Once a upon a time, there’s a financial guru by the name of Dave Ramsey. He’s the “get out of debt” guru and likes making blanket statements about debt. But is Dave Ramsey right about debt?

This post hones in on why Dave Ramsey is completely wrong about debt and has no clue what he’s talking about.

Is Dave Ramsey Right About Debt?

No, he’s not.

He takes a black/white view to debt and he’d post crap like this.

No substance, no nuance.

It should be taken as a red flag when someone makes a blanket statement about things, because it generally means they can’t rationally talk about the topic from different angles. That is, a black and white statement can mean the person has only a shallow understanding of the topic. That is, Dave Ramsey only has a shallow understanding of debt so isn’t an expert on the topic shouldn’t be considered a believable person when talking about debt.

This is ironic, since he’s the “get out of debt” guru.

Why Dave Ramsey Is Wrong About Debt

In this Twitter above, he says debt makes banks wealthy, not you.

But debt has made plenty of non-bank entities wealthy. In fact, mortgage debt has made tens and tens of thousands of success stories in real estate. So debt can definitely make people rich, and there’s endless cases to prove Dave Ramsey wrong.

I personally don’t like rental real estate as a model because the risk-to-reward is too high for me. And I don’t want to flip houses because the volatility is too high for me personally: I know a dude that made $7 million in real estate, and another guy with similar experience that seems to lose $200K+ on every single deal. That kind of volatility is even crazier than crypto for me.

I personally think that real estate *could* be a great model, but you probably shouldn’t jump in if your risk tolerance isn’t high or if you can’t afford to lose a ton of money.

But does it mean that I’d just say ‘real estate is bad’ in general? Hell no.

Reality is reality. Even though I don’t prefer real estate, there’s definitely endless cases of people making it in real estate. It could be a great model for you if you’re OK with the risk of losing every last dime, or if you’re rich enough to absorb huge volatility already.

Outside of real estate, debt can be useful in so many ways.

Debt can help a small business in the form of working capital, so the business can actually grow and scale. And in a lot of cases, debt from working capital is required to keep businesses alive.

So in both the real estate case and in the small business case, Dave Ramsey isn’t right about debt at all. In both of real estate and business, you’d almost certainly lose without any debt.

Sure, there’s businesses that bootstrap from the ground up, but those pertain to very specific business models. But does that mean only businesses that require low capital upfront should be the ones to survive?

I don’t think so, because we’d never have things like computer chips or Uber, or any other big company out there today.

Debt is what’s made a ton of modern innovation possible, and Dave Ramsey is just an old guy who isn’t right about debt at all.

Dave Ramsey’s low-hanging fruit advice is with no substance. And his black or white opinion is poison for the general public. Saying something is just “right” or “wrong” is dumb because it prevents people from diving in deeper and understanding that topic more fully. That’s what propaganda does.

Debt Is Neither Good Nor Bad

Debt is good or bad only in the context of how you use it.

Use debt responsibly and it can help grow your businesses and investments quicker than you might have originally expected.

On the flip side, if you rack up a ton of credit card debt because you wanted to buy Gucci, that’s very bad since you can go broke from doing that.

But even then, credit cards go deeper than that. Ramsey will tell you not to use credit because “debt.” Moronic.

All you need to do to use credit cards well is to budget your monthly expenses responsibly and autopay your credit cards so they’re paid on time. This’ll actually increase your credit score and allow you to save a ton of money if you were to purchase a home to live in.

Not only that, using your credit card in a responsible way will give you a ton of credit card points. Why cut up your credit cards and use cash, when you can conveniently pay for stuff with your card, incur no debt, and get all the free perks that credit cards provide you?

Likewise, business debt can be good or bad, just like credit card debt.

Using debt with conservative underwriting in business can allow your business to scale healthily. On the other hand, going YOLO on business debt can make your debt service so high that it’ll kill all your cashflow – not to mention that you’ll have the added pressure to sell a ton more just to pay off the debt, because if you don’t pay it off your business is bankrupt.

Debt Is Only A Tool

Debt is a only a financial tool. It’s an inanimate object, and so it can’t really be “good” or “bad.”

Use debt wisely and conservatively and it can be a booster towards your financial goals.

Use debt poorly and you can go bankrupt.

At the end of the day, just because Dave Ramsey thinks he’s right about debt doesn’t mean he is. And just because Dave Ramsey wasn’t able to control his credit card debt because he’s a moron with no self-control when a credit line is dangled in front of him, doesn’t mean you’re a moron with no self-control too.

Just be smart with your finances and debt, and you’ll enjoy all the benefits it provides.

For my own example: I’ve had a credit card for 2 decades now, and I’ve yet to incur a single cent of interest because I just pay it on time, every time. And even though I’m not a huge believe in real estate, I have used mortgage debt in real estate and I’ve only ever profited from rental real estate (but I still don’t like it).

I use debt all the time and I just don’t see how Dave Ramsey could be remotely right about debt.

PS: If you found this post entertaining or useful, please share it with a friend so they don’t cut up all their credit cards and sneak into your house and cut up yours as well. It’ll help enormously and I’ll love you 5ever if you share this post.