Let’s compare two highly successful, well-respected financial entrepreneurs and their respective stances on debt: Robert Kiyosaki, author of Rich Dad Poor Dad, says that there is such a thing as good debt – or debt used to buy money-generating assets like rental properties and businesses.
Dave Ramsey, radio personality and author of The Total Money Makeover, teaches followers to avoid debt altogether. Both agree that debt carried on credit cards and cars is bad debt, because these things only make us poorer.
Kiyosaki is not completley against using credit cards, but says that balances should be paid in full every month.
While some see Ramsey’s stance on not using credit at all as extreme, the fact that the Federal Reserve estimates that almost half of U.S. households are unable to pay their credit card bills in full each month, and that these households owe more than $800 billion in card debt (about $15,000 per household), lends itself to the idea.
Ramsey proposes using mutual funds as a main investing vehicle for retirement, and is also a self-admitted lover of real estate as an investment, but only if one uses cash to purchase instead of mortgaging. Kiyosaki advocates leveraging and using real estate as a primary builder of passive income and wealth.
Both programs have worked for millions of faithful followers. We could easily leave it at that, but in finance, just as in many other things, we tend to project what we know to be true on others. This is where things can get distorted.