It's not often that America's Grumpy Finance Dad Dave Ramsey admits that he was wrong about one of the tenets he published in his book "The Real Money Makeover."
But when an audience member at a recent live taping of The Dave Ramsey Show asked him about the effect of inflation on his suggestions, he admitted that the step was "never designed to be enough."
The topic Ramsey was referring to was his well-known emergency fund rule, which advises that those starting from scratch on getting their finances in order should begin by saving $1,000 in an emergency fund.
But now it seems that Ramsey is updating that advice -- or adding a caveat, at least.
"It's enough to buy an alternator or a car tire[,] but it's not enough to be a real emergency fund," he says. "It's enough to keep the little things from kicking your butt off the Get-Out-of-Debt Wagon."
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"When we first started this stuff years ago, I just said 'Use all your savings, have zero.' And that didn't work, honestly," Ramsey admitted to the audience. "Before we had the baby steps, I was just hardcore[...] like you're in boot camp. Shut up, sell everything, use all your money, don't whine[...] Because if you don't get out of debt, none of this [will] work."
"We discovered pretty quickly that every little thing that came along that wasn't in their budget [would] knock them out[...] and then they would give up hope," he said. "So we decided okay, we're gonna give you just a little bit of a[...] starter emergency fund."
"It's not enough," he reiterated. But he continued, "It's not designed to be enough. It's just there to cover[.] It doesn't need to be inflation-adjusted because it wasn't supposed to be enough."
