Dave Ramsey: 9 Key Signs You’re Making a ‘Stupid’ Financial Decision
Looking back at your financial decisions at a distance, you can often see which ones were wise and which were foolish. However, wouldn’t it be nice to see with a clear head if you’re making a bad decision for your net worth?
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Brash money expert Dave Ramsey is always happy to help his listeners steer clear of what he calls “stupid” financial decisions, in his uniquely direct manner. He did just that in a recent episode of The Dave Ramsey Show.
Here are nine key signs you’re making, or about to make, a stupid financial decision:
You Haven’t “Stupid Proofed” Your Finances
While some “stupid” financial decisions may only hurt you at the level of one paycheck, Ramsey warned that bad decisions around money on a larger scale, such as purchasing a car, a house or investing in crypto, “can set [you] back a decade by screwing up…”
He said that people should spend more time thinking about how to “stupid proof” themselves than just building wealth. And in his experience, there’s one emotion that tends to lead to bad financial decisions:
“So one of the things I discovered about me, and turns out it’s true of everyone, is that right after I get desperate, I get stupid. And right after I get stupid, I get broke.”
You Believe Your Own Hype
Ramsey suggested that behind that feeling of desperation is a misbelief that you “have to” buy something.
“When you feel desperate [and] trapped…your language will tell you… ‘I was forced to. We had no choice.’ [But] never in the history of the human race has that been true. You were not forced. They did not have a gun. They don’t do reverse carjackings. It doesn’t happen, right?”
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You may find yourself in a desperate situation, perhaps related to transportation. Per Ramsey, it’s no excuse to justify a “dumb decision…to pay double for the car at a 28% interest rate and then say, but I was forced. You weren’t forced. You were just stupid.”
He admits he’s been stupid too” after feeling desperate and trapped.
You’re Not Listening To Your Language
Ramsey urged, “[L]isten to your language, and if your language is indicating a sense of being trapped, a sense that there [are] no other options and your language to yourself in this decision you’re making to your spouse who you’re trying to talk into… then that tells you that you’re getting ready to screw up.”
You Use Justifications When Spending Money
Ramsey gave another example of a hypothetical man named George who finds that every property for rent in his hypothetical town is $4,000 a month, thus he can’t find a place to rent, telling himself he must buy a home instead.
He said that “hyperbole statements” like this are indications that you feel desperate and stuck.
“Once you’ve decided inaccurately that every property for rent is $4,000 minimum in this town, you can justify buying something. You shouldn’t be buying at a point in your finances that you weren’t ready to buy. Do you see what I’m saying? Yeah. So when you start making these fatalistic, absolute statements that are overstated, then, and if it sounds bizarre to you, then that tells you you’re there.”
Ramsey refers to this voice that gets desperate as “the drama queen” that “lives in all of our heads.”
Statements like that “smack of weirdness and desperation” and, he warned, suggest that you’re getting ready to make a mistake. “[What] that leads to then is [making] a deal here that I know I shouldn’t be doing because this is the only property. See, you know how that comes out. And I do that in my own head.”
High rental prices are not a good excuse to buy a home you can’t afford. “That’s just dumber than crap. No, it’s just not true.”
You’re Falling Into Fatalism
In this hypothetical scenario, if the only property “George” finds to live in requires 60% of his take home pay, that’s a terrible scenario, Ramsey said.
“These are our two options because we forced ourselves in desperation into this false narrative of fatalism that I’m stuck,” Ramsey said.” And the only way out is to go from one stupid horrible thing to another stupid, horrible thing. And I’m trying to justify it by saying it’s the only option. You see what I’m doing? Oh yeah. And every time I do that in my head, I have lost so much money.”
Fear-based decisions lead to more problems than they ever solve.
You Haven’t Rejected Your Inner “Whiny Toddler”
When you start making these “over the top crazy butt statements,” Ramsey suggested it is like feeding “a whiny toddler” inside you that just wants what it wants. “Just admit it. You want the shinier newer car,” he said.
You Haven’t Contacted Your Inner Adult
Admitting that you just want something because you want it, he said, would be to deal with yourself as an adult. “Instead, I would rather create this false narrative [that] the marketplace is forcing me into doing. It’s the economy. These high interest rates. I mean, it forced me.”
You’re Making Overstatements
Every time you make what Ramsey called “a bizarre set of overstatements” it’s indicating you’re getting ready to make a mistake, he warned because he can speak from experience.
He reassured listeners that he’s not making fun of them because he’s been in their shoes when he faced bankruptcy years before.
“I lost so stinking much money. I made decades of income evaporate in single strokes of the pen because I was desperate, stuck and fixated.”
You Fall Prey to Quick Fixes and Greed
Another mistake is to get greedy, Ramsey said. “[W]hen you get all fired up and you’re like…okay if the system is broken and the millennial can’t get ahead, then the millennial has to do something completely different.”
Doing something such as taking a “crazy shortcut” like a TikTok life hack to make quick cash is not a good idea either.
In a nutshell, don’t let hot emotions, false desperation, fatalism and other negative mental habits bind you to a financial decision you can’t undo.
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