Comments on: The Total Money Makeover: Money Myths – The (Non)Secrets of the Rich

By: TJ

TJ — Tue, 14 Jul 2009 19:20:49 +0000

Dave Ramsey is dead wrong about life insurance. Sure, term insurance is great. But he simply does not understand permanent life insurance. His advice is, in my opinion, criminal.

By: Bill in NC

Bill in NC — Tue, 14 Jul 2009 14:57:08 +0000

With debit cards the issuer often gives themselves weeks to investigate any alleged misuse, as another poster noted.

So if someone steals your debit card and drains the account you could be waiting a long time to get back that money.

Better have a contingency plan for that possibility if you carry a debit card.

By: Kate

Kate — Mon, 13 Jul 2009 01:27:23 +0000

sorry that the link didn’t do properly. Here it is: http://www.usatoday.com/money/perfi/credit/2009-07-08-banks-overdraft-fees_N.htm

By: Kate

Kate — Mon, 13 Jul 2009 01:04:48 +0000

“A debit card allows you to only access the cash you actually have – the stuff sitting in your checking account.”
Very wrong and it is the way that many people who are living close to the wire (i.e. students/young professionals who are scraping by) can get into real financial trouble: Banks’ ‘courtesy’ loans at soaring rates irk consumers

By: Battra92

Battra92 — Fri, 10 Jul 2009 19:48:41 +0000

I don’t know, I pay for just about everything with my credit card and pay it off at the end of the month. The credit card company sends me nice rewards checks every few months that I use on other items I want or I just toss it into savings.

By: britfaye

britfaye — Fri, 10 Jul 2009 18:45:17 +0000

I just want to say that if people kept track of their spending in a checkbook register (you know, the little book your bank gives you) they would be less likely to overdraft at all.
I keep mine to the penny and have only overdrawn my account once in 10 years (I forgot to write down a check).
Overdraft protection is there in case of a mistake but if people were more responsible for their own spending they would have a lot less to worry about.
I am a bank manager (yes, i know i am the enemy) and I have to deal with overdraft fees on a daily basis. I have never been asked to refund a fee by a person who keeps an up to date checkbook register.

By: Just A Guy

Just A Guy — Fri, 10 Jul 2009 18:41:29 +0000

When it comes to life insurance, for 98% of the people and time, term is the only type that makes sense.

However, many posters have a lack of true understanding about permanent ONLY as it relates to someone with estate tax issues and other complicated manners. Then, permanent policies with certain types of trusts are the way to go.

An unrelated point, insurance companies and agents make money when you buy term too.

By: gina

gina — Fri, 10 Jul 2009 16:01:32 +0000

I am definitely one of those people who spend more when using a card than when using cash. my brain just doesn’t seem to equate swiping a card with spending money. and half the time i don’t even register the amount of the transaction. when i use cash and have to count it out and see how much i have left, it becomes very real to me. i don’t carry around lots of cash. i carry around what i expect to need for the day. yes this requires planning ahead, which is something i need a lot of help with anyway.

By: Jonathan

Jonathan — Fri, 10 Jul 2009 14:29:59 +0000

Like some have mentioned, I think a big part of the debit card/credit card/cash debate is understanding on how you react to those situations and make the best choice. Everyone has different weaknesses with credit or cash, so you need to take an honest assessment of yourself and decide what’s the best choice. You find credit a huge weakness and that cash keeps you “honest”. Some find cash burning a hole in their pocket and need to use credit to control themselves.

That said, I do love using credit cards. Getting 1% cash back (or more) on expenses isn’t just “small potatoes” – it adds up over time for zero work. If you have the discipline to pay it off each month, it’s worth it.

I mentioned this before, but my personal trick is to go into ING after I make a charge and transfer the cost from my checking into a separate “credit cards” savings account. Then when the bill comes due, I transfer the balance of the credit cards account back into checking. It helps me see how much is getting charged each month and my checking account is reflective of how much I actually have available.

By: Kate

Kate — Fri, 10 Jul 2009 07:28:03 +0000

Trent said Having a large amount of cash on you is a security risk, no two ways about it. It is, and not just from the risk of theft. It’s not that hard to just flat LOSE money, to have a bill or coin drop as you are jostled or juggling packages and purse, etc.

I’ve never lost much, but I have occasionally lost a dollar bill and not been able to grab it before it blew away. On the flip side of this, I’ll never forget the time I walked into the local convenience store at 3 am for a pint of milk and found a hundred dollar bill on the floor. I told the clerk I’d found money (did NOT specify the amount) and left my number in case anyone called; no one ever did. The timing was great for us, but I’ve occasionally wondered how badly the original owner needed that hundred.

Debit cards get a BIG yes vote over cash from me as well!

By: J

Fri, 10 Jul 2009 01:49:33 +0000

@Kevin — Oh yes, of course there are those who get the medical bills, unemployment, etc who get to the bottom of the very big hole and don’t have the ability to dig out of the hole that the people with better incomes have. Definitely. Some of their stories are heartbreaking because you can tell they are working their tails off to make ends meet, but they’ve been through a horrible divorce, illness, prolonged job loss or other awful situation and they just can’t get ahead — they can’t sell the vacation home and the boat and take the kids out of private school and cut out the Disney vacation.

I guess what I’m getting at is that the people who are saying “Ramsey’s approach that credit cards are evil is just wrong because I can handle my credit” don’t understand Ramsey’s audience. It’s like telling a recovering alcoholic to have a drink because you can handle it.

For inspiration, though, the Friday editions of the Ramsey podcast are “Debt Free Fridays” where people call in that are entirely debt free (or who only have the mortgage). People of all walks of life call in, from people making 40K to making 400K and tell how long it took to pay it off and what their challenges were along the way.

By: Pam

Pam — Thu, 09 Jul 2009 23:35:13 +0000

I am familiar with DR’s concept of cash/debit card/credit card having attended his Financial Peace class earlier this year. His ideas and recommendations in this area are particularly important for those who need to learn discipline and control in their spending. His ideas are also excellent for those just beginning to earn and spend their own money. If they can learn these concepts early, they could save themselves a lot of hardship later.
Still, the same things don’t work for everyone and the cash idea didn’t work for me. Although it may be unusual, I’ll spend more with cash, than with a credit card. I understand that it probably a psychological thing since I was raised in a frugal home and have lived frugally most of my life. I’ve never not paid a credit card balance off at the end of the month and usually have funds left over at the end of the month for adding to savings. But, when I tried the cash approach it was much more difficult. I’m sure if I stuck with it I could have adapted, but since my way (credit card) works well for me, I think I’ll continue with it. In closing, let me go on record in saying that I have utilized many of DR’s ideas and am reaping the benefits, so I highly recommend giving his ideas a try to anyone who needs to learn some self-control in finanical areas. Best wishes to everyone.

By: Kevin@OutOfYourRut

Kevin@OutOfYourRut — Thu, 09 Jul 2009 21:02:17 +0000

J (#41) You’re describing a lot of people of course, bu the problems with credit aren’t always related to bad money habits. A lot of people carry small credit card balances that become big balances in the event of a prolonged period of unemployment, or a medical disaster. It’s often lower income people who have few resources to liquidate in the event of emergency. So they borrow for food and rent.

In that case, credit becomes a short term blessing/long term curse.

Anyway, just a different perspective here.

By: Kristen@TheFrugalGirl

Kristen@TheFrugalGirl — Thu, 09 Jul 2009 19:51:18 +0000

I think that you just have to be honest with yourself about your ability to handle cash or credit. If you know you can’t handle credit, then cash is probably a better option.

I know that I can handle credit just fine, and so whenever possible I charge purchases to my credit cards, which I pay off each month. I certainly don’t think that’s a good idea for everyone, though.

I’ve been doing this for 12 years, though, and have yet to carry a balance on any credit card.

By: J

Thu, 09 Jul 2009 19:03:11 +0000

@Marsha — you have to realize you are “weird” (and I mean that in the kindest possible way). Most “normal” people keep a credit card balance that is somewhere around $8000. They also usually have a car loan or lease. Not to mention school loans, rent/mortgage and possibly home equity loans, and possibly boat loans. They are stuck in a position where they can tread water but so much of their monthly income goes to debt service that they can’t build wealth. These people also have probably $0 in an emergency fund and aren’t contributing meaningfully to retirement or college funds.

Wow, that sounds really negative. Here’s how these people look to you: They have a new car all the time. They have new clothes. They have a big TV and audio system. They have a Wii, XBox 360 and a Playstation. They take a family trip to Disney in the summer and skiing in the winter. They have a boat that they take out on weekends, and maybe have a lake house. Their children are beautiful and have new clothes all the time.

Of course, it’s a facade. Their income barely keeps up with the debt service. If something expensive breaks, they put it on a card. If they want a new TV, they put it on a card. When their car is 3 years old, they lease a new one. Retirement and college for the kids are “something they need to get to”.

The problem is that eventually the debt payments outstrip the income entirely, or the HELOC runs out, or someone loses their job. Then the excrement hits the fan.

That is one of the audiences Dave is writing to, and yes, for those people, the credit card is genuinely bad. Dave’s other audiences include poor people, but a lot of the people who call his show have a decent income — they are just drowning in debt. And as he says, the first way to get out of a hole is to stop digging. Giving up that magic piece of plastic that lets you buy new video games for the kids and a new outfit for you is a significant lifestyle change.

By: Brent

Brent — Thu, 09 Jul 2009 17:19:15 +0000

Gold/Precious metals are a good safety net. If you have fears of devalue during crisis. Its a very real possibility and does not have to be complete to be beneficial. Precious metals hold onto their value well and usually increase in value during times of panic. I’m not saying that you should be paranoid, but having accessible enough to get by for a short while in something that doesn’t devalue during crisis is very helpful even for a simple dollar reader.
Plastic is also not anything you don’t let it be. I am actually far worse with cash than a card. It all depends on how you assign that value. Cash is just paper. It is not real value any more than the swipe of the card is. The difference is the “trade this much for this much” mentality. But make no mistake the balance sheet is the same.

By: Sandy E.

Sandy E. — Thu, 09 Jul 2009 16:33:48 +0000

After giving it a lot of thought, I’ve decided that since I prefer using cash, I’ll take out all the cash I need at the beginning of the month, and in so doing, then I can retire my debit card. I just have too many reservations about them. I don’t like the way gas stations and other businesses can put a block on them, meaning charge you more temporarily, and I don’t want to have to keep track of my purchases with them, which winds up being as difficult as charge purchases. And I’m not worried about being robbed! And then against Dave’s teachings, I’ll put my one credit card back in my wallet, with the understanding to myself that I can only use it if my car breaks down or to purchase airline tickets. The second I use it for any other purchase, then I’ll have to eat humble pie and admit that he was right.

By: Marsha

Marsha — Thu, 09 Jul 2009 16:22:16 +0000

Grrr, this whole “credit cards are inherently bad” argument DR has created drives me nuts. The danger is not in the cards, and there is no inherent safety in cash – it’s all about what’s in the spender’s (or saver’s) mind.

I mostly use a debit card, but I write down all my expenditures and subtract them from my montly budget figure. That “hurts” as much as physically counting dollar bills.

By: Marianne

Marianne — Thu, 09 Jul 2009 16:10:05 +0000

If a thief steals your debit card and cleans out your bank account, you may not be ultimately liable for the damages, but your bank may give themselves up to two weeks to put the money back in(I’m with BofA and this is their policy as stated on their website). I’m way more worried about debit card theft than CC theft!

By: Kevin M

Kevin M — Thu, 09 Jul 2009 16:08:43 +0000

Personally, I’d rather lose a credit card than $200 cash. There’s no 800 number you can call to get that $200 back…it’s gone baby gone.

IMO, that is a more common scenario than getting mugged. Does Dave skip over that point entirely? I can’t remember from when I read the book.