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Five Memorable Things Finance Expert Dave Ramsey Has Said About Debt

Posted By:  |  July 16, 2014  |  0 Comment(s)

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Dave Ramsey has been helping folks manage their finances for well over two decades. People from all over the world have sought his advice on effective money management and climbing out of debt. Ramsey has had much to say about debt over the years, but below are a few words of advice that stick out.

The Wealthy Don’t Use Debt

Culturally we’ve come to accept debt as a part of our lives. Debt is normal and everyone has it, even the wealthy, right? Not so, says Ramsey. According to the money management expert, the wealthy are far less likely to be in debt than we are led to believe. Using loans to make big purchases has become a natural step in consumer behavior, but if you had the money, wouldn’t you buy your house and your car outright? Ramsey believes the key to building wealth lies is how effectively individuals are able to prioritize their spending. Instead of spending money on things that are definitively outside your spending bracket like paying off a car, he suggests getting rid of the car and repurposing that money for building a nest egg or funding your children’s education.

Build an Emergency Fund of $1000

If you’re deep in debt, chances are building an emergency fund is the last thing on your mind. As part of his “Snowball Plan” for getting out of debt, Ramsey insists debtors immediately get to work on building a nest egg to this effect. Having a little bit of money set aside to cover the costs of unforeseen circumstances like being laid off will stop you from using loans or credit to get you through. Emergency funds help minimize the likelihood of falling further in debt.

Debt Consolidation is Not the Answer

While some people might regard debt consolidation as a way to lessen their debt load, Ramsey argues nothing could be further from the truth. Ramsey says debt consolidation is simply a way of shifting the debt around even though factors like a lower interest rate and turning your debts into one lump sum might give you the impression that you’ve made progress. In reality, the source of your financial problems, which includes bad spending and budgeting habits, have yet to see any real solutions.

Focus on One Debt at a Time

According to Ramsey, fragmented focus is a weakness for debtors. Instead of attempting to tackle multiple debts at once, Ramsey suggests sticking to making principle payments on all of your debts and zeroing in the majority of your efforts and attention on paying off one debt at a time. This strategy is a key step in Ramsey’s “Snowball Plan.” Ramsey believes checking off one debt at a time will help build a momentum which will in turn motivate you to keep paying off your debt.

Pay Off the Smaller Debts Before the Larger Debts

Ramsey tends to get hounded by financial gurus on this point, but supporters of his debt management program are more than happy to supply proof of this tip being one of the most important steps to becoming debt-free. Paying off smaller debts before larger debts seems to defy logic, because after all you’ll be spending more on interest rates for the larger debts. However, Ramsey’s philosophy tends to move beyond considering just the numbers into making permanent lifestyle changes. Successfully paying off smaller debts requires less time but still gives you a feeling of accomplishment that can motivate you to keep going. Essentially, it uses positive reinforcement as way to alter your behavior.

The road to becoming debt-free can be a long one. Regardless of how much debt you’ve accumulated, if you want Dave Ramsey’s advice the solution is clear: stay persistent and start now. Freedom from debt is possible.


  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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