Whether you are new to investing and figuring out your personal finances or have been sticking to a strict financial strategy for years, you have likely come across the names Dave Ramsey and Warren Buffett. The two are considered absolute gurus when it comes to any piece of financial advice you would search for from a money expert.
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Ramsey made his name helping people get out of debt. Buffett, known as the “Oracle of Omaha,” is considered one of the most successful investors of all time. The two financial experts have given a lifetime of advice through websites, interviews and other media.
GOBankingRates searched for advice from the two men on many common money moves people make in their lives. Here is what Buffett and Ramsey say about four key financial topics, including investing, debt, mortgages and retirement.
Financial Topic 1: Investing
Ramsey is all about keeping things straightforward when it comes to investing. According to his company Ramsey Solutions, his main investing principle is, “Get out of debt and save up a fully funded emergency fund first.” He believes you should build an emergency fund of at least three to six months of expenses before you start investing — no exceptions.
Buffett’s investing strategy is also simple in concept, but perhaps a bit more complicated in practice. In addition to being widely quoted as saying the number one rule is “never lose money,” he also encourages investors to stick with what they know.
In a now-famous letter to Berkshire Hathaway Inc. shareholders, he said the goal of an investor should be to purchase “a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now.” He added, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
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Financial Topic 2: Debt
Both financial masterminds recommend avoiding debt or paying off debt as quickly as possible. Though this is easier said than done, Ramsey is well-known for his advice on how to get out of significant amounts of debt quickly. He advocates using the debt snowball method.
To become debt-free under this strategy, Ramsey says you need to first “list your debts from smallest to largest regardless of interest rate.” Then, “Make minimum payments on all your debts except the smallest.” Next, “Pay as much as possible on your smallest debt.” Finally, “Repeat until each debt is paid in full.”
Buffett suggests that individuals, particularly young people, simply avoid debt. He says, “Even though we issue lots of credit cards and everything, we’d say, probably, if I had one piece of advice to give to young people, you know, across the board, it would be just to don’t get in debt.”
Financial Topic 3: Mortgages
Here is where our financial experts may differ the most. As noted on his list of Mortgage Loan Do’s and Don’ts, Ramsey firmly believes, “Your home loan should be a conventional, fixed-rate mortgage with a 15-year (or less) term.”
Most notably, he cautioned, “Do not get a 30-year mortgage! A $175,000, 30-year mortgage with a 4% interest rate will cost you $68,000 more over the life of the loan than a 15-year mortgage will.”
Buffett, on the other hand, believes the 30-year mortgage is just fine. He said, “If you get a 30-year mortgage, it’s the best instrument in the world, because if you’re wrong and rates go to 2 percent, which I don’t think they will, you pay it off.”
He continued, “It’s a one-way renegotiation. I mean it is an incredibly attractive instrument for the homeowner and you’ve got a one-way bet.”
Financial Topic 4: Retirement
One of the most crucial pieces of financial advice you’ll receive for a lifelong plan is how to prepare your nest egg. Both money experts offer sage advice about saving for retirement. Ramsey provides a three-step plan on how to do it:
- Set a goal for your retirement savings.
- Invest 15% of your income into tax-advantaged accounts like a 401(k) and Roth IRA.
- Max out your 401(k) and tax-favored investment options.
Buffett is known for his 90/10 strategy to maximize retirement savings. He explained in a 2014 letter to Berkshire Hathaway shareholders, “My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s).”
He added, “I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions, or individuals — who employ high-fee managers.”
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: Dave Ramsey’s vs. Warren Buffett’s Advice on 4 Key Financial Topics
