About Dave Ramsey and why you Shouldn 't cut up all your credit cards

Posted on 2 December 2009 – 10: 03 pm | by Ryan |

Firstly, This is not a "bash Dave Ramsey" publication. Rather, I admire very much Dave Ramsey and overall philosophy on personal finance.

I am sure most of you have heard Dave Ramsey (seems to be everywhere these days), but for those of you who haven't, Dave Ramsey is a popular financial gurus – he is a broadcast radio and a TV channel Fox Business.

 Dave teaches that the names "baby steps".The baby steps include 7 steps that Dave thinks that someone can take to achieve wealth (or like him, "economic peace"). Dave describes steps in great detail in his book the total Money Makeover .

First, I read the book about a year ago and I'm attending the free podcast to iTunes for about 4 months.I definitively this book to anyone who is just starting to get a handle on my finances.

The process uses the total Money Makeover Dave is to take the reader through a journey as they complete each step baby during reading. before discussing the details of each step and the subsequent remuneration, Dave methodically, tends to hammer a reader's idea in your head: your money problems are valid only through self-decipline in handling money issues that you may get financial peace. Basically says that the steps will work only if you change your conduct in connection with money. Couldn't agree more.

I am not going to look at each of the steps of Dave baby in this post (you can find on the Web site), but I should like to address the first two and to say what I believe to be inconsistent (and possibly useless) advice would also open up the debate, so please comment or email me with your thoughts.

Dave's first baby step is to save $ 1,000 on a contingency Fund – that is, money should be used only if you can find yourself in dire straits while working in step 2 baby.

As a prelude to baby step 2, Dave indicates that you can get strong and do something drastic: ensure that all credit cards (he calls it a "plasectomy") Says the reader for the closure of all credit card accounts payable and repay any account credit cards with balance as soon as possible, and then close your account.

Step 2 baby says to pay off all your debts (except the home), smallest to largest.At this point, this assumption that the reader has sworn off credit completely – forever.

This is where can I find more inconsistencies.Firstly, there is a big fat elephant in the room that is not possible to avoid Dave: close all credit card accounts will destroy your credit score.

Dave's answer is simple, but in fact, misleading and useless to most people. Dave says that people should not concern themselves with their credit score.After all, having sworn off credit, he doesn't even have a FICO score.

Dave claims that if you use the steps in the baby will become rich, and I believe him.However, it should also be noted that even he admits it lasts for decades.You want to pay an extra $ 50 per month on your car insurance, until you become rich, because you do not have a score FICO? do your premium car. is only one of dozens of problems that will arise in your life with credit score of a poor (or no).

You never get a decent rate mortgage; this is debt that Dave allows, by the way, because even he realized that most people simply can't save $ 150,000 or more; however, there is no such thing as a mortgage lender does not seem to be at least in your FICO score. Dare anyone to find a frankly.

Beyond the problem of destroying your credit score, the inconsistency that really lies in the fact that before, as we have discussed, Dave says that it is necessary to become disciplined money issues, even tells us that we do not have the restraint, to maintain the high credit card account free of charge at the same time, the point is that anyone who does not have the ability to use their credit card, more than likely is also the possibility to save $ 1,000 emergency Fund for emergencies.

All this, of course, is a journey where we are Suppose to gain the skills to be successful with money and this requires that we ourselves teach restraint rather than destroy the ability to be tempted.

Again, I wholeheartedly Thesaurus of Dave's overall financial advice – it is really a gem. However, I would suggest that kind that anyone who starts with Dave's Baby Steps, review closes your credit card accounts; in the final analysis, with a little restraint taught by Dave Ramsey is just as easy to put your cards in a dresser drawer and you use them.

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