Ryan Pineda Challenges Dave Ramsey on His Debt Framework

 How do you look at business expenses that are monthly obligations? In my mind, they're not really that different than debt. When we start losing money, I'm going to use some of the cash reserves we have to try to keep you. But when those start dwindling, I don't borrow money, so you're going to go home. If we understand it as a tool, we get less emotional and say, is this going to help my net worth? Is this going to help my cash flow? Is this going to reduce my risk? Well, shouldn't I want to do all three of those? We're going to be reacting to a video of Dave Ramsey and Ryan Pineda talking about, is debt ever a good idea? This is a video that just came out on Ryan Pineda's channel. I'm here with Austin Williams, Demetrius Walker, Alden Armstrong, and we've never seen this clip. And so in the Better Wealth Studio, we're going to be reacting for the first time to this clip that Joel, our producer, teed up for us. So without further ado, let's dive in. Rock and roll. Let's do it. Is there any point where debt is acceptable? Because I've heard you talk about getting a primary residence with debt. What changes from that aspect? Well, I just don't yell at people about that one and then put it in the place where you can pay off quickly. That doesn't mean that all of a sudden debt became a good thing. It's just a tolerable thing. And so here's the simple ratio, and we all know this ratio. All your viewers are smart guys and gals. They're not dumb. So the ratio is real simple. More debt equals more risk. Yeah. Less debt. Less debt equals less risk. And as you manage a portfolio of anything, if you can keep your risk low and play the game a long time, sustainability is the key to wealth building, not being brilliant. All right, let's unpack this. He's saying more debt, more risk, and then he talks about sustainability. I want to hear your guys' reactions to that in real time. Again, we don't have notes because it's the first time we're watching this. When you said more debt equals more risk, my thought was like, I kind of agree to a degree. And at the same time, it's like the risk doesn't inherently find itself in the debt itself, but the investor who you are and what you're investing in. Let's define debt because I think Dave Ramsey would define debt as an alone. Fair, yeah. I would define debt as having a negative net worth. Okay. Okay, so let's for example. If I have $100,000 over here and I choose to do $100,000 loan, I'm technically, in my opinion, I'm not in debt. I have $100,000 to back this loan. Okay, are we tracking? I have enough assets. The assets equals my debt. But if I had a $200,000 loan and only $100,000 of assets, I'm $100,000 in debt. And I would actually agree with Dave Ramsey. In that scenario, I would agree, which you increase your risk. Now, not all risk is bad. You know, I'm with, I maybe tend to agree a little bit more with, I can understand where Ryan and Dave are talking about with potentially more risk over a long period of time. Maybe it doesn't compound well, but there's some people that we know that are extremely wealthy and they made that bet because of quote unquote risk. But where I don't think Dave Ramsey would even agree with me on this is having a loan in general. And I think he says all loans, like a mortgage and all is considered debt. And I would just look at your balance sheet and say, like, I would actually feel safer having debt as a tool than paying cash for things. And that's where it's like might boggle someone's mind to be like, what do you mean by that? And so, yeah, it's just an interesting thought. It's definitely an interesting thought. I think with the whole concept of debt, personally, I think you're either in debt or you're in equity. Right. So if you have. Like you're talking about the asset to back up the line of the line against that asset, then you're still in charge. The thing that I think is overshadowed sometimes is the cash flow situation. So, I mean, I could be on paper a million dollars in debt, but if my cash flow is like 95 percent and only 5 percent of servicing debt, I need more debt to be more efficient. Right. So it's it's a multifaceted totally situation for sure. Well, and you have to factor in risk because, again, would would I rather have. Like a hypothetical, this is going to be amazing or cash on hand. There is something to say about cash on hand. What's the what's the phrase of one bird in the hand is better than two in the bushes. So one thing that I think most people don't factor in is risk risk into a situation because it's almost impossible. It's almost impossible to really factor in true risk. And that's why the best investors in the world tend to be more focused on down eliminating risk than getting greater upside. It's like, can I get market returns with less? With less risk? That seems to be like what what all. So it's just it's just interesting. I actually that's where I'm like very empathetic. But I just think we're using terms like debt. And I love that as a tool. I don't like being in debt. And I tend to agree that being in debt does increase your risk, doesn't make it bad. But that does mean you have you have greater chances of negative than positive. Any any thoughts on that? Yeah. Yeah. Two thoughts I'd even say to that. So he mentions. The beginning, you know, like that he's as a Christian, he's been thinking about it. He's been burned in the past. And I mean, I grew up watching Dave Ramsey. I don't know about you. So I went to private school K through 12. And this was essentially our financial education. A lot of good things to say about Dave Ramsey. A lot learned a lot of good basics from him. And one of the things that I remember learning in the course is just how does the Bible talk about debt? And actually, the one verse that comes to mind that I think is like really like the best way for us to think about is that says, let no debt remain outstanding except the continual debt to love one another. And. It's a pretty neutral way to think about debt is that like, you know, ultimately, like there was debts even back in the Bible days. Right. And there was there people had debts, like whether it was to buy a boat, you know, whether it was to whatever. But like ultimately, like, you know, be wise about the debts that you have. And really the one debt that we should really allow to remain outstanding is our continual debt to love one another. So, yeah, in that sense, like, you know, I think that, you know, be wise, you know, about about the debts, the debts that you have. And actually, I can't remember what the second thing. Was so that was the first thing that people just got to really understand what their risk is overall. Right. So I had a friend had one hundred eleven million dollars net worth and it was all in those real estate syndication things at seventy eight years old. He died broke. Well, every bit of it went down. I had another one that was seventy two years old. He lost his health and lost a fifteen million dollar portfolio, all because there were two leveraged. Now, what is to leveraged? I don't know. I don't know. You guys got to decide that for yourself. Right. But I really appreciate David even talking about that because he's like, what is to leveraged? I don't know. That seems to be a tune that I've not heard him say all the time. I've never heard him say that. And so, like, I think it's an interesting and I think that that speaks to Dave Ramsey and like who he's talking to. He knows that Ryan Pineda is in the real estate space. And so I think that's where Dave Ramsey would say, I don't know what's to leverage. So I'm going to choose. I'm going to choose airing on the side of like, let's not even touch with the ten foot pole, which is admirable. Yeah, absolutely. It doesn't, you know, I think and I haven't looked at the baby steps in a long time, but I believe that that's like a mortgage for primary residence is one of the. Yeah. I think it's like all your debt. Yeah. Then start investing and then. Yeah. But there have been videos where they've contradicted themselves. Sure. I think everyone's in a little bit different situation. Exactly. Exactly. I definitely feel like paying off even a primary mortgage is a like ticket to success. Yeah. Yeah. Which is why I was thinking like he's a little bit more sensitive to it. Even audience aside, he was a little bit more sensitive to it. And maybe it just depends on the day. But I was a little surprised by it, but almost pleasantly surprised. Yeah. But this idea that debt doesn't have implications is horse crap. Of course it has implications. Right. But, you know, I can argue with you intellectually about it, but it doesn't matter. Uh, or spiritually about it. Uh, I came to the conclusion for anything. I am never going back. Life's too short. Right. And it's worked out because here's the thing, even though it's harder initially and it's slower, you don't go backward. There's no reset. You know, all I do is just make money every stinking month. All these properties that I own a hundred, you want a cashflow looks like on a dadgum, you know, I'm going to go to a bank. I got an $8 million strip center down here. You want the cashflow looks like on that sucker. Oh my God. It's amazing. You know, not much. I worry about it. If a tenant gets sideways down there, zero. Yeah. I'm going to lean on that tenant and we're going to work it through and I'm going to do the right thing for them. I'm going to be kind to them. And if they can't make it, we're going to move them on and I'm not going to sit here and go wring my hands. Oh, I have to have this tenant because I have to pay the mortgage. Yeah. I think what he's saying there. It's actually very profound in a lot of ways. If you don't have debt, you have more options, right? If you don't have debt, oftentimes you can be more flexible. And so it's, it comes down to the value proposition of the individual. Is it more valuable to be super duper flexible or to be mathematically more efficient with your dollars? Well, and I'll, I'll say this, our business does not have any debt on it. Are all of our personal lives. We're not crazy overspending. And that's a version of like, if, if I was living this crazy, lavish lifestyle and having debt on the business, we might be making different decisions in a business and I might have more anxiety and cut corners. And so like, in a way. I really appreciate how he lives life. And another way to say is just live below your means and, and, and you're going to be set and I know some people that rubs them the wrong way and some people like being motivated by being in debt, but I tend to be, those are the same people that cut corners when they, cause they have to make something. So in a way I admire what Dave Ramsey. He's saying, I think he makes a great point. How do you look at business expenses that are monthly obligations? And in my mind, they're not really that different than debt. I mean, you can get out of them, I guess you could stop marketing. You could, you know, get rid of the staff, but there's still obligations every month for the business to actually make money. Well, the difference is the, um, the, the time horizon that you're dealing with. I've got 1100 team members here. Our payrolls. Well. It's of 150 million. Yep. And, um, so what's the time horizon on that? If, uh, five of our departments completely go to zero revenue because there's some kind of a weird disease out there. Yep. That could have happened a couple of years ago. I'm just saying that might've happened, you know? And so, you know, what's the time horizon on that? Well, if I've got a payment on the office complex that has, I mean, our, our campus, if I've got a payment on $500 million. Yeah. I've got a, I've got a $500,000 to pay for that. Uh, I've got a $500,000 to pay for the, for the, for the, for the, for the, for the, for the, for the, for the, for the, for the, for the, for the, for the, for the, for the, for the, uh, and I've got these payroll payroll, I can adjust. And I did, we didn't, I told our team though, when we start losing money, I'm going to use some of the cash reserves. We have to try to keep you, but when those start dwindling, I don't borrow money. So you're going to go home. I, I, you know, I'll, I'll, I'm not going to take a salary. I'm not going to pull any profit out of this. So you're going to go home. I'm not going to take a salary. I'm not going to pull any profit out of this. I'm not trying to make money. But we're also not going to keep a team when the thing's not profitable. Yeah, but you could potentially also sell. Yeah, you could sell. You could sell. But to be fair, you might not be able to sell it for market value or what you purchased. I really appreciate what Ryan Pineda asked because I had a very similar question for Dave. How does he view business and salaries? And that's a huge quote-unquote nut. But I think what he would say is they're making their profitable business. And so it is the cost to create profit. But in a way, that's the same logic that you would use for debt. I'm using a debt to invest in this thing. And this thing is going to create. But what Dave would say is you have more flexibility to cut some things. And so I appreciate Dave's response. I'm really grateful that Ryan asked that. And so what would be your guys' final thoughts as it relates to the whole is debt bad, good? What are your guys' frameworks on this whole thing? And I'll end as a business owner's perspective around this. I think when it comes to debt as a whole, I wouldn't say it's good or bad. It depends on how you use it. And so we have many different tools in our tool belt that we can pull from, even life insurance, if we want to bring that into the conversation. It can be used very stupidly. And that can be a very bad and detrimental asset to the wrong person if it's sold incorrectly, if they have no flexibility, all these different things. So I think any product, any financial tool, and debt is a financial tool. It's just been around for forever. Any of those tools, they exist for a reason. And then on top of that, as long as you understand the risks with using that tool. I think it can be incredible or detrimental. So it's like it's in the eye of the beholder. And it's really what you make of it. I almost think about it through the lens of like opportunity costs. Like you could do one thing, you could do the other thing. If you do one thing, you can't do the other pretty much. And whenever you take on debt, going back to the whole risk idea, I mean, you could have made another choice and not had as much risk. And it's like you just have to be good at it. Right. Right. Right. Right. Right. Right. Right. Good at analyzing it, asking good questions and making the decision that's going to best suit you at that time and place, depending on a myriad of factors. So the thing and I now remember what I was thinking about earlier. So I got back onto it. So I would think that of all the clients that I talk to. Right. Almost when I hear about people who are the debt has gone belly up. It's almost never investment debt. It's almost. It's almost consumer debt. I think something that we all agree on here, including Dave, is that like a lot of the debt that people are getting is just bad debt. Ultimately, there's a lot of debt that people are getting into is bad. And I think what's getting lost, the nuance of the conversation is kind of the investment side. Right. Which is like, is there a good kind of debt? And that's a really good point. Yeah. So so that that's one thing that I feel like we all kind of around where I started to when my eyes kind of got open to this other world where maybe that could be a good thing was actually. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Nelson Nash's idea that you finance every purchase you make. Like like either you you pay somebody else interest on their dollars or you lose interest on your dollars for the rest of your life. And like that is, I feel like the next almost like step in thinking there where it's like when you realize you almost can't fully get away from it. Like maybe in your head you can, but you can't fully get away from it. You know, be smart about it. Right. Like be smart about it. Let no doubt remain outstanding except the continual debt to love one another. I love that. That's a tough one. here's my maybe thoughts frameworks final thoughts around around this really love dave ramsey when he's talking to other people on interviews like i he dave ramsey was on tucker carlson a few months ago and was really enjoyable to listen to and even tucker was tucker like made some things that like if i said or someone else said it would be like maybe more defensive but because tucker carlson said and their buddies are like you know they went back and forth and you kind of could see like okay the dave ramsey that's not on a television show like is like a real dude and and and like chopping it up my my whole thought though is i actually live my life way more like dave ramsey so for example um i personally wouldn't want to make a decision in business or my personal life and get something including a house if i didn't have the money for it now that might sound extreme like today there are properties that my wife and i are looking at we want to get land and maybe if maybe it's going to be a huge regret we should have got land and because land's going to continue to go up in nashville and people might be losing their mind but there's something inside of me that goes i don't want to make a decision on a big even though maybe i could afford it on paper but that would put in jeopardy what we're doing in business but then would also put in jeopardy like a fear of like i have to work and i guess this is a lie because we all have to work i there's none of us in this room have you know money that we don't have but it's like there's an element of of like not make not doing any decision such by that decision creating a risk that would um make you a hamster to that and and so it's just it's it's a thought process um i will there be a time where i take a loan for a business idea maybe but i also have been in business long enough where i'm like things take longer things things take more money i'm going to be grateful we don't have debt on the business because if we did we would just be running at a different level and i think we would be making decisions because we wouldn't be as long-term thinking so so in a way i i'm really excited for sitting down with dave ramsey and being able to have a nuanced conversations my biggest thing though is we use debt and he uses debt and i don't think we're talking about the same thing i i think of debt as being in debt i think he's talking about being in debt but anything whether it's a great deal or not it's a great deal and i'm a credit card because that's a gateway drug or it's a mortgage or it's different type of car debt and i think that's where it's like let's look at it as a tool if we understand it as a tool we get less emotional and say is this going to help my net worth is this going to help my cash flow is this we're going to reduce my risk well shouldn't i want to do all three of those and oh by the way if this is a 30-year mortgage why wouldn't i do that and at the same time most debt decreases your net worth decreases your cash flow and increases your risk and then there's no amount of ways that i would get behind that and so overall i think we agree more than we disagree we would love to hear from you on what your thoughts are and ryan thank you for asking that question at the end about business owners and uh we'll see you on the other side