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Originally Posted by Travis  I am a lover of books. I have come across two authors with two different point of views.
Dave Ramsey: author of Total Money Makeover and Financial Peace
His basic message is that debt is bad, and that people should not borrow money. No credit cards, no car loans, and if possible no mortgage (he wants you to buy a house with cash, or pay it off as fast as possible).
Robert Kiyosaki: author of Rich Dad Poor Dad series. I have only read his first two books (Rich Dad Poor Dad, and Cash Flow Quadrent).
He says that there is good debt and bad debt. Kiyosaki says that using debt to buy investment real estate is an example of good debt. Consumer debt would be bad debt.
I for the most part agree with what Ramsey says. I do not have any credit cards, my wife and I are paying off our debt, and we plan on putting at least 50% down on a house.
I would like your thoughts on this subject. Do agree with me, or think I am completely crazy. If you have not read these books, well go get them. They are fantastic books. |
Both of them are correct in their own ways.
Dave Ramsey's stuff is mostly intended for people who are heavily in debt and trying to get out of it. Thus, he teaches those people how to save money very conservatively and pay off the debt.
Obviously someone who has a problem with debt already, should not be told "there is good debt and bad debt" (which is true) because they have already proven their incompetence at distinguishing between the two. Thus, you tell them that "all debt is bad" because you don't want them mistaking new debt as good debt when it is in fact bad. (kind of like telling a child "crossing the street is bad" because he is too young to know when it is safe to cross)
Meanwhile, Robert Kiyosaki's work is not intended to get you out of debt, but to get you upwards in income and obtain wealth. Thus, if you start a business yourself, taking on large amounts of debt is very often a necessary component of funding its startup.
By the way, if you take even a basic corporate finance class in a business degree at a university, you will soon learn exactly why there is such a thing as good debt. The very shortest explanation of it would be "they borrow money at 5% interest and make 8% returns on it, thus profiting from their debt." (although those two percentages will vary)