The difference is the option to go into debt doesn’t even exist if you use cash that you actually have (via a debit card), but a credit card can enable going into debt. Based on current debt numbers (at least in America), generally speaking people are constantly running into the problem of debt.
If you’re disciplined enough to not let that happen then that is fantastic, and more power to you. But the data supports that most people unfortunately suck with debt.
You can go a few routes and be totally fine. One is an S&P fund. Probably fine given how strong the US has been. Another would be VOO or VTSAX. A little broader. A third option would be a three-fund portfolio - US, international, and bonds if you care to. I have 65%/25%/10% in these three. Vanguard has very low cost mutual funds for them all. I can see the logic of maybe no bonds if you want to be hyper aggressive. Fourth option would be a target date fund, which is fine. I don’t like that those tend to be overly conservative and don’t always expose you to enough but they would work just fine.
The credit card vs no credit card debate (especially in the context of Dave Ramsey) always ends up becoming circular. Dave knows the benefits of using CCs for those in the minority who are financially savvy, but the financially savvy aren’t his target audience so he almost never alludes to it. People can mistake this for ignorance when it’s just simply about brand protection.
The only time he softens his position is when he’s doing podcasts like the iced coffee hour where he concedes that the “responsible” use of debt or leverage can get you further ahead in life, though he would never recommend it. He’ll never endorse this as it’s in conflict with his brand and the values he’s teaching his target audience, who are the financially un-savvy and those who are prone to the pitfalls of CCs and debt.
It’s the same reason he doesn’t use a credit card himself; it’s not because he doesn’t believe it would benefit him personally, it’s because it would appear hypocritical and in direct contrast with what he preaches, reducing his credibility.
I enjoy DR in the same way I enjoy Rudy, what they say isn’t particularly useful when you’re already au fait with the topic; they’re just very entertaining and occasionally come out with some interesting stats!
Do merchants charge you extra to use a credit card? Typically no. The agreements merchants have with the card providers do not allow them to charge more. That means everything you buy most places is ~3% more expensive just to cover credit card fees.
Who does that impact the most? Not people who are responsible with finances- to your point, you get a lot of that back if you work it right. It’s people who have less margin, people for whom 3% is a big number that are impacted the most.
That’s where your $15, $20, $25, whatever small number it is per month comes from. It’s a tax on irresponsible people that gets redistributed to people who can play the game.
Meanwhile, the credit card companies use the (massive) margin to market the scheme and keep it going. It’s hard to find good data (a lot of is presented as percentages and doesn’t list finance as a separate industry), but this report shows that two of the top 10 marketing spenders in the US in 2022 were credit card companies.
While I get somewhat where you’re coming from, or at least see the point you’re trying to make, at scale the moral high ground argument just simply doesn’t work. There is no practical argument against credit card use that is not an emotional appeal. Here are the typical arguments and counter points, because this is a very overdone debate already:
I don’t mind people that use cash. Good for y’all. But if prices are inflating anyway, I’d rather be getting 2-3% back on spend and infinitely more consumer protection. If I pay for something with a CC and there’s a problem, I call my bank and they cancel the charge. If I pay for something with cash and there’s a problem, I’m usually fucked. If the “disproportionately affect the poorest” argument was intellectually honest, we’d be pushing for legislation to eliminate all cash transactions entirely since cash transactions are rife with fraud
A con of credit card usage I experience that I’ve never seen anyone discuss are actually processing times. We live by a very strict weekly budget, which includes paying off our cards on a weekly basis. Sometimes, it will take upwards of 5 full days for our payments to be reflected and cash to be debited from our bank accounts. This can really make budgeting confusing if you’re not careful, and can mislead you into thinking you have more cash on hand than you actually do. A similar situation can happen for pending transactions as well, where a purchase amount is not reflected in the total amount owed on the card for quite a while. This is very much a “me” problem, but just something I’ve never seen mentioned.
An interesting point. We pay for a ynab annual subscription and the way that software works gets around this by immediately debiting your spending category, but if you’re not using software I can see that as an issue
What’s driving doing a weekly budget? That is a shorter cadence than most people use.
While my wife and I both have salaries, we found that we regularly have excess income from other avenues that are unpredictable (ebay sales, my wife performs tax services, i get consulting checks from outside IT work, etc.). We started to fall into the trap of lifestyle inflation because of a streak a really good months that were not the norm (eating out more, spending more on hobbies, etc.). So we decided to throw that excess money per week into different “funds” that can help work towards things we actually want like throwing into the market and family vacations and stuff. We found it just works better for us to do weekly since there can be a lot of variance. At the end of the month, my wife and I basically have a finance meeting to see how things went for the month and if there are any adjustments we should make to anything. That’s one thing that also I can’t stress enough, that partners should be in regular discussion about finances and have a mutual understanding of their position and paths to achieve goals. It has worked beautifully for us and has actually brought us so much closer.
So it sounds like the drive is irregular income that comes in at all different times? And awesome that you and your spouse are planning together, agreed that that is key.
You might find this podcast episode interesting that talks about the psychology of budgeting and how we don’t do a good job of mentally accounting for windfalls.
Most relevant part starts at 17:30
Yep, and the credit card processing times factor into it too. We’re just sure to pay them in full each week so we’re never caught for any nonsense charges.
This was a great listen @pfm! A lot of the conclusions at the end are the same that my wife and I have come to over the past 5 years. Credit moreso to my wife as she really dialed in our budget categories. But we actually do practice a lot of the things mentioned, def. We even have our Emergency fund broken into separate categories like car repairs, home upkeep and emergencies, and discretionary replacements (for stuff like TVs, furniture, etc.). This would be a really good podcast for anyone wanting to further improve their budgeting.
I listened to it in 2022 and obviously it stuck with me because of some of the psychology I hadn’t ever thought about prior. I like the idea that when we get a small windfall we tend to splurge and tell ourselves “well I got that extra money” but tend to repeat that logic and end up splurging more than what the windfall originally was! Feels relatable, especially in Pokemon cards.
I think it’s useful to know and recognize a lot of the psychological pitfalls our brains fall into.
This is a smear campaign in an attempt to steal kid’s pokemon cards and bitcoin!
They were really out of their wheel house with the pokemon stuff.
Happy Tuesday all. Thought a good topic for today would be compound interest. What is it? It’s 
magical
Investopedia states that compound interest is interest that applies not only to the initial principal of an investment or a loan, but also to the accumulated interest from previous periods. In other words, compound interest involves earning, or owing, interest on your interest.
Generally speaking, it means that the longer you have your money invested, your returns will grow more quickly. The earlier you can get started investing in the stock market, the better off you’ll be. Going back to the Money Guy, they have this wealth multiplier table that shows how much money you’d need to invest each month to become a millionaire by 65.
Disclaimer: The lifetime rate of return used in our Wealth Multiplier illustration is 10% annually from age 20, dropping by 0.1% each age after, until reaching a 5.5% terminal rate of return at 65. Returns are compounded monthly.
This ties in with the FI number we talked about last week, but you can mess around with interest rate, what you have saved already, and what you’re able to invest a month to see how much money you’ll have at a certain time using this calculator:
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Can’t say enough about compound interest, it’s a wonderful thing.
Love this visualisation! Great storytelling. Now I wish I was investing more heavily in my 20s 
Thank goodness Australia has mandatory retirement savings (Superannuation). Still, wish I had made extra contributions in my 20s.
I accidentally bought 700 shares of Bluesky Digital Assets (BTC on CSE) thinking it was the social media company Bluesky when in fact it was a crypto mining company lmao.
It was a penny stock so I didn’t loose anything crazy:)
Total loss is about 28$ with how quickly I sold lol…
But goes to show you should not place orders at 3am 
Reminds me of how that small tech company with the ticker “ZOOM” rose around 1800% at the beginning of the pandemic when people were trying to buy Zoom the video conferencing company “ZM”!
