In the YouTube video titled “Dave Ramsey Loses His Mind Over This Advice On Instagram” from September 2022, Dave Ramsey reacts to an Instagram reel of a father proudly giving advice.
Rachel Cruze, financial coach and daughter of Dave Ramsey, introduces a segment on a video from Instagram that she was repeatedly sent. The video features a father-daughter duo at a car dealership, where the daughter, Maddie, explains her financial strategy for buying her first car.
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In the now-deleted Instagram reel, which was played on the Ramsey Show, Maddie shares that she obtained a $15,000 car loan at 3% interest and plans to invest the $7,000 cash she saved in an Airbnb property, expecting a 14% return. Her father asks her to explain it to everyone, and she breaks it down saying, “It cost me three cents to borrow a dollar from the bank and then I go and take that dollar and I give to someone for 14 cents and then so 14 minus three is eleven so I keep the difference in the middle.” Her dad adds, “Boom! You buy assets that then cash flow and pay for your stuff… it’s called arbitrage.”
Dave Ramsey reacts strongly to the reel, stating, “I mean he’s so slimy. You need to take a shower after watching that guy. It just drips in arrogance.” He expresses skepticism about the feasibility of Maddie’s plan, emphasizing the impracticality and risks involved. Ramsey points out that Maddie, being 15, could not legally qualify for a bank loan, suggesting her father likely co-signed, which may have helped secure a lower interest rate.
Ramsey also questions the investment in an Airbnb property, saying, “You can’t buy an Airbnb property for eleven thousand dollars either … and that’s assuming the Airbnb property stays rented and the local city council doesn’t pass a law against Airbnbs. In which case, your little butt would be broke at 15 because your father’s a moron.” He mocks the father’s use of the term arbitrage, remarking, “It’s called arbitrage okay which is Greek for I’m stupid.”
Ramsey further criticizes the plan by highlighting that none of the millionaires he studied became wealthy through such methods: “Number one, you have never met a millionaire and we studied 10,167 of them, and zero of them, precisely ZERO said ‘I borrowed money on my car and arbitraged it into being a millionaire.’ Zero real millionaires do that. ZERO!”
Ramsey dismisses the strategy as impractical and potentially harmful, particularly for a young individual like Maddie, who he implies lacks a full understanding of the financial decisions being made. He insisted the 15-year-old girl has no idea what she’s doing and didn’t even know the interest rate. He called her a “parrot.”
Cruze then discusses with Ramsey the allure of complex financial strategies that promise quick wealth. She mentions the perception that to become wealthy, people think you need to engage in sophisticated methods like arbitrage, which can appear elusive and exclusive. Ramsey responds by debunking this notion, emphasizing that there are no secrets or magic formulas to becoming rich. He highlights the importance of living within your means, consistent investing and understanding compound interest.
In the father-daughter Instagram reel, the concept of arbitrage is presented in a way that oversimplifies its complexities and risks. Arbitrage, in general, involves exploiting market inefficiencies to generate profit, but it’s not risk-free and doesn’t guarantee profits. Market conditions can vary, and the opportunities for successful arbitrage might not always be present. This strategy requires a deep understanding of financial markets and the associated risks.
While the internet has democratized access to financial information, it’s crucial to be cautious about financial advice found online. Consulting a professional financial adviser is recommended for anyone looking to leverage their funds and create passive income in a more informed and safe manner.
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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.
Jeannine has written about personal finance and investment for the past 13 years at a variety of publications including Zacks, The Nest, and eHow. She is not a licensed financial advisor and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Jeannine believes that the information contained herein is reliable and derived from reliable sources, there is no representation, warranty or undertaking, stated or implied, as to the accuracy or completeness of the information.
Image and article originally from www.benzinga.com. Read the original article here.