Donna Genie (video uploaded Feb 8, 2024) critiques Dave Ramsey's 'stay within your means/pay cash' philosophy as ill-suited for many business owners. She argues entrepreneurs often must leverage other people's money, knowledge, and assets (e.g., financing productive equipment) to grow; uses a numeric example ($100,000 machine with $2,000 down that could 10x sales within two years) to illustrate when financing can be a sound, calculated business decision. She recommends using accountants and tax strategies to evaluate ROI rather than blanket anti-debt rules.
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Hey there. Who out there loves Dave Ramsey? He's a pretty popular guy. But I gotta tell you, I got a beef with Dave Ramsey, and I don't think he's for everybody. That may be a little controversial, but let me explain what I mean. Dave's premises and philosophy overall is that you should stay within your means and you shouldn't buy anything unless you can pay for it. That's it in a nutshell. But I think that that is, we'll say, a poor man's strategy in a lot of cases. Now, don't get me wrong. I like some of Dave's stuff and I think some of common sense planning is great for a lot of people, but for a business owner, not so much in my book. As a business owner, you need to know how to deal. You need to know how to leverage other people's money or other people's knowledge or other people's assets to be able to grow a business. You can't just wait until you have enough money to buy a machine, a new person, a whatever. That's two far in advance. You need to be able to leverage the dollars of other people to make your money. So an example. If I told you, hey, I want to buy a car and it's $100,000, I have $2,000 to put down and I want to buy this car because it's really cool and I'm going to finance the rest, all right? We all know if we put on our Dave Ramsey hat, he's like, what are you thinking? That's ridiculous. Yes, I think that's ridiculous too, because that car is not going to make you money. Let's flip this on in. Let's say I'm that same business owner and I have the ability to buy a piece of machinery that will help me magnify my sales by 10 times because I can do things 10 times faster. But that piece of machinery is going to cost me $100,000. I have $2,000 to put down and I can finance the rest. Me as an accountant, I going to say, let's look at the payback. What's the return on investment on that piece of equipment purchase? All right, if in 2 years you can 10x your sales twice, that will pay for that piece of equipment. That is a way that you should be looking at leveraging dollars. I think that would be a slam dunk for your business. So Dave Ramsey would poo poo that idea and tell you that's ridiculous. You shouldn't do it. But a true accountant who can help you make numbers decisions, not just say, ah, we don't want to take any risks. We'll tell you that that's a good deal, and you should do it. Now, when we look at a lot of Dave Ramsey strategies, what he's leaving out is he's trying to remove risk. What he's leaving out is that being an entrepreneur is about taking a risk. The date you started that business, you took a risk. You need to know your limits, and you understand your own risks, and you're willing to make calculated moves to make that business a success. And sometimes that will mean leveraging other people's money. Sometimes that will mean leveraging other people's knowledge, like a good CPA who can help you make good decisions and leveraging the marketplace to make sure that you're making all the right moves. Let's also remember you're leveraging your tax dollars by making smart moves with your accountant. What if you could save the money with Uncle Sam to pay for that piece of equipment? I've been there and done that a lot of times, and that can make a huge difference. When we talk about the decisions. I never really hear Dave talk about that, so watch out. I like Dave Ramsey as a person. I think he's a cool guy. I think he's got a good, good head on his shoulders for a lot of common sense. For your everyday person with a W2 job, does Dave have the right advice for business owners? No, not really. So take a look. Make sure that you understand what you're doing with those Dave Ramsey principles and that sometimes you need to leverage other people's money and make that work for you.
