Dave Ramsey emphasizes a straightforward financial principle: if you can't pay for a purchase entirely in cash, you can't afford it. This advice promotes avoiding debt to maintain financial health, as borrowing increases the overall cost of purchases due to interest. Such debt also limits the funds available for savings or essentials, as future income is already allocated to past debts. However, there may be exceptions for necessary purchases that can enhance net worth, indicating a need for thoughtful financial decision-making.
"If you can't pay for it, in cash, in total, on the spot, cash on the barrel head, you can't afford it - whatever it is."
Borrowing to buy things can make them more expensive due to interest, and it's essentially committing future income that may not yet be earned.
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