Dave Ramsey’s Smart Spending Advice
Living a debt-free life can be liberating, but it requires intentional and disciplined financial choices. Dave Ramsey, a trusted voice in personal finance, urges individuals to make deliberate decisions to avoid unnecessary debt and build lasting financial stability. According to Ramsey, some common purchases may seem routine or beneficial but can actually be costly mistakes. On the other hand, there are investments that are truly worth the money. Here’s a breakdown of what he recommends avoiding — and where it’s wise to spend.
Three Purchases Dave Ramsey Says to Avoid
1. New Cars Financed with Loans
While buying a brand-new car may seem like a milestone of financial success, Ramsey advises against it — especially if it requires taking out a loan. New vehicles depreciate rapidly, and financing them only adds to your debt load. According to Experian, in the first quarter of 2025, the average interest rate on auto loans was 5.18% for those with excellent credit and a staggering 15.81% for those with poor credit.
Additionally, new cars come with higher insurance premiums. Their value and repair costs compel insurers to charge more, and lenders often require full coverage insurance until the loan is paid off. This makes new cars a double hit to your wallet.
2. Timeshares
Timeshares may appear to be a convenient way to guarantee vacation time, but Ramsey urges caution. Timeshare ownership does not equate to real property ownership, and thus lacks investment value. Beyond the upfront cost, buyers are often burdened with recurring fees such as maintenance, utilities, and annual dues.
Moreover, many timeshare buyers finance their purchase, further increasing debt. Exiting a timeshare agreement can be notoriously difficult, making them a long-term financial liability rather than a wise investment.
3. Extended Warranties
Extended warranties on items such as cars and household appliances may offer peace of mind, but Ramsey believes they’re generally not worth it. The likelihood you’ll need to use the warranty is low, which is why companies can profit from offering them. Coverage is often limited and may not align with actual repair costs, making these warranties a poor financial choice.
Buying extended warranties frequently can quietly eat away at your budget, especially when most items don’t end up needing the additional coverage.
Two Purchases Worth the Money
1. Budgeted Home Repairs and Maintenance
Deferred maintenance on your home can lead to larger, costlier problems. Ramsey emphasizes that preventative home care is a worthwhile investment. From replacing a worn roof to repairing a furnace, these expenses help avoid more serious damage and higher repair bills down the line.
However, he stresses the importance of budgeting for these expenses. Avoid using credit cards or loans to fund repairs. Setting aside funds regularly for maintenance ensures you stay debt-free while keeping your home in good condition.
2. Used Cars Bought with Cash
Instead of financing a new vehicle, Ramsey encourages buying a used car outright with cash. Used cars have already undergone depreciation, which means you get more value for your money. By avoiding loans, you also eliminate interest charges and reduce your insurance premiums.
To ensure reliability, consider having the used car evaluated by a mechanic before purchasing. Certified pre-owned vehicles are another good option as they often include warranties and inspections, providing added peace of mind at a lower cost than new cars.
Think Before You Spend
Ramsey’s advice may go against what’s considered normal spending behavior, but that’s precisely the point. Often, the most common financial choices — like financing a new car or buying into a timeshare — can be the most damaging to your financial health. Being intentional with your money can help you stay out of debt and build long-term wealth.
By avoiding large, unnecessary purchases and focusing on practical investments like home maintenance and reliable used vehicles, you can take control of your finances. Ramsey’s guidance serves as a reminder that financial freedom is possible, but only with the right mindset and spending habits.
This article is inspired by content from Original Source. It has been rephrased for originality. Images are credited to the original source.