Debt Free Dr

To help other dentists obtain financial independence within 5-7 years by investing in passive real estate investments.

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DebtFreeDr

Dave Ramsey vs. Robert Kiyosaki: The Ultimate Showdown

Dave Ramsey tells you to get out of debt and stay out of debt. Robert Kiyosaki says get out of bad debt but get into good debt and become rich. One person says one thing, and the other says the opposite, yet they both have sold millions of dollars worth of personal finance books.

So, who should you listen to?

Let’s get ready for the ultimate showdown between Dave Ramsey and "Rich Dad Poor Dad" author Robert Kiyosaki.

I owed about $300,000 in student loan debt when I got out of my dental residency. Dave Ramsey was the only financial person I had heard about at that time. I listened to his radio show a bit and read his books "Financial Peace" and "The Total Money Makeover." The financial principles he teaches are important, especially for the majority of people out there, because most people are in debt and broke, just like I was way back when.

However, I also form my own opinions about what I read or hear, especially as I get older. For the first six to seven years after training, I was a hardcore Dave Ramsey fan, and I still recommend that those starting their careers read his book "The Total Money Makeover."

I’m going to delve into his specific recommendations shortly, but I’ll also compare him to another very popular financial guru, Robert Kiyosaki, best known for his books "Rich Dad Poor Dad" and "The Cashflow Quadrant."

Overview of Financial Philosophies

Kiyosaki's strategy is the polar opposite of Ramsey’s. While Dave Ramsey is anti-debt, Kiyosaki advocates for using debt wisely to build wealth.

So, which person or strategy is best for you? Is one person right and the other wrong? Let’s break down each person's point of view regarding finances so you can decide which is best for you.

Dave Ramsey’s Principles

If you don’t know much about Dave Ramsey, just listen to a few callers on his show, and you’ll soon realize the type of people he deals with daily. The majority of these people are in pretty bad financial shape. Initially, I didn’t understand why he always recommended cutting up credit cards, but the more I listened to the callers' stories, the more I understood why.

For example, I once heard a caller who owed $50,000 on their trailer, $30,000 on a couple of cars, and had $12,000 in credit card debt. They were clueless about where to start cleaning up their financial mess. These callers need major help and direction because, again, most of us aren't taught about finances in school or training.

When I first started practicing, I felt similar to some of his callers because I was also up to my eyeballs in debt. After a few years of making a decent income, digging out of debt, and investing along the way, I realized I wasn’t in as bad a financial position as I had thought.

As a loyal Dave Ramsey follower, I stuck to his seven baby steps. However, once I completed step seven, I realized I needed to do more. Here are the basics that Dave teaches:

    
1.     

   Get on a Budget: He states that if you don’t know where your money is going, who does? My wife and I have always been frugal, but we resorted to a strict budget once the pandemic shut down dentistry. It showed us how little we needed to live on and how wasteful our spending had become.

       
    
2.     

   Live a Frugal Life: Dave teaches that living frugally is essential to becoming a millionaire. While I have no issue with living frugally, I also believe you don’t have to be frugal to build wealth. High-income earners should be able to live life as they want and still get rich.

       
    
3.     

   Cut Up Credit Cards: His message targets the general public, and research shows that many Americans can’t cover a $400 emergency. For those lacking financial discipline, cutting up credit cards is good advice. Dave argues that he’s never heard of someone becoming a millionaire from credit card points.

       
    
4.     

   Start an Emergency Fund: He recommends starting with $1,000 earmarked for emergencies and later bumping it up to cover three to six months of expenses after getting out of debt.

       
    
5.     

   Get Out of Debt and Stay Out: Dave despises debt due to his experience with bankruptcy. He often quotes Proverbs 22:7, "The rich rule over the poor, and the borrower is a slave to the lender."

       
    
6.     

   Invest in Retirement Accounts: He recommends investing 15% of your household income into retirement accounts like a 401(k) or IRA. He’s a proponent of mutual funds, though his claims of 12% returns are controversial.

       

Robert Kiyosaki’s Financial Teachings

When I first began educating myself about real estate, I quickly realized that I didn't want a second job managing properties. The principles that Dave Ramsey ingrained in my head held me back because he was the only financial advisor I knew of. However, I had to keep an open mind.

When I began reading Kiyosaki’s "Rich Dad Poor Dad," I realized that someone was teaching the exact opposite of what Dave Ramsey taught. This was a revelation because I had been suffering from selective distortion, interpreting information in a way that supported my existing beliefs.

Kiyosaki’s main teachings are:

    
1.     

   Focus on Buying Assets and Avoiding Liabilities: This principle is central to his book "Rich Dad Poor Dad." He emphasizes the importance of knowing the difference between an asset and a liability and focusing on acquiring assets.

       
    
2.     

   Start a Business: He advocates for entrepreneurship because of the many advantages, including significant tax benefits. Kiyosaki learned these principles from his "Rich Dad," who owned a construction company and real estate, as opposed to his "Poor Dad," who was an employee.

       
    
3.     

   Use Debt Wisely: Kiyosaki recommends using good debt to build wealth after acquiring enough financial education. He agrees with Ramsey on avoiding consumer debt but believes that good debt can be a powerful tool.

       
    
4.     

   Learn from Mistakes: Mistakes guide us and keep us on the right path. For instance, I learned valuable lessons from a failed real estate investment, which pushed me to educate myself further.

       
    
5.     

   Rent Instead of Buying a Home: Kiyosaki and Grant Cardone recommend renting instead of buying a home. They argue that home equity is dormant and doesn't generate income.

       
    
6.     

   Use the Tax Code to Your Advantage: Kiyosaki emphasizes the importance of understanding and utilizing tax advantages, especially for real estate investors.

       

Final Thoughts: Which Approach is Best?

Ultimately, both Ramsey and Kiyosaki are right, depending on your stage in life. It’s called personal finance for a reason—it’s personal.

Stage One: If you’re fresh out of training with a high debt load and need guidance, Dave Ramsey is your guy. He helped us pay off hundreds of thousands in debt.

Stage Two: If you’re consumer debt-free and ready to start building real wealth, consider Kiyosaki’s teachings. He focuses on diversification and investing in assets that generate cash flow.

So, who should you listen to? Dave Ramsey or Robert Kiyosaki? If you're in Stage One, follow Dave. If you're in Stage Two, Kiyosaki’s advice will help you build long-term wealth.

To dive deeper into the difference between wealth and income, make sure to watch the next video. See you there!