Suze Orman's "Women and Money" book

I think you should take a look at the book, or get a book on tape version to listen to when stuck in traffic. You will be surprised to learn that the topics that Suze covers in her books are quite different from what she covers on TV. Her books are mainly on financial planning, while the TV show questions are often from folks with problems.

At any rate, I think folks with financial problems are better off looking at Dave Ramsey than Suze Orman. Both have their strengths, and I think Ramsey has a better and more well thought out program for getting out of debt and solving money problems.

-john-

I think that any author likely has some tidbits worth listening to, as well as advice I'd dispute.

Dave Ramsey states on his web site: "Myth: Aren't there positive uses of a credit card? Like rebates and airline miles? Truth: Responsible use of a credit card does not exist. Credit card debt is a major problem in America."

Wow! So running all my expenses through a card that's given me 2% cash into a 529 account, and paying it in full every month was actually not a good thing? That free semester my child will have in 10 years is what? A fantasy? That blanket statement 'does not exist' was a bit over the top for me.

Also, his 'debt snowball' method. Suze used a pejorative against the author when asked about this method. I agree with her, regardless of the number of cards or size of each balance, one should pay the highest interest cards or loans down first.

JOE

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I also disagree with Dave Ramsey on this point. I see a credit card as a tool. If you know how to use a tool and can be trusted to use it properly, then you can use it. If you don't know how to use a tool, or use it wrecklessly, then you shouldn't be using that tool.

In the case of people who call his show, many are up to their ears in debt, have cars worth more than their annual income, and have house payments that are over 50% of their take home pay. For these people, credit has not been a blessing. Rather, it allowed them to commit financial hari-cari.

Another point that Ramsey makes is a study that shows that folks who use credit cards spend quite a bit more per purchase (on average) than those who use some form of cash. Simply cutting up the cards and switching to cash can add quite a bit of extra money to your monthly budget.

That is a fair criticism, and one that I made at one time, too. To defend the Dave Ramsey method, Ramsey states that getting out of debt is a behavioral and habit change, not a mathematical decision. If one attacks small debts first, they get some quick wins and see real progress. As a result, one is far more likely to buy into the program and stick with it. Interest rates are math, which is a head thing, while getting out of debt means a decision to do the right thing, which has to come from the heart.

-john-

John A. Weeks III wrote on [Sun, 24 Feb 2008 03:31:09 -0600]:

However, he always fails to mention that while he advocates the use of a debit card, the studies show the exact same over spending applies to debit card usage.

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We often talk here about getting to know the clients risk tollerance, and guide not just based on the numbers, but how well they'll sleep at night. So I agree with you on the above. And that's why I'd never make an absolute statement such as those Dave makes. Did the spending come from the easy card use or do these people use the cards because they're irresponsible in the first place? Perhaps his debt snowball method is the best for his listeners/readers. I can't say. But I know that when I was young and stupid and digging my way out, it was the high interest cards that offered the highest credit lines, a new low interest (12% at that time) card might have a $1000 limit. So I viewed that as a way to save $100 interest per year, and kept stacking up the small balance cards. I made minimum payments on the small ones and as much as I could on the higher ones. In the end, his comments and methods are likely right for some group, just not 100% of all advise seeking people. JOE

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As you said, he may just be being careful about his audience. I'm sure he's personally aware that it's possible to use a credit card responsibly. He may (and this is just me giving him the benefit of the doubt, having never actually heard his show) just be trying to keep it as simple as possible. If most of his audience cannot use them responsibly, it may be detrimental to suggest that they can - they all will then assume that they are in the category of "oh, that don't-use-credit-cards business doesn't apply to me..."

Exactly - for some people, the numbers are the most important part. For me they are. But some people need more motivation and positive feedback - proof that the process is working. The achievement of having paid off a card, having one less bill - has huge psychological impact. I'd prefer that folks are presented with the upsides and downsides of both ways of doing this, but, again, it may be a matter of him playing to an audience.

That all said, someone who only plays to his audience and glosses over the exceptions (especially if he says stuff like "always" instead of "in many or most cases") would annoy me no end.

I agree. For much of his audience, telling them some credit card use is OK is like telling an AA meeting that two glasses of red wine a day is good for your heart. -- Doug

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Yes, that is a good point. The counter-point is that at least with a debit card, you stop spending at zero since the money is coming out of your checking account. With a credit card, you can keep on spending past zero, and end up spending far more than what you have.

The second counter-point is that Ramsey is a big advocate of budgeting. He advises people to spend it on paper before you spend it for real. If you follow your budget, you shouldn't be overspending because of use of a debit card.

-john-

I concur with that view, but only to give the debtor a little psychological boost. Paying a few off completely, even if low interest, may be worthwhile. If very low balance compared to the total, the interest difference of doing so is probably immaterial.

I wouldn't waste a lot of time or resources on it, though. Those high interest cards definitely need early attention. Logic must prevail over emotion.

John A. Weeks III wrote on [Sun, 24 Feb 2008 13:46:32 -0600]:

Do you use a debit card currently? It's very easy to spend hundreds more than you have in the account with a debit card. Banks realised how much more they can generate in fees due to authorising charges even when they would send the account negative.

If you are following these same guidelines then the use of a rewards credit card would do you better than using a debit card.

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snipped-for-privacy@fractious.net wrote on [Sun, 24 Feb 2008 12:47:13 -0600]:

You forget though, that he is not providing advice to his listeners, he is ministering to them. His words, not mine.

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If two debts have similar interest rates, attack the one with the smaller balance first because paying it off increases your monthly cashflow (if something goes Terribly Wrong, you have reduced your total minimum payments.) For the same reason, it might make sense to quickly pay off all the debts that have small balances regardless of their interest rates. Each account with a balance has a minimum payment every month and a potential for generating late fees and penalties.

Bob

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I just skimmed it, but it seems to me that it just cover the basics. So, if you don't invest nor save for retirement, you might find it useful.

HTH

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