For many Americans, debt is just a part of life. From taking on student loan debt to swiping credit cards and managing car loans, debt is woven into the fabric of daily life. Sometimes, this can lead to a casual attitude about debt — after all, what’s another couple of dollars in the hole, you think, inserting your card into another vendor’s machine.
The average American never considers these 4 financial moves — and it’s costing them.
Well, if you’ve followed financial guru Dave Ramsey, you know he’d tell you that even a small amount of debt can dig a deep hole. Ramsey is less than thrilled about how indifferent about half of Americans are to debt — saying that it’s “no big deal.”
Spoiler alert: It’s a very big deal. Ramsey is keen to dispel a number of myths about debt and reinforce how serious it can be.
Debt Can Seriously Hinder Your Ability To Build Wealth
While some financial experts point out that strategically leveraging certain types of debt — like taking out a mortgage on an investment property or securing a business loan — can build wealth, Ramsey takes a hardline stance against consumer debt: “Well, those folks are just plain wrong.” He warns that relying on credit cards, car loans, and personal loans can have a profound negative impact on your ability to get ahead financially.
According to Ramsey, the best way to build wealth is through your income. “And when you have to send huge chunks of your income out the door every month to make debt payments,” he said, “you’ve completely lost control of that tool.”
You Don’t Need a Credit Score To Be Successful With Money
This insight might seem counterintuitive, since the common assumption is that you must use a credit card to build a credit score that can open doors to major financial goals — like literally opening the door to your first home. Ramsey suggests that you can throw that assumption right out the window.
He said that a credit score is actually just an “I love money” score, an indicator of how much debt you’ve got, not how well you manage your money.
“And unlike what the toxic money culture wants you to believe, you don’t need a credit score to rent an apartment or buy a house,” Ramsey wrote. “So if you don’t have a credit score because you’ve never taken on debt, keep it that way. If you do have a credit score, get rid of it — cut up your credit cards, pay off all your existing debt, and stay debt-free.”
If you’re worried about renting a hotel room or a car without a credit card, Ramsey offers reassurance. You can do it all with a debit card, while still enjoying many of the same protections as a credit card.
You Shouldn’t Accept Some Debt as Inevitable
Sure, you don’t have to charge your hotel room or that night out at dinner. But some debts are impossible to avoid, like a car loan or student loans, right? Not so fast. Ramsey insisted that viewing these debts as inevitable parts of life does you a great disservice.
He referred to car payments as “a money pit, especially when you’re talking about a new car.” Since new cars lose 60% of their value during their first five years of life, Ramsey said that a car payment is basically like sending away money on an asset that depreciates rapidly. He’s also down on monthly payments for used cars, citing interest and the fact that used car dealers make more money on financing than on the car itself.
His advice? Save up and pay for your next car in cash.
Ramsey also said that student loans aren’t just an unfortunate reality of getting an education. Loan interest can end up crushing you just as you get started in your adult life. The key is to apply for as many scholarships as you can, work while in school, and apply for schools that are affordable.
While debt may seem like an unavoidable part of life, Ramsey views it as a way to dig yourself into a hole and hinder your ability to build wealth. For those looking to reassess their financial strategy, his strict views on debt may be just the insight they need.
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This article originally appeared on GOBankingRates.com: Dave Ramsey: Half of Americans Say Debt Is “No Big Deal” — Here’s Why That Thinking Is Dead Wrong
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