Dave Ramsey vs. Robert Kiyosaki: Whose Debt Advice Should You Listen To?
Written by
Crystal Mayer
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Rebekah Evans
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On March 16, 2024, famed investor Robert Kiyosaki asked his 2.5 million followers on X (formerly Twitter), “WHO IS RIGHT? My friend Dave Ramsey says ‘Live debt free.’ I say ‘I use debt to invest. I am $1.2 billion in debt.’ Again who is right?”
As many know, Dave Ramsey is a huge advocate of getting out of debt and staying out of debt. He recommends using strategies like the Debt Snowball Plan to live a debt-free life. Kiyosaki, bestselling author of “Rich Dad Poor Dad,” on the other hand, says people should use debt to invest in assets.
While both suggestions have their merits, GOBankingRates takes a deep dive into which method works best for different situations and why, ultimately, having a firm understanding of finances is critical to your success no matter which person’s advice you follow.
Robert Kiyosaki on Using Debt To Invest
Kiyosaki frequently speaks on the subject of debt and changing people’s perceptions about debt. In “How Debt Can Generate Income,” part of his Millennial Money series on “The Rich Dad Channel,” Kiyosaki explained good debt versus bad debt. He said that while most people think of their house and car as assets, they are, in fact, liabilities.
He said, “The definition of liability, does it take money from your pocket? And for an asset does it put money in your pocket?” A house, therefore, becomes a liability since you are paying money to a bank for your mortgage, so cash is flowing out instead of coming in.
In Kiyosaki’s opinion, a rental property is an asset since it brings in money. He considers his real estate investments, which are all financed, good debt since they continue to bring in money each month. In other words, they generate cash flow or income. He does caution, however, that this method may not work for everyone since investing in a bad real estate deal can turn it into a liability.
Dave Ramey’s Living Debt-Free Advice
Ramsey takes a much different approach compared with Kiyosaki and other debt advocates. In “The Truth About Debt,” he said unequivocally that it is a myth that “debt is okay if you’re using it as leverage for investments…[and] it actually qualifies as ‘good debt.'”
“That’s because debt always equals risk, and more debt always equals more risk,” Kiyosaki said. He advises against using debt for wealth building specifically because of the risk involved.
Instead, he regularly focuses on debt-free living and helping people obtain financial freedom. “Your biggest wealth-building tool is actually your income,” he said. “When you have to send huge chunks of your income out the door every month to make debt payments, you’ve completely lost control of that tool.”
Whose Advice Should You Follow?
The internet is absolutely inundated with financial gurus offering their ideas of how to make money. It can be hard to sift through all of the information and determine which method is the right one for you.
When deciding which expert to follow, it is important to take into consideration your lifestyle and your ability to incur losses. You also should have a firm understanding of money or superior financial literacy if you are following anything that requires taking on risks.
When discussing whose advice to follow, Kiyosaki noted in his X post, “My answer is for most people with low financial acumen, Dave’s advice is the smarter advice. For the financially educated and experienced my advice may be better. I know you’re smart enough to know whose advice is best for you.”
Therefore, for the average person, the safest bet is to go with the route that incurs the least amount of risk. Kiyosaki said he has been taking real estate classes since he was 25 and continues his education on the matter.
Before taking the leap into utilizing debt to generate income, it is probably best to familiarize yourself with whatever you are investing in to make sure you do not end up in financial trouble.
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