Is Dave Ramsey Unrealistic?

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Dave Ramsey is known for stating that you shouldn’t borrow money, at all. If you can’t make the purchase with the income or cash you have then you can’t make the purchase.

 

However, in our society, using credit is not just common it’s ingrained. Credit is used to make large purchases such as cars, houses, large appliances for the home or business, loans for education etc. I remember not even considering another option. It’s just the way things are done.

 

If you are thinking of purchasing a car, you check your credit score and consider the best loan terms you’ll be able to get. The same plan is used to purchase a home and large appliances. Most of us never even consider purchasing such items without using credit aka borrowing money. So is Dave Ramsey unrealistic or should we be thinking of things a different way?

 

The average U.S. household has $15,191 in credit card debt, $154,365 in mortgage debt, $33,607 in student loans debt. That’s a lot of debt.

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So if you’re a college graduate that owns a home you’re likely to have somewhere over $200,000 in debt. That’s a lot of credit or borrowed money. What would happen if we just decided to not use credit? Is it possible?

 

Well according to the U.S. Census, the average U.S. income is around $51,371 per year. Americans save about 3% of their income so that would mean $1,541.13 saved per year. There’s no way you would be able to afford to pay for a college education, a house or a car at the same time with that savings rate. We would need to start saving much more money in order to do away with credit.

 

The rule is to aim to save and invest at least 20% of your income. If you’re the average person and have an income around $51,371 then that would equate to $10,274.20 of your money saved a year.

 

Now living without credit seems more attainable. Hmm, maybe Dave Ramsey isn’t being that unrealistic. You will need to not just live within your means, but spend much less than you earn while saving and investing what you save.

 

Check out the savings habits of others in this previous blog post. In order to build wealth you need to save and invest at least 20% of your income. If you’re able to reduce your spending, avoid credit and save more money then you can use that freed up money to build wealth.

 

Do you believe you could do it? What would you need to do to live without credit?

About Dr. Maria James

Dr. James, The Money Scientist, has expertise with designing income management, debt management, and wealth strategies to help you live your best life. She is the founder of Pocket of Money, LLC and the creator of The Wealth Protocol™. Dr. James has also been a guest financial expert on ESSENCE, WEAA, Madame Noire and more.

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