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Debt Myths Revisited

Dave could rail against debt all day long, but that’d make for one really long FPU class! He covered the biggest debt myths in the Dumping Debt lesson, but there are several more that trip people up every day. So let’s tackle a few more of the most common myths.

Myth: If I loan money to a friend or relative, I will be helping them.
Truth: The relationship will be strained or destroyed.


Like the old joke goes, “If you loan your brother-in-law $50 and you never see him again, was it worth it?” We laugh for a reason, and that reason is that we know loaning money to a friend or relative totally changes the dynamic of the relationship.

That’s actually a biblical principle. Proverbs 22:7 says, “The rich rules over the poor, and the borrower is the slave of the lender.” Say that out loud: “slave of the lender.” If you lend money to your son, you stop being his parent and start being his master. It doesn’t matter if you mean to, want to, or intend to. It doesn’t even matter if you believe it or not. It’s not a choice you make; it’s a fact of life.

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Bankrate.com reports that 57% of people have seen a friendship or relationship end because of loaning money, and 63% have seen someone skip out on repaying a loan to a friend or relative. If you really want to help your loved ones, and if you have the money to help, then just give them the money outright. Don’t risk the whole relationship with a loan.

Myth: Cash advance, rent-to-own, title pawning, and tote-the-note car lots are needed services for lower-income people to get ahead.
Truth: These are horrible, greedy ripoffs that aren’t needed and benefit no one but the owners of these companies.


Ever wonder why you never see rent-to-own and tote-the-note shops in wealthy neighborhoods? If you think it’s because wealthy people don’t “need” their “services,” you’re way off track! It’s because wealthy people wouldn’t dream of using such incredible ripoffs! It’s not because they’re wealthy; it’s why they’re wealthy. It’s like Dave says: If you want to be rich, do rich people stuff. If you want to be poor, do poor people stuff. And payday lending and these other trash products are definitely “poor people stuff.”

These terrible businesses prey on broke people. It’s predatory lending at its worst. Would you defend a credit card company with an APR of up to 1,800% percent? No way! Well, that’s what payday lending looks like if you turn their “service fee” into what it is—interest on a bad loan. Stay away!

Myth: Playing the lottery and other forms of gambling will make me rich.
Truth: The lottery is a tax on the poor and on people who can’t do math.


The lottery is not a wealth-building strategy. It is a complete and total waste of money, and it targets low-income families who simply cannot afford the “fun” of throwing much-needed money out the window. Studies show that people with incomes under $20,000 were twice as likely to play the lottery than those making over $40,000. And a Texas Tech study found that lottery players without a high school diploma spend an average of $173 a month playing.

Let’s put that in perspective. We’re saying the least educated people with the lowest incomes—at or near the poverty line—spend the most money on the lottery. Does that make sense? Forget the $173; let’s say you put just $50 a month into a good growth stock mutual fund from age 20 to age 70. You’d end up with $1,952,920—every time!

Luck has nothing to do with it. Building wealth is all about doing the same simple, smart things over and over again, and to do this over time with patience and diligence. There are no shortcuts to wealth. The tortoise wins the race every time!

Myth: The economy would collapse if everyone stopped using debt.
Truth: The economy would thrive!


This is one of the oldest and most persistent myths people have thrown at Dave over the years. They love to put it out there as some kind of “gotcha.” But there are a lot of problems with the idea that the economy would collapse if everybody switched over to Dave’s system.

First of all, let’s deal with the obvious. If everyone in the country stopped using debt and stopped buying anything while they all got out of debt at the same time, then yes, the economy would take a big hit and probably collapse. But look at what we just said: Everyone—every man, every woman, every family in the country—suddenly decides to stop borrowing money and get out of debt. At the same time. Folks, that’s just not going to happen.

However, if we as a nation made a gradual shift away from the “normal” and “broke” ways of life that we’ve gotten so accustomed to, that’d be a different story. If we all, as Americans, gradually took control of our lives, got out of debt, set cash aside for emergencies, and truly built wealth, the net result over time would be that we’d stabilize the economy. That’d be because the economy would not be built on a shaky foundation of debt, and the idea of “consumer confidence” wouldn’t be based entirely on how much the average consumer overspends each year.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.