After 14 years, roughly 195,000 miles, and a ton of memories, my little blue Toyota Corolla is no longer part of our household.
Our plan was to replace it in March of 2019, but I was involved in an auto accident in November which caused me to rethink that plan. The accident took off half the bumper, and I’m sure I could have replaced it. But having already gone down the path of sinking money into an old vehicle that wasn’t worth fixing, I wasn’t going to repeat that mistake.
I found a 2010 Toyota Corolla with 84,000 miles on it and it cost half of what my 2003 Toyota Corolla cost when I bought it in November 2004. Yes, it was bought on credit. Despite all the things I’ve written about on this blog and our minor stint 100 percent debt free this year, I have zero negative feelings about that.
Allow me to explain.
I found a flaw in Dave Ramsey’s system, and it has everything to do with Baby Step 1: Save $1,000 in a starter emergency fund.
The starter emergency fund is just to get you buy while you go crazy about debt and get it paid off. That worked well for us for a long time. But if you live in a place where having dependable cars is a necessity, you won’t be replacing your car for only $1,000 if you have one die. There will be fees associated with taxes, tags, insurance, and in the case of the state where I live, inspections. And what you don’t pay for in dollars, I promise you’ll pay at least as much in time getting your a different car established in your name.
When you get to the end of your debt free journey as we did but have nothing to your name but $1,000 and things start going bad, guess where you end up? That’s right: credit. I’m sure I could make a case against doing what we did. I’m sure we could have been more strict, more intense, more whatever. We even received a financial gift that helped out a lot with our van purchase, but had we not had that gift we would have definitely used credit either way.
That’s not to say I think Ramsey’s plan is a bad one. I think it’s great for a lot of people. My biggest complaint would be that the plan tends to be touted as the only way to financial fitness, and its devotees tend to believe the same way (I was one of them).
I think his plan needs updated. Maybe your starter emergency fund should be a percentage of your monthly income. Maybe while you’re paying off debt (which is typically two years or less according to Ramsey’s experience), you should be saving a little every month rather than putting it all on debt. I don’t know what the answer is, but I’m sure it needs adjusted. I don’t believe Baby Step 1 is correct.
We are no longer following Dave Ramsey’s Baby Steps plan.
That’s not to say I wouldn’t recommend Dave Ramsey and his plan to those looking to go from zero to hero in terms of financial knowledge. I think his plan has many, many good points and has obviously helped many people.
But the plan might not be what is best for your situation, and I think that’s something Ramsey’s plan misses. That is now the path my household is on. We are figuring out our own plan for our situation, and we’ll take it step-by-step.
Yes, I want to be debt free. Yes, I want to financially wise. But I also don’t want to be confined to dogma because someone else is too scared to think outside of the box.
So Dave, it’s been fun. I will still listen, still be a fan, and still recommend you to others. But your plan doesn’t work for us, and we’re going to find a different way.