Recently I posted an article from the Dave Ramsey blog about 20 things the rich do every day (that presumably the poor don’t do much) I stated in the re-post that I don’t necessarily believe that Dave’s approach to wealth creation is for everyone, but it probably is a best answer for 85%-90% of people. Especially if they are struggling with financial basics. Then its Dave ALL THE WAY!
I want to share a couple of examples of how I think a bit differently. One is in the area of credit card use. I have one and only one card. I use it a lot but need to define HOW and WHY I use it a lot. First of all, we use a card that only charges 4% interest. Of course there is no interest charged when the entire balance is paid off every month. The card accumulates “points” or “miles” that can be used elsewhere for other things. We do as much business on the card as we can because it’s money we will spend anyway every month. We either pay out a little here and a little there (or a lot here or there) all through the month, or we pay out one big payment on the credit card statement once per month. We just make one big payment. It works out the same, but we get the points. We got our card in 2008 and so far we have paid for 6 cruises from just the free accumulated points! Not bad. It’s like our savings account for cruises that the credit card company pays for.
What about carrying over a balance?
Believe it or not, there are times when we do carry a balance on the card. Remember, we are paying 4% when we carry a balance. In our business we renovate houses and rent them to long-term tenants. If we use construction loan money from a bank, we typically have to pay around 6% interest and will incur fees when securing the loan. With the card, not only is the interest lower, but the origination fees are not there and we do not have to secure the loan with a real estate lien. Another time we carried a balance was once when we actually bought a house with a credit card. We actually made the down payment of about $5,000 with a 0% introductory card. We paid it off 3 months later before the 0% interest ran out.
Why I Don’t Fit the “Dave Formula”
I personally don’t fit the Dave formula mainly because I have big dreams and plans. I cannot do my business by living on the notion of always keeping my spending below my earning (at least as the normal mind-set) When I find myself needing more income, I choose to go and create more income. If my income were derived from a job where I were paid by the hour, I could not do this very well. My income originates from investments that can be duplicated or “increased” exponentially. There is no limit other than my ability to find and secure income producing investments.
Where Dave and I Agree
We do agree in the area of understanding and implementing financial strategies for those who have struggles with their finances. One MUST gain control over un-disciplined spending, over consumer debt and budgeting. If you cannot control yourself in those areas, you should never be thinking of aggressive investing. You will self destruct if you do. If you want to see The 20 Things the Rich Do Every Day, click the link to the left. It is a link to Dave’s blog and has access to his other resources there.
Meanwhile, I just booked a cruise for 2 for my wife and I and plan to enjoy a week of tropical bliss in the middle of winter on Capital One!