Category Archives: Money myths

Dave Disputes Debt Management Psychology Hurts Consumers

Posted on January 16, 2012 | Leave a comment

An article written by Cynthia Cryder, an assistant professor in my hometown of St. Louis, stated that it is undisputed that the best way to tackle debt is to pay down the loan or credit card with the highest interest rate first.

Dave disagreed

On 1/10/12 (half way through the 1st hour) Dave verbally disputes this claim so it isn’t undisputed. But you didn’t need a post from me to tell you that.

I have to disagree with Dave (What!?)

The study is correct and a majority of the statements made in the article are also correct. It can be proven mathematically that paying off a higher-interest balance loan will pay down a balance faster than tackling a low-interest rate account. Example: If you have a $1,000 credit card at 3%, a $4,000 student loan at 4%, and a $15,000 car loan at 10% then paying down the car would reduce the debt faster than making only minimum payments in order to tackle the credit card first.

But this isn’t about math

The problem with this article, and what the statements made by the researchers imply, is that paying down debt has little to do with interest rate. A dozen accounts with a 0% interest rate is still debt. The problem with debt reduction plans that tell you to pay off the higher interest rate first is that you don’t get the instant gratification that you got when you put the debt on the stupid credit card in the first place. Without the “quick win” you lose motivation and quit. Then you still have the debt and a hopeless attitude.

The way humans pay off debt

Math doesn’t pay off debt, humans do. The way to pay OFF debt is to get mad, work extra, spend less, and send everything you can to debt reduction. Reduce it so much that it goes away fast! Experiencing the results of paying off a debt quickly will keep you energized and psyched to keep going, regardless of interest rate!

Make all your accounts 0%

“I wish I had 0% interest rates” you say? You can. Pay off all your debts, smallest balance to largest for the quick wins and you won’t be paying interest. Put money into savings and investments that earn you interest instead!

Those who understand (compound) interest are destined to collect it. Those who don’t are doomed to pay it.

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Dave Reads: 7 Millionaire Myths

Posted on August 19, 2010 | Leave a comment

On 8/17/10 (at the beginning of the 2nd hour) Dave read an article by Claire Bradley posted on Yahoo Finance.  The article: Seven Millionaire Myths.   The article also features a bonus link that Dave did not comment on that you may find interesting (check out #7: Millionaires Are Elitist).

He also commented on an AARP article that reported that “76% of adults age 18+ rely on or plan to rely on Social Security as a source of income at retirement”.  For the complete 51 page study go to http://assets.aarp.org/rgcenter/econ/social_security_75th.pdf (page 27 contains a graph for this portion of the study).  Also mentioned on the radio show was a study from the Social Security Administration which states that “Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983“.  For the complete release go to http://www.ssa.gov/OACT/TRSUM/index.html

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Dave’s Rant – Buying birthday gifts for huge family

Posted on August 20, 2009 | Leave a comment

One of my favorite things about the Dave Ramsey show is when Dave just lets loose and rants.  Today’s rant was spurred on from a listener’s Tweet that asked “What do you do for birthday gifts when your family is huge”?  Dave’s response – give them a call and say “HAPPY BIRTHDAY”.  The thought is that buying gifts for every member of the family for birthday, Christmas, Anniversaries can get extremely expensive, especially when you have a large family.  It just isn’t practical to buy gifts for every occasion.

The rant: After Dave gave his answer he went on to say “Have you ever thought that all the holidays might be a marketing ploy?  I’m old enough now to remember that nobody knew, hardly, that there was anything that happened at Easter.  Easter is about as big as Christmas at some of your houses.  If we had a little KoolAid KoolAidon our upper lip, got a sugar high and went around and kicked a ball in the yard at a birthday party we were good. Now you guys import Barney in and have a tent outfit with blow-up stuff, it’s unbelieveable man!”  “Are we the most celebatory culture in the history of man?  And it’s all bought at retail inthe mall!  It blows up and comes in a costume.  It’s weird to me when Christmas stuff comes out before Halloween.  It’s weird to me when back-to-school specials have Halloween costumes in the isle.  This tell me that retail is working overtime”.

Yes, he sounds like a cheapskate but think about it.  When did giving greeting cards for Halloween become commonplace?  Have you ever received a gift for St. Patrick’s day?  And consider this: Did you think the colors used in some of the words above look like your perception of the holiday?  That’s marketing at work.  Certain visuals, sounds, and even scents can provoke thoughts of specific memories – and the colors GREEN and RED make me think of Christmas.  How about you?

  

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Loose Change equals Sloppy Finances!

Posted on June 27, 2009 | Leave a comment

On 6/22/09 in the 2nd hour (about 14 minutes into the podcast) Dave read a message from a listener: “I think Dave Ramsey would be proud of the $40.00 in loose change we dug out of our house.” He then expanded on a thought.  Dave has a friend that buys repossessed cars, fixes them up, then sells them.  His friend stated that without fail in every repo there is lots of loose change found throughout the car. Lots and lots of money.LooseChange

That brings up an interesting debate.  Loose change becomes lost change when left in the hands of someone who is irresponsible with their overall finances.  I would venture a guess that the majority of those repossessed cars were owned by people who were sloppy with their finances (I don’t think that statement is much of a stretch, do you?).  When you are haphazard and disorganized with money it causes you financial problems.

How much loose change is in your car?  Go ahead, walk away from the computer now and go check your seats and crevices of your dashboard.  Let me know how much money you find that you didn’t know was there.

I double-dog dare you to comment on what you found!

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Posted in Dave Ramsey Show, Money myths

Debit Card – Zero Liability policy

Posted on May 29, 2009 | Leave a comment

On 5/27/09 Dave took a call from a listener with questions the safety of a Debit Card versus a Credit Card (about 7 minutes into the 2nd hour).

What many of us do not understand is that using a Debit card has the SAME PROTECTION as using a Credit card on fraudulent activity, so long as you are not using your 4-digit PIN number.  Visit Visa’s website, on “Using Visa”, then “Personal Finance Resources”, then “Debit” on the left hand side (click here to go directly to that section of their website).

So credit transacitons are the same as debit unless the PIN number is used.  Protect your PIN number: do not write it down on the back of your card, make it something difficult for others to guess (don’t put your birthday or something normal), and I suggest signing the back of the card AND writting “Check ID” on it as well (my post office won’t accept cards that are not signed, but I also want people to check my photo ID against the card as added protection).

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Who listens to a show about finances?

Posted on April 21, 2009 | Leave a comment

Who spends their time listening to a radio show about finances?  I didn’t until I caught this guy on the radio.  He was challenging the callers, highlighting their mistakes, showing them where they went wrong.  The Judge Judy of money.  This is a radio show, sensationalism to sell ads for new cars and home mortgages, right?

 

Wait a minute, he just spent 3 minutes explaining how a new car looses more than 60% of its value in the first 4 years.  Clearly he is not pandering to car salesmen if he’s saying this out loud on the air.  Besides, that can’t really be true.  Or is it?  (Click here to see for yourself)

 

Later in the show a caller explains how he took out a home equity loan and now owes more on his house than it is worth.  Dave gives the caller some options on how to negotiate a deal with the lender.  (Click here for Homebuying.about.com link about short sales).  I wouldn’t want my commercial to air during his show if I were a bank.

 

Then he says gold is a bad investment and is not the basis of our economy.  Really, gold?  Now I have to challenge EVERYTHING he says because he is clearly wrong on this one!  Nope, the United States means of exchange has NOT been based on the gold standard for years (click here to see for yourself) and really has a horrible track record as far as long-term investments are concerned.

 

dave-ramseyOver the years I have questioned what has been said during Dave Ramsey’s show.  I’ve challenged his statements, his statistics, even his character and I found him to be an honorable man with an incredible amount of integrity.  It has changed my life, as well as thousands of others who have learned from his teachings. 

 

Let us begin a discussion about money, your money.  Comments welcome, questions required!

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Posted in Live Like No One Else, Money myths