Dave Ramsey's Latest Garbage Advice: If You Have A Car Payment, 'You Will Be Broke Your Whole Life' (2024)
Dave Ramsey may be an expert at running a toxic company where employees aren’t even treated with basic respect, but when it comes to giving financial advice, he has a questionable background at best. Earlier this month, he gave some truly dumb advice to a woman whose husband got taken advantage of by a Kia dealer. And even if we ignore his stupid envelopes-of-cash system, that’s far from the only example of Ramsey giving bad advice. This time around, Yahoo reports he’s back on his “if you have a car payment, you’ll die alone, broke and miserable” bullsh*t.
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“I guarantee you’ll be broke your whole life as long as you stay in car payments because it’s the most expensive thing you buy that goes down in value,” he said in a recent TikTok series before claiming, “The average millionaire drives a four-year-old car with 41,000 miles on it, and of course, it’s paid off.” He also told listeners to avoid buying a new car because it will lose between 60 and 7o percent of its value in the first four years.
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It’s the same ham-fisted, overly broad advice that Ramsey’s been giving for years and, of course, never bothers to define what “millionaire” really means. Someone who owns a $350,000 house and has $650,000 invested for retirement is technically a millionaire, but that’s far from the type of person that comes to mind when most people hear “millionaire.” Also, cars losing 70 percent of their value in four years hasn’t been true for, what, at least five years?
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He’s not exactly wrong that you’ll have a lot more money if you invest $500 more per month for 40 years vs always having a car payment, but what percentage of people actually do that? Some of Ramsey’s fellow mega-millionaires? A small number of more regular people? Because that’s definitely not normal behavior.
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Obviously, you shouldn’t buy things you can’t afford, especially when there’s interest involved, and used cars can definitely be a better deal if you find the right one. At the same time, you’re usually giving up the manufacturer warranty if you go used, and that’s not even accounting for how long you plan to keep your car. Someone who finances a reasonably priced car for their income level and plans to more or less drive it into the ground isn’t going to be affected by its depreciation even if it loses 90 percent of its value in five years.
Ramsey’s advice also ignores the time value of money. Plenty of people have the money to pay for a car in cash but decide not to because they’re able to get interest rates that are lower than what their investments are earning in the stock market. If you buy a car with cash that would have earned eight percent a year on a car that you could have financed at three percent, you’re giving up a good bit of money just to avoid a loan.
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Let’s also not forget the number of people who need a reliable car to get to work every day. In a perfect world, public transportation in the U.S. would be fast, convenient and affordable, but we don’t live in a perfect world. We live in America where driving is essentially mandatory, and many people can’t afford to pay cash for a car that they can depend on to get them to work day in and day out.
And since at-will employment is the name of the game here, a whole lot of workers have to worry about losing their jobs if they’re late or forced to call out because of a breakdown. If financing a (presumably used) car allows them to finally drive something reliable, odds are, they’re going to be in a much better financial position five years from now than they would be if they took Ramsey’s advice. You know, because of that whole thing where they’re able to not only maintain consistent employment but also because it gives them the ability to switch to a higher-paying position more easily.
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The truth is, everyone’s financial situation is different, as are their financial goals. The right decision for one person may be the wrong decision for someone else, and that’s OK. Heck, someone with a massive amount of credit card debt might even benefit from carrying envelopes full of cash with them everywhere they go if it helps them get their spending under control. Unfortunately for Dave Ramsey, the world is full of far more nuance than his “everything is black and white” brain seems to be able to handle.
Dave Ramsey Guarantees If You Have A Car Payment, 'You Will Be Broke Your Whole Life' And Says The Average Millionaire Drives A 4-Year-Old Car With 41,000 Miles — Investing The Payment Could Make You $5 Million Instead.
A couple of months ago, Pam and Mary Anne independently alerted us to a local hidden treasure that they had read about in the July issue of Elmore County Living, featuring Dave Ramsey's car and plane collection (the article begins on p. 13).
Personal life. Ramsey married his wife Sharon in 1982, and the Ramseys have three children, including Rachel Cruze. All three work for Ramsey Solutions.
"Cars drop in value like a bag of rocks, losing 60% of their value in the first five years! This isn't a smart investment. You really should only consider buying new if you have plenty of money to burn." With this in mind, Ramsey urges potential car buyers to understand what dollar amount they are capable of spending.
Here's why Dave Ramsey thinks you need to sell your car if you're upside down. According to Ramsey, selling the vehicle is your best solution if you no longer want to owe more on your car than it is worth. "If you want to get out of an upside-down loan, you've got to sell the car," Ramsey said.
When it comes to saving for retirement, money expert Dave Ramsey knows exactly how much you should be setting aside. Ramsey's recommendation, which he shared on his website Ramsey Solutions, is to invest 15% of your gross income into your 401(k) and IRA every month.
He was also in debt to banks for millions of dollars. Unfortunately, due to various circ*mstances — including the financial climate in the late 1980s — the banks called Ramsey's notes, and he ended up having to file bankruptcy because he was unable to pay off the enormous amount of debt he owed in a few short months.
Eventually, your goal is to have 3–6 months of expenses in a fully funded emergency fund and at least 15% of your gross pay going into retirement savings. (These are part of the 7 Baby Steps, aka the proven method to saving money, paying off debt, and building lasting wealth.)
I put my personal 401(k) and a lot of my mutual fund investing in four types of mutual funds: growth, growth and income, aggressive growth, and international.
Some say that the Great Resignation happened as a result of their poor leadership and how out of touch they are with their employees. And of course, the pandemic. Yeah, we've lived through a nightmare that's permanently changed the landscape.
Throughout high school and into college, Ramsey continued to work hard and earn his own money. He passed his real estate exam right after high school and worked upwards of 40 hours per week during college to help pay tuition. He graduated from the University of Tennessee with a degree in finance and real estate.
Daniel Ramsey is an entrepreneur, founder, and CEO of MyOutDesk, a company that provides virtual staffing solutions to businesses in various industries. He is a long-time entrepreneur who has run and sold several businesses throughout his career.
An affordable car payment would be one that doesn't exceed $600 a month, based on the rule of thumb that your car payment shouldn't be more than 15% of your take-home pay.
Dave Ramsey, the renowned financial guru, has long been a proponent of financial discipline and savvy money management. This can include paying off your mortgage early, but only under specific financial circ*mstances.
20% down — be able to pay 20% or more of the total purchase price up front. 4-year loan — be able to pay off the balance in 48 months or fewer. 10% of your income — your total monthly auto costs (including insurance, gas, maintenance, and car payments) should be 10% or less of your monthly income.
According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%.
Introduction: My name is Aracelis Kilback, I am a nice, gentle, agreeable, joyous, attractive, combative, gifted person who loves writing and wants to share my knowledge and understanding with you.
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