Who is this Dave Guy?

For those of you that do not know, Dave Ramsey is a New York Times bestselling author, a radio host and the guy behind my enthusiasm for this new debt free life.

You can download his radio show as a podcast at itunes. Give it a listen; this guy is a hoot.

I’ve read lots of financial management books, because I read a lot and because I’ve always been involved in small business and money. By far, Dave’s is the simplest most straightforward advice out there. He doesn’t just tell you the theory, he has a very definite step by step plan and he motivates his readers to actually follow the plan.

After I read his book, The Total Money Makeover, we attended the 13-week class, Financial Peace University that many churches host. Still not having enough of Dave, I attended his week long, very intense counselor training.

The average family, while going through Financial Peace University, pays off $5,300 in debt and increases their savings by $2,700!

The foundation of Dave’s plan are the seven baby steps:

STEP 1 – $1,000 to start an Emergency Fund

Making a commitment not to borrow money requires that you have some other method to pay for life’s little emergencies like the busted water heater or the bad alternator on your car.

STEP 2 – Pay off all debt using the Debt Snowball

List all your debts, except for the house mortgage, smallest to largest. Pay minimums on everything except the smallest and attack it with everything you’ve got. When the first debt is paid off, take what you were paying on it; add it to the minimum on the second and work like crazy to pay it off. Keep that snowball rolling until all of the debt is gone.

STEP 3 – Build an emergency fund of 3 to 6 months of expenses in savings

$1000 is not enough money to handle a real emergency. Loss of job, prolonged illness or a death in the family may require much more. Almost universally, money experts recommend 3-6 months of expenses.

STEP 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement

If you were in debt when you started the program, Dave recommends stopping all retirement, college and other saving temporarily until you reach this step. Now it’s time to re-start your retirement savings.

Step 5 – College funding for children

While maintaining your 15% retirement savings, start saving for the kids college.

STEP 6 – Pay off home early

Now put all you can into paying off the house.

STEP 7 – Build wealth and give!

You have no payments. No car payments, no credit card payments and no house payment. You can really afford to build wealth and give.

Even Snake Charmers get Bit

I’m a Dave Ramsey follower, a fan, a true believer. I have no doubt that his simple personal financial process changes lives. I know it has changed mine.

It works whether you make 24K or 240K a year. It works if you are deep in credit card debt or if you’ve never borrowed a dime.

But even I can occasionally get the But Dave’s. If you’ve ever listened to his radio show, you’ve heard the But Dave’s. People call in and say I get the process and I agree – BUT. They think their situation, intelligence or self-control is so different than everyone else’s; they should be given a pass on some Dave principal.

One of the most common But Dave questions involves the use of credit cards. Dave is very clear–you should NEVER use a credit card. He refers to credit cards as snakes and warns if you play with snakes you’re going to get bit.

But Dave, I pay it off every month.

This is where I was when we started Dave’s program. We had debt but not credit card debt. I was however, always living on next month’s paycheck. I lived on my American Express, put most of my recurring bills on it and then sent them a huge piece of my paycheck the 1st of every month.

Getting off this cycle was not easy but it helped a lot.

Once I quit using the card, I had control again of my check. I could plan what to do with the money rather than react to what I had already done.

I spent less. It’s a proven fact you spend more when using a credit card.

While I quit using my cards for personal use, I continued using my American Express for reimbursable business expenses. From software, to continuing education classes for the employees, to computers and client gifts; as a key decision maker at a very busy insurance agency, my card got used a lot. It was convenient, it was easy, and above all it was stupid.

When the owners of the agency and I agreed to part ways, it was not easy or comfortable. They were angry and insulted that I had refused their new contract and yet, they asked me to stay through the end of the year. I agreed not wanting to hurt the agency or the employees. For six weeks, our relationship deteriorated. On my last day, having completed all I promised, I left without  a reimbursement check.

My reimbursement was paid. But it wasn’t be until my blood pressure maxed out and the “boys” demonstrated to their own satisfaction their absolute power.

What did I learn?

It is stupid, expensive, risky and unnecessary to use credit cards. If you can’t pay for it, wait until you can.

It is light-years beyond stupid to use your credit card for someone else’s stuff. If your employer can’t find a way to pay for their own stuff AND your travel expense without using your credit – start looking for a new job.


Keeping up appearances is one of the reasons people get into, and stay in debt – they are living beyond their means. Dave Ramsey says, “We buy things we don’t need, with money we don’t have, to impress people we don’t like.”

You have probably spent your whole life learning this “need” to impress, and it is surprisingly difficult to change.

I see two year olds sporting Nike and Ralph Lauren; so if a good part of your decision making involves what others might think, let’s get the blame thing out of the way. It is your parents’ fault (just kidding, Mom). Now let’s start looking for ways to change this.

We have been proudly on our “austerity” program for some time as we worked to pay off our debt, build our emergency fund, and finally pay off our house. We’ve been killing it, living on a tiny percentage of our income and very happy doing it. We do not feel restricted or deprived. Many of our friends and family know what we are doing and although they sometimes poke a little fun, they are for the most part very supportive.

So given this and the fact that I think I’m way past spending money to impress others, what was up with my GT soda explanation? We recently had some family over for dinner including a favorite aunt and uncle that I don’t often get a chance to see. As I served our guests refreshments, I found myself giving a lengthy explanation of my Aldi (discount groceries) brand diet cola. I do believe I was a little embarrassed to be offering an off-brand soda to people I care about.

How silly is that? These people have known me all my life, I’m certain whatever they think about me would not have changed based on the brand of a cola.

It’s an important to be aware how much this concern of what others might think controls our decision making. Before last night I would have said none, but apparently the real answer is some.

If you find yourself at the car lot because your car isn’t new a enough or nice enough for your friends – STOP. What do you think? What financial goal are you currently working on? Will a new, or new to you, car advance or setback that goal ?

The objective is not to take all emotion out of decision making but to create an internal dialog where we catch ourselves before making choices that conflict with our goals.

Build yourself a list of the thoughts that trip you up and check your thinking before making choices.

“Self, I’ve noticed that you still tend to make some decisions based not on what will lead you to your goal, but based on what others think. Is this one of those decisions?”

“Self, Seems like sometimes what you really, really want today – you lose interest in by next week. Is this one of those decisions?”

So easy peasy, now that we know you’re predisposed to want things to impress others (that’s your parents’ fault remember), all you have to do is be on the outlook for choices that don’t move your goals forward. Question your choices and rethink these stinking thinking decisions; you’ll be richer for it.