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.

Loans and Debt

Earlier I wrote most of this entry and I had a nagging suspicion that I was going to have the opportunity to trust God again with our finances...and my suspicion came true. 2 1/2 years ago we got our basement waterproofed. That is what starts my story below. This morning, I discovered water in my basement. Ugh! I got on the phone to the company, but a technician can't come out until Monday to check on it. So began the process of figuring out what to do. This job is all up to me since my husband is gone for 3 more weeks. At first, I was at a loss. I talked to my husband and he was overwhelmed which made me realized I just needed to figure out what to do. I called a friend who's a contractor and he explained to me what to do and how not to lose my carpet (the most expensive part to replace). I fixed the kids lunch and then set to work. Now, 2 1/2 hours later, the carpet and pad are pulled up in 1/3 of the room. The carpet is draped backwards and the pad is draped over a supergate to help it air dry. One fan is on and I'm off to get another out of the garage. The next step is to get the wet/dry vac and vaccuum the carpet. So, I need to get to work. But, here's what I wrote this morning....

Yesterday, I shared with a friend how much we'd paid off in debt in the last 2 1/2 years. The friend said, "Wow! How did you do that?" My reply was "God. God did it." I say that with all humility and thankfulness for what He's done in our lives. It wasn't like God just handed us a check and paid for it--we had to be diligent. There is a part that we play in it. I like Jerry Bridges' picture of the Holy Spirit and how it works--the Holy Spirit is the Electricity that makes the motor (us) work. One doesn't work right without the other.

I look back on the last 2 1/2 years and it's an interesting journey for us. It all started when we had to waterproof our basement because there was water in the middle of it. That led to having to replace our furnace at the same time. And my husband had just bought a new motorcycle right before it. And so it began...

Honestly, I stressed about it a lot and often didn't trust God with it as well as I wish I had. Part of it was because the first loan we took out for the waterproofing felt horrible. My advice about loans when people are married is to always make sure both people's names are on it--even if you think you'll be able to pay it off quickly. If you're not on the loan, the lender won't talk to you. That happened with that first loan, the man played it off as not being a big deal--it was a difficult loan to deal with. The second reason I hated (yes hated) that loan was that the whole deal left a bad taste in my mouth. I recognized that the salesman was making a hard sell and yet I still got caught in it. We did need the basement done. We got caught.

So, then we had 2 loans (we had to take out a separate loan for the furnace/motorcycle) and a car loan. It was daunting. But, we knew we just had to plug away and so we did.

In the spring, we had to remodel our kitchen (our sink was leaking), replace our deck, and replace our roof all in the wake of our third child arriving. Because we had loans, we had to pay outright for everything--and amazingly God provided for all of these needs.

The following summer we tried to go down to one car and we sold my husband's car. That was a trying time. My husband traded his motorcycle and got a different one. (I wrote about our motorcycle buying adventures a long time ago =) if you're curious--that's a whole other story.)

http://makingthingsstretch.blogspot.com/2009/09/motorcycles.html

After only a few months, we decided we needed to find a way to get another car. My husband did research and we chose a used Chevy Equinox with less than 30k miles. God has been very gracious to us with this car. It has only had minor issues and is very comfortable for my husband to commute in. More than that, God has been gracious to me because I have my car when I need it and I don't feel panicked if something were to happen to one of the kids and I have to get them to the doctor or hospital.

The car loan was a small loan to me, but I was thankful to have the first one paid off. But, then we took on another car loan. But, God provided so that we paid off one of the loans and also paid off my husband's new used car. We worked on it bit by bit, but were thankful every time we were able to pay off a big chunk.

After making the comment to this friend the other day, I sat down and totalled how many loans we'd paid off and the amount of them and then the amount of money we'd had to spend on other big repairs for our home. We paid off 6 loans in 2 1/2 years and I am thankful. The amounts surprised me. After taking taxes and health care off the top of my husband's income, we paid 30% towards loans and close to 50% for house repairs and loans together. That blew me away to see God's gracious provision for us on paper.

Sometimes I think we know that God can stretch the "loaves and the fishes" far more than we can imagine, but sometimes writing it down or articulating it can show us truly what that means and how much more God can do than we can ever imagine.

Do I think I'm really a person to give advice about these things? I don't know. I think we're just like everyone else. We struggle too with our wants and needs every month. But, we keep pressing on. We weren't able to save a lot in the past 2 years because of the loans and expenses we paid outright. We are looking forward to saving now that all the loans (except the house) are paid off.

I read a book this summer that I really liked by Matt Bell about finances (http://makingthingsstretch.blogspot.com/2009/09/gods-provision.html) and I liked what he said about loans and debt. I think the hardest debts to tackle are credit cards because they are not a set amount and they are connected to our habits and daily lifestyles more than car loans and personal loans. All financial advisors recommend that credit cards be paid off first. Then they say to pay off the smallest loan first and then move to the next biggest and then the next biggest, etc. I agree with that. It feels good to get a loan paid off and it's going to be quicker going if you start out with the smaller loans. The other thing I took into consideration, though, was the interest rates on the loans. I was most anxious to get the loan paid off that felt yucky. It was the second loan paid off, I think.

My hope in sharing all of this is that it might encourage you if you do have loans--we can trust God and we are called to be good stewards of what we are given.

My little Sami has been asking for things when we go into stores a lot lately and I have been telling her often that when we go to stores we buy things we need, not just things we want. Needs come first.

At the end of a day like today (and it's not even over yet), it seems like there's always something. And that can be really discouraging. But, on the other hand, it keeps us from getting self satisfied and putting our trust in ourselves and it helps us to remember that we continually need to trust God with our finances--every single day. He is our provider =)