"Financial expert, radio personality and author Dave Ramsey has built an empire on bold, uncompromising advice. In recent commentary, he distilled decades of teaching into a single principle: The way you pay for things determines whether you stay poor, remain middle class or build wealth. Wealthy people ask "How much?" and pay upfront to avoid interest. The middle class fixates on monthly payments and credit card rewards. The poor turn to payday lenders, pawn shops and lottery tickets."
"The core insight holds up. Financing everything through monthly payments locks you into a cycle of interest charges that compound over time. Borrowing costs have risen sharply since the pandemic, with the Fed's effective federal funds rate now in the range of 3.50% to 3.75%. Credit card debt has become particularly destructive; cards typically charge APRs of 18% to 25%, which can turn small purchases into long-term drains on wealth. This makes Ramsey's advice about avoiding interest charges more relevant than ever."
How a purchase is financed largely determines financial trajectory: paying upfront avoids interest while monthly financing and high-interest credit drain wealth. Wealthier households prioritize total cost and pay cash; middle-class households focus on monthly payments and credit-card rewards; lower-income households often use payday lenders, pawn shops, or lottery tickets. Rising borrowing costs since the pandemic and higher Fed rates make interest avoidance more important. Credit cards charging 18–25% APR can convert small purchases into long-term drains. Repeated financed purchases compound costs over decades and contribute to stark wealth concentration across households.
Read at 24/7 Wall St.
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