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Total Money Makeover Review: Debt

In my previous post I discussed denial. Today we're going to be talking about debt, and how many of us are in denial about debt. Here are some key take-aways that from Dave.

Stop doing bad things before you can do good things good ones- Dave Ramsey

According to Dave, there is no such thing as "good debt". He stands by the statement "Cash is King"

#1 Debt is Not a Tool For Creating Prosperity

I agree with Dave here. I've learned that since I come from a poverty background, I was under the impression that liabilities were assets. Things like cars, luxurious brands, and the latest gadgets were assets. All of these things that I mentioned, most people will utilize some form of financing to have them. A liability is anything that takes money out of your pocket, and financing items just that. If you want to create prosperity, you need to invest in methods and objects that will allow your money to appreciate (grow) over time. Dave touches more on this is his book.

#2 You Should Not Cosign

I don't want you all to think this is something that Dave came to conclude on his own, This is a biblical principle. There are many reasons that a person should not cosign. There's much misinformation on it as well, Dave touches on how cosigning can ruin significant relationships in our lives. That's a main reason, he does not recommend it. Ever.

#3 Avoid Rip-offs

Dave encourages us to avoid rip-offs. Lay-away and Payday advances are prime examples of rip-offs that he points out. He goes a bit more into detail on this, which I will not be doing. However, if you're curious to why things like lay-away and payday advances are rip-offs, you can read the book, or leave a comment "rip-offs", and I will create an article about them.

#4 Get Smart About Buying Cars

As soon as you take a vehicle on a test drive, it can depreciate about $2 to $4,000. If you proceed to purchase said vehicle, you are already paying up to $4,000 more then what the car is worth, without including the interest (if you're financing). To avoid such a situation, Dave shares that we should look for vehicles that are about 2 years old with very low mileage.

#5 Get Smart About Credit Cards

Dave hates credit cards. He has a strong disdain towards American Express. So, it's no surprise that he recommends avoiding credit cards all together. The average American Consumer household has over $6,000 in credit card debt. The balance kept on credit cards collects interest, compounded interest. This means, you'll owe more money than you borrowed. Dave recommends debit cards, since they function the same way, but you won't go into debt using them.

#6 Get Smart About Debt Management

One last tip that he covers about becoming debt free, is to avoid debt management agencies and consolidations. His reason is simply this, "you cannot borrow your way out of debt". We would end up with more debt.

This section of Total Money Makeover was enlightening for me. I recall growing up and my mother utilized layaway, and my grandmother used payday advances. They were always broke, and become broker. I don't think they understood the cost of borrowing someone else's money. I do now! Thanks to these tips, I know to think twice and consider the real cost of financial opportunities.

I hope this was helpful to you. Do you agree or disagree with any of Dave's recommendations? Do you have any insights to share? Any questions, comment down below! We'd love to hear from you!

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