Rethinking Dave Ramsey: Money Rules Are Made to Be Broken

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TV DAVE RAMSEY
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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