Financial Freedom

Seeing that we are leading towards a paperless society, how do you feel about the use of a credit card?
Dave Ramsey: We saw the effects over the past few years of people not using cash. Millions of people used credit cards to buy things they couldn’t afford. When times got tough, they did not have any cash reserves to bail them out. Many people think using cash is weird, but to me, using cash is smart. Not only do you spend less when you use cash but you also free yourself from dealing with credit card companies! If you want to be paperless use a debit card.
The best way to avoid debt is by having a plan for your money. By creating a plan for your money, also known as a budget, you will be able to create an emergency fund and avoid debt. And remember, you have to learn to say “no”. If you can’t pay cash for it, you can’t afford it.

When is it appropriate to take out a loan for either a car or school?
Car payments and student loans are the quickest way to prevent wealth building. There is never a time I suggest going into debt for a car or for school. Most people have car payments and student loans their entire life simply because they didn’t have a plan. If you are in a situation where you need a car quickly, save $1,000 and buy yourself a beater. If you save what the average person pays for their monthly car payment, $495, you’ll have nearly $5,000 cash for a car in just ten months!
Student loans are toxic, once you have them you can’t get rid of them. There is a myth that you can’t be a student without loan, but that is not true! Many students work 30 to 40 hours each week in order to pay for school. You may not be able to go to a private college or you may have to go to community college for two years, but what you are going after is knowledge, not pedigree. In fact, a recent study showed that students who worked during college actually had better grades than those who didn’t work.

What are some of the pros and cons to having a credit card?
There are no positives to having a credit card. If you play with snakes you’re going to get bitten. Even if you pay the card off, you’re still not beating the system. Many studies have shown that you spend less when you use cash because there is an emotional attachment. If you must use plastic, use a debit card. There isn’t anything you can do with a credit card that you can’t do with a debit card except go in debt.

Continued on page 2: More tips from Dave Ramsey... »