Home  »  Finance   »   Personal Finance Face-Off: Dave Ramsey v. FIRE

Personal Finance Face-Off: Dave Ramsey v. FIRE

personal finance tips

Choosing Dave Ramsey or FIRE – Personal Financial Management in the Military

Dave Ramsey and his counterpart Financial Independence Retire Early (FIRE) are two big names in personal finance. Both offer advice on how to save your money and live comfortably in your later years, but as a service member how do you know which path you should follow? Let’s take a look.

Dave Ramsey, an Introduction

Dave Ramsey is a longtime proponent of debt-free living whose claims to fame are his 7 Baby Steps and Financial Peace University. He has been teaching his brand of financial management for several decades. Ramsey’s strategy can be broken down into a few broad concepts:

  • Do not incur credit card debt or other debts;
  • If you do have debt, pay off the lowest balance first (debt snowball);
  • Invest 15% of gross income;
  • Pay off your home loan early;
  • Live off 8% yearly investment withdrawal;
  • Give generously.

Possible Negatives of Ramsey’s Methodology

  • Expects to earn 12% return on investments, which is not likely;
  • Hatred of credit cards and any form of debt;
  • Active management of investments means extra fees paid.

FIRE, an Introduction

FIRE has become popular over the last decade as an alternative to the traditional model of work life balance. The core concept of FIRE is to have its adherents majorly frontload investments in their early years, then quit compulsory work as early as possible. This is an option for those looking to do a full 20 years in the military because without a pension and medical benefits it may not be possible to save and invest enough money using this method. The core concepts of FIRE are:

  • Aggressive savings and investment of 50% or more;
  • Invest in index funds (passively managed, lower fees);
  • Create alternative revenue streams;
  • Live off 4% yearly withdrawals;
  • If you are carrying a credit card balance, pay your highest credit card debt first (debt avalanche);
  • Use credit cards (paid in full monthly) to earn points and other rewards;
  • Retire from you career well before the traditional retirement age;

Possible Negatives of FIRE method

  • Exclusionary — requires relatively high income;
  • 50% or more investment may alter quality of life;
  • Military pension is a big part;
  • Retirement may not mean retired from work.
  • Future costs are not fixed.

Comparing Ramsey and FIRE in a Military Lifestyle


Ramsey says investing 15% of your income should help you meet retirement goals. This may be achievable in the military by maxing out your TSP allotment, and then squirreling away another 10% in Roth IRAs. Set this ratio up right out of boot camp or OCS and you’ll thank yourself later.

FIRE adherents invest 50% or more of their income in into TSP/401K, index funds, and real estate. This method is aggressive and will require strict budgeting from junior enlisted and junior officers and will force participants to make sacrifices. This high savings strategy may not be possible for single income families.

 Monthly Investment Costs Ramsey V. FIRE

Monthly Base Pay Ramsey’s 15% FIRE’s 50%
E-4 (over 3 years) $2,507 $376 $1,253
0-2 (over 3 years) $4,968 $745 $2,484


Yearly Retirement Withdrawal Ramsey V. FIRE

Retirement Investments* Ramsey’s 8% FIRE’s 4%
$500,000 $40,000 $20,000
$1 Million $80,000 $40,000
*remaining investments expected to replenish some withdrawals


Ramsey encourages investment into Roth IRAs consisting of mutual funds. Roth IRAs are investments made with after-tax income and mutual funds are a special selection of stocks that the fund managers think are indicative of a certain sector (i.e. technology, bonds, agriculture).

FIRE very much supports investing into index funds. Index funds are passively managed investments which seek to perform as the market does, not to beat. This means less risk and greater long-term performance. Passive fund management means there are less fees associated with the investment which will save you money when your portfolio value rises.

Navy Federal Credit Union offers IRA Certificates (guaranteed returns much like a savings account, (usually lower than 3%). USAA recently shifted investment management to Charles Schwab who offer a variety of IRA and other options. Index funds can be purchased through a variety of brokers like Vanguard.

Credit Cards

Ramsey is strongly against credit cards since the temptation to spend is too great and the ability to slide into debt is deceptively easy. Cut them up, hey says.

FIRE encourages the use of credit cards for earning points and bonuses if you have the cash to pay the statement balance every month. Afterall, if you are going to spend $10,000 a year on groceries and dining out, you may as well earn 2.5% cashback.

Some credit cards to look into include the American Express Platinum card for its waived fees for active duty and its travel perks, Amazon Prime Rewards for its 5% cashback on Amazon purchases, and the USAA Cashback Rewards Plus card for its 5% cashback on on-base purchases.


Ramsey preaches a debt-free lifestyle. Since debt does not build wealth, it is useless. Can’t afford to buy a $12,000 used car in cash? Then downgrade to a model that you can buy straight up. If you can avoid the temptation of a brand-new sports car from the dealership right off base, then you can position yourself nicely for financial success.

When it comes to paying off existing debt, Ramsey adheres to the concept of the Debt Snowball. Simply put, paying off your smallest debt first will give you the momentum and encouragement to tackle the next larger debt.

If you are struggling with debt and monthly living expenses, be sure to contact your installations military relief society.

FIRE adherents also generally avoid revolving debt (i.e. carrying a credit card balance from month to month) as well. Where FIRE differs is in using debt to position themselves for future revenue streams. This includes business possibilities and real estate investments. These larger investments are likely not possible for junior enlisted folks, but more senior military personnel (especially dual income families) may be able to acquire one or more properties for rental housing.

Debt Avalanche is FIRE folks’ preferred method of debt reduction. Simply pay your largest debt first and progressively work down to your smallest. The idea is to pay less in interest and therefore shortening the amount of time in debt.

Ramsey or FIRE: Final Verdict?

There is much, much more to cover when it comes to these financial management strategies, but with this overview you should be able to decide on a savings path. Think of it this way:

Dave Ramsey is traditional, methodical, and somewhat elementary. Don’t spend money you don’t have, and save some of what you do. This is an option for a one or two-term active duty service member who is not going to earn military retirement. Without the automatic paycheck and health benefits you simply do not earn enough to retire early.

FIRE is flashy. FIRE has moving parts. FIRE is aggressive. And frankly, FIRE can be risky. You are, after all, betting that you have enough saved and invested to last 30, 40, or 50 years.



About the author

+ posts

Julie Provost is a freelance writer, and blogger. She lives in Tennessee with her National Guard husband and three boys.