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Dave Ramseys general advice to work hard, make your marriage a priority and avoid debt is excellent. In fact, any one who religiously followed Daves suggestions would have experienced far less trouble in the recent financial crisis. In far, some people probably side-stepped the whole mess by applying Ramseys ideas.

Nevertheless, in a handful of specific areas, one can find some minor yet important faults with the financial planning advice that Ramsey gives–and in particular with the financial calculations Dave shares in, for example, his books.

Overly Optimistic Rate of Return Assumption

One of the first problems that appear to certified public accountants and chartered financial analysts looking at Ramseys materials concerns the commonly quoted “12%” rate of return used in examples.

Thats way too optimistic an assumption. Yes, some years investments do generate 12%. And some specialty categories of investments (like small company stocks) may return roughly 12% over lengthy periods of time. But a traditional portfolio of diversified stocks and bonds will probably over long financial planning horizons deliver average annual returns of more like 7%-9%.

You will not, sadly, find it possible to consistently earn 12% on a well-diversified, moderate-risk investment portfolio. No way.

Inflation Ignored Only Leads to Future Disappointments

Inflation represents another issue that an accountant or good financial planner will want to include in financial plans but an issue that isnt always thoroughly discussed by Dave. Inflation can be tricky to incorporate. But inflation will probably eat away at the value of the savings you accumulate.

If youre earning 9% on your investments, for example, but inflation runs 3%, youre not really making 9%. Youre making 6%. You can more implicitly recognize inflation in your financial planning calculations, by the way, by using the net-of-inflation return in your financial calculations. To adjust for inflation when you expect a 9% return and 3% inflation, make the computations with a 6% return.

Expense Ratios Matter

One final investment issue (for some investors) needs to be highlighted. While investment expense ratios often dont matter much for people just starting to save money–probably this is Ramseys typical reader in fairness–by the time one accumulates a more size-able investment nest egg, investment costs matter. And they matter a whole lot.

In fact, if an investment pays a 2% expense ratio–and that sort of expense might be pretty normal once all the investment costs are tallied–that amount doesnt sound so bad. But its pretty outrageous in most circumstances.

Consider the situation, for example, where youve got a 9% rate of return from an investment but suffer from a 3% inflation rate. In actuality, youre really only earning 6% on your money. (The inflation thats baked into the return is not really profit to you.)

If out of your net 6% investment return, you pay 2% in investment fees–in other words, if you pay out 2/6ths of your profit for investment expenses–thats equivalent to a 33% income tax. Ouch.

In the end–just to play this sad song to the very end–while you start with 9%, after you subtract 3% inflation and 2% in investment fees–youre left with only 4%. And note that value is a pre-tax return. So if you pay income taxes on your investment profits (and you probably will eventually), youll actually end up with something less than 4%. Double ouch.

Putting These Financial Planning Insights Together

The nit-picking shared in the preceding paragraphs may seem a little unfair. But to illustrate how significant the mistakes become when combined, ponder the following scenarios:

If you and your spouse save $5,000 a year into a retirement fund for 30 years and say youll earn 12% annually, the calculated future value equals roughly $1,200,000.

Note: If you know Microsoft Excel, you can copy this formula into a workbook to double-check the statement: =FV(0.12,30,-5000)

In comparison, if you and your spouse save the same $5,000 a year in an IRA or 401(k) plan for 30 years but admit (sheepishly) that youll really only earn 4% once you adjust for inflation and that friendly financial advisor, the calculated future value equals roughly $280,000.

Note: Again, if you have access to a personal computer and Microsoft Excel, you can copy this formula into a spreadsheet cell to test my math: =FV(0.04,30,-5000)