Debt is dumb in personal finance and in business

Remember the old saying about how if you repeat something often enough it becomes the truth? Well, it doesn’t really become truth.

But a repetition of misinformation can start to sound believable after awhile. This is especially true in the business world, where many entrepreneurs have spent years hearing and believing the lie that debt is a necessary component of building and running a business.  

People often ask if my advice on personal finance also applies to running a business. Absolutely. If you were to tell the founders of Apple or Starbucks it takes tens, or hundreds, of thousands of dollars of debt to start or expand a business, they’d laugh—and so would I.

Next to nothing
Those guys started with next to nothing, and I literally began my company on a card table in my living room. Starting and growing a company at the speed of cash is always the best idea.

Having a big pile of cash set aside in your business is a must. In personal finance, we’d call this an emergency fund. When it comes to business, we’re talking about retained earnings. Even seasonal businesses can forecast their cash flow and prepare for down times during the year. All it takes is having good budgeting and accounting practices in place. Combine these basics with prioritized saving, and you’ll essentially become your own line of credit.

But Dave, it’s okay to borrow money for the really big stuff, right?

Nope. This advice holds true for big buys, as well.

Formulate a plan for your money, and pay cash. This planning and budgeting doesn’t have to be anything fancy. Just be realistic about operating costs and how much revenue you’re generating. Set a goal, and systematically save a specific amount as a line item in your monthly accounting.

Debt isn’t necessary
In your timeline, decide how long it will take to save up the cash for big purchases. In the meantime, find alternatives that do not involve debt. If it’s a new building or piece of equipment, you can rent for a short period of time. You can even outsource some things, or buy used stuff at a significantly lower cost.

Saving money and paying cash lowers risk. You don’t need to borrow money to make it big in business or in life!

Leadership and small business expert Dave Ramsey is CEO of Ramsey Solutions. He has authored numerous best-selling books, including EntreLeadership. The Dave Ramsey Show is heard by 16 million listeners each week on more than 600 radio stations and multiple digital platforms. Follow Dave at on the web.