Posted on 04/30/2013 9:05:48 AM PDT by Altariel
Dear Dave,
My divorce will be final in a month, and I’ll have $100,000 when everything is over. I will also have $8,000 in credit card debt, and I’m currently unemployed. Do you have any suggestions to help me move forward?
Meryl
Dear Meryl,
The first thing I want you to do is raise your right hand and promise never to use credit cardsagain. Then, if you still have any of those awful things, I want you to cut them up and close out the accounts. The next step is for you to find some kind of income, whether it’s a regular job or just something part-time to get money rolling in on a regular basis.
Your credit card debt is a small part of your financial picture right now. I think I’d go ahead and pay off the cards. That way, you’ll be debt-free and still have $92,000 in the bank. But here’s the key. You have to live like that money doesn’t exist. Use just enough to get yourself settled, and go make some money so you can eat and keep the lights on.
A year from now, when you’re past some of this stuff emotionally and looking toward a new future, that money will still be sitting there. As long as you have this mentality, you’ll come through this mess stronger and in good financial shape. God bless you, Meryl!
—Dave
Dear Dave,
My daughter has the opportunity to take a trip with her eighth-grade class. The cost is $650. Do you think she should have to contribute to the cost of the trip, or should I cover it all?
Colleen
Dear Colleen,
This is a really good question. When it came to making these kinds of decisions at our house, we’d take a look at whether the kid was behaving, getting good grades and stuff like that. It can be a challenge at that age, I know. But if they were living like responsible young people, we would pay for this sort of thing as a reward.
Still, at that age a kid should definitely have some skin in game. If you can pay for this without breaking the bank, and she’s fulfilling her responsibilities as a good kid, it would be a good idea to make her come up with her own spending money for the trip. You don’t want her to grow a sense of entitlement, and doing this would force her to work and savea little bit to make this thing happen!
—Dave
*Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Timesbest-selling books: Financial Peace, More Than Enough, The Total Money MakeoverandEntreLeadership. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.
Empowering Freeper Financial Freedom, one Freeper at a time, Dave Ramsey ping!
Debt is financial cancer.
Because CC's are a tool, just like anything else. OK, so long as they're used responsibly.
They're a lot more convenient for me than walking around with a stack of 100's in my pocket, every time I go shopping. For instance, this past weekend, Mrs WBill and I caught dinner and a movie. I also bought a new lawnmower (my 12-year-old one met a large hidden rock and suffered a sudden and inglorous demise), some other stuff at the hardware store, groceries, and a fillup at the pump. I'd have needed a pile of cash to take of everything ... or I swipe my card a few times and pay it all off on the 15th. Easy Peasy.
FWIW, I have several credit and gas cards, and I continue to use them because I find them convenient. Easier than having a pocket full of bills and coins, and easier to pay at the pump. But I pay them off every month, when the bills arrive. No debt, no interest.
If you can resolve to do that, and never get into debt, then I think credit cards are fine.
Otherwise, yes, cut them up and throw them out.
We have one credit card, an amex that HAS to be paid off every month. Makes me very careful with it.
Yes, he is. Now, the preponderance of replies from FReepers about using a credit card (on a Dave Ramsey thread) will be from posters saying they pay off the balances every month. The posters mired in revolving credit don't really post that they're happy with 5-digit unsecured debt.
Dave helps (ok, advises) people break their dependancy on credit with the only exception being mortgage balances. If everyone took Dave's advice, our economy would look vastly different (for the better0. Of course, that's just my opinion.
Dave has a method that is targeted primarily to people who have had financial difficulties in the past.
Most of the people he is trying to help have not used credit responsibly. Probably the number one thing he sees is that credit cards tempt people to do/buy things that they shouldn’t and couldn’t if they had to pay cash for it.
I agree credit cards are a tool if used properly. But most of the people that try to follow Dave have not used them responsibly. I am one.
In my 20’s I had more than enough money to cover my bills and credit cards. I deployed a lot and didn’t pay my credit cards on time and in short order got in over my head. No one’s fault but George W. Bush’s, just kidding. It was all my fault and I am still trying to get it back on track, again after a recent divorce.
I use secured credit cards now to do the things like buy gas for my car.
I tried emailing Dave’s column with my question but couldn’t make it go through. Maybe someone else here has some suggestions. I’d covet the opinions of fellow freepers—you guys are the best (if the toughest).
I’m a lady on the high end of middle age. Just sent the younger of my two kids off into the world as a US Marine, so I’m on my own now. But it’s been very, very difficult raising these kids on my own with my health problems and theirs, so I have no savings.
As Dave recommends, I don’t have credit cards or credit card debt anymore—if I don’t have the money for something, I don’t buy it. Recently my old beater of a car broke down rather expensively, and it turns out that without a credit card, I can’t rent a car to get me back and forth to work. No, there is no public transportation between my job and my home, nor a rideshare program in the area.
Car rental companies are not interested in debit cards, checks, or cash. The car rental places want to be able to put a hold on your card in case you run off with it or wreck it or turn it in late. I’m starting to think there might be reasons to have a credit card in a drawer somewhere, to be used for emergencies.
What is the sense of the forum on this?
I liked the second response where he told the mother to make her daughter pay for at least part of the class trip so that she did not develop a sense of entitlement. That is golden advice in a society like ours where way too many people expect to live the good life off someone else’s dime.
You’re a big girl, get a credit card, and just use it for the purposes you’ve decided on. You can trust yourself not to buy things you can’t afford, I’m sure.
If correctly used - and that would involve paying it off monthly (or having a plan to pay it off) - I don't see the problem. BUT, I can see how less responsible people could quickly get into trouble.
They've tighted limits a lot. I recently picked up a new gas CC - the program got cancelled on my old one, so they cancelled the card as well...I could 're-apply for a new card at the low, low yearly fee of...'....forget it.
Anyhoo, all of my CC's I've had for years and years. Their limits that run from 'high' to 'foolish'. This new gas card has a limit high enough for me to buy a month's gas on, and not a whole lot else. Which is fine, because that's what I wanted. But I still thought that it was interesting - and likely a good thing - that banks had tightened up.
Truly, I can see how people get into trouble.
These days you need a credit card as almost a financial ID. Try to rent a hotel room or a car without providing one - or a major power tool (say, a ditch witch). Even if you intend to pay cash, you have to leave the credit card so that if you trash the room or wreck the tool the renter has something to charge damages against.
Yup. I think it's a good idea. If you're conscientious enough to ask, you're certainly conscientious enough to have one for emergencies. If you get one, look at all of the perqs that come with it. Not all the 'cash back' and 'points' nonsense, but the stuff in the fine print. Purchase Protection, Rental Car Insurance, and the like. Lots of good stuff in the details. ;-)
I've read about people who don't trust themselves to carry CC's, but want them for emergencies. So, they keep them frozen in a block of ice in the freezer. Good idea as any, sez me.
I was given the option of renting a car from Dollar over spring break using my debit card. They simply wanted to know it up front, so they could (presumably) block off a charge on it had I chosen to use it. I didn’t end up using it as I have a work Amex with aut rental coverage that exceeded, far exceeded, the coverage my own insurance company would have offered. But I had the opportunity to use my debit card.
In my humble opinion, some people should keep credit cards, and some people shouldn’t. I had a credit card, and I actually did keep it in a drawer, as you said. As a matter of fact, when I was young and single, I did use it as collateral for car rentals whenever I traveled. That was the only time I used it. My credit record was excellent.
After I married, the credit card sat in a drawer, and I practically forgot about it. However, as I eventually discovered, my now-estranged husband was using it secretly. As I said above, some people should have credit cards... and some shouldn’t.
You sound like the type of person who could keep a credit card without being tempted to go into debt.
I have a couple of credit cards (a Visa and a Mastercard, so they don’t charge annual fees), and I use them depending on how close it is to the end of each card’s monthly period. I pay them off at the end of the month, every month, so since I’ve had them I have paid $0 in interest or late charges. They basically allow me to walk around without much cash and get stuff that one can’t get without a card (such as rental cars).
So, while I’m a big fan of Dave Ramsey, I would never say that people should avoid credit cards—I think that they should avoid credit cards if they can’t trust themselves to pay them off completely at the end of the month. In your case, you have proven to yourself that you will not spend money irresponsibly, so you can trust yourself to get one.
As for renting a car, you should do it if you need it to get to work, but you should look aggressively to replace your non-running beater with a beater that works. Car-rental payments will add up quickly, even if you rent a wreck.
Good luck, ma’am.
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