My Dave Ramsey Review, Why Dave Ramsey Says That You Shouldn’t Use Credit Cards, and Why I Sometimes Use Them Anyway

Dave Ramsey actually has very strong logic when he says the news credit cards, and that there’s been tons and tons of research on the subject actually spend 14% more money when he use a credit card versus if you use cash or debit card. He also goes on to say that if you do use cash in the least out of all three of them, but that when you use the debit card it’s still significantly less spends, but if you use a credit card. The logic behind this reasoning is actually pretty sound in that you could think of it like this, when you using a credit card your brain doesn’t register it as your own money, it registers it is someone else’s money. The following blog post will walk you through my full Dave Ramsey review, and will explain why I 99% agree with his philosophy on getting the heck out of debt, and on avoiding credit cards, loans, mortgages, etc to the fullest extent, and why I go even further on certain subjects. For more information, subscribe to our blog for regular updates, and comment down below with any questions that you may have, and we’ll get back to you within one business day with a response. 

Why I Think Dave Ramsey’s No Debt Philosophy Does Not Go Far Enough, My Dave Ramsey Review

Overall, I generally like Dave Ramsey’s financial acumen and his advice surrounding your money, with 2 exceptions. First off, his knowledge of equity finance is absolutely terrible. He recommends actively managed “Growth Stock Mutual Funds” to his clients, which in hundreds of studies and research, not to mention nearly every computer based statistical simulated model out there, perform poorly compared to passively managed index funds, and with higher fees. Add to this that value stocks actually tend to outperform growth stocks pretty significantly over the long run, and you are leaving money on the table by listening to Dave Ramsey’s advice.

The other piece of his logic that is not that great is his argument for buying a home, on a mortgage, earlier than I would like to see someone do, even with a proper emergency fund in place. My advice for buying a home…if you really want to get rich, is do not buy a house until you can pay for it with CASH, comfortably. This normally means not buying a home until you have $650,000-$800,000 in cash put away, and would presume a $350,000 to $400,000 home. From here, pay for the home in cash, do not utilize a mortgage, as although the 3.5% rates may seem cheap, it adds too much leverage to your portfolio,, adds risk, and takes 3.5% off of your portfolio. Simply put, if you have a mortgage, all of your money should 100% be going into paying down the mortgage. If you are contributing to a 401K plan, hold off on continuing to do this until the mortgage is paid off (do not cash it out as you will get killed on taxes and penalties.) No going out and save every single dime until that mortgage is paid off or 80% close to it, then you can pick back up on filling up the retirement accounts again.

Dave is more on the side of mortgage the home so that you’re not giving your money away to renters, however he is not looking at the cost of capital, nor the downside of leverage. On some level, he is correct, if you have $650,000 liquid cash, you are probably better off spending $250,000 towards a $325,000 home and paying off the rest of the mortgage fairly rapidly, rather than continuing to spend something like $2000-$3,000 per month on rent, any more debt than this however, and I would say to keep stocking up cash.

Dave Ramsey on Credit Card Debt, My No Debt Dave Review

Since what you are essentially doing is giving a piece of plastic,  getting something, and then getting the same piece of plastic back, your brain doesn’t register and some spent any money. When you’re spending cash, your brain says oh that was painful, I just lost money for that item, I’m going to be cautious, so you spend less money. This is a big difference overall, and spending an extra 14% money every single time and I have really big problems with your finances of the long term, and it can really add up, overall it’s better than not use a credit card, and Dave Ramsey is absolutely right.

Final Thoughts on The Dave Ramsey Show, and Why Snowballing Your Credit Card Debt is 100% The Right Thing to Do

All in all, Dave Ramsey means well with regards to finance, and most of his advice regarding debt is actually very good, his logic behind why you should NEVER use a credit card, and of why you should pay cash for everything is very strong, and he understands psychology quite well. Overall, I would definitely recommend watching his podcast for beginners, and for beginners, intermediates and advanced Finance gurus, I would recommend subscribing to our blog for daily article updates from yours truly!

Cheers!

*Inflation Hedging.com

Sources:

https://finance.fandom.com/wiki/Firm_Foundation_Theory
https://finance.fandom.com/wiki/Castle-in-the-Air_Theory
https://money.cnn.com/data/markets/

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