Dave Ramsey Vs Rich Dad Richard Kiyosaki
09 February 2009
One of the biggest differences between the philosophy of Dave Ramsey vs some others like Richard Kiyosaki of the Rich Dad Poor Dad series is the view on Debt. When it comes to Debt Dave Ramsey is an absolutist in that he simply doesn’t and won’t use debt. His teachings follow a similar manner. When someone calls the radio show with a scheme to use debt to further some effort about the only debt that Dave Ramsey finds acceptable is a 15 year fixed mortgage to fund the purchase of a primary residence. When it comes to most everything else it’s pay cash or wait and pay cash. Richard Kiyosaki would have another opinion. He divides debt into two camps good debt and bad debt. Most of Dave Ramsey’s callers have bad debt which is simply debt you are paying for someone else. When you buy a car, charge on a credit card or get a TV on zero percent interest you’ve signed up for bad debt because you must now take your earned income and apply it to your debt. Good debt however is debt that someone else is paying for you. The best example of this would be to take out a mortgage to buy a rental property. Your tenant is paying the debt for you and you gain the benefit of a paid off piece of property in 15-30 years. I think one of the reasons you don’t hear Dave Ramsey discuss good debt and bad debt is that Dave Ramsey focusses on the reduction of risk so he would possibly consider debt taken on but paid for by another still bad debt because you’ve assumed the risk that comes with that debt. Richard Kiyosaki would view the eventual payoff of the property as your payment for assuming the risk that came with your good debt.
March 24th, 2009 at 9:27 pm
Dave Ramsey is beneficial for some, especially those who have a significant amount of debt in their household. However Dave’s advice of living debt free isn’t necessarily the best way to base for everyone to live all the time. In fact he can only espouse such a viewpoint due to the fact that the majority of Americans will continue to leverage debt. His system is ultimately dependent on a larger debt based monetary system. Should everyone pay off their debts and pay cash only then the system wouldn’t last long in its current form. Secondly Dave mentions nothing about proper debt leverage. Thirdly Dave’s solution to rely strictly on cash would only apply to individuals and not business models especially medium to large businesses. The fundamental mistake Dave Ramsey makes is his own disregard for use of debit and credits in accounting. Debits and Credits are the primary building blocks of an account ledger. It is impossible to avoid debit and credit… unless of course you’re cooking the books.
July 9th, 2009 at 3:59 pm
Jonathan,
Actually there are several extremely large sized companies that aren’t in debt. Chick-Fil-A, Microsoft, Apple to name just a few. Cash flow is always a huge topic in a weak economy or not.
January 5th, 2010 at 8:06 pm
Jonathan is gravely mistaken (on all counts), and Jason’s answer is incomplete (though entirely correct).
To respond to each of Jonathan’s points.
1. Dave’s system is NOT dependent on others staying in debt. Quite the opposite. I have no idea where you got that from.
2. Dave addresses leveraging in all of his books and seminars. He opposes it, but he doesn’t ignore it. Once again, no idea where you got that idea.
3. You are once again completely wrong, but Jason amply responds. No business, small or large, needs debt. Debits and credits exist whether or not you are actually borrowing money. Any time you perform a service for a client, or send them a product, you are owed money unless they are paying on the spot. You send them a bill and they pay it. That does not, however, equate to a loan.