting it on debt and others didn't. Either way they were winning.

Right. To help with the HABIT of saving.

Same

We like to have 5...we have had huge emergencies...more than most Ie heard of.

Yep exactly! It’s about looking at what could really throw you out personally, and working with that, until you’re able to get out of debt and start putting a proper 3-6month emergency

same

​@@jessicabixler1658 this is starting off

If $1000 isn't enough people risk blowing through it and getting back into bad habits. $1000 isn't enough to "not be enough".

It's a 2-10% quicker win every year!

I would think simply wanting to get out of debt would be enough motivation on its own vs mental games to try to get you to be motivated.

@@Ryan_DeWitt you could say the same thing about many things - weight loss, fitness goals, building new habits. It's not easy enough to just be motivated.

But he also tells people with more than $1000 to drain their savings. That makes no sense

So she went from $0 to $5k? 😄

​@@Reindeer_jay where did he say that? A lot of people have debt but cash in the bank. 🤨

What does FPU stand for? Financial Peace…

University

We started FPU when we got married and started with a $2k fund because we were new to this whole adulthood business and wanted to be extra sure our young butts were covered.

Yep, you get it. Sad that so many don't. They justify it to themselves because they want to feel "safe", so they never get motivated by the real FEAR that having only $1,000 brings. A little fear is healthy! It motivates you to cut deeper, sacrifice more, and work harder. I imagine anyone can think of reasons why their BS 1 fund should be $2,000 or $5,000 or $10,000. What they don't understand is feeling "safe" saps your motivation. Small, quick wins are what gets you moving and keeps you on pace to achieve any large goal. These are the same folks who think it's smart to start training for a marathon by getting off the couch and running 10 miles. They hurt themselves and it takes forever to finish, so they give up around mile 4 because their body simply can't handle the strain, so they never achieve that first goal. They need to start out running 2 miles.... then 4... then 5... and so on, until their body slowly adapts to the new demands. Psychology is critical here. And keep in mind... don't take advice from broke people. 90% of the folks saying "Well, you don't understand MY situation" are broke. Take advice from wealthy people who got out of debt.

Good Point!

Thank you for calculating the inflation for me

Right, but how much "safer" is $1,600 than $1,000? Not much. As Ken sad, if you end up needing $600 above your emergency fund this month, you can literally earn that by going down to the local temp agency and get a job for 10 extra hours per week at $15/hour. Those kinds of jobs are everywhere. 40 hours/month * $15/hour = $600. Problem solved... and now your SUPER motivated and might keep that spare job to super charge your baby steps. The next 1.5 months, you build back the BS emergency fund, then start hammering out debts in BS 2. The cold hard fact is most people will give up on a new plan/lifestyle after 3 months if they don't see results. BS 1 is the quick win people need to see to get and stay motivated. Even pushing that off by 1 month could be a disaster psychologically.

Not just Americans. The rest of the planet as well

​@tictac3147 Yeah, but my concern is Americans.

America first

Probably have less now than 2003

@@LIMuscleBlackdevil true, and by the way, we have become more of a cashless society, now we have debit cards, and on an app on a phone.

You reduced risk with the $3k

I did the same, I think $3k is the perfect amount and then paid everything off

Dave is not the be all end all authority on finances. If you have a lot of debt, he has some good ideas to help you reduce the debt. But, there is a lot more wisdom out there that will take you a lot further. Consumer debt is bad, but using debt strategically is a very powerful tool for gaining financial freedom. Don't discount debt entirely. Get spending under control, then research using debt wisely to acquire growth and income producing assets.

I feel like the BEST thing that Dave does is he gives a good skeleton of steps. Most people need something to discuss in their head to START to make a plan. Especially if you are married, altering the steps so both people are on the same page is a good thing. Forcing a discussion that might never have happened is better than demanding a dollar amount.

​@@cherylallis2458Dave Ramsey once tried leveraging good debt to make money from property. The property market crashed, and he lost a ton of money and went bankrupt. Good debt is very risky, and it's best to just invest your own money.

That’s only true if the emergency isn’t a job loss…

@@rsafree1139 - That's a fair point, but when you're cleaning up a big mess, you can't be timid about it. I could see having a baby emergency fund of $2,500, in this day and age, but most folks use that logic as an excuse to not really attack debt aggressively.

I thought you were putting that extra cash flow into the next debt??

@@macuse2008 - You do put all extra cash flow toward the next debt, but IF you have an emergency you can often cash flow it by not paying extra that one month.

If you have 100k saved you're better off than most people, maybe take some of that and aggressively invest...jus sayin 🤷🏿‍♂️

Tough.Need One Months Income. Get to work.

He doesn’t say adjust it as needed. He says save $1000 and then use every single extra cent after that to pay down consumer debt. You can’t add to your emergency fund if all of your money is going to pay off debt.

😂😂😂 Dave’s whole appeal is basically being a grandfather of sorts

I'm a cop

Bigger question is how could you manage to go years into your adult life with below $1,000 in savings?

@@MrJimmy3459 Majority of the population are one missed paycheck away from bankruptcy and trouble

Liked your comment! Made me laugh

RenegadeElite101 haha, yes you r right

Inflation is a combination of multiple factors. It kicked off with people having 18 months of disposable income saved up looking to renovate their home. Trades men more than doubled their rates blaming material costs and they haven't dropped. Then logistics increased their rates due to shipping shortages and lack of labour, the war in Ukraine driving fuel prices through the roof and finally everyone else demanding an inflationary pay hike. So wage inflation did not cause the initial price hikes but it will prolong them. No easy solutions other than increasing interest rates to cool consumer demand.

But what's the difference if you have a credit card? Why can't that save you in a dire emergency? We all use credit card for everything anyways. And you can always do a cash advance.

@@JoeBudd-D using a credit card when you've lost your job and the economy is tanking is not the same as using an emergency fund when the money is already in your bank account. What's the interest rate on credit cards these days if you don't clear them every month 30%pa probably more. If the economy is tanking there is a good chance you will end up in temp jobs in the short term on a fraction of what your previous job was,everyone things that because the job market has been booming the last 5 years you can just walk into a job tomorrow taking 10-20% more than the last one.

@@Weakeyedominant but even with all that said, if it’s an emergency, it’s an emergency. If it’s life or death, the credit card can still serve you short term.

@@hydepark1382 I do agree with you. But if it’s an emergency and the credit card is all you have between life and death, it still counts short term. Ideal, no. But if the only reason to have money saved is for a life or death emergency, I don’t see how a credit card isn’t a back up.

A good place to invest an emergency fund is into Treasury bonds. During a recession (when you're most likely to need the money), the Treasury lowers interest rates, so your existing Treasury bonds with the higher rate become worth more. So, your bonds become more valuable when you need the money the most.

I came here to say that, the major problem is increased profits

Ken is pro corp. He blames the working class for everything

@@HHHPedigrees People like that will only learn when their own children struggles. Karma will come knocking

I remember when I was working way up north in early 2010's they were paying fast food workers around 20$/hourly. The prices were exactly the same as in any major city.... price inflation isn't because workers are making more it's definitely because corporations are making more.

Thank you, I came here to say this as well. We know it's not because people are making more. One place to find out more about this is following Robert Reich's email digests, and having taken his Wealth & Poverty class, the data tells you corporations are making bank and shifting the blame. The baby steps are getting me and others where I need to go which is fantastic and I'm thankful all the same.

That's really impressive! Well done, keep it up!

Yeah. If people dont think 1k is enough then they should do 2k, or 5k even. I think holding onto more than that as an emergency fund might be overkill, but 5k will cover pretty much anything. Its just getting that first 1k, 2k, 3k, etc, thats hard.

Keep up your good progress.

Exactly.. its to cover for the rare Emergencies that come up... Granted,... 1K won't cover a few back-to-back emergencies.. But how often does that really happen??? Thats why I started building a CD Ladder as part of my EF (12K spread out over 24 months)

Right! 1k will cover quite a bit really. The washer breaks down & it's gonna be $600 to repair it, the car needs muffler work, your window AC died & its 104° or your insurance covered all but $800 on that trip to the hospital. That 1k can give you a lot of peace of mind but if it doesn't feel like enough, for your situation, then simply bump it up to 2k.

2k can cover a homeless emergency..1k depending where you’re at may or may not cover that.

$95!! What a deal. Tires for my Audi RS5 were $800 each...and because it is 450hp 4wd it burns out both fronts real fast. I now drive a Mazda CX5!

Actually it's 57% of americans cannot come up with $1k if something happened. Fewer than half of all americans can just pay $1k in an emergency. Baby step one is still valid at $1k.

He says $1000 is not intended to be enough, but he's also telling people who want to save more like $2000 or $5000 (or already have that much) that anything more than $1000 is too much. So $1000 is still deemed to be the correct magic number, and it makes no sense that it can be correct in 2003 and in 2023, and is also correct regardless of family size.

Dave always talks about conventional wisdom about managing debt and investing doesn't take into account risk. Well I think the $1k emergency fund doesn't take into account the risk today vs the risk in 2003 of having an emergency expense that can't be covered by that amount

One Months Income.

@@raiden031 you didnt watch the video....

There are a few things that will cause inflation. Wars, less people being born, labor shortage where employers offer higher pay to attract and keep workers, famine, millions of chickens being killed because of bird flu, meat processing plants being blown up or sabotaged, I think we lost at least 2 of them recently and the cost of beef went up.

I work at a plastic company making 18 dollars an hour, on the low side. The people stacking pallets making 23 dollars an hour plus overtime. If you paying me this to make plastic, not counting the food that goes inside the plastic or the shipping and wondering why your 6 apple cups are 6 dollars at the store. You think it's from printing money and not about raising minimum wage to 15 and all the ppl who may wayy more then that simply stacking it on the pallet,.where do you think that money comes from?

@@mewtwomotherfuka the printer...

His response is a typical Econ 101 response. He should’ve said Multi-billion dollar companies need to raise prices to ensure that they continue to profit hundreds of millions/ billions each year and keep the money in offshore accounts/ foreign countries to keep it sheltered from tax.

@@Delboydunno yes much more accurate. 😂

Yup, and its incredibly annoying to see him sell that mess on stage like that. Profits come after expenses are covered. We know the game, just don't gaslight.

Exactly!!!

yes, let's blame the janitor making a buck more per hour!

You pretty much just proved Ken's point.

Ken is clueless. Yeah, let's all just work 24 hours a day. Great solution!

Not really. A 40 hour "work week" is not really full time. I've worked 50-70 hours a week my whole life because I love what I do. I know a missionary in Mozambique (woman) who works 120 hours a week. We were created to work...

Lol. The Ramsey police are looking for you. They just haven't found you yet.

Inflation is evil yet noone ever talks about it

Buy cheaper tires?? I've literally been an auto tech. I'm not telling you to buy linglongs, lol, but a decent pair of tires can still be mounted and balanced for $300. Also, since only 43% of americans have $1k on hand, it really isn't that big of an issue. Some of that /is/ dependent on where you live. If you live in LA, maybe you want closer to $2k or more. If you live in the Midwest or the South, $1k is still a lot of money for most people.

This exactly. $1k 20 years ago stretched a LOT farther than today

According to the online inflation calculator, $1,000 in 2003 would be worth $1,640 today. So even if he adjusted it for inflation it wouldn't be that dramatic.

They need to not listen to people who don't have the track record they have

That's baby step 3, the question was about baby step 1

I think you need at least 3 to 6 months of income savings for emergency. If you make 2000 a month. You need 6000 (equal of 3 months ) My parents farm got flood. It took them six months . To make money from the vegetables crop. They didn't borrow any money or use credit card.

Only if you want people to give up before they pay a cent of debt and never progress past Step 1

Other financial experts recommend adjustable amounts like one month of expenses or $1000 per household member. The one-size-fits-all $1000 is not widely accepted in the world of financial gurus.

Yeah, that was my favorite part. Even though those same companies are saying they can't get enough workers because "no one wants to work."

No worries...in a few years machines will be making the burgers with just one highly paid operator handling what is now ten positions. Those jobs will be gone based on the push on the overhead.

That's not exactly what he said. He said because wages have increased for workers, it has made everything more expensive.

@@heatherfetterly5296 Which is also a load of malarkey, because wages are increasing more slowly than just about everything else.

🤔 Great question? 🙄 The guy is under a rock! Make your own amounts for each saving plan; not ask Dave what to do with every penny! Get your head out of from under the rock, and think for yourself.

@@HeidisHereAndThere He wasn't asking how much he should save, he was asking Dave if the baby steps should be updated

Also, if you're creating your own steps then you're not using the baby steps you're just making your own plan The whole point of the baby steps is to give a roadmap to people who don't know how to create their own plan

So you basically followed Dave's advice?

Absolutely mental costs for having a kid.

@Kevin Minke if we had followed daves advice we would have only had $1k and $9k in medical payments.

Out of order you gonna have debt

Then you did it wrong. It cost less than $5000 to have a midwife.

You must not be a Christian because that is not a Kingdom mindset. Do you go through life thinking what bad things might happen to you daily???? I'm a 47 yr old female....never had an emergency fund. I also don't have health insurance. Nothing ever bad happens to me. I go through life surrounded by favor.

We’ve all been there at some point.

Yeah, I appreciate Dave but sometimes I feel he's too simplistic. People that have lower paying service industry jobs are getting raises -- some places -- but it's still not enough to keep up with cost of living. Especially areas where housing costs are crazy. I live in Florida and we have plenty of places where everything pretty much depends on service industry jobs, but the housing costs outpaced those salary's years ago. And side hustle jobs aren't as easily available sometimes, because everyone is having to do that. And the mantra of, "Get a better job!" doesn't work here, because our economy is reliant on these types of jobs.

I think he means the actual dollar amounts but he’s leaving out that it doesn’t go nearly as far as it should.

This is dangerous. You could infect patients before you have any symptoms.