Across 32 years of giving people financial advice on the airwaves, Dave Ramsey has probably seen it all. But on a recent episode of “The Ramsey Show,” he notes financial mistakes callers frequently make that can be described as “Dumb! Really dumb!”
He added: “These things baffle me, that’s why I’m hitting them,” he said. “Because they’re just illogical.”
Don’t miss
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.
Co-buying property
Ramsey despises the prospect of buying property with anyone besides a spouse. He advises against this even in long-term relationships.
“If you’re shacking up, don’t buy a house with your roommate,” he said. “That’s dumb.”
This 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. In some states, however, living together could qualify couples for “common-law marriage” and grant them similar rights.
The housing crisis has pushed more people to consider co-ownership of property. A report by Co-Buy, a platform that helps multiple buyers share a property, says 26.7% of home purchases in 2023 were co-purchases, while 30% of these co-purchases were completed by unmarried couples.
Perhaps surprisingly, 59% of co-purchases were made between friends, according to Co-Buy. These strategic moves might be financially risky, but they’re also a response to a stubborn housing crisis across the nation.
Read more: No landlord? No problem! Explore hassle-free real estate investments
Upgrading cars
Ramsey says a totaled car is not a reason to upgrade.
“You were driving a $6,000 car,” he said. “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 January was around $47,400, according to Kelley Blue Book, while the average used-car listing price was around $25,300.
Put simply, you’d have to dig deep to find a replacement vehicle at Ramsey’s estimated price. If your car gets totaled nowadays, you likely have had little chance of buying one that’s cheaper than the depreciated value of your existing vehicle.
Overspending 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.
Indeed, Americans are collectively sitting on $1.6 trillion in student loan debt. According to the Education Data Initiative, it takes individuals about 20 years to pay off their student loans, while some grads may take 45-plus years to do so.
What to read next
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.