Photo: Image Courtesy of Dave Ramsey
Love him or hate him, there’s no denying the impact financial guru Dave Ramsey has had on the millions of cash-strapped consumers who tune into his syndicated radio show each week.It was his advice that inspired Angela Coffman, of Kansas City, Mo. to pay down $90,000 worth of debt in just six months and his followers (sometimes referred to as ‘disciples’) have likened his financial seminars to sermons.
In a three-part Q&A series, we’ve asked Ramsey to speak out on some of the most controversial topics in personal finance. Today, he weighs in on the generation that’s on the tip of everyone’s tongues these days: Millennials.
Business Insider: There have been countless articles written on the so-called “Boomerang Generation,” but your daughter’s clearly not among them. She’s already following in your foot steps, travelling the country to give advice to 20-somethings on staying out of debt. How did you prepare her for financial independence?
Dave Ramsey: My children were taught at an early age how money works and that it comes from hard work. They’ve been on a commission – not an allowance – since they were little. They learned that if they worked around the house, they got paid. If they didn’t work, they didn’t get paid. By the time they were teens they had their own checkbooks and lots of practice budgeting their money. When they left for college we knew they could handle themselves.
BI: The student loan debt bubble’s swollen past the $1 trillion-dollar mark and students leave college today carrying an average of $27,000 in debt. What advice would you give them?
BI: Let’s get more specific. Here’s the kind of story we run into all too frequently here at Your Money: There’s a 20-something drowning in college debt. He might have a chronic health condition and all he can find is a poor-paying contract job with no benefits. What’s the first piece of advice you give him to start working through the mess?
DR: Take the job. And then be looking for another job with benefits. As far as the bills go, worry about necessities first! You need to put food on the table and keep yourself healthy. Pay your utilities, gas and other basic needs before paying on your debts. Talk to your creditors and tell them how much you can pay and when, then hang up the phone. Once you are receiving steady income, you can clean up the student loan mess.
BI: What do you know about money that you wish you had known when you were younger?
DR: That debt is not a tool.
More than 20 years ago, my wife, Sharon, and I went broke. We lost everything due to my stupidity in handling money, or not handling it, as the case may be. Hitting bottom and hitting it hard was the worst thing that ever happened to me and the best thing that ever happened to me. We started with nothing, but by the time I was 20-six years old, we held real estate worth over $4 million.
I was good at real estate, but I was better at borrowing money. Even though I had become a millionaire, I had built a house of cards. The short version of the story is that we went through hell and lost everything over a three-year period of time. We were sued, foreclosed on, and, finally, with a brand-new baby and a toddler, we were bankrupt. From there we swore we would never under any circumstances borrow money again.