Why Debt Free Can Be Foolish Financial Independence Goal

When seeking financial independence, all debt is bad, right? After all, "Debt is bondage," says Suze Orman. "You will never, ever, ever have financial freedom if you have debt." (CNBC article, Suze Orman: This is when to pay off your mortgage). According to Dave Ramsey, using debt to create prosperity is a myth,

Myth: Debt is a tool and should be used to help create prosperity.
Truth: Debt isn’t used by wealthy people nearly as much as we are led to believe.

Note he states debt isn't used by "wealthy" people as much as we are led to believe. He doesn't address how they became wealthy. Did they leverage debt to become wealthy and, subsequently, become debt free? Was Ramsey in debt when he started his tremendously successful business? Did he borrow money to invest in more real estate after he went bankrupt? I don't know, I'm not his accountant but my guess is he wasn't "debt free" until "after" he became wealthy.

Blanket advice stating all debt is bad is so wrong. It is really bad advice for those "seeking" financial independence. Maybe it is good advice for wealthy people like Ramsey and Orman. But, to become financially independent it is an excellent tool when used wisely. Wisely is the key here. If you are financially illiterate, don't borrow money. That's like getting into the pilot seat of an airplane and taking off without a pilot's license; that's dumb.

Don't be greedy like Ramsey was initially. He took on way too much "risk" in real estate without using his good fortune, before the real estate market crashed, to diversify his portfolio to reduce his real estate risks. He took on more debt and risk than he could manage. What happens when you take on too much debt and risk? You often go bankrupt. Example, Dave Ramsey. That was dumb at that time as he admits. IMHO, it wasn't debt that caused his financial demise. It was poor financial decisions and greed.



  1. Interesting perspective. I always think in extremes when it comes to avoiding debt. I’m realizing now that debt can be leveraged in ways to help you reach FI faster if you are wise.

    If we have debt again, it will be for a rental house. I’m not sure I can do it, but I hope the numbers can guide me in the future more than my aversion of debt.

    • Thanks for contributing. I borrowed money when I purchased my first rental property; I was 28 years old and rather broke. My wife and I still own that property, which has increased in value by over $400k (we’ve owned it a long time). With the rent, tax breaks, etc. we easily increased our net worth by over 1/2 million on that one property.

      It would be really hard to convince me all debt is bad financial management. Learning to manage certain types of debt, even credit cards, can be really good for your bottom line (net worth). The key is, “when managed wisely.” We have credit card debt every year, at zero percent interest (a strategy where we get a new credit card every year). We’ve made over $10,000 in the past 10 years. About $1k per year on average. Here’s a link to the math for anyone interested in how we wisely manage credit card debt (risk free) to produce additional “income” – http://www.bossmanjax.com/credit-card-deals/bonus-credit-card-deal/

      I hope this helps someone reach FI faster so they can get up everyday and do what they choose to do. Again, thx.

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