I'd love to hear back from Cat about what he likes/dislikes about Ramsey as well.
If I may, here's some of the thoughts I have of Ramsey: (disclosure: Years ago I listened to his radio show daily for a span of several yrs. I also, went to a seminar about 10 yrs ago)
-He's an extremist. And, for the majority of citizens who are over their head in debt, they need an extremist. Ramsey talks over and over about the evils of credit cards and how you should cut them up and never have them. And then only pay cash. He makes it sound like it's the best and only way, but obviously it isn't. However, like I said above, many people need to take the extremist approach to their finances.
I'll give you an example. I have an American Express card which gets 6% cash back on groceries, 3% back on gas, and 1% back on all other expenses. ($95 annual fee) Since, the vast majority of what I purchase is groceries/gas, I more than make up for the annual fee by a large margin. I pay the card off every month.....sometimes just a few days after a make a purchase. There is no debt accruing here.
Credit cards are also safer in some aspects to debit cards or cash. I've been victim of fraud both with a credit card and a debit card. The credit company was far easier to deal with and wiped the charges clean....the bank was not so easy to work with. So, on vacations we tend to use credit cards that way we're protected and we don't have to carry around large amounts of cash. When we get home, we pay it off immediately.
We have also used credit cards for larger purchases. We had a home repair last yr. Instead of selling off some of my investments that were earning interest (plus having to pay the transaction fee), we used one of those 0% credit card checks they sent through the mail and I paid it off long, long before it every elapsed. (We could've used our cash savings just as easily in this case as well, but we didn't)
The above scenarios work, but you've got to be disciplined. If you can't be that disciplined to maintain a zero credit card balance, then the more extremist Ramsey approach is the best.
I agree with all of this. Here's my thoughts on Ramsey:
He's about changing behaviors more than how the math works. I agree that people in heavy debt with median incomes need that. He says to pay off the lowest debt first and work your way to the largest (debt snowball)...regardless of interest rates on those debts. That's bad math, but the intention is to get traction and start feeling good about getting rid of small debts that will lead to more motivation when it comes time to tackle large debts.
While incorrect mathematically, I agree with the psychology.
Another thing he preaches is to stop saving for retirement while working your way out of debt. Again, this is so you focus all of your extra money on attacking the debt and pay it off faster. However, if your employer matches your 401k, you are throwing away free money for 2-3 yrs while you work off your debt. Not to mention what that free money is worth compounded annually over the next 25-30 yrs.
Again, I get why he says to do that, but I'm not throwing away free money.
I also agree with you and disagree with Ramsey about credit cards... when used responsibly and paid off every month. Again, you could be leaving free money on the table. The problem is that most people aren't financially responsible and will run up more debt after they just worked to pay it all off. So I get why he preaches what he says.
My wife and I discovered Dave Ramsey about 7 years ago and went through a modified version of his plan with the alterations I described above. The bones of his plan are great and it helped us to pay off 60k in debt and completely change the way we manage money.
No more debt except the house (because it's cheap money at less than 4% interest), college savings, maxing out retirement, have a healthy liquid 6 month emergency fund, and we never fight about money anymore.
I'm a fan of his, and his program changed my life, but I don't agree with him on all the finer points.
