Dave Ramsey is a sensation in the world of personal finance. He may even be the most popular financial guru of our time. He has had several TV shows, he’s a best selling author, he’s created classes which are now taught all across the country, and he has his own radio show too. When a man has these kind of credentials, we must all see if his advice is right for us.
I first heard of Dave Ramsey from my parents. They were about to enroll in his series of in-person classes called ‘Financial Peace University’, where there would be live instruction at their church each week for about 3 months. The classes were about everything from creating an emergency fund to paying for the children’s college education.
The course also came with a series of CDs to listen to on your own. Mom and I took a road trip from Nebraska to Arizona one time, and the CDs were in the car so I figured I’d listen. I got hooked on Dave then.
His advice covered the basics and his Southern twang made me feel like the information was even more basic. He spoke of having more money than you could possibly spend. He infamously uses a 12% rate of return on the stock market. Many people scoff at it, but the S&P 500 did average a nearly 12% return since inception, and there are a handful of mutual funds that have matched that. I can see why Dave has become so popular.
I listened to Dave’s radio podcast for months thereafter. It was all good stuff but pretty soon I felt like I knew it all. I could answer the caller’s question about as fast as Dave. I also grew tired of people complaining about their debt situations. It’s fine if you’re in debt. People mess up. But no one needs to complain about it. Just do something to get rid of it.
I branched out from Dave. I found Suze Orman and Clark Howard. Suze is cool. Clark is super-savvy and his practical advice feels ever-so-empowering.
As I sought advice from other personal finance gurus, I hadn’t forgotten Dave. I did begin to question his way of thinking a bit, mainly in relation to credit cards. He says never to use them. He advises people to cut up their credit cards and pay cash for everything. In a digital world where credit reports matter… this is bad advice.
I know why he does it. Because many people get themselves in trouble with credit card debt. I’ve come to the conclusion that credit cards aren’t inherently evil though, so there’s no need to turn away from them.
I personally like credit cards because they help boost my credit score. This will make getting a mortgage much easier and much cheaper. I also get cash rewards. It’s not life changing money but a few extra hundred bucks per year can cover my annual shoe budget. Paying with a credit card also offers benefits like purchase protection, free rental car insurance, free credit checks and other perks. Combined, these can really add up.
People will find it hard to get a mortgage by listening to Dave Ramsey to the tee. Many more will find it harder to get refunds on purchases, get a car loan, etc. Credit is the closest thing we have to a financial report card, and having a blank report can make life much less convenient.
Personally, I don’t listen to Dave anymore. For the most part, his advice is sound. He’s helped lots of people get out of debt. But asking everyone to turn away from credit cards and use cash instead? No thanks. Some countries like Denmark, Sweden, and others are nearing a cashless society already. Going cashless is cheaper for the government, it reduces theft, it’s easier to track your income/expenses and you can use a mobile wallet such as Apple Pay. Our own government could stop producing paper bills and coins. What will you do if you are strictly using cash then?
What do you think of Dave Ramsey?