I watched a video where Dave Ramsey and Clark Howard were being interviewed by Diane Sawyer. In the interview, Diane Sawyer looked bewildered that they would suggest to pay the credit cards last. Then I saw another video that pretty much illustrated why Americans are on the wrong track financially. In this interview, Mellody Hobson is telling us how to survive an economic crisis. Some of her advice may be OK, but her answer on how to prioritize your bills lead me to believe that she is a lunatic!! She says you should pay your credit cards first so you can later use them again to pay your utility bills. Unbelievable! Watch the videos and decide for yourself.
Why should you pay your credit cards last?
I think Dave Ramsey is dead on in his suggestion to pay your Four Walls first. Your Four Walls are Food, Shelter, Utilities, and BASIC Transportation. Just for the record, BASIC does not mean you should go buy that new SUV you have been wanting. BASIC means the cheapest way possible without going into debt! These are your first priorities when doing your budget.
The most OBVIOUS reason why your credit card should be paid AFTER your Four Walls, is that your FAMILY should not suffer because you want to retain the ability to dig a deeper hole! Does food taste better when you pay more for it? You don’t have a house anymore but hey, at least you have a Visa Gold card right? What about the added bonus of not having any utility payments because you have no home?
The truth is that having a credit card will only get you so far once things start going downhill. It’s not a good financial plan to rely on your credit card to finance an economic crisis. You would be better off putting yourself on a budget, and saving for a rainy day. Use your rainy day fund to get you through tough times, not Mastercard!! A slow and even bad economy does qualify as a rainy day.
Do you want to become recession proof?
Are There Dave Ramsey Critics?
Yep and in my opinion they are missing the big picture. His plan is about NOT buying something that you really can’t afford. It IS about getting your priorities straight so you can experience Financial Peace. Your life is about priorities! The most criticized part of Dave’s plan is that it says that you do not need debt AT ALL EVER! No car loan, no credit cards, and no student loans! If you absolutely can’t be talked out of getting a mortgage then Dave says to get a house that is no more than 25% of your income and it should be a 15 year fixed rate mortgage.
I just read a blog that so brazenly states that, “Every successful business in American relies on some level of debt to survive and grow. It is one of the key elements of capitalism. Without debt and risk, there is very little growth.” Is he saying that the ONLY way Capitalism works is by the use of debt? This is just flat wrong!! Harley Davidson, J.C. Penny, as well as Dave Ramsey’s company are proof of this. The blogger goes on to say,“In order to reach an even higher financial position, it is important to accept debt and understand how to use it as a tool for growth and innovation.” As long as people continue to justify this myth by accepting it as truth, then I am afraid that the debt problem in America will only get worse!!
I will close by adding that most of the people that call the Dave Ramsey Show thought they were using debt as a tool as well. Responsible users of debt ran into Murphy, or should I say Murphy ran into them. To be fair the author of these comments also suggests that he ONLY uses debt if he has saved the cash to back it up. I say what is the point? If you have the cash to back it up then doesn’t that kill the assumption that you need debt to prosper and grow. Debt only hinders prosperity and growth!!
DEBT IS NOT A TOOL!!!!!