inside recent interviewsreal estate investor, businessman grant cardon he said he doesn’t agree with it dave ramsey‘s advice credit cards and debt. “If you’re an idiot, listen to Dave,” Cardone said in a popular clip of the interview.
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Of course, this quote has some necessary context and is not as controversial as it may seem, but see for yourself. Next, consider what a money expert should do for you. What part of their advice should you apply to your own finances? Let’s dig deeper.
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Cardone’s approach to credit and debt
While Ramsey is known for his staunch opposition to all forms of debt, Caldonaire argues that: Create wealth using debt.
He argues that using credit responsibly can be a powerful tool, especially when investing in income-producing assets such as real estate. Cardone’s strategy emphasizes rapid growth and the use of debt as leverage to expand earnings potential. He emphasizes that: Real Estate Investment“You can never be too aggressive.”
Cardone believes that the fear of debt prevents many people from achieving financial freedom, and that calculated risk-taking is essential to growing wealth.
Use debt to leverage growth
Cardone distinguishes between “bad debt”, which is used to purchase depreciating assets, and “good debt”, which is used to purchase assets that appreciate in value or produce income. Cardone’s approach This involves selecting opportunities where the potential return on investment from the use of borrowed funds significantly exceeds the cost of borrowing.
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Investing in profitable real estate
Cardone talks about the importance of finding real estate investments that generate steady income. He recommends apartment buildings over single-family homes because they can provide more diverse sources of income. The income generated from these properties can be used to cover the loan used to purchase the property.
10x rule
One of Cardone’s most famous principles is that “10X rule” he outlines in his book, The 10X Rule: The Only Difference Between Success and Failure. This rule encourages individuals to set goals that are 10 times greater than they think they can achieve and to take actions that are 10 times greater than the goals they think are necessary.
Ramsey’s philosophy on credit and debt
Ramsey is at the opposite end of the spectrum. ramsey’s advice built on the foundation of life debt free life. He strongly opposes the use of credit cards and advocates a cash-based budgeting and spending system.
Ramsey argues that debt is a burden that limits economic freedom and potential. He suggests that the risks associated with debt, such as high interest rates and the possibility of fiscal overextension, outweigh the potential benefits. This, of course, is in stark contrast to Mr. Cardone’s view.
Additionally, Ramsey’s philosophy centers around the concept that true financial peace and prosperity comes from being completely debt-free. Ramsey’s advice extends to avoiding consumer debt, car loans, and even mortgages if possible, and promoting a lifestyle where you own everything outright.
Ramsay’s “baby steps” framework guides individuals through the process of eliminating debt, creating an emergency fund, and building wealth through investing in low-risk options such as mutual funds. [10].
Baby Step 1: Save $1,000 for a starter emergency fund.
The first step, Ramsey suggests, is to start a modest $1,000 emergency fund. This first safety net is intended to cover unexpected expenses and prevent you from accumulating debt without relying on credit cards or loans.
Baby Step 2: Pay off all your debts using the debt snowball method
Ramsey’s Debt Snowball Method involves listing all your debts from smallest to largest, regardless of interest rate, and focusing on paying off the smallest debt first, then paying off the rest with minimal payments. Once the smallest debt is cleared, the amount used to pay off that debt is applied to the next smallest debt, creating a “snowball effect” until all debts are paid off.
Baby Step 3: Save 3-6 months worth of expenses as an emergency fund.
After clearing all your debts, Ramsey recommends building a larger emergency fund that can cover three to six months of living expenses. This greater safety net allows individuals to withstand significant financial hardships, such as job loss or medical emergencies, without falling back into debt.
Baby Step 4: Invest 15% of your household income for retirement.
To be debt-free and have a solid emergency fund, Ramsey advises putting 15% of your household income toward retirement savings. He suggests using tax-advantaged retirement accounts, such as 401(k) accounts or Roth individual retirement accounts, to invest in mutual funds.
Baby Step 5: Save for your child’s college fund
For those with children, Ramsey emphasizes the importance of saving for their education to avoid taking on student loan debt. She recommends using tax-advantaged savings accounts, such as 529 plans or education savings accounts, that can grow tax-free when used for qualified education expenses.
Baby Step 6: Pay off your home early
Ramsey advocates for early mortgage repayments and argues that owning a home outright is a key element of financial freedom. He suggests applying additional payments to your mortgage principal balance to reduce the interest you pay over time and accelerate your repayment date.
Baby Step 7: Build and Give Wealth
The final phase of Ramsey’s plan focuses on wealth building and philanthropy. With no debt and fully funded emergency funds and retirement savings underway, individuals are encouraged to further grow their wealth and give generously to causes they are passionate about.
Whose personal finance advice should you follow?
Cardone advocates investing in real estate and using debt as leverage to accelerate wealth creation. Although this strategy offers high returns, it also comes with risks.
The 2008 financial crisis is a reminder of what can happen when real estate market conditions deteriorate. The value of real estate can plummet, investors can become overleveraged, and find themselves with a mortgage that exceeds the value of the property. Many experts, including members of the Federal Reserve, believe that the current housing market may have some of the characteristics of a bubble, and therefore debt-fueled investments may be risky. .
If you are considering elements of Cardone’s approach:
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Understand the market: In-depth knowledge of real estate cycles is important.
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Assess your risk tolerance. Determine whether you can handle the potential financial burden if the investment does not work out as expected.
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Let’s make a plan B: Have a strategy in place for worst-case scenarios, such as a sudden downturn in the market.
Ramsey’s philosophy centers around avoiding debt, building an emergency fund, and investing strategically for the future. His approach provides a more stable foundation, especially in an uncertain economic climate.
eventually, best financial strategy It’s one that aligns with your personal goals, risk tolerance, and financial situation. Although leveraging debt can increase profits, it is important to remember that it can also magnify losses, especially in unpredictable markets.
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This article was first published GOBankingRates.com: Battle of the experts: Grant Kardon and Dave Ramsey clash over financial advice