Tuesday, May 4, 2010

Dave Ramsey

I have been curious about Dave Ramsey and his financial advice for a long time.  I have a very dear friend who has enjoyed the seminar her church put on with his materials.  So, when I got the chance to review this book, I was very excited to see what he had to say.

This book is called The Money Answer Book.  It is a collection of short answers to questions.  None of the answers are more than 2 pages.  And the pages are small.  It is only the size of maybe a 4 x 6 or a 5 x 7 picture.  This is the third book I've received from publishers that is being printed smaller than books used to be.  (I assume it is a cost cutting measure in the publishing world.)

But, back to the book's contents.  The questions are organized by topics such as real estate and mortgage, insurance, budgeting, etc.  The entire book can be read in less than an hour.

Here are some things I learned about Dave Ramsey's financial philosophy:
1) He advocates paying everything you can in cash.
2) No credit cards.
3) Pay off small debts first and then move on to bigger ones.
4) Buy used unless you're rich.
5) Get out of debt (except for your mortgage) and stay out of debt.

I pondered first the paying for things in cash idea.  I brought it to my husband to ask what he thought.  He brought up several points that I hadn't considered.  First, we use our credit cards to save us marital conflict.  He doesn't have to save all his receipts and hand them to me.  I look them up and write them down.  We pay off our credit card every month.  Second, he told me that it is far easier for him to whittle away a $20 bill than to use his credit card.  If he has a $20, he'll spend it and have no idea what it was spent on.  I shared this with a friend and she said the same is true of her.  So, for people that don't pay off their credit cards each month this can be a great idea--to pay in cash.  But, for some people using cash can be a greater source of temptation.   Third, at Target, Lowe's, Toys R Us, Home Depot and several other stores, the clerks can look up your returns using your credit card.  This is a great thing for people like me who have 3 kids and can't keep track of receipts very well.  It's also great because I can return something for my husband and he doesn't have to save the receipts for me. (Costco can also look up your purchases using your membership card.)

So, the cash idea won't work for us.  But, it has worked for a lot of my friends and I think it's a great idea.  It just isn't a one size fits all solution, though.

I did learn something that scared me in this book.  I discovered that credit card companies can pull your credit report without your permission and then they send you a prescreened/preapproved credit card application.  Thankfully, there is something you can do about it.  Call 888-567-8688 to put a 5 year ban on unsolicited credit inquiries.  To make it permanent, you have to write a letter.  When you make the call, it will associate your name and address with your phone number, so call from your primary home phone.  If it is not your name that comes up, spell your name and say it.  I had to spell my name and the phone picked it up perfectly.

Because this is just a Q&A book, the answers are very short and that works well for some of the questions, but for others, it is very inadequate.  The section on real estate and mortgages was extremely short.  I think this is an area that our culture struggles with immensely.  We hear and see everywhere that we should have huge homes--bigger than we can afford.  I wish there had been more discussion of the consequences of such actions.  I am glad, though, that he said an Arm is never wise--rather that choosing a fixed rate loan is the wise road.

This is a great gift book to help people get their feet wet and begin thinking about their finances.  It isn't a comprehensive financial guide.  Still, I have two people in mind already that I would like to give this book to.  I think Dave Ramsey has some great advice.  The thing I most agree with about his financial advice is something he states on page 1, "...be responsible to God and family, sacrifice the unnecessary to gain the necessary, get rid of debt, and build a financially peaceful future."

Please note that I was given a complimentary copy of this book for review.

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