When Kate and I were newly married 20 years ago, we had a goal to pay off our debt, made up of tens of thousands of dollars in student and car loans. So we did what plenty of folks did at the time: we picked up a copy of Dave Ramsey’s The Total Money Makeover and followed his plan for getting ourselves financially square. Our combined income was paltry, but we pinched a lot of pennies and budgeted by putting cash in envelopes allocated to different expenses; once the cash was gone, we couldn’t spend any more.
And we did the debt snowball, where you pay off your smallest debt first, then roll that payment into the next smallest one. The snowball worked for us. It gave us a lot of psychological momentum and helped us pay off all of our debt in a few years.
Another step in Ramsey’s plan is to get rid of your credit cards. The idea is that if you have problems with spending, you don’t want easy access to buy things on credit. Kate and I are both frugal by nature, so buying stuff we wanted with credit cards wasn’t a problem for us, but we got rid of ours anyway.
We were both pretty philosophically anti-consumerist, and ditching our credit cards felt countercultural and contrarian. And it feels cool to be countercultural and contrarian. Our perspective was: we’re committed to never buying stuff we don’t have money for, so why would we need a credit card?
So we started relying exclusively on cash and debit cards for buying stuff. And by and large, it worked fine; you can get through most of life using just a debit card. But in recent years, we’ve started traveling more as a family, and I noticed that not having a credit card was making things a hassle.
For one, plenty of car rental companies won’t let you rent with a debit card, and the ones that do often make you jump through extra hoops. On one trip, I thought I had reserved a car with a company that took debit cards, but when we got to the counter, I discovered they had stopped taking them a few months earlier. So we were scrambling to find a car we could rent for the week.
Extract — continue reading at the source.
