“Debt is not a tool; it is a method to make banks wealthy, not you.” - Dave Ramsey
This is false.
Now let me prove it with a $2.7 million mistake my doctor friend just made.
First, let's be clear: if you carry credit card balances month to month, Dave Ramsey is right - you need to stop reading this and pay off that debt immediately. No rewards program is worth 24% interest. This advice is for people who pay their cards off monthly and want to optimize wealth, not recover from financial mistakes.
At my day job, I manage millions in corporate debt. When executives pitch projects, I ask one question: 'What's your ROI?' If they say 15% returns and our borrowing cost is 5%, we take the debt every time. It's free money. But most people do the opposite with personal finance.
Here’s how this plays out in real life…
I was talking to a friend of mine who is a doctor. He tends to think he knows best about all matters, even those unrelated to doctoring, but he also hates debt. In 2017, he purchased a home for $425,000. When he purchased the home, he put down 20% and financed the remaining 80%. Because this was 2017, he got a great interest rate of 3% on a 30 year fixed loan. His monthly payment was roughly $1,400.
I caught up with him a few weeks ago and the topic of his house came up to which he proudly exclaimed he only had $61,000 remaining on his mortgage. He was puffing his chest, but I screamed in horror:
“DUDE WHAT THE HELL ARE YOU DOING?!”
As we talked it through, I learned he had been paying an additional $2k in principal payments every month bringing down the balance rapidly. So his $1,400 payment was now $3,400. Let’s break this down.
His first mortgage payment was on 9/1/2017. As of 9/1/2025, it has been 8 years and he has paid an additional $192,000 in extra principal payments ($2K x 96 months).
Let’s run through the positives: by making these additional payments, he has saved himself ~$24K in interest payments over these 8 years. And assuming he continues to make the additional $2K in payments, he will have saved himself $122K in interest over the life of the loan.
Those numbers sound promising, but let’s get into why this is a bad financial strategy:
He is only paying 3% interest on this money. Since 1957, the S&P 500 has delivered average annual returns of > 10%. So let’s assess what this would mean for my friend the doctor. Let’s say he had spoken to me before he started making extra payments and instead decided to invest $2K per month into the S&P 500.
If he would have done that, as of 9/1/2025, the $192,000 in extra payments would be worth over $335,000 representing a profit of $143,000 or a total return of 74.5% over the 8 year period.
Now, when you compare that to the $24K in interest he saved over the same period, making extra payments doesn’t seem like such a sound financial strategy for our friend the doctor.
But, in fairness to the doctor, we did say he was going to save $122K in interest over the 30 year loan period by making extra payments. So it’s important that we compare those savings to potential profits. As we said, markets are impossible to predict, but for ease of calculation, let’s just assume he can earn an average return of 10% annually through the remaining period of his loan. If he were to allow this money to sit and earn 10% in the market for 22 years, it would be worth $2.73 million (!!!).
That seems like a lot to give up to save $122K in interest.
Dave Ramsey won’t show you this math. He’ll keep telling you “all debt is bad” and that you must pay it off to achieve your goals. His advice hinges on a moral belief that debt is evil and people can’t be trusted with it. I prefer to use math.
Interested in more tips on how to grow your wealth, subscribe to the newsletter and follow along on social media.