The best thing that has probably ever happened to me financially was that in college I interned at Dave Ramsey's company. If you don't know who he is, I'll tell you. Dave is a financial guru and founder of The Lampo Group, based here in Nashville. His radio show broadcasts to thousands nation-wide, and thousands more have read his books.
When I was applying for the internship, I didn't know much about Dave at all. I read his bestseller, "Total Money Makeover," and did some other research to learn more about his and his company. It totally changed my perspective on money, saving, and spending wisely!
Dave and his ideas can be somewhat controversial - he's very black-and-white about most financial decisions and can be oversimplifying when it comes to real life situations. Unfortunately, I think the average American has a seriously dysfunctional relationship with money and needs a financial slap in the face to set them straight.
I'm mostly grateful that Ben & I read this book and adopted some of its principles before we were even married. We decided that we wanted to try to go for the first year of our marriage without a credit card... four years later and we've still never had one! In fact, with the exception of our house and Ben's car (both of which we are paying off fast and furious), we don't owe anyone anything. Not a penny! It is thoroughly freeing!
Seth Godin (a marketing blogger I follow) had a great post last summer about finances, in which he said,
Only borrow money to pay for things that increase in value. It's a short list:your business, your house and your education, mostly... If you have credit card debt, you're in big trouble. Your bank account has a huge leak in it, and it's getting worse. Hence the urgency. If you have credit card debt, that means that every time you spend money (even cash), you're borrowing money to do so. And so, if you're going out to dinner or buying a new pair of shoes... you're spending borrowed money on stuff that is decreasing in value.
It's simplistic, but true. Dave often puts it even more bluntly... if you can't afford it, don't buy it! Or save up cash until you can. It's an antiquated idea in current times, but one that our grandparents and great-grandparents understood well. The very modern notion of instant gratification is alive and thriving in the way most of us spend money.
I don't mean this to sound condemning to anyone who does have credit cards or loans - I'm sure there are good reasons out there to have one and many responsible people who can use them wisely. I'm just sharing how we've been able to do without and what that looks like for us.
So what's the best financial advice you ever received? Who is the most financially sound person you know and how have you benefited from observing them? What about financial habits you need to nip in the bud? (I'll confess ours... we eat out WAY too much!) Now it is your turn... let me hear from you in the comments!
3 comments:
I didn't realize Dave Ramsey was so against credit cards. I guess that is good advice for people who already have debt that needs to be managed.
My parents are my major source of advice on finances. Among the many things they taught me was that having and using credit cards responsibly doesn't require a person to be in debt. It's when you pay for things you can't afford with credit (i.e., money you don't have) that credit cards are dangerous.
Jon and I use a card with cash-back incentives and pay it off in full every month, for things like the grocery store or gas station where we would pay with our debit card. Neither of us has EVER had credit card debt (zero balance at the end of every month), and we have each been using credit wisely since 2001. Also, because we have been using credit responsibly for so long (and thus getting larger and larger spending limits), our credit scores are very high, which was instrumental in us getting a mortgage (because of our incredibly low stipends were not convincing anyone). We were told by multiple mortgage brokers that our credit was the deciding factor in us getting a good mortgage, or even getting one at all.
Sorry to rant, I just don't get the blanket negativity towards credit. If you use it just like you would use a debit card, you're fine, and it can actually have benefits. Besides the credit rating, you can dispute charges much more easily (and usually with greater success) than you could with a debit card, reserve things like hotel rooms in advance without freezing a portion of your bank account, and reap benefits like airline miles, cash back, etc.
Another thing my parents always told me was that car loans are one of the worst forms of debt you can have. Hence Jon and I driving around in our paid-off, 13- and 11-year-old cars, because we haven't saved up enough for a new one. Hopefully we'll be able to pay for at least 2/3 of the next car outright!
I agree that responsible people like YOU shouldn't bat an eye about using credit cards. I think Dave's so anti-them because 99% of the people that call in to his show or come seeking his help have already gone so far down the debt rabbit hole that they've proven themselves incapable of using them responsibly.
And I agree too about the car loans! It killed me not to fork over the cash for Ben's car in full up front but after juggling some numbers it turned out we got a better deal by not doing that and then putting down as much as we can monthly instead. I think it had something to do with how cheap the car was in the first place... Ben would know, he's our budgeter and bill-payer! But still, I hope to get the most we can out of our current vehicles and be able to purchase future ones outright. That would be awesome!
I think having parents who are financially responsible and teach their kids valuable lessons about money is so important. I hope to be able to do the same for my own kids!
I'm so thankful that you got the opportunity to do an internship with Dave Ramsey! We're all impressed at how well you & Ben manage your money (that's Tom, Sally, Butch & Darlene)! Dad and & are attending Dave Ramsey's Financial Peace University and wish we had done this years ago!
I was poor growing up but my mother, especially after she & my dad were divorced, did an excellent job of making sure we had what we needed & never borrowed money to get by. Having that background, I have been a combination of not having to have it all, but wanting things just because I wanted them since I had not had that freedom growing up.
Tom and I were blessed to have good jobs with excellent benefits. I feel if we had followed some of Dave's principles we would be very well off today and we would have passed those teachings to our children. However, we were blessed with the wonderful opportunity of early retirement which gave us precious time with our kids and each other. I'm looking forward to being better stewards of what God has blessed us with.
Some good advice I remember: My mom would say if you really want something, wait for a few days and see if you still have that passion for it. Sometimes the desire was just for the moment. From FlyLady - you can't organize clutter. I have come to the point of really hating clutter, so I don't buy as much. Also - if you've dug yourself into a hole, stop digging! I was watching Oprah and Suzie Orman (sp?) talked about the importance of having a good credit card history and how a higher limit can improve your credit scores (like Heather said), but like Amy said - it takes a strong person not to fall into the credit card debt pit. Another tip would be that when your kids are babies and probably up to at least middle school - there are so many things parents buy just because the parents want to see their kids with adorable clothes & toys, etc. At this point the kids don't really care. So, put that money in the bank for college, etc. Buy a few really nice things instead of so many junky/trendy things.
As far as the most financially fit person I know - it would be you & Ben and my mother & step-dad.
The habits I need to nip in the bud and I'm working on them are not eating out so much and not buying anymore scrapbook stuff until I use what I already have!!! That's it for me, Mom
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