Some days I love Dave Ramsey and others, well, not so much! I think Dave Ramsey has a great plan for most people, but, as with everything, it is not a good plan for everybody.
One of the things I tend to disagree with is never using credit. If you are good with credit then having a credit card will help you. Pay it off every month and you will get rewards (1-5% of what you spend) and the safety of not having to carry cash with you. A stolen credit card can be cancelled and the charges taken off (it will be a pain in your side, but it can be done); stolen cash is gone for good. That said, if you are bad with credit, even a little bit, then you should stay away!
Another Dave Ramsey disagreement I have is with how to pay down your bills. For many people the debt snowball is the way to go, but not always! The more financially sound method is highest interest rate first. If you do not need the mental boost of paying off an account and instead are a “big picture” kind of person who is looking at your entire debt being reduced then you will save more money by using the highest interest first method. Or, you could use debt consolidation so you are paying down one account instead of all the little ones. I used debt consolidation on my student loans and it saved me quite a bit in interest!
One other small gripe I have with Dave Ramsey is his ability to find people in financial pickles that have a larger than average income. It’s nice to hear about those folks who paid down 100K of debt in a year and a half, but it is simply not attainable by a family bringing in 25K a year.
I was listening to Dave Ramsey and a man was telling a story of how he was considering bankruptcy. Dave asked how much he owed and he told him $32,000 and he made $17,000 a year. I don’t know if Mr. Ramsey was having a bad day or what, but he laughed and said “a debt of only $32,000 was not worth claiming bankruptcy over”.
He told him to “just get another job” (the man worked 40 hours per week, but only made $17,000 a year). I felt bad for the crying man on the phone. He was being told his problems were not as bad as the previous caller, who was $200K in debt and made $150K a year. The feeling was “suck it up and deal with it you don’t owe that much”. If the man did manage to find another job (more than likely another minimum wage job) and used all of his post tax income towards his debt then it would take him two years and one month of working 80 hour weeks. Not to mention that living off of $17K a year is pretty tough. There are basic needs that need to be met and that is hard to do with $17K.
Being in debt is serious and it’s a difficult situation to be in. That is true if you are Donald Trump claiming millions in bankruptcy for the third time or if you are a a minimum wage worker who owes $17K. Being debt free is a wonderful goal and one you can attain! Just take it one day at a time and if you are overwhelmed please get help.
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- 2 Myths about Earned Income Tax Credit