183: Rich Habits vs. Dave Ramsey (Debt Edition)
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What is the main disagreement between Rich Habits and Dave Ramsey on debt?
Hey everyone, and welcome back to the Rich Habits Podcast, a top 10 business podcast on Spotify brought to you by public.com. By the end of today's episode, you'll understand exactly where we disagree with Dave Ramsey on debt and why. My name is Austin Hankwitz. I'm joined by my co host Robert Croak. Robert is a seasoned entrepreneur with lifetime revenues of over $300 million, and I'm a multimillionaire. millionaire in my early thirties with a background in finance and economics. As the show name might suggest, every episode we talk about rich habits as they relate to business, finance, and mindset. So Robert, what are we talking about in today's episode?
Well, I'm obviously excited because in today's episode of the Rich Habits podcast, we're gonna do something a little different. We're gonna go head to head with Dave Ramsey. And look, Dave Ramsey has helped millions of people. His core message spend less than you make, build an emergency fund, stop letting credit card debt ruin your life. That's foundational. And honestly, most Americans need to hear it. We're not here to dunk on the guy or pretend his advice doesn't work. A large portion of the population. But Dave's philosophy on debt is built on one hard rule. All debt is bad, and you pay it off as fast as humanly possible, no matter what. And when you apply that rule with little to no nuance across every single situation, like student loans, business debt, mortgages, it starts costing people real money, sometimes hard.
Hundreds of thousands of dollars, maybe even millions, over a lifetime. So today we're breaking down our three biggest disagreements with Dave on debt, and that's student loans, business acquisition debt, and mortgages, and showing you the math behind why we think his one size fits all approach leaves way too much money on the table for many of you. So Austin, let's start with the one that affects the most listeners right out of the gate. student loan debt. And currently over 20 million people in their 30s and 40s still carry student loan debt. So this covers a wide swath of the American public.
Yeah, no, it certainly does. So Dave's advice on student loan debt is simple. Attack it like your hair is on fire. Baby Step Two in his baby step protocol framework says that you list out every debt you have, smallest to largest, including those student loans, and you throw every extra dollar at them before you save more than a thousand dollars as this like starter emergency fund. But more importantly, before you invest a Single dime. No investing, no building wealth, no nothing until that student loan debt is completely gone. Now, here's why we disagree with this framework. And it's not because we think that student loan debt is good, it's because the two things you're comparing actually behave differently over time.
So student loan debt has a ceiling. The worst case scenario with a $35,000 student loan balance. Is that it costs you $35,000 plus whatever interest accrues along the way. That's it. I cannot compound against you forever. It has a finite. I borrowed this amount of money for this period of time. These are my monthly payments. This is that interest rate. It starts and it ends. Like that's student loan debt. And once you pay it off, it's gone. It's gone forever. Congratulations. But money and Invested in the market, however, right? Compare contrast here. Money invested in the market does not have a ceiling. The SP 500 has averaged about 10% annually going back to what is it, Robert, the early 1920s, right? That money compounds not just for you know a five-year, 10-year, 15 period of time, which is whatever your student loan amateurization timeline might be, but it can compound for the rest of your life.
For your children's lives. This is generational, right? There is no maximum as to how much money can be made in the markets. It can double and then double again and then double again. We all know the rule of 72. So that is so important to understand. And Robert talked about these nuances. That's the most important nuance to consider when it comes to student loan debt.
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