Jun 28, 2024
Dave Ramsey gets his fair share of criticisms for some of his ideas that seem a little … old fashioned.
Gen Z and Millennial financial content creators have recently called him out for his views on the housing crisis and the cost of childcare. But his unconventional perspective on debt tends to get the biggest backlash.
Advertisement
Ramsey’s insistence on a “debt-free” lifestyle could be so outdated that even his fellow baby boomers disagree with him. Real estate mogul Grant Cardone, who is three years older than Ramsey, isn’t a fan of the “debt-free” lifestyle.
“I think Dave’s good for people that want to stay in the middle class,” Cardone said in an episode of The Rich Somers Report. To get to the top, he believes everyone needs a dose of so-called “good debt.”
Here’s why borrowing money is such a divisive issue even for ultra-rich entrepreneurs.
Good debt vs. bad debt
There’s a group of uber-wealthy entrepreneurs who consider debt an essential tool in their arsenal. Cardone is firmly in that group.
“At Cardone Capital we always use debt but never over leverage, keeping our debt leverage in the 65% range,” he once said.
“Goldman Sachs ain’t worried about debt,” he told Rich Somers. “JP Morgan’s not worried about debt. Elon Musk is not worried about debt.”
Indeed, Musk has borrowed billions of dollars to acquire companies such as Twitter and billions more through loans against his shares to fund his other ventures.
Similarly, Jeff Bezos borrowed $2 billion to finance Amazon’s growth during the dot-com bubble.
Advertisement
Entrepreneurs like Cardone, Bezos and Musk consider debt used to expand a business or bolster investments “good.” Borrowing money to invest in appreciating assets, such as a house, or to enhance your skills, such as student loans, could be considered beneficial.
However, some entrepreneurs believe that borrowing money adds risk that is simply not worth it.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Is all debt “bad”?
Like any other investor, Dave Ramsey financed his early real estate investments with debt. However, a brush with bankruptcy in the 1980s left him scarred for life.
Now, the financial guru insists on a debt-free path to wealth. “Debt always equals risk, and it’s always dumb,” he wrote on his website last year. “While your calculator may say that leveraging debt can help you get rich faster, it doesn’t consider risk. But when you pay cash for everything, you don’t have to worry about that risk.”
These sentiments have been echoed by the world’s most famous investor: Warren Buffett. “You really don't need leverage in this world much,” Buffett once said. “If you're smart, you're going to make a lot of money without borrowing.”
Fellow billionaire Mark Cuban once explained that paying off debt was like making a good investment: “Whatever interest rate you have — it might be a student loan with a 7% interest rate — if you pay off that loan, you’re making 7%. That’s your immediate return, which is a lot safer than trying to pick a stock or trying to pick real estate, or whatever it may be,” he once told CNBC.
It seems clear that there is more than one path to success. For most people, the choice between “good debt” and “no debt” could depend on their investment style and appetite for risk.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
