To continue on the review of TMM, I will touch on another aspect of his book. The fixation on credit cards.
That is where he and I part ways. According to him, we should not have credit cards, even if we are fully capable of paying off the card before they charge you anything. I got my first credit card when I was in college. I learned about and used it very well. With some help from him. I managed to make some $200 from the company before I graduated. Plus I had no debts. Although I disagree with Dave on that point, I understand where he is coming from. Most people do not know how to manage credit cards. But to those who have purposed to live way under their means and know what a credit card means, it can be a great tool.
If we don't have the money, we don't buy it. I didn't buy a car for the first two years I was here. I walked or took the bus. I didn't buy any new clothes until I graduated. In those two years, with an average income of $500, I graduated with $1000 in savings. That being said, now we ALWAYS take advantage of 0% interest. We bought our bed, sofa, and appliances that way. Not becasue we didn't have the money to pay upfront. We just earmark the money and put it in a cd with a particular bank. 1 month before we have to pay up, the cd matures and we pay it off. And we get to keep the interest from the cd. If there is an unexpected difficult situation, like a job loss or something, we are not scrambling to get the money to pay off the cards. It is already there, and it is not part of our savings.
We must have gotten at least $300 back in gift cards. (I know that means we spent a lot, but majority of those were home related and medical expenses which we had to do). I got $60 each when I moved (3 times) and many other incentives. I have never so far paid interest on a credit card loan. Credit card is not the evil he portrays in the book. Most of the time, the problem is greed. Buying things we cannot afford. Sometimes it is just unwise choices. But we can do something about that. And the book gives good encouragement to work hard and pay it off. And that is sound advice.
I would reccommend the book mainly becasue it is sound, sensible advice. Even if you are not wallowing in debt, it can help you to shape up financially. The couple issues I have with it, I already addressed. Above everything, live simply, give liberally. Becasue that is true religion.
4 comments:
I've read that book, and I agree with your assessment. I think he has to say that stuff about credit cards because most of his readers/listeners are in credit trouble. And he's speaking from his own personal experience.
I took issue with his saying to use a debit card for online purchases and hotel reservations.
We've had our debit card stolen before, and that is a headache a billion times worse than having a credit card stolen. Our accounts were all tied up for a few days, and we had no access to our own money. I think a credit card is just so much safer.
And like you, we use a card with rewards. We put all our house repairs of the past year on our credit card and paid it all off right away with the insurance money. Those repairs gave us a lot of rewards points, and we've redeemed them for several gift cards. It's worth our while since we're able to use our cards responsibly.
Can I just confess that we, too, have a credit card and use it regularly? We get restaurant giftcards as rewards. We don't ever pay a penny in interest, and in exchange the credit card company pays for us to go on dates.
And I agree with Anne Marie -- a credit card number is much safer to be giving out than debit. If someone steals my credit card number, I don't have to pay for false charges. If someone steals my debit card number, I lose a lot of money.
But I do understand the audience he's writing to. If you don't have the self-control, then ditch the card and learn self-control without the temptation there. :)
Okay...so I have to disagree. ;) In love, of course! :)
I speak from personal experience. About 4 years ago I filed Chapter 7 because of those stupid plastic cards and my finance ignorance. I had been laid up for months due to serious health issues, was far behind on pretty much every payment known to mankind, and had to charge everything to the credit cards because I had no money. $50,000 in debt later, I freaked when the collection agencies tried to take me to court. So I filed.
Stupid mistakes and as Dave Ramsey calls it...stupid tax. If only I had heard about his program back then.
Fast forward to now....
I have one credit card right now that I am working to pay off. Will have it paid off next paycheck. And I will never have another credit card again.
Reading Dave Ramsey's book was a wake up call for me. And it really got me to see the danger of buying things that I do not have the cash on hand for. And I am not a "stupid person" as some may assume me to be. But I was never taught how to handle finances and how to create a budget and all that stuff. And there are many out there like me. We are not stupid or lazy or slow...we were just never taught HOW to handle finances properly.
I have a debit card but I have a $100 limit on it so that way if ever it is stolen, the person can only spend up to $100 in a 3 day period.
I learned from experience as I was also a victim of identity theft.
If I do need to make a more expensive purchase, I just call up my bank and they authorize an increase for however much for 24 hours and then lower it back down to the $100. Have never had a problem with doing that.
Leslie, your situation is a different one, which I forgot to mention in the post. You had medical emrgencies. You HAD to do it. Even if you didn't have the funds to go for it. Those are unfortunate circumstances.
I was focusing more on people who just stack up credit card payments to buy things they cannot afford. For such people, there should be no credit cards.
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