Dear Dave,

I’ve heard you tell people to avoid debt consolidation companies. Why do you think debt consolidation is such a bad thing?

— Tom

Dear Tom,

The main reason is that debt consolidation makes you feel like you did something to really change your financial world when you didn’t. That’s part of the catch. Believe it or not, I hear people all the time say things like: “I took out a loan, and paid off all my debt!” No, you didn’t. All you did was move your debt around. It’s still there!

In cases like this, the biggest issue remains because you didn’t do anything to address the real problems — you and your behaviour. When you have debt, the number of payments you have left isn’t the problem. The problem isn’t interest rates, either. The problem is the person you look at in the mirror every day.

Until you get mad enough about your financial situation and the real reasons for it — until you fix you and your behaviour — you’ll never make any progress towards winning with money!

— Dave

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Dear Dave,

My husband and I are following your plan, and we’re in the middle of saving up our emergency fund. When do you recommend buying a new car in the process? Do we have to wait until we’ve finished all the Baby Steps?

— Alanna

Dear Alanna,

I never advise buying a brand-new car, unless you have a net worth of at least $1 million. At that point, you’ve got enough assets that you won’t get rocked by the ridiculous depreciation that comes with buying a new vehicle.

Now, you don’t have to drive a beater until you pay off your house or anything like that. I advise people to drive the minimum they can in terms of a car until they complete my first three steps. Baby Step 1 is a beginner emergency fund of $1,000. Baby Step 2 is paying off all debt except for your home. Baby Step 3 is fully funding your emergency fund with three to six months of expenses.

After you’ve accomplished these first three steps, then you can move up to a nicer car. Notice that I didn’t say move up to a new car. I want you to save up cash, and get a really nice used car. That’s what the typical millionaire does, and I want you to model your financial behaviour after people who are in the position you want to be in some day!

— Dave

• Dave Ramsey is CEO of Ramsey Solutions. He has authored seven bestselling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 15 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey