Dave Ramsey Vs ???

One thing you’ll never hear Dave Ramsey recommend is using debt, he’s a fairly absolutist person in this area. Sure he’ll provide guidance on obtaining a mortgage but he won’t recommend it. When callers call in asking for advice for funding a small business he’ll always steer them away from using debt of any kind to fund the business. In the context of Dave’s program and the nature of the callers this is usually the right advice to give.

Robert Kiyosaki on the other hand categorized debt into good and bad debt. Unfortunately most of Dave’s callers are over their head in bad debt so that may explain why good debt is never an advice option on his show. Bad debt according to Robert is any debt you pay for yourself. A car note, home mortgage, credit card and even debt for business if the business is not paying 100% of the note + profit for you. Good debt is any debt that is obtained by you but paid for 100% by others. The best example of this is a mortgage on a cash flowing rental property. Sure you went into debt but if your numbers were correct you should have tenants paying 100% of the debt and you should have some sort of cash flow on top for this to qualify as good debt.

This brings me to my point on leverage. Another topic you’ll never hear from Dave is using debt as leverage to outsize returns at the expense of some risk. In the case of the rental property, your are using leverage of you your down payment to obtain a future outsized return on your money when the property is paid off or appreciates and is sold.

I recently used leverage and good debt to increase provides from my web publishing business by 40%. I started with a series of assets, many many websites on the unemployment application process in various states like unemployment California, Nevada Unemployment and Texas Unemployment. These websites were created to provide information for those seeking unemployment benefits. Of course I have my Google Adsense ads there to generate revenue for the business. With my network of sites I was earning a steady $50 per day in profit. Using debt and leverage I started promoting my network of sites with Google Adwords, I watched carefully which sites made a profit on a daily basis and which sites lost money. Those losing money were quickly removed. Within days my business went from $50-60 per day to $80-90 and now to $100-130 per day. The Google Adwords charges are put on a credit card which is paid off monthly and the difference is my now outsized profit. Within a month or so I should be able to proactively send the advertising funds to the credit card or switch to a debit card so the business runs on cash and not debt. However in the mean time, i’ll take using good debt and leverage and manage the risk.