What are the risks of debt?
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Debt carries significant risks, as highlighted by various experts.
Matt King, a strategist at Citigroup, notes that increasing levels of debt can lead to economic instability. He argues that higher debt levels can result in runaway inflation, monetary debasement, and societal polarization. This increases the risk of negative economic scenarios, similar to historical debt crises 1.
Dave Ramsey, a financial radio host and author, strongly advises against debt due to its inherent risks. He explains that borrowing money to invest is uncommon among wealthy individuals, with significant risks including increased stress, strained relationships, and financial instability. Ramsey emphasizes that more debt generally results in greater risk and can lead to financial hardship, especially during economic downturns 2 3 4.
Rachel Cruze, a financial expert, stresses that living with debt exposes individuals to significant risk, particularly in unpredictable situations like a pandemic. She points out that debt often creates financial vulnerability, as many people live paycheck to paycheck and cannot cover emergencies. The psychological stress of owing money also impacts overall well-being 5.
Alex Hormozi, an entrepreneur, discusses the specifics of margin debt, highlighting that borrowing against investments can lead to severe financial losses if the market crashes. He underscores the importance of understanding the risks and maintaining financial freedom by staying debt-free 6.
Collectively, these experts highlight that debt can lead to economic instability, increased personal risk, financial stress, and long-term vulnerability.
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