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Is Dave Ramsey Right?

Lots of people are talking about Dave Ramsey.  Just about everyone knows who he is:   the evangelical radio personality who has become widely popular for his rantings about getting out of debt and dumping credit cards.shutterstock_108735110
So is Ramsey right?
I agree with Ramsey talking the basics, addressing common sense money matters that should be obvious to most people but are not, things like not spending more than you make so you can stay out of debt.
But I do take issue with his idea that all debt is bad.  Any truly experienced expert will tell you that there are two kinds of debt:  good debt and bad debt.  What Ramsey should be helping people understand is what equals bad debt:  A mortgage for a home that you live in (contrary to what many so-called “experts” teach, this is NOT good debt), credit cards, installment loans, car loans, anything that costs you money to get into and does not give you a fairly quick return.
Then there’s “good” debt. Good debt? How can there be such a thing? Wealthy people understand the need for good debt, which is usually investment debt into something that will return a profit quickly, like rental properties, business ventures and the like.  To get out of bad debt and have the money you need to invest in good debt that will provide a return on that investment in a timely way you must understand both kinds of debt. Unfortunately Ramsey doesn’t do a good job of explaining this.
His assessment of the American fascination with automobiles and how auto loans can be one of the most detrimental obstacles to financial success for the middle class is accurate. However, Ramsey falls short in so many other ways because he fails to tie the way people spend to their debt, to their lack of savings, and to the overpayment of taxes. The way we spend, borrow, save, and pay taxes are all tied together and MUST be dealt with together. They are not separate issues — focusing only on debt and cutting up credit cards will not help Americans become financially secure.  He really doesn’t deliver the big picture view, and this is probably the worst thing he can do for his loyal and super-charged followers.
To get the big picture view of how personal finances should really be managed explore the Why Money Mastery page on the Money Mastery Web site.


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