While Dave Ramsey helped millions escape debt, his one-size-fits-all approach may be keeping high earners from building serious wealth.
Many professionals following Ramsey’s advice find themselves financially stable but not wealthy, missing opportunities that could multiply their net worth. The problem with dave ramsey advice is that it ignores how wealthy people strategies actually work in practice.
In this guide, you’ll discover why paying cash for everything creates massive opportunity cost, how the ultra-wealthy strategically use “good debt” to multiply returns, and 11 specific debt leverage techniques that rich people use instead of Ramsey’s limiting methods to build generational wealth.
Why Rich People Love Debt (And Why Dave Ramsey Is Wrong for High Earners)
You make good money. Maybe $150K, $300K, or more. You follow Dave Ramsey’s advice. Pay off everything. Buy only with cash. But something feels wrong.
Your wealthy friends keep taking out loans. They borrow against their stocks. They finance real estate deals. And their net worth keeps growing faster than yours.
Here’s what’s happening: Dave Ramsey’s math works great if you’re drowning in credit card debt. But it can actually hurt you if you’re a high earner trying to build real wealth.
The Dave Ramsey Trap: Why His Math Doesn’t Work for High Earners
Dave Ramsey tells everyone the stock market returns 12% per year. That’s just not true anymore.
Real returns over the last 20 years? About 7-10%. And that’s before inflation and taxes eat into your gains.
His other big mistake: He says you can safely withdraw 8% from your retirement accounts. Financial experts say 4% is the safe number. Follow Ramsey’s 8% rule and you might run out of money.
But here’s the bigger problem. Ramsey gives the same advice to everyone. A person making $40K with credit card debt needs different advice than someone making $200K with no debt.
Academic researchers have looked at his numbers. Their conclusion? His math “doesn’t work on a mathematical level” for wealth building.
You need a different playbook.
The $163 Billion Secret: How Billionaires Use Debt to Avoid Taxes
America’s wealthiest people avoid $163 billion in taxes every year. They’re not breaking the law. They’re using debt strategically.
Here’s how it works: Instead of selling stocks to get cash (and paying capital gains tax), they borrow against their portfolios.
Jeff Bezos paid $0 in federal income tax in 2007 using this strategy. He owned billions in Amazon stock but borrowed against it for spending money.
The debt doesn’t count as income. No tax bill. Meanwhile, his Amazon shares kept growing in value.
You can do this too with securities-based lending. Borrow against your investment accounts at 2-4% interest. Keep your investments growing. Pay no taxes on the loan.
Major banks like JPMorgan and Schwab offer these programs. You typically need $100K-$250K in investments to start.
Rich people figured this out decades ago: Debt can be a tool, not a trap.
The Opportunity Cost Disaster: What Paying Cash Really Costs You
Let’s do some math. Say you have $100,000 cash.
Option 1 (Ramsey’s way): Put it in a savings account at 3%. After 30 years: $242,000.
Option 2 (Rich person’s way): Use it as a 20% down payment on a $500,000 rental property. The property grows at 5% per year. After 30 years: Your equity is worth over $2.1 million.
Same $100,000. Different results.
Here’s why: Real estate leverage gives you 5x exposure to market appreciation. Your $100K controls a $500K asset. When that asset grows, you capture gains on the full amount.
Cash sitting in savings loses to inflation. A $100 bill today buys less than it did 10 years ago. And it’ll buy even less in another 10 years.
Rich people understand this. They use leverage to multiply their returns.
Why Real Estate Debt is “Good Debt” in 2025
Not all debt is bad. Credit cards charging 25%? That’s bad debt. A mortgage at 7% on appreciating property? That’s good debt.
Good debt does two things:
- Creates income
- Grows in value over time
A rental property mortgage checks both boxes. The rent covers your monthly payment. The property value increases year after year.
Current mortgage rates sit around 7%. But good rental properties can return 8-12% annually when you factor in cash flow plus appreciation.
You make money two ways: Monthly rental income and long-term value growth.
Here’s the real trick: You can use the same $10,000 down payment multiple times. Buy a property. Wait for it to appreciate. Do a cash-out refinance. Use that money for the next down payment.
This is how people build real estate empires starting with modest amounts.
The Velocity of Money: How Rich People Recycle Capital
Rich people don’t let money sit around. They put it to work immediately.
There’s a real estate strategy called BRRRR:
- Buy a property
- Rehab it
- Rent it out
- Refinance to pull your money back out
- Repeat with the same money
You use the same $25,000 down payment five times instead of once. Five properties instead of one.
Portfolio lenders make this possible. They’ll finance multiple properties for real estate investors. Regular banks usually cap you at 4-10 mortgages.
Business owners do this too. They use business cash flow to fund personal investments. Or they use business credit lines to jump on opportunities quickly.
Speed matters. While you’re saving up cash for two years, they’ve already bought and profited from three deals.
Securities-Based Lending: The Wall Street Wealth Secret
This might be the best-kept secret in finance. You can borrow against your investment portfolio without selling anything.
It works like this: You have $200,000 in stocks. A bank will lend you up to 70% of that value at low interest rates. That’s $140,000 in cash.
Your stocks keep growing. You pay simple interest on the loan. No taxes because you didn’t sell anything.
Use the loan for whatever you want:
- Real estate down payments
- Business investments
- More stocks
JPMorgan calls theirs a Securities Based Line of Credit (SBLOC). Schwab has Pledged Asset Lines. Interest rates typically run 2-4% above treasury rates.
Minimum requirements vary but often start around $100K-$250K in investments.
This is how wealthy people access cash without disrupting their investment strategy.
Real Estate Debt Funds: Earning 10-14% While Others Pay 3%
While your savings account pays 3%, private real estate debt funds pay 10-14%.
These funds lend money to real estate developers and house flippers. You earn interest while they do the work.
Your money gets spread across multiple loans to different borrowers. This reduces risk compared to lending to just one person.
New Silver Income Fund targets 14% annual returns. Other funds focus on senior debt (lower risk) or mezzanine financing (higher returns).
Most require accredited investor status ($200K+ income or $1M+ net worth). Minimum investments often start at $25K-$50K.
This beats savings accounts and many stock investments. Plus you’re helping fuel real estate development.
The Tax Optimization Game: Deductions Ramsey Ignores
Ramsey doesn’t talk much about taxes. Big mistake.
Mortgage interest is tax-deductible. If you’re in the 32% tax bracket, a 7% mortgage really costs you 4.76% after taxes.
Investment property owners get even better breaks:
- Depreciation deductions
- Cost segregation studies for accelerated depreciation
- Interest deductions on investment property loans
The 2024 standard deduction is $29,200 for married couples. If your mortgage interest and other deductions exceed that, you save money by itemizing.
Rich people structure their debt to maximize tax benefits. They might choose a mortgage over paying cash just for the deduction.
Business debt gets special treatment too. Business loan interest is fully deductible against business income.
Work with a good CPA who understands these strategies.
Inflation Protection: How Debt Becomes Your Friend
Inflation makes debt cheaper over time. Here’s why:
You borrow $100,000 at a fixed rate today. With 3% inflation, that loan payment feels like $97,000 next year. And $94,000 the year after.
Meanwhile, your rental income and property values typically rise with inflation. You pay back the loan with cheaper dollars while your assets grow.
Cash does the opposite. $100,000 in savings loses purchasing power every year inflation runs positive.
Fixed-rate debt is an inflation hedge. Rich people figured this out long ago.
Business Leverage: Scaling Beyond Personal Income
Business debt opens doors personal debt can’t.
SBA loans let you buy existing businesses with as little as 10% down. Seller financing is common too – the current owner acts as the bank.
Equipment financing beats paying cash for business tools. Preserve your cash for opportunities. Let the equipment pay for itself through increased productivity.
Business lines of credit give you flexibility. Jump on deals quickly. Cover seasonal cash flow gaps. Fund growth opportunities.
Keep business and personal credit separate. This protects your personal assets and gives you more borrowing capacity.
When NOT to Follow This Advice: Risk Management for Wealth Building
Leverage isn’t for everyone. You need:
Stable income: Don’t leverage if your job is shaky. You need reliable cash flow to service debt.
Emergency reserves: Keep 3-6 months of expenses in cash before getting aggressive with leverage.
Market timing awareness: Don’t buy at market peaks. Learn to spot good deals.
Risk tolerance: Leveraged investments can lose money. Make sure you can handle that psychologically.
Debt-to-income ratios matter. Most experts suggest keeping total debt payments under 36% of gross income.
Have exit strategies. Know how you’ll get out if things go wrong.
Your 2025 Action Plan: Implementing Wealthy People’s Strategies
Ready to think like rich people? Start here:
Step 1: Calculate your opportunity cost. What is your cash currently earning vs what it could earn?
Step 2: Build your team. Find a good CPA, attorney, and financial advisor who understand these strategies.
Step 3: Research your local real estate market. Look for cash-flowing rental properties.
Step 4: Contact portfolio lenders and SBLOC providers. Understand their requirements.
Step 5: Set up business entities if needed. LLCs can provide protection and tax benefits.
Start with one strategy. Master it. Then add others.
Don’t try to do everything at once. Pick the approach that fits your situation best.
The Bottom Line
Dave Ramsey’s debt-free approach works great for getting out of trouble. But it can keep you from building real wealth.
Rich people use debt strategically. They understand the difference between good debt and bad debt. They use leverage to multiply returns and optimize taxes.
You don’t need to be born wealthy to use these strategies. You just need to understand how money really works.
Start by calculating what your current approach is costing you. Then pick one wealthy person’s strategy to implement this year.
Your future self will thank you.
