Dave Ramsey Says This Is the Main Problem With Debt

You may be surprised at Ramsey's issues with borrowing. 

Dave Ramsey is a well-known finance expert who has given many helpful tips. One of the themes he stresses over and over to his audience is the importance of avoiding debt. In almost all situations, Ramsey is against borrowing. In fact, he even urges you to pay cash for a house if you can, rather than getting a mortgage. You may want to avoid following this particular piece of advice, though. 

The big question, though, is why Ramsey is so anti-debt. And he actually has a very good reason for suggesting you steer clear of borrowing. 

Dave Ramsey believes debt is a big issue for this key reason 

So, what is Dave Ramsey's big objection to borrowing. It has to do with the impact that debt has on your future. 

"Here's the main problem with debt," Ramsey explained. "Your income is your greatest wealth-building tool. But debt is all about paying off the past -- putting this month's income to something you bought last month, last year, or even longer ago. You can't move forward like that."

As Ramsey points out, if you borrow for something you need today, you are committing your future self to paying for it. If payments are $100 per month, that leaves you with $100 less that you can use to cover your bills in the future or that you could potentially put toward goals like saving for retirement or big purchases.  

For all of those future months when payments are due, it will be harder to live within your means since you've already committed a chunk of your money toward something you purchased long ago. If you want to do other things, there won't be as much money to do it.  

And you can't just change your mind if you end up regretting the fact you've tied up this money that you may prefer to do other things with later -- you're committed to paying it to your creditors whether you want to or not. 

"Debt holds your income hostage," Ramsey warned. "It holds your future hostage."

Is Ramsey right?

Ramsey is absolutely right that when you borrow, you are limiting your future options. You no longer have the option to do what you want with the money you've promised to pay. Simply skipping out on making payments could have serious financial consequences, including damage to your credit score and potentially legal action if creditors try to collect. 

Now, that does not necessarily mean you should absolutely avoid debt in all circumstances, though. While you have to agree to put future money toward a commitment you made in the past, it can sometimes make sense to do that. For example, if you are borrowing to start a business that will increase your future income, then you may end up better off even if you have to make payments on a business loan.

The key thing to think about when deciding whether debt is bad or not is whether it is worth it to deprive yourself of some future earnings by committing to send the money to creditors. If the things you are buying with the money won't improve your situation in the long run and may not even last as long as your payments, then you should avoid debt. But if you will end up better off for having borrowed, then your future self may not mind making those payments at all.