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Across 32 years of giving people financial advice on the airwaves, Dave Ramsey has probably seen it all. But on an episode of “The Ramsey Show” he once called out the financial mistakes callers frequently make as “Dumb! Really dumb!”
He added: “These things baffle me, that’s why I’m hitting them,” Ramsey said (1). “Because they’re just illogical.”
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However, some argue that economic and social trends may have made some of these mistakes unavoidable. Here’s a closer look at three of Ramsey’s top “dumb” money mistakes and why they’re so common.
1. Buying property together before marriage
Ramsey despises the prospect of buying property with anyone besides a spouse. He advises against this even in long-term relationships of five years or more.
His advice is rooted in the fact that separating assets between an unmarried couple can be complicated. They do not always share the same property rights as married couples.
“If you’re shacking up, don’t buy a house with your roommate,” Ramsey said. “You’re going to screw up the relationships. You’re going to end up in legal and financial trouble.”
That said, Ramsey isn’t against investing in real estate as an individual. In fact, he owns $850 million in property, according to an interview with The School of Hard Knocks on YouTube (2). Besides, if you can’t afford a home outright — and co-buying before marriage sounds like a liability — there are other ways to get into real estate.
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2. Wasteful spending on education
Investing in your education, Ramsey believes, should yield higher earnings. Otherwise it’s a wasted pursuit.
“Don’t spend $250,000 getting a master’s degree in sociology so you can be a caseworker for the state making $38,000,” he said.
He believes students should realistically consider their career prospects and future earnings before going into debt for college.
You can also minimize the impact of paying for education by saving up for it ahead of time — whether for yourself or for your children — by using a high interest savings vehicle such as a certificate of deposit or other high-yield savings account.
A certificate of deposit (CD) pays a fixed interest rate on money held for a set period of time. CD rates are usually higher than other savings accounts, but if you withdraw your CD funds early, you’ll be charged a penalty fee.
But since this is a long-term savings play for your or your kid’s education, they are a strong option you’ll be less tempted to dip into.
For those seeking predictable, reliable growth, a platform like CD Valet can help you find higher-yield options that work for you, whether you’re saving for something soon or building a cushion for the long haul.
CD Valet tracks over 40,000 verified rates from FDIC-insured banks and NCUA-insured credit unions nationwide. Unlike other websites, they show every publicly available rate, ensuring you have a comprehensive view of the market.
Plus, their CD rates are updated continuously, so you can shop, compare and open CDs with ease.
One thing to note about CDs: If you withdraw the money before the end of the term, you’re likely to face penalty fees.
For those who already have student debt, it can be a daunting task to tackle it. Americans are collectively sitting on $1.6 trillion in student loan debt.
Consolidating all your debts into a personal loan through Credible is an effective way to get rid of your debt faster. Instead of juggling multiple monthly payments, you’ll have one predictable payment to manage each month.
Through Credible’s online marketplace, finding the right loan becomes much simpler. Credible lets you comparison-shop for the lowest interest rates with just a few clicks.
In less than three minutes, you’ll see all the lenders willing to help pay off your credit cards or other debts with a single personal loan.
If you owe a substantial amount, you may also want to see if you qualify for a debt relief program to help clear a significant portion of your debt.
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If you’re eligible, they can negotiate settlements with your creditors until all of your enrolled debt is resolved.
3. Upgrading cars after a crash
Ramsey says that not even a totaled car is good enough reason to upgrade. One of his long standing pieces of advice is to buy used if possible.
“You were driving a $6,000 car,” he said, referring to a caller’s situation. “Your car gets totaled, you get a check for $6,000 and, suddenly, $6,000 cars aren’t good enough for you. That’s dumb!”
However, the high cost of vehicles could make this financial error difficult to avoid. The average cost of a new car in April was $49,614, according to the Kelley Blue Book (3). And that’s before you get to monthly essential like insurance.
If you really do need to buy a new car — whether for work or family — it could pay to shop around for the best rates. After all, long after your car is paid off you’ll still be shelling out for insurance on a monthly basis.
By using a comparison platform like Insurify, you can instantly view quotes from top-rated providers to ensure you aren’t paying a hidden ‘loyalty tax’ to your current insurer.
Just answer a few basic questions, and Insurify will show you the most affordable deals in as little as 3 minutes.
Not only is the process 100% free, but you could also save up to 15% by bundling your car and home insurance.
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
The Ramsey Show Highlights/ YouTube (1); The School of Hard Knocks/ YouTube (2); Kelley Blue Book (3)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.