Good Debt or No Debt: Where Money Teachers Split
One camp tells people to eliminate every loan before doing anything else, and another says borrowing well is how wealth gets built. This piece sets out each case and who each piece of advice is meant for.
On what do all five money teachers agree about debt? Show answer
That borrowing for consumption, such as credit cards, financed cars and pay-later purchases, is a mistake.
Where do they split? Show answer
On borrowing to buy assets. Kamel and O'Neal say no or almost never, while Cardone and Srivatsaa say it is how real estate wealth is built.
Why is the Ramsey position so anti-debt, according to George Kamel? Show answer
Dave Ramsey knew how to make money in real estate in his 20s but was so over-leveraged that he lost it all. Debt equals risk.
What is the debt snowball? Show answer
Paying off the smallest balance first regardless of interest rate, because a quick win creates momentum.
What does Anthony O'Neal mean when he says 95 percent of Americans cannot handle debt? Show answer
That they cannot borrow money and use it to buy assets that pay the loan off. It is a claim about people, not about loans.
What condition does O'Neal set before getting a credit card again? Show answer
Being free of consumer debt for at least 24 months, to build the discipline first.
What is Caleb Hammer's objection to bankruptcy and consolidation as shortcuts? Show answer
They do not help unless the behavior changes. People who consolidate and keep their cards open often run them up again and double their debt.
How does Grant Cardone define good debt? Show answer
Debt that finances an investment which a tenant or customer pays off, as opposed to consumer debt.
What opposite lessons do Ramsey and Cardone draw from a crash? Show answer
Ramsey was over-leveraged and lost everything, so his answer is no debt. Cardone was too small in 2008, so his answer is to get much bigger with far more debt.
What are Sharran Srivatsaa's four checks for any investment? Show answer
Good people, good intentions, good rationale and good contracts.
Who is each side's advice written for, according to the article? Show answer
The no-debt plan is for people whose spending is the problem. The good-debt plan is for people with margin, deals and the knowledge to read a contract.
Why does the article caution against copying Cardone? Show answer
He borrows against a portfolio in the billions with investors alongside him, and he says himself that small gets hurt.