Debt free with or without Ramsey

My wife's a Dave Ramsey fan so we watched the story about him on 60 Minutes tonight. I agree with his overall message of living debt free, but differ with how one should go about achieving that lifestyle.

I was the epitome of the typical American before I met my wife. I was a college kid from a middle class neighborhood who rebelled against the norm and got my first credit card as a sophomore. That spring I headed for an all expense paid trip to Daytona courtesy of Citibank. I even bought a stuffed animal Flounder from the Disney store knowing full well the little guy was taking me over my credit line. I figured I could make my minimum $20 monthly payment and all would be well. Unfortunately, it was all too well as in deep and all wet. By early in my junior year, I had firmly entrenched myself in debt with a poor credit history to boot.

Along comes my future bride. She was in accounting and kept a financial journal to track each quarter deposited in the student union vending machine. While she never forced her Depression driven financial formula on me, it nevertheless rubbed off on me over a l-o-n-g period of time. We've now been married over 10 years and I've come full circle (well, 300 degrees any way) and live a debt free lifestyle.

Nowadays, unlike the typical American family, we have two cars paid off (and less than 5 years old to boot), no credit card debt or student loans, a thriving retirement account and money in the bank for the proverbial rainy day. Much to Mr Ramsey's dismay, we still have a mortgage payment that we have no plans to pay off early (although it is on the 15-year track), and we regularly pay for everything from movies to groceries with a credit card (GASP!).

Dave focuses on paying cash for everything and only buying what you can pay cash for now. If you don't have the money you shouldn't make the purchase without saving first. That is a classic AA approach to finances. While I would agree that this approach may be the best or only aternative for someone addicted to a spoiled, greedy lifestyle where they have to have everything the Jones' have and an upgraded model to boot, I don't believe that everyone must follow this recipe for success.

Just as some people have been successful at weight loss on Slim-Fast while others only had luck with low carbs, I believe that each person can achieve the same goals using different methods. Obviously, the first (common) step is to make a commitment to reduce your debt and live within your means. Once you've made the choice and plan to stick with it, you need to determine what approach will allow you to stick to your goals. For us, we are able to pay with a credit card and use Quicken to keep track of our monthly total and then pay off the entire balance monthly so that finance charges are never an issue.

Whereas Dave would advocate saving up $1200 for that new, widescreen television, I prefer to use the 18 month/no interest plan whereby I make 18 equal payments with no interest and get my TV early. 18 months from now Dave and I both have a TV. Likewise, I see no harm in the discipline of using a credit card that carries no annual fee and pays cash back or some other return for using plastic. At the end of a year, Mr Ramsey and I have both purchased the same $8,000 worth of goods and services, but I also have $80 in free gas at the pump. Hey, a few months from now that may only be good for two fill-ups, but it's two free fill-ups Dave doesn't have!

Bottom line? I agree with Dave Ramsey that Americans are heading for a heartbreak if they continue to spend like there's no tomorrow and they have a money tree orchard in their backyards. But I don't think there's only one way to get to your debt-free destination. Live within your means and accept that just because it exists doesn't mean you need it. And if you happen to fall short of your goals, just remember those of us going without today will be the ones living high on the hog tomorrow when you are in line for food stamps because that Hummer H2 and house on the lake aren't putting food on the table in retirement!