Dave Ramsey Said This Purchase Is a 'Horrible Financial Decision.' Here's Why He's Right

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KEY POINTS

  • A timeshare is a vacation property you buy the right to stay at for a set period of time every year.
  • Finance guru Dave Ramsey is anti-timeshares and called out the fees and fraudulent practices in the industry.
  • Timeshares are often expensive, and you end up losing money in the end.

Making the right financial decisions all the time can be tough, and it's inevitable that you'll make mistakes during your life that will affect your checking account balance. But while putting a few extra purchases on a credit card or making other minor errors are often easy to recover from, there are certain financial choices you'll want to make absolutely sure to avoid.

Dave Ramsey has identified one such choice, and in particular, called it a "horrible financial decision." Here's what it is.

Dave Ramsey has a big warning about this type of purchase

According to Ramsey, one financial choice you're almost sure to end up regretting is purchasing a timeshare.

Essentially, with a timeshare, you buy the right to stay at a certain vacation property for a set period of time each year. But in addition to the upfront cost of the timeshare purchase -- which can be very expensive -- you also get stuck paying annual maintenance fees as well.

Ramsey also warned about vacation clubs, which are similar to timeshares but allow you to buy the right to stay at one of many different resorts or locations that participate in the club.

Ramsey believes each of these types of purchases should absolutely be avoided because the downsides outweigh any possible benefits. And he's correct about that.

Here's why Ramsey is absolutely right

Dave Ramsey is 100% right when it comes to timeshares. These are a money-trap that cost you a fortune and actually provide very little benefit in the end.

The upfront costs of timeshares are astronomical, with the American Resort Development Association (ARDA) reporting the average initial cost to buy at $24,140 to purchase a week's time at a vacation resort. You'll also have to pay maintenance fees, which can total thousands of dollars more each year. In fact, older data from the ARDA estimated annual maintenance costs at $1,290 per year for a unit with three or more bedrooms.

Some timeshares also tack on other fees, such as costs to book your stay at your resort. And timeshares may also impose special assessments on owners under certain circumstances, depending on the terms of the original agreement.

In exchange for all this money, you get the right to stay at your resort -- usually for about a week or two. Now, you could buy a lot of nights in a hotel for $24,140 upfront, not to mention the $1,290 or so that you pay in maintenance fees each year. And you get to choose where to purchase a hotel stay and whether you want to or not. With a timeshare, even if you can't go on vacation one year for some reason, you're still stuck with the costs.

Timeshares also don't give you a valuable asset you can resale, unlike when you buy a vacation home, as timeshares often sell for $1 because people just want to get out of their obligation to pay annual fees.

There's no reason for anyone to waste money buying into this system, which is why you'll often see resorts doing a very hard sell on timeshares (for example, offering you free nights in exchange for listening to a timeshare presentation). Do not fall for this. Ramsey is right, and a timeshare is something you should just say no to.

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