Rethinking Dave Ramsey: Money Rules Are Made to Be Broken

Mark Humphrey/APDave Ramsey gives solid advice, but Johnny and Joanna have developed their own variations.
The first financial book my husband, Johnny, and I read as a couple was Dave Ramsey's "The Total Money Makeover." We had student loan debt and had never kept an itemized budget, and Ramsey's book was the detailed manual we needed to start our long journey toward financial stability and security. Some of his steps were hard to swallow at first, but we made a blood oath to keep at it -- and by blood oath, we mean we looked at each other and said, "Cool. Let's try this." And lo and behold, in less than two years, we'd paid off our $20,000 in school loans, built an emergency fund and started saving for retirement.

We will always have Ramsey to thank for getting us on the path of financial freedom. But now that we've begun to learn the financial ropes, we've decided to veer from his course on a few topics. Some of his advice that helped us in the beginning doesn't quite fit our lives anymore. Here are a few areas where we've cut loose from Ramsey.

Keeping the Credit Cards

My husband and I never cut up all of our credit cards like Ramsey recommends, but we did try to go without using them in the beginning of our debt-payoff journey. We soon realized this method wasn't for us, for a few reasons: We never carry a balance because we pay off our credit cards every month; credit cards are an easy way to build our credit score and history; and we love cashing in on credit card rewards. Currently, we have enough airline miles to last us for the the next few years. If we had a history of reckless credit-card spending, perhaps we would have cleansed our wallets and purses of credit cards for good, but for now, plastic still serves a purpose in our household.

Building a Beefier Emergency Fund

Ramsey recommends you start with a $1,000 emergency fund while you're getting out of debt, and then build up an emergency fund to cover three to six months' worth of expenses once you're out of debt. Even while we were getting out of debt, we kept at least $3,000 in an emergency fund at all times, and we added to it from month to month. Now we have six to eight months' worth of expenses saved up for a rainy day. We feel better with the larger emergency fund while we're young and our career paths and futures are still a bit unpredictable. And if we don't end up needing it for an emergency, we certainly won't complain about the extra dough in savings.

Thinking Outside the 'Envelope' System

I will say that the use of cash only and the envelope system made us very aware of our spending. And we definitely needed that in the beginning. In fact, we still recommend it to first-time budgeters. But once we'd exorcised all of our spending demons and gotten our budget down to a science, the cash/envelope system seemed needlessly inconvenient. So we switched back to using credit cards (that we pay off in full each month). And instead of envelopes, we track our expenses with a budgeting app. It's an easier way for us to stick to our budget effectively.

No Longer Itemizing Every Cent

While itemizing every expenditure is important initially when setting up your first budget, it's also quite laborious. After a couple of years of budgeting this way, Johnny and I had an aha! moment.
What if we had an "everything else" category for our discretionary spending? For example, instead of having $20 allotted for dry cleaning, $30 for medical, $25 for pets, etc., we just budget $400 for all of our discretionary spending. And as long as we don't go over $400, it doesn't matter how and where we spend. Some months we spend more in entertainment or home improvement, but as long as all of our discretionary spending stays under $400, no problem. We're not sure what Ramsey would think of our method, but it works for us. It makes our budgeting less complicated, while still keeping our spending in check.

So while we've graduated from some of Ramsey's rules, we're sure glad they were there to help school us in the first place. But some rules are meant to be broken. Or at least we'd like to think so.

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I would stick with DAVE. Going back to credit cards increases spending eventually.

March 20 2015 at 10:51 PM Report abuse rate up rate down Reply

Debt or freedom it's your choice. Buy what you need instead of waste. What's wrong with living within your means?

March 12 2015 at 2:58 PM Report abuse +1 rate up rate down Reply

Dave Ramsey is the MAN!

Quick 7 step process to get your finances in order -

Step 1: Create an emergency account of $1000 to $2000
Step 2: List all debt SMALLEST to LARGEST, and Pay off THE SMALLEST FIRST. Then, you snowball the payment (once paid off) into the next biggest, creating a SNOWBALL EFFECT.
Step 3: Save 3-6 months of monthly expenses and at the same time, lower them! Cut car insurance to $25/month (check Insurance Panda), cut gas to less than $50/month (check Gasbuddy), get rid of cable TV (check netflix and aereo), and look to TMobile for cellphone ($20/month).
Step 4: Stash away 15% of income for Retirement
Step 5: Save for KIDS' college savings (at 12%, accounting for inflation rate).
Step 7: Give, Invest, and Spend your Accumulated Wealth

March 12 2015 at 9:47 AM Report abuse -4 rate up rate down Reply
1 reply to jameschen5307's comment

He may well be "the man" but I doubt he appreciates being linked to your tiresome spam posts.

March 12 2015 at 12:43 PM Report abuse +5 rate up rate down Reply

You guys touch on an important point many savings-minded people miss because they've been conditioned to think of credit cards as always a bad thing. The point is that credit cards are better than cash IF you can pay them off every month. I cringe every time I meet someone who brags about how they pay cash for everything and don't have any use for those evil credit cards. The fact of the matter is, unless you can't control yourself around large spending power, paying with cash is moronic. All credit cards nowadays come with cash back incentives. Most are 1-1.5% for general purchases and 2-6% for select categories. I make about $500 per year just by using my credit card for everyday purchases. The bottom line is that if you pay cash for everything you're missing out on hundreds, maybe even thousands, of dollars every year by being a cash only person. I understand that it's a great chance to be smug, but I'd rather just get the 500 dollars.

July 11 2014 at 10:30 PM Report abuse rate up rate down Reply

I have taught Financial Peace about 20 times over the years. I have seen many people come out of pretty deep holes using these steps. Dave's way is very prescriptive because when you are in financial trouble and are not yet good at this stuff you need a pretty stable foundation. You need a scaffold which Ramsey's steps are. If after you master the steps and find yourself totally in control (which usually takes a while) then loosening up a bit may suite you as long as you are vigilant with the most important ideas. It seems the person who wrote this article is at this place. But the most important things he has kept. Paying attention to where the money goes, staying out of debt and having a plan.

May 21 2014 at 5:24 PM Report abuse rate up rate down Reply

I agree, Ramsey has done a lot of good work helping people get out of debt. However, what does it truly mean to be in debt? If we invest in a college education? A house (that appreciates)?
Not all debt is bad. It actually can increase our return on investment rather than paying cash.
Debt in the Bible was slavery. WE do not want to become slaves to debt, but the wise use of it to buy assets that will appreciate is being a good steward of our resources.
Being in "deb" and the wise use of it t has made me a millionaire.
Christian University Professor, MBA, PhD

April 21 2014 at 2:52 PM Report abuse +1 rate up rate down Reply
1 reply to ridgecourt1's comment

Very true and well said. Only when i decide to pay it down, I normally go after the highest rate 1st (no matter what the balance is, unless there is a other reason to pay a smaller one off first (i.e interest rate likely to increase on it soon, need more cash flow, etc)

March 13 2015 at 7:30 PM Report abuse rate up rate down Reply

Ramsey is short sighted and fails to give credit to individual common sense and management ability; Loans are fine so long as cash flow is availale and the borrower is receiving more than the interest build an estate. I know...I did it., from $2.00 in my pocket when I left a rural setting for the Army, and 40 years later, with G-ds' blessing, I have millions, all with borrowed money.

April 21 2014 at 9:20 AM Report abuse rate up rate down Reply

Dave Ramsey really does know what hes talking about when it comes to life insurance. I feel stupid but I used to pay like $300 a month for life insurance. After 4 years of wasted money, I finally did some research and realized that I can get basically the same policy for about $25 a month from Life Ant or a place like gnworth. What an expensive lesson I learned. You cant always trust your financial "advisor" you have to use your own mind.

April 15 2014 at 11:46 PM Report abuse -3 rate up rate down Reply

A lot of people are being helped with the book "It's My Money & I Want It!", found at:

March 25 2014 at 11:05 PM Report abuse -5 rate up rate down Reply

What works for one does not necessarily work for another. Just take all of these financial gurus advice with a grain of salt. My credit card is rewards, safety, convenience, and is paid off every month.

March 25 2014 at 11:00 PM Report abuse +3 rate up rate down Reply