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Debt, Dave Ramsey, and a dilemma

April 22nd, 2011 at 07:15 pm

When I first got married (just days after both of us graduated from college), my initial reaction to anything debt-related was "no big deal, we'll pay it all off once our incomes increase". Naturally, with our fancy new diplomas in hand, the money would soon start flowing in and wash away any of the spending that occurred in the meantime ... except, it never did.

In fact, income had been stagnant for most of the past decade. Sure, it was enough to cover 2002-era expenses, but the free-wheeling spending never stopped climbing upward. Thinking that the only answer to our problems was to make more money (and not being able to deliver), I became increasingly frustrated thinking about the future.

Dave Ramsey was my cure. The stories of people paying off debts greater than their annual incomes seemed unbelievable to me, yet I couldn't get enough of his radio program. Though highly skeptical at first, I finally bought his book The Total Money Makeover. My wife and I read it, discussed it, and decided to act upon it May of last year.

So here I am, nearly a year later, and our financial life is much improved. In particular, budgeting has been a godsend for us. Acknowledging our expenses, working the snowball, and finding snowflakes is now an obsession. I can now see an exit.

Unfortunately, I'm finding that I don't need Dave so much anymore. Sure, I don't technically owe him anything since I forked over the cash for the book and have listened to the sponsors that fund his show. But I'm discovering that the more I educate myself on personal finance, the more I find Dave Ramsey's advice to be basic and even, dare I say, inefficient.

The most obvious example is Dave's insistence on paying down debts starting with the lowest balance and working on up. The psychological aspect might make sense when the balances range from very small to very large. Each of my debts started very close in size (and many over $10,000), so it is hard for me to wrap my mind around the amount of the balance when the interest rates vary so much.

But I'm also finding myself disagreeing with some of Mr. Ramsey's core beliefs. My biggest offense: I don't think credit cards are evil. I type this even as I glance over at my $12,000 Capital One balance. True, I haven't accumulated a single dollar of new debt since last year. But I've been educating myself on using credit for profit through leveraging and cashback programs and believe that I can handle the responsibility.

So my dilemma is this: am I hypocrite for loving Dave Ramsey for opening up my eyes to basic personal finance, even while outwardly admitting that I can do better following my own plan?

8 Responses to “Debt, Dave Ramsey, and a dilemma”

  1. MonkeyMama Says:

    I don't think you are a hypocrite at all.

    I personally agree with Dave 90% of the time, and strongly disagree with him 10%. Overall, I like him and enjoy listening to his show. As someone said recently, somewhere in the forums or blogs here, there is probably no financial guru anyone agrees with 100% of the time.

    There is no doubt Dave Ramsey has helped a lot of people - and I think that is a good thing!

    I kind of have a love/hate relationship with him since he is so outspoken, BUT overall, the longer I listen to his show the more I like him. He even told one caller the other day that if they had a credit card for 20 years and never ran a balance, that was probably okay. Wink The accusations that he is anti-feminist just make me laugh. Am I listening to the same guy??? Telling women not to be taken advantage of, and encouraging married partners to work together as equals.

    I only heard of him recently, but his financial point of view is largely how I Was raised. Which is weird. So I like listening to people celebrating being weird.

  2. Petunia in an OP Says:

    I don't think you are a hypocrite either. I'm with MM on the 90/10 thing. I LOVE listening to Dave on the radio and appreciate his straight-forward approach to life. But we also have a credit card which we pay in full every month.

  3. creditcardfree Says:

    Nope. You are just now thinking for yourself with more knowledge than DR provides. Great job!!

  4. Ima saver Says:

    I like him but don't agree with him all the time either. We have had a chase business credit card for several years. My dh is a builder. He charges his materials; I pay the bill off in full each month. We get a cash rebate back for everything we buy. This month we are getting back $100! It works for me!

  5. Petunia 100 Says:

    I've only recently read anything by DR, though I have been hearing about him for years. A lot of the information on his website regarding investing is very, very bad. Relying on his advice to keep your nest egg 100% in stocks post retirement while withdrawing 8% per year would mean the odds are high you will spend your latest years completely broke, so I sincerely hope no one is following that advice. I like most of his debt advice, though. I'm sure he would be happy to know that he changed your financial life for the better!

  6. mskills Says:

    Looks like a lot of support for the rewards credit cards ... good. Big Grin
    ---

    Petunia 100,

    You're right, his investment advice seems too optimistic (and risky). 8-12% annual returns are far-fetched enough, but he never seems to include inflation in the retirement calculations either. After much research, I've subscribed to the Boglehead school of thought regarding asset allocation.

    I'll admit this, though: I would love to do the debt-free scream on his radio show!

  7. CB in the City Says:

    I haven't read too much of Dave Ramsey -- read a lot ABOUT him -- and it seems to me he is very helpful to people who are broke, in debt and clueless, but not so much to the naturally frugal. That's just my take on it.

  8. mskills Says:

    CB in the City,

    I think "broke, in debt, and clueless" was my motto for several years, don't knock it! Wink

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