Dave Ramsey Hates Debt. Is it Really Possible to Live Debt-Free?

A woman placing cash in a check folder while sitting at a table in a restaurant.

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Many consumers routinely carry debt. But can we break that cycle?

key points

  • Financial expert Dave Ramsey has made it clear he’s not a fan of debt.
  • While he has plenty of tips to help consumers stay out of debt, they may not be workable for everyone.

US consumers are hardly strangers to debt. In February alone, debt levels rose nearly $42 billion to a total of almost $4.5 trillion across different borrowing categories, from credit cards to car loans.

That news is unlikely to sit well with financial guru Dave Ramsey. Ramsey’s opinions on debt are pretty clear — he thinks any debt is bad and that it’s something consumers should aim to avoid at all costs.

Dave Ramsey is so against debt that he thinks consumers should steer clear of credit card usage completely. And he’s even gone as far as to suggest that home buyers purchase properties with cash if they have the means to do so — even though mortgages are generally considered a healthy type of debt.

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

Choose your debts carefully

To go through life without any debt whatsoever is something many consumers won’t manage 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 doesn’t do anything for you other than cost you money. Credit cards are known to charge exorbitant amounts of interest — so much so that a $100 purchase paid off over time could easily end up costing double, depending on the amount of interest accrued.

Plus, credit card debt can damage 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 that credit card debt should be avoided at all costs.

But mortgage debt is a different story. Carrying a mortgage — even a large one — won’t hurt your credit provided you’re able to keep up with your monthly payments. And also, a mortgage can help you own an asset whose value can grow over time.

Furthermore, buying a home in cash makes little financial sense even for people who happen to have that option. Homes are fairly illiquid, which means it’s not easy to turn a home into cash. And so plunking down $400,000 to purchase a house means risking a scenario where you need a financial lifeline and have to wait months for your property to sell.

Also, mortgages are a pretty affordable way to borrow. Even with mortgage rates being up these days compared to recent years, you might easily generate higher returns in the stock market than the interest you pay on a mortgage. And so keeping your cash out of a home and investing it could make better financial sense.

Good advice, but only to a point

Dave Ramsey’s advice to steer clear of debt is designed to help consumers avoid throwing money away on interest and getting in over their heads. But do you need to commit to a lifestyle that’s totally debt-free? Not necessarily.

There’s nothing wrong with financing a large purchase, like a home or even a car, which likely won’t gain value over time but enables you to function. And as long as you pledge to do your best to stay away from credit card debt, you’ll be doing Dave Ramsey proud, at least to some degree.

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