Why Dave Ramsey’s Financial Advice Is Toxic AF

Dave Ramsey has become a household name for many of us, and like any sensational movement, his methods can be polarizing, controversial, and toxic (much like the man himself). He was someone I knew of, but to be honest, I hadn’t paid much attention to him until this past year when a tweet of his went viral in my social media circles. The tweet reads, “If you’re working on paying off debt, the only time you should see the inside of a restaurant is if you’re working there.” 

So that means that for any of you with tens of thousands in student loan debt, you’re basically effed if you want to do anything outside of work, picking up a second (or third job) or side hustle, cutting ALL unnecessary expenses like therapy, Netflix, internet, or anything over a budget cell phone plan. You know, until you’re “worthy” of being able to eat at a restaurant again because you’ve paid off your “bad” debt.

Much like the diet industry, Ramsey has built his business around shame. Shaming you for not working hard enough and shaming you for not being where you want to be because you don’t work hard enough (hello, cis, white, male privilege?). Furthermore, Dave believes a credit score equates to you loving debt and believes debt is not a tool to be used, but instead a horrible transgression to be repented for and corrected as soon as possible. I could go on for hours, but instead, I’m going to pick a few key points about dear old DR, and elaborate on why they’re toxic and what alternatives you have! (Because trust me, you have them.)

Scarcity Mindset

Rooted in shame, guilt, and “faith,” Ramsey vilifies, debt, credit cards, mortgages, car loans, and credit utilization of any kind. What his methods don’t take into consideration is how beneficial credit cards, mortgages, and other loans requiring credit can be when you don’t have the generational cash flow to buy things outright. Take me, for example. I bought my first house the month I turned 20, with an adjustable mortgage (gasp), and I put just the bare minimum (or 3.5%) down as a down payment. My mortgage payment came out to $1,000 a month, when I had previously been paying $757 for a 1 bedroom apartment (it was 2010 people, calm down). 

Had I tried to save up the $160,000 my first house cost, I would still be saving for it while I continued renting. Having available credit on my credit cards also gave me the ability to leave my first marriage when I was still a broke twentysomething. Debt can ALWAYS be paid back. Repeat after me: debt is just a tool to be used.

Even more radical, I recommend asking for a credit line increase on your credit cards once a year. Not only does this help you by showing you have more available credit and you’re using a lower percentage, but it’s there in a true emergency situation to pay for groceries, gas, insurance, and more. Expert tip: You should also ALWAYS accept a credit line increase when the credit card company offers them!

Thousand-Dollar Emergency Fund

In order to allocate as much money as possible toward paying off debt and minimizing interest payments on things like student loans, cars, credit cards, mortgages, etc, one of DR’s main tenets is to save $1,000 for an e-fund and then direct ALL other money toward debt payoff. As many of us may have recently realized when the $1,200 stimulus checks hit the bank, a $1,000 emergency fund may sound all fine and good, but when shit really hits the fan (you know, like a worldwide pandemic) $1,000 isn’t even a drop in the bucket in the bigger picture of your bills.

So what can you do instead? Assess your personal expenses and review what a realistic amount is for your emergency savings. I normally recommend at least three months of your base expenses (rent/mortgage, credit card payments, utilities, food, gas, insurance, etc). Three months may not seem like that much, but it can normally be stretched longer than that with unemployment benefits, decreased gas (if you’re not working), fewer bottles of wine, etc. The next step would be to have six months of your average income saved, which can then be stretched to 9-12 months. 

Your employment industry, and whether you have multiple jobs or a side hustle, all factor in as well, because what are the actual chances of 100% of ALL income sources going *POOF*? Honestly, fairly slim. The goal is to have an emergency fund, not a long-term savings fund. So save what you feel comfortable with and then start working to pay your debt down/off.

Debt Snowball vs. Debt Avalanche

A debt snowball is where you list your debts in order of lowest total balance owed to greatest balance owed, and you start paying your debt off in that order (smallest to biggest). While this can provide a psychological win right off the bat (woohoo my $500 credit card is paid off), it’s not actually the most cost effective method, because your smallest balance doesn’t always equal your lowest interest rate. 

Cue the debt avalanche method: You rank your debts from highest to lowest interest rates, and start paying off the most expensive debt first. I recommend a hybrid approach and tell clients to knock out their smallest one or two debts (if they’re less than $1k), and then roll into the avalanche method. This combines the psychological win of debt being paid off, with actually saving you the most money in the long run.

Student Loans/White Privilege

Mr. Ramsey is a BIG fan of telling students and their parents that they shouldn’t take out student loans and should only go to colleges they can pay cash for. Because you know, students looking to go to med school or law school (or obtain some other type of degree and aren’t able to bankroll it) just shouldn’t be able to get that degree then. Or *GASP* they should wait until they’ve saved up enough money to pay for it outright. Furthermore, they should do this while working other jobs to save and waste years of compounding income in their chosen profession. This doesn’t take into consideration anyone that may have a less-than-privileged upbringing. Instead, he assumes most people are being lazy instead of acknowledging the inherent assumptions of white privilege he extols as virtues. 

Student loans are serious. Yes, I don’t recommend taking them out willy nilly, using them to pay for all of your living expenses, and then not paying a damn bit of attention to how that money gets spent. Or even worse, taking out extra above and beyond what you need to pay for items that aren’t needed. However, I stand by my statement that debt can be a FANTASTIC tool when used well, but it’s up to you to learn more about your intended field for work, and confirm that the loans you’re taking are a smart investment in your future self. And guess what? If they are, then do the damn thing!

Overall, Dave Ramsey’s opinions are not the wave of the future, but a hindrance on millennial money growth. My hope is that we can learn better methods and leave the toxicity behind.

Images: Teerasak Ladnongkhun / Shutterstock; daveramsey / Twitter

Why You Need To Start Investing Now & How TF To Do It

Even though more womxn are working and earning higher salaries than ever before and breaking glass ceilings all over the damn place, we’re still behind when it comes to retirement and investing—yet we live longer than men do. So what gives? 

Well, a lot of the womxn I know in my life feel like they have time to wait, they can invest later when they have more available cash, after they save for a wedding, or after they pay off student loans or credit card debt. Or it’s just not that important right now. Even worse is my biggest pet peeve: that they can rely on their spouse’s 401(k). In other words, they’re contributing to their spouse’s retirement for THEIR future. Well, I’m here to tell you that in most cases, you’re wrong. 

You need to be investing what you can, right now. Not only for your future self, but for your present self. So you can change things in the world, literally put your money where you mouth is (or values are), and invest in ESG or SRI stocks (aka, socially, environmentally, and ethically conscious investments). Plus, if you walk away from a marriage or a relationship, you need to have your own damn money to fall back on. Yes, you can have a healthy relationship while still prioritizing your own financial well-being.

And if you’re over there thinking you’ve got it all figured out because you have a good chunk of money in a savings account, kudos. Money in savings is a GREAT first step, but even in the highest interest savings account you can find, your money is still worth less with each passing year. The only way to combat that decreased buying power is by investing that money in something that beats the rate of inflation (which has been an average of 3.22%/year). 

First, I’m going to define a few important terms I’m going to use throughout this article:

Compound Interest/Compounding Returns: Interest/returns paid on both the principal balance and on accrued interest/gains.

Retirement Accounts (SEP IRA, Roth IRA, 403b, 401k, Traditional IRA, etc): A plan for setting aside money to be spent after retirement. For the purposes of this article, the retirement accounts I refer to are all qualified retirement accounts per the IRS. Some of them help you pay less in taxes now (SEP/Traditional IRA 401k), and some help you pay less in taxes later (ROTH). For these accounts, you can’t take your money out without incurring a 10% penalty before the age of 59 ½. This is to incentivize you to keep your money in here, and not touch it until you’re actually retired (and also why I recommend also having savings accounts and non-retirement investment accounts).

Investment/Investment Account: A type of account that is post-tax, doesn’t have any long-term retirement benefits, but money can be withdrawn at any time, regardless of your age.

Inflation: A general increase in prices and fall in the purchasing value of money.

Why You Need To Invest

We’re going to talk about compound interest here for a minute. One of my strongest beliefs is that you should get retirement and investment accounts set up first, followed by a savings account. That’s because your retirement and investment accounts will generally give you an 8% average return over a 10-year period. 

Now we’re going to do some math (I know, but trust me, it’s important).

If you’re 25 and invested $5,000 now, contributed $100/month to retirement for the next 40 years, and retired at 65, you’d have somewhere around $470,467.71. If you waited until you were 30, invested $5,000 and contributed $100/month for 35 years and retired at 35, you’d have $310,851.00. That’s a difference of almost $160,000, and the amount invested only decreased by $6,000 (5 years of $100/month).

Even crazier, if you’re 20 and invested $5,000, contributed $100/month for 45 years, and retired at 65, you’d have around $708,271.99!!

So when I tell you that compound interest is important and that investing something now is better than investing a larger amount in a few years, trust me on it.

How To Invest

Invest in yourself and your future right now, even if it’s only five dollars a month. Something is better than nothing, and like I talked about above, compound interest is your friend when it comes to taking care of your future self. 

If you have a retirement plan offered through a job, you can start now by:

Opening a retirement (or multiple) accounts (if you don’t have access to one through a job).

If you have one through your work, you want to contribute to both a ROTH and regular option. ROTH contributions help future you with taxes, and regular/traditional pre-tax options help you with taxes. 

If you’re self-employed or don’t have a retirement plan offered through a job, you can start now by:

Opening two types of retirement accounts: a ROTH and a Traditional IRA (or a SEP IRA if you’re self-employed).

You want to open and contribute to both types of accounts because post-tax ROTH contributions help future you with taxes, and regular/traditional pre-tax contributions help you now when it comes to taxes.

Whether you have a retirement plan offered through your employer or not, I recommend splitting your pre- and post-tax contributions 50/50, so if you can set aside $50/month for now, I’d send $25 to a ROTH and $25 to a Traditional account. I also recommend opening an investment account, then a savings account. I like Ellevest and Betterment.

That’s it. Your step-by-step guide to starting investing today (in like 15 minutes). You’re worth it, and the world needs more womxn investing and taking control of their financial future.

Images: Startup Stock Photos / Pexels

6 Finance Trends Impacting Millennials & How You Can Use Them To Save $

Adulting is hard af. You don’t have someone to make your lunch for you every day or clean up the house. You need to take out the trash yourself, and don’t get me started on paying the bills. In 2019, the state of our personal finances has drastically changed from when our parents were young. Sometimes for the worst, but sometimes for the better. Alexa von Tobel, the founder of Inspired Capital and New York Times bestselling author, sums up the six biggest financial trends in her new book, Financially Forward: How To Use Today’s Digital Tools To Earn More, Save Better, and Spend Smarter, out now. She lays out where we’re losing money (oy vey) and how we can save more (thank the lord). Her book is a much-needed reality check, and can teach you how to not be broke by the time you reach 50. (And it isn’t just about cutting back on the drinking. I hope.) Here are the top six finance trends and advice outlined in von Tobel’s book, and how you can use those trends to your advantage.

Trend #1: We’re Living Longer

Shop Betches But How Do You Save $ Tank

It’s no shocker that we are living longer than 50 years ago. Science (and my killer wrinkle-reducing night cream) tends to do that. While only 12% of the population was over 65 in 2000, it is estimated that 20% of Americans will be 65 or older by 2050. She says, “the majority of us underestimate the average life expectancy. This may sound like no big deal, but underestimating how long you might live can also mean underestimating how much money you’ll need to live comfortably after you retire.” So while you may think investing in those designer shoes is fine now, think about when you’re 75 and homeless. At least you’ll have cute shoes, right?

Living longer also means that we’re retiring later. The average life expectancy for an American woman is 81.1. So while some people retire at 65, a study by Northwestern Mutual found that 38% of people wait until they are in their 70s. Additionally, von Tobel says that “the idea of a completely work-free retirement is a bit of a myth for today’s retirees.” Just think of those cute old people working as greeters at Walmart.

Advice: Build your financial plan with the assumption that you will live well past 65. Alexa recommends assuming you’ll live to 95. But if your family members have lived to be over 100, assume you will too and plan accordingly. Also, consider the idea of working part-time once you retire.

Trend #2: Family Structures Are V Different

Our families are no longer the 1950s sitcom version of the average American family: husband and wife. picket fence, 2.5 kids (WTF is 2.5 kids?). But how are our families changing? For starters, we are getting married later. In the 90s, women and men would get married, on average, at 24 and 26, respectively. Although my great aunt never fails to remind me that she had already had four kids at my age, Americans are now waiting until their late 20s to get married. Similarly, “DINK” Status is very much a thing (dual-income, no kids) since people are shacking up before getting hitched. According to the Bureau of Labor Statistics, “combining your finances with a second earner leads to more money in the bank.” Well, no duh. The thing is, not only do you have more money in the bank, but you tend to save money as well (just under $7,000 a year). Anyone down to move in with me and we can split the savings?

But on the costlier side of our changing family structures, there is the cost of raising children. In 2015, the cost of raising a child from birth to 17 (not including college), was about $233,000. That doesn’t even factor in if you need costly treatments to help you get pregnant. For IVF, costs have sky-rocketed from 10 years ago, increasing by $3,600 for one round of treatment, according to Jake Anderson-Bialis, co-founder of FertilityIQ. That means a single round of treatment usually costs more than $10,000. However, most people do two or three treatments, which drastically increases the price. Finally, there is the concept of the “Sandwich Generation,” aka you might end up living with or financing your kids and your parents at the same time. Joy.

Advice: Speak openly with your family about costs. Before your parents are too far down the rabbit hole (sorry), discuss what savings they have for long-term care. Make sure to keep all these different family-related costs in mind when you’re figuring out savings. The best rule of thumb is always to plan ahead.

Trend #3: Our Earning Potential Is Flexible

Have you ever gotten an urgent message from your boss late at night to do something before the next morning? Or gotten a call to come into work early? Hate to break it to you, but this is the new normal. The majority of jobs are no longer a basic 9-5. And for many people, holding one job just doesn’t cut it anymore. 40% of independent workers have a side hustle to make some extra cash for savings or for a big purchase, like a house. Others (16%) do it out of necessity. Then there are the “free agents” like freelancers or Uber drivers. 30% are in this field because they like the flexibility, while others want a full-time job but are using this as their primary income at the moment.

Advice: Use side hustles to your advantage. Figure out what you want and use the flexibility of part-time work to reach your goals easier and quicker.

Trend #4: Our Career Paths Are Fluid, And Sabbaticals Are In

What’s great about our generation is that we are indecisive have the flexibility to change career paths if we are unhappy or want different opportunities. On average, those who graduated college from 2006 to 2010 have held twice as many jobs as people who graduated between 1986 and 1990 did in the same amount of time. But people aren’t just changing companies, they are also changing entire career paths. According to von Tobel, there is “no such thing as it being ‘too late’ to pursue an entirely new path.”

Like those adorable matching sets every girl on Instagram wears during the summer, sabbaticals are in. Think of it as an “adult gap year”. It’s all about increasing your learning, and whatever other BS your university guidance counselor told you about your year abroad. But while taking an extended vacation may seem like the best thing ever a load of crap, employers are getting on board. Hear me out. Over a three-year period, those who took more than 10 vacation days were 31% more likely to get a bonus or raise compared to those who took fewer than 10 days off.

Advice: If you’re deciding on whether to take a job, check out the company’s policy with regards to taking time off work. You should also plan ahead with your finances if you’re able to. If you can, allow yourself the funds to take that time off work.

Trend #5: Everything Is On-Demand

Our lives today are all about instant gratification. I’m not going to lie that I don’t get annoyed when my Uber takes longer than 5 minutes to arrive or my Amazon Prime package doesn’t come the next day. Patience is non-existence. While 22% of people shopped online in 2000, 80% shop online today. Crazy. Since nothing is off-limits, there is tons of competition, which keeps the prices (fairly) low. The best part of having everything accessible to us? Saving money. As someone who loves a good deal, being able to compare prices of the same product at different stores is the best feeling. Like, sex is cool, but saving $50 is better.

Advice: von Tobel says that while this is great, impulse shopping is dangerous. So beware.

Trend #6: Forget Ownership. Sharing is Caring

If I told my mom that I was staying in a stranger’s house when I traveled Europe last year, or regularly get into randos’ cars, she would have a heart attack. But today, Airbnb and Uber are the new normal. These services allow us to save money by sharing stuff and make money by letting others borrow it. And who needs a car in a busy city when you basically have your own chauffeur? These services allow us to cut down on what we have (Marie Kondo is so in and von Tobel approved) and save $$$. You also can stream movies and show online, instead of buying DVDs (or VHSs … yikes) and even borrow clothes instead of buying a dress you’ll wear once.

Advice: Keep on sharing!

For more of Alexa’s financial advice, pick up a copy of Financially Forward: How To Use Today’s Digital Tools To Earn More, Save Better, and Spend Smarter, out now.

Images; Giphy (5)

These Are The Perfect Budgeting Apps For Every Personality

Happy new year, Betches. We’ve said thank you (next) to the past year, made our 2019 vision boards (ok, maybe that was just me) and have mustered up a more motivated outlook on life. Still, we’ve spent the entire month of December buying sh*t for our loved ones and it’s very possible (ok, entirely accurate) that our bank accounts are empty AF.

So many people want to get their finances in order in the new year. But it’s hard. Literally, every article you read is like, “skip the Starbucks” and you’ll literally be a millionaire. I’m here to tell you that is not the case. If I skip Starbucks, I’ll just be cranky. And still poor.

For me, the hardest part of getting my finances in a somewhat respectable state is knowing how much I can and cannot spend if I want to save a certain amount of money in the right categories. Like, do I need to start taking Uber Pools? Or not order Postmates so many times a week? Probably all of the above, but whatever.

A busy betch might not have time for all that planning and luckily, there are a zillion apps to help you figure this hard sh*t out, so you can get back to watching Love Island. We’ve outlined the perfect budgeting apps for every personality type.

The Type A Betch: Mint

Mint is a free money management and financial tracker app that pulls all your credit cards, bank accounts, investments, (LITERALLY all your finances) together in one neat little package.

TBH, I use Mint all the time. And yes, I’m Type A as f*ck. I like that I can see everything going on with my money in one place, get notifications about unusual spending (usually some online sale let’s be real) and budget out in different categories.

Mint essentially analyzes all your spending and then shares what you are spending in each category. It’s semi-intense with all the graphs and charts, but for anyone who likes to be in control, this will be your financial heaven.

Because you can link your checking or savings account, it also can see how much money you bring in every month, allowing you to see if you are ending your months with positive or negative funds.

You then can create a budget based on what you spend in each category and how much you want to save each month. It’s super easy, and the notifications are frequent, but not annoying. Perfect for any Type A betch trying to save her way to the top. Or at least to a new pair of shoes.

The Straightforward Betch: EveryDollar

EveryDollar LITERALLY only keeps track of your budget, so if you are looking for any sort of detailed money tracking (investing, etc) this is NOT the app for you. I personally like this app because it’s focused and if you are on top of your sh*t, it’s super easy to use. Hence: a straightforward betch.

When I signed up for EveryDollar, I had to input my own money goals and my own spending, for things like my electricity bill or my water bill, you know, the important stuff.

So I input everything manually and estimated the best I could all my basic expenses. Then you pick your money goals, to which I wanted to say, uhhh to be able to live?! Instead, I chose to save like a few hundred dollars each month. I should mention the free version of the app doesn’t connect your bank account to the app, but the visuals created based on your manual inputs are enough to help get your finances in order. Super easy, straightforward and to the point. Got it?!

The Chatty Betch: Albert

If you like texting a random person about your finances, Albert is the app for you. Kidding. From what I gathered in my very serious journalistic research, when you use the Albert app, you also have the opportunity to text a real person about your finances. Pretty neat-o.

If you are a chatty betch who likes to talk to your Uber drivers and make conversation with random people in public places, this is the app for you because you can LEGITIMATELY text a financial counselor (if you want) by using this app. I had to add “Albert” to my phone contacts in the sign-up process for the app, because apparently there are human financial experts at my fingertips now. Lucky me. Even though I have no idea who the f*ck Albert is, it’s really nice that I wouldn’t have to Google all my finance questions and could literally just text someone and be given the answer.

In terms of budgeting, the Albert app allows you to set specific spending goals (i.e. I want to buy a car) and work specifically to save toward that goal. I like that it keeps you very focused on your financial goals, in addition to sending a ton of reminders through texts. A lot of texts. so you better be ready to talk to Albert…a lot.

The Lazy Betch: PocketGuard

Similar to the other apps, PocketGuard will connect to your bank account and do the heavy lifting for you in terms of understanding what’s going on with your finances. I imagine if someone is looking at mine they are thinking, “does she really wear that many clothes?!” to which I will answer, “YES, yes I do”.

You can also create spending limits and savings goals, but there is one different quality that makes this whole process slightly less tedious: it finds where you COULD be saving more money.

PocketGuard will analyze your finances and tell you where you could be saving money, which I kind of love? Like, yes, tell me what to do – I’m clueless in this department. You can also upload bills that and get someone named BILLSHARK™ (a mysterious person on their end) who will go and make your bills cheaper by finding you deals and sh*t. This sounds too good to be true but who the f knows.

And there you have it. I hope you all go and download an app, remember your bank password and are able to pick out all the stop lights in recaptcha in order to download one (or many) of these apps to meet your money goals. Who knows, before we know it all of us will be buying new purses and going on vacation, regardless of whether or not we are a lazy or chatty betch.

Is one of your 2019 goals to start saving money? What apps do you love for budgeting? Lmk, because I need as much support as I can get.

Images: Shutterstock; Giphy (2)