In general, I think that Dave Ramsey lays out a solid financial plan that everyone can implement. Most of the information is pretty basic. Spend less money than you make, find your frugality, and avoid credit card debt and so on.
While he does give good financial advice I have found that there are a few tidbits that I disagree with. In fact, one piece of advice he gives has cost me hundreds, possibly even thousands of dollars.
Horrible PF Advice: Spend Cash Instead of Credit Cards
Ever since I have read The Total Money Makeover 
I thought it would take some time to make the cash system work so I stuck with it for a couple of months, but never got the results I had hoped for. The money was gone so much quicker than it would have been using a debit or credit card. So I went back to my old ways.
When I was working two jobs I felt pretty secure. I knew that I would always be able to pay my credit card in full every month so I signed up for a rewards card. I didn’t spend excessively and it was nice to be able to rack up points and use them to get free books off of Amazon.
Then when I went down to one job I felt like I needed to go the safe route. I stopped using my credit card and went the cash route once again. I thought since this method was preached by a “financial guru” it HAD to be the smart way to go. I would withdraw my cash and then a couple days later it would be gone. A small purchase here and there, lunch at work, a sucker for the girls…..gone.
I have recently gotten back on budget and I can accredit this to shopping with plastic. I know exactly where my money is going and spend more time evaluating my purchases before I make them.
Back on budget. Bye, bye cash, hello plastic!
Why Plastic Trumps Cash
OK, so using credit cards is not for everyone. Self-discipline is required so that money you don’t have doesn’t get spent on things you don’t need. However, I think there are more responsible people in this world than Ramsey likes to acknowledge. (And why would he? A lot of his ratings and attention come from taking this extreme stance.)
Why plastic works in my favor:
- I can see where my money is going.
- I won’t make a small purchase with a credit/debit card. (Therefore I haven’t been eating out for lunch at work, that is around a $40 savings per week!)
- I evaluate each purchase so I don’t look at my statement and see frivolous spending.
- I plan ahead so I don’t have to make small purchases. (Buy enough drinks/snacks to take to work. This prevents me from stopping in the gas station each morning and spending money on junk I wasn’t planning to buy in the first place.)
The rewards points are a just an added bonus to all the points listed above. Although I am thinking I would like to get a travel rewards card so I can rack up some airline miles for next year’s vacation!!
What do you think cash, debit, or credit? Which is the best method for you?
I completely agree! If it weren’t for a couple restaurants I LOVE that are cash-ONLY, I would never need cash in my pocket. (Even parking metres where I live take credit-cards)
I have a cash-back card that collects 1-4%, so when the end of the year rolls around, I get enough cash back to pay for a whole rent-payment. It never goes to rent mind you… It comes to me in December just in time to pay for the holidays which for me, makes the giving season far less costly.
If I paid in cash, I’d lose out.
I originally planned to use my rewards points for Christmas shopping but I every time I hear about a good book I check my points balance and if I have enough get the book for free off of Amazon. Either it is saving money by spending the cc companies money instead.
I like using credit because I can earn rewards and also track my spending. I hardly ever carry cash!
I like to track my money as well. I feel out of control with cash.
The key is that you won’t use a debit card for a small purchase. That is why this works for you. I know that isnt true for me ! I find working with cash difficult but I do really look at what I am buying more closely. It all comes down to what works for You ! ~ Christie
Yeah that is true. Everyone is different so they need to do what is right for them. I am just glad I stopped trying to force the cash method on myself when it doesn’t work for me.
Alexa, I think it’s terrific that you are experimenting and using what works for you. We too have found that using some tips from each of the “experts” works best for us, instead of using a whole package from one or another. Personal finance plans work best when they’re tailored to the individual’s or couple’s specific personality traits. Good for you for recognizing this!
Thanks Laurie! And yes, it’s true there isn’t one right way to go about personal finance. That is why I am surprised Dave Ramsey says it’s not possible to beat the credit card co.
Good for you to speak out against the almighty Ramsey! I’m also in the minority because I like my credit cards. I find it more efficient, easier to track, and I of course love the cash back every year. The important thing here: Not all the financial guru’s have got it right. Some of their advice you take. Others of it you leave. It’s your money – you do what you want to with it.
I really liked this article because using cash doesn’t work for me either. I’m a waitress while I go back to school for my master’s degree and if I have cash in my wallet I try to spend that first and save myself a trip to the back. Instead it’s much harder for me to keep track of where it goes. We save receipts to keep track of our grocery budget no matter how we pay at the register. I also have several credit cards and I keep all of them at a zero balance but still receive other perks from having them and I have great credit. Recently I have saved over $30 at one store, received a free $2o gift card, free $10 to spend at another store, and other free items and perks. I agree that the problem with credit cards comes from not paying them off right away so I always do.
YAY!! I so agree with you on this one. The cash system doesn’t work for us. It was too confusing and we always wonder where our cash went because I will grab a few bucks for lunch, he will grab a few bucks for lunch. LOL
I shouldn’t feel guilty that I love me some rewards at the end of the year. 😀
I agree with this, I don’t like carrying cash. For one, it’s way too tempting. I have a big bill in my pocket at the moment and it’s taken a lot of will power to wait until I can go to the bank (3-day weekend, memorial day, give me strength Holy Dinero!) I know what I’d do with it, but I won’t. I like cards more, they let me keep track of everything and it forces me to think about my budget a little more. If I can’t keep track of all my daily expenses mentally, then maybe I shouldn’t be spending so much or anymore that day.
I have tried all ways as well. I like to use my debit card because then I know the money is gone, but I’m not really good enough to leave money left over for other purchases. Credit cards, well, I max out. Cash is a pain in the butt for me because bank hours are the same as my hours. I dont know what works best!
Hi Alexa,
I believe in the “many mentors” rule ~ listen, try and apply what works best for you. I use a combination approach but there was a time when I was on a strict cash envelope system. Yuck…I hated that time in my life!
The thing Dave Ramsey says that I disagree with is to take a 10 or 15-year mortgage. I COMPLETELY disagree on that one. I’ve seen people I love be forced into selling their home because tragedy befell them and they were stuck in a short-term loan. Because there was equity, the bank wouldn’t help…they wouldn’t even just extend the term, which could have solved the problem. I say, get a 30-yr term and make 15-yr payments.
Ree ~ I blog at EscapingDodge.com
I agree that you have to find what works you! Personally, I have paid off $29,000 of debt with Dave Ramsey’s methods. I use a combo of cash and debit cards, but track my cash flow when I spend it. It is tracked against my budget and is super fun to see how little I can spend and how much I can spend. I listen to Dave Ramsey daily and look forward to paying off a second mortgage in the next year. As a single mom of a six year old, it is really important for me to work toward financial freedom. I look forward to early retirement and a fully funded college account for my son. Equally as important, I can’t wait to GIVE to animal relief and children.