Learn to say ‘no’ to taking on debt

  • Debt burden: one of the keys to financial success is to avoid debt

    Debt burden: one of the keys to financial success is to avoid debt


Dear Dave,

Weíre debt-free except for our home, and weíll have our fully funded emergency fund of three to six months of expenses, weíve agreed on six monthsí worth, saved up by the end of February. Weíre also setting aside a little each month to buy a newer car with cash later. Weíre about $5,000 from our car fund goal, but my husband is getting impatient. He wants us to go ahead and finance the remainder, since itís a relatively small amount. He has tried to justify this by mentioning that you donít seem to have a problem with people borrowing money to buy a house. Could you explain the difference?

ó Lana

Dear Lana,

Okay, first things first. I donít like debt of any kind. I donít really like borrowing for a house, but Iím not unreasonable. I tolerate mortgage loans, as long as people use a 15-year, fixed-rate mortgage, with payments that are no more than a fourth of their monthly take-home pay.

A house is often the largest purchase in a personís life, and one most people canít achieve based solely on saving. I still recommend, however, setting aside as much as possible for a down payment before taking out a mortgage.

Hereís the thing. Cars go down in value, while traditional homes generally increase in value substantially over the years. Plus, you can get an absolutely great, pre-owned car for $10,000 to $15,000. This is an amount which, in my mind, is doable over the course of several months through determined saving and living on a budget. Depending on where you live, a good home can cost ten to 20 times that much.

The best way to build wealth and have a secure financial life is to stay away from debt. This means getting out of mortgage debt as quickly as possible, too. Youíre never going to win with money if you canít learn to delay pleasure.

Everyone has that little kid inside them, and that little kid wants everything he or she wants right now. Your husband is asking a normal question, but heís dangerously close to letting that immature little kid out. It happens to all of us once in a while, but we have to grow to a point as adults where we tell that little kid no!

ó Dave

ē Dave Ramsey is CEO of Ramsey Solutions. He has authored seven bestselling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 16 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey

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Published Feb 1, 2020 at 8:00 am (Updated Feb 1, 2020 at 12:05 am)

Learn to say ‘no’ to taking on debt

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