One of my common comments I get a lot, especially with my recommendations to get a credit card and start building credit, are comments like “Dave Ramsey’s head would spin if he heard this.” And I used to be one of those people, growing up I was told that credit cards were awful and it wasn’t until I was older did I realize that this was a terrible mentality to be in. Feel free to add me on Snapchat / Instagram: GPStephan
If you don’t already know who Dave Ramsey is, he’s a financial speaker who teaches about money, and also has a youtube channel where he takes calls and answers questions. I’d say he provides a pretty decent foundation for someone just getting into personal finance and financial independence - He focuses primarily on the average person with the average income and the average spending habit. Which, less face it, the average person has a terrible spending habit and usually loaded with debt from over spending. He’s also terribly against credit cards and debt, to an extreme.
I hate to say it, but from my experience, the average person isn’t interested in finance, saving, and building wealth. I’d like to go on a limb and say most people would rather increase their annual income and increase their spending by the same amount. Only a small percentage are more interested in saving and investing long term. The immediate gratification of cars, houses, vacations is a lot to resist…so in this regard, Dave Ramsey comes on extremely hard in his approach to break that cycle that so many people get caught up in.
The thing is, I think this advice is perfect for the average person who has a spending problem. If you’ve proven you can’t responsibly handle money and debt, the best choice - psychologically speaking, is to cut it out entirely - no exceptions. This isn’t a mathematically correct choice, but when humans deal with emotions, wants, and needs, this often over-rides what’s really the “correct” thing to do.
And that’s what Dave is great at - he knows the spending psychology of his viewer. Many people who can’t control themselves. So for this, I applaud him because his strict advice of no debt, no credit cards, cash only is the best possible outcome for someone climbing out of debt. If I were to say people as a whole could responsibly handle money, I’d say no - they couldn’t. Even you watching this right now - you’re in the very small percentage of people actually interested in money and wealth building. So overall, Dave’s advice is good…for most people who are bad with money.
But this isn’t the full picture. Credit cards are amazing when used responsibly. Want to buy a house and invest in real estate? You’ll need good credit for that. Want a business loan to expand your products? Need good credit. Lease a car? Good credit. At a certain point, the money you borrow is paid back at a lower interest rate than what money makes you, so you can dramatically increase your income by leveraging yourself.
Good credit for me has been the foundation of everything I do. One of my biggest mistakes was not getting a credit card sooner, because I was brought up with the mentality that credit cards were evil. If I had credit, I would have been able to double the amount of properties I was buying in 2012 vs buying fewer of them, cash. The thing is that it needs to be done responsibly. Like any financial tool, it can’t be abused - it needs to be used wisely. Don’t go and buy things you don’t need just because you have credit - this is what Dave Ramsey is good at stopping. But for people with self control who understand the benefits of building their credit score and reaping the rewards, building credit could be one of the best things you do. At the end of the day, it’s important to know yourself enough to do things responsibly. If you can’t handle it, fine - at least you know that and not having a credit card/debt is much better than maxing it out and moving on to the next one, while paying crazy high fees. But if you can handle it, get the credit card.
Feel free to add me on Snapchat / Instagram: GPStephan
For business inquiries, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq