Transcript: Dave Ramsey on Beating Debt

This is a partial transcript from "Your World with Neil Cavuto," February 3, 2006, that was edited for clarity.

NEIL CAVUTO, HOST: Ever hear the saying there is good debt and there is bad debt? Well, you won't hear that from my next guest. He says all debt is bad.

Dave Ramsey is the best-selling author of many books, including "The Total Money Makeover," and host of the very popular "Dave Ramsey Show." It's airing around the world. In fact, it is airing right now.


CAVUTO: So, Dave is in the middle of his own show now. And he is being kind enough to talk to us.

Dave, good to have you.

DAVE RAMSEY, FOUNDER & PRESIDENT, THE LAMPO GROUP, INC.: Well, it's good to be back on, Neil. Good to have you on our show.

CAVUTO: Same here, buddy.

You know, Dave, I was thinking of you when I heard these savings figures, or the lack thereof. Americans, we are deep in debt. What is the problem?

RAMSEY: Yes. It is pretty scary when you get these Department of Commerce numbers that have just come out that shows, you know, the lowest savings rate in American history since the bottom of the Great Depression in 1933.

And, well, I mean, you know, we are just spending more than we make. This is not rocket science. And it is not working.

CAVUTO: All right.

Now, I always argue with these figures, Dave. They miss certain things. They don't count the value of our homes. A lot of them don't count the value of our 401(k)s or other pensions that we have. So, while we are in deep doo-doo, I don't suspect we are in as deep doo-doo as the — the numbers portray. What do you say?

RAMSEY: Well, I agree with you. It is kind of like the consumer price index. Is it really a good figure that measures inflation?

If you tear it apart, probably not. But it is the one we use. And, really, what we can take from it is trends. And this is trending the wrong way. People are not saving money.

CAVUTO: What are we doing wrong, though? What...


RAMSEY: Like they think "Social Insecurity" is going to take care of them.


CAVUTO: Right. Right. There, you and I agree, my friend, that this idea that there is going to be a safety net for us, we have got to dissolve ourselves of that notion.

But what is the problem, really?

RAMSEY: Well, the problem is, is that several things have combined to make the consumer, you and I included, at times in our lives, stupid, you know, the aggressive marketing of debt, five billion credit cards in people's mailboxes last week, 3-year-olds, dead people and dogs getting cards.

It is ridiculous, and it is out of control. You combine that with a culture that has kind of lost our maturity, where we think in sound bites now. We think, "thank God it is Friday," "Oh, God, it is Monday," is our planning window.

And you combine that with, I deserve anything I see on a television commercial during the Super Bowl, and I can get it with easy payments, and, all the sudden, we have got a mess on our hands.

CAVUTO: Yes. But you go a step forward, right? You don't even like mortgage debt, right?

RAMSEY: Well, the reason is really simple.

I mean, I have just seen the abuses of these things to no end. And I have had calls this hour on "The Dave Ramsey Show." I just had a lady just before I came on with you call in from Dallas, Texas, cashed out some stock options, and paid off her $200,000 house.

And she called in and screamed at the top of her lungs, "I am debt free!" You know why? Because it has completely set her free. Her life is completely different without any house payments.

CAVUTO: But people who do have mortgage payments oftentimes move themselves into a lower tax bracket or at least save on taxes. What is the tradeoff there? Not enough of one for you?

RAMSEY: Well, you and I both know that any time in history that we have begun doing our investing for tax advantages, and that is the primary motivator of choosing my investment, and the process by which I do the investment, I always get stuck in some really deep stuff.

And, so, I mean, real estate syndication from the '80s, need I say more? You know, these things are ridiculous. So, you don't want to do things for taxes. You want to do things because they are smart and then look at the taxes.

CAVUTO: Yes, but what if you are catching something that is hot? Let's say, in your neck of the woods or my neck of the woods, housing is going through the roof, you want to get in on that gravy train. You don't have the money, but you go into debt. You acquire an asset that is rocketing ahead at 20, 30 percent a year. Your debt is more than justified and more than paid off, when all is said and done, right?

RAMSEY: Assuming your plan works, and that, you know, we don't see interest rates bump just a little bit and the whole market freeze like a deer in the headlights.

See, I'm an old guy. I have been around. I watched the real estate market freeze a couple of times. We have seen it go up continually long enough now that, unless you are over 40, you have never really bought a house in a down market. And, so, they do exist.

CAVUTO: So, would advise the young couple...

RAMSEY: Now, am I saying real estate is a bad investment?

CAVUTO: Right. Right.

RAMSEY: No. And I don't even yell at people on my show about getting a mortgage.

CAVUTO: Right.

RAMSEY: The idea, though, is, go ahead and get it paid off as one of your life's goal.

CAVUTO: OK, so, in other words, sooner rather than later, but it's the debt itself doesn't bother you; just make sure you get rid of it fast?

RAMSEY: Don't make it a way of life, like all these broke people do.


What about other things Americans do? We all like to drive fancy cars. We all like to wear nice clothes. Clearly, for this particular segment, you chose not to.


CAVUTO: It is a big deal.


CAVUTO: It is a big deal.


RAMSEY: Well, I could never keep up with you.


RAMSEY: You're the big dog.

CAVUTO: But, no, in all seriousness, you raise a good point in your books. And I know I have met you a number of times on your show. You say, chill. We don't need all this stuff.

But this is the country where we like stuff.

RAMSEY: Well, there is nothing wrong with stuff.

I am not a financial guy that says you ought to live in a cave, collect lint, and only come out on triple-coupon Thursday. I want you to enjoy your life. But the problem is, we have bought so much crap over the years that all we do now is work for the man. All the money comes in and all the money goes out, and only the names are changed to protect the innocent.

The neat thing is, if you get out of the business of paying payments, you have this really cool thing called money, and then you are able to buy a really nice suit, like Neil Cavuto, instead of the Dave Ramsey shirt.


CAVUTO: Dave, thank you very much. You are a great guy, also a cheap date. But thank you very much, Dave Ramsey.


CAVUTO: He's the money man. His books stay on the best-seller list for years. And we are very envious of him.

RAMSEY: Just like you. Thanks, Neil.

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