Dave Ramsey hates debt. Is it really possible to live without debt?

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Many consumers are regularly in debt. But can we break this cycle?


Key points

  • Financial expert Dave Ramsey has made it clear that he is not a fan of debt.
  • Although he has many tips to help consumers stay out of debt, they may not be right for everyone.

American consumers are no strangers to debt. In February alone, debt levels rose by nearly $42 billion to a total of nearly $4.5 trillion in different borrowing categories, from credit cards to auto loans.

This news is unlikely to please financial guru Dave Ramsey. Ramsey’s views on debt are pretty clear – he thinks all debt is bad and something consumers should aim to avoid at all costs.

Dave Ramsey is so against debt that he thinks consumers should avoid credit card use altogether. And he even went so far as to suggest that home buyers buy properties with cash if they can afford to do so – even though mortgages are generally considered a healthy type of debt.

Of course, Ramsey’s advice is well-meaning. Every time you rack up debt, you sign up to pay interest, and in Ramsey’s mind, that’s the same as throwing money away. But is it really possible to live a completely debt-free life? It’s more debatable.

Choose your debts carefully

Going through life debt-free is something many consumers fail to do. But that doesn’t mean we shouldn’t aim to avoid certain types of debt.

Credit card debt is considered unhealthy because it does nothing but cost you money. Credit cards are notorious for charging exorbitant interest, so much so that a $100 purchase paid off over time could easily cost double, depending on the amount of accrued interest.

Plus, credit card debt can hurt your credit score, making it harder to borrow money affordably, or buy or rent a home. And in that sense, Ramsey is right when he says credit card debt should be avoided at all costs.

But mortgage debt is another story. Having a mortgage, even a large one, won’t hurt your credit provided you can meet your monthly payments. Additionally, a mortgage can help you own an asset that can increase in value over time.

Also, buying a house with cash makes little sense financially, even for people who have this option. Houses are quite illiquid, which means turning a house into cash is not easy. And so, shelling out $400,000 to buy a house is risking a scenario where you need a financial lifeline and have to wait months for your property to sell.

In addition, mortgages are a fairly affordable means of borrowing. Even with mortgage rates rising these days compared to the past few years, you could easily generate higher returns in the stock market than the interest you pay on a mortgage. And so keeping your money out of a house and investing it might make better financial sense.

Good advice, but only up to a point

Dave Ramsey’s tips for avoiding debt are designed to help consumers avoid wasting money on interest and getting in over their heads. But do you need to commit to a totally debt-free lifestyle? Not necessarily.

There’s nothing wrong with financing a major purchase, like a house or even a car, that probably won’t increase in value over time but will keep you going. And as long as you commit to doing your best to avoid credit card debt, you’ll make Dave Ramsey proud, at least to some degree.

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