In my last post, we talked about vacations and how they can be beneficial to your overall quality of life. I talked about how the way I paid for it was not a good way to go, and others jumped in and shared some thoughts on taking a vacation even if you’re not totally out of debt, or using credit cards for points to help pay for a vacation.
A truth: Dave Ramsey advises against even owning credit cards, even if you pay the balance in full. He says to pay in cash, and use a debit card if you need to use plastic at all.
A reality: Dave Ramsey is not managing your own personal budget.
He is right in his principles and he has helped many people pay off debt. But unless you call into his radio show and tell him your story, he doesn’t know your exact situation. He doesn’t know your debt load, income, budget plan, financial motivations, life dreams…none of that.
His advice is good, but it’s not one-size-fits-all. Personal finance is personal. It’s your money, do what you want with it.
If you’re going to break the rules, I think it’s reasonable to know what the “rules” are and why they exist. That way, you are still being purposeful with your money.
When I lament about my honeymoon purchased on credit, it’s not that I necessarily think no one else should ever pay for a vacation on a payment plan (do what you want with your own money, n’at). Rather, I think I was reckless in doing so because I had no real plan for paying it off. I figured, the 0% interest period is long enough that we probably won’t have to pay much in interest. Surely we can afford this. Surely we can pay it off quickly.
I did no number-crunching. I prepared no budget. In no way did I have any evidence that we could actually afford to pay off our Alaskan adventure in a quick way. I just looked at our future earning potential and it sounded like a lot to my college student brain. Pfft.
THAT’s my regret about it.
So, if you want to use a credit card, pay it off every month, and use cash-back or points earned for something, go ahead. Just know why the experts say you probably spend more money in the long run that way — and then take action to make sure that you don’t overspend. Use the card for fixed bills, for instance. Follow a strict budget, perhaps.
Or, if you want to go on a big trip to Europe while you still have student loans — I say bon voyage! Just make sure you weigh the financial ramifications against the intrinsic value of the purchase.
Maybe it’s true that if you held off on that big trip for a few more years, you’d have a higher net worth. But at what cost? It’s possible if you waited, you’d never actually take the trip. Who knows?
I guess what I’m trying to say is I think it’s important to be deliberate with your money. If you’re going to go against the wisdom of financial experts, have your own reasons for doing so (rather than acting entirely without a plan in mind). That way, you can have a full picture of your own situation and the consequences of your choices.