Dave Ramsey says that this is the key difference between rich people and those who have no money. Is right?

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Do you find yourself identifying with rich or broke people?

Key points

  • Dave Ramsey believes that there is a big difference between the way rich people and bankrupt people approach money.
  • Specifically, he believes they ask a different question when making financial decisions.
  • Ramsey has a point about how just considering the monthly cost of a purchase can have financial consequences.

Some people become rich due to good luck and some people go bankrupt due to bad luck. But, in many situations, the decisions you make throughout your life Will impact if you end up rich or struggling.

Finance expert Dave Ramsey is a big believer in the idea that your money mindset can have a big effect on your bottom line. Specifically, Ramsey believes that rich and poor people approach a particular type of decision very differently, and that these different approaches have a significant impact on financial success.

This makes all the difference in your financial success.

According to Ramsey, a big difference between the rich and the poor comes down to the question they ask before making a decision about whether or not to buy something.

“The rich ask ‘How much?'” he said. “Broke people ask ‘how much is the down payment and how much per month?'”

Obviously, these two questions focus on different things. The first question, which analyzes total cost, it gives you a chance to assess whether the purchase is really worth it when you take the big picture into account. It is also the question you would ask if you were going to pay for the item without borrowing, since you would need to know the total price if you were going to pay for it all at once.

The second question, however, is one you’d ask if you’re looking to finance a purchase that you can’t afford all at once. And although there are times when taking out a personal loan buying something might make sense, even in that situation, you’ll still want to focus on whether the total it was worth the cost, rather than just if you could afford the monthly payments.

If you’re asking how much you’d have to put down and how much you’d have to pay each month, you’re probably not considering what committing to a purchase will do to your overall financial situation. You could find yourself straining to buy something that is really, ultimately too expensive for you, and committing to monthly payments that last too long to do so. And that’s not a good way to grow wealth.

“Don’t buy things you don’t need with money you don’t have to impress people you don’t even like,” Ramsey said.

Is Ramsey right?

Ramsey is absolutely right that focusing solely on the monthly payment is not the right way to make a loan decision.

Committing to one monthly payment over a long period of time can hinder your ability to do other important things with your money, like saving money for your future. And you could end up spending much more over time than the item is actually worth to you.

Ideally, you should avoid borrowing for anything that won’t appreciate in value or isn’t absolutely necessary, so start asking the right questions before making a buying decision if you want to end up rich rather than broke.

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