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Dear Dave,
Why do you think all debt is bad? Aren’t some kinds of debt, like a mortgage or student loans, good?
— Nathan
Dear Nathan,
It’s not necessarily a question of what I think. I’m really just the aggregator of information we’ve gathered while walking with people through their financial issues. I’ve worked with tens of thousands of folks over nearly 30 years, everyone from billionaires and millionaires to broke people, and those in between. In the process, we’ve collected a lot of data through formal research projects — I’m talking about a huge stockpile of statistics, facts, and figures. And all that data shows debt is the biggest roadblock between people and wealth. I’m also a Christian. Having read the bible, and what it says about money, I can tell you there’s not one place where it says debt is a good idea.
Any kind of debt is a burden, Nathan. It steals from your ability to save, build wealth, and be generous.
— Dave
Don’t cash out retirement
Dear Dave,
I owe $18,000 on my only car, and the payments are killing me. I’m also upside down on the vehicle by about $4,000. I’m 31, and I’ve got exactly $18,000 in my 401(k). Should I cash it in to pay off the car?
— Monty
Dear Monty,
If you use your 401(k) they’ll charge you a 10 percent penalty, plus your tax rate. That means you’ll probably lose anywhere from 25 to 50 percent to the government. I don’t know about you, but I think they already get too much of our money.
If it would take longer than 18 months to pay it off, I’d get rid of the car. To do this, you’d have to sell it for as much as you can get, then go to a local credit union for a small loan to cover the difference. If it’s your only car, you’d need to ask for an extra $2,000 to $3,000 to buy a little beater to drive until you can save up and get into something better.
I hate all kinds of debt, Monty. But being $5,000 to $6,000 in the hole is a lot better than having $18,000 in debt hanging over your head.
— Dave
— Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including "The Total Money Makeover." "The Dave Ramsey Show" is heard by more than 14 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.
