Dave Ramsey’s Advice on Selling Crypto to Pay Off Debt

Dave Ramsey advises a caller to sell cryptocurrency to pay off debt, citing its extreme volatility and speculative nature as risks. He highlights the sunk cost fallacy and urges prioritising debt reduction over potential investment gains. Despite the couple’s reluctance to sell their crypto, Ramsey argues for prudent financial management, advocating that they use investment gains to become debt-free.

Dave Ramsey, a traditional financial expert, expressed his strong reservations about cryptocurrencies during a recent call on “The Ramsey Show.” A caller mentioned that her decision to invest in crypto was divinely inspired. Ramsey argued that crypto’s primary record is extreme volatility, categorising it as a highly speculative asset with inherent risks.

When the caller inquired whether she should liquidate her crypto assets to pay off debt, Ramsey supported the decision, highlighting that doing so could alleviate their financial burden. Specifically, the couple faced $14,000 in student loans and $37,000 in auto loans. By selling $51,000 worth of crypto, they could become debt-free while retaining $9,000 in their initial investment.

Despite Ramsey’s recommendation, the couple hesitated to sell as they anticipated a potential future rise in crypto values. This mindset reflects a typical investor pitfall where individuals become overly attached to their investments, particularly when decisions are tied to emotional beliefs. Ramsey cautioned that this approach equates to market gambling, vulnerable to external influences such as policy changes affecting asset prices.

Raiding the couple’s mindset, Ramsey explained the sunk cost fallacy, which creates a reluctance to abandon a failing strategy due to previous investments. He provoked reflection by questioning if they would borrow against credit to invest in crypto, highlighting the irrationality of their current situation. Despite crypto’s previous performance, he urged them to utilise their gains to prioritise debt zero out, which exemplifies prudent financial behaviour.

Ultimately, Ramsey advocates realigning financial priorities, advocating that selling off certain crypto assets to settle existing debts is a more secure and beneficial choice, especially given the couple’s volatile financial stability. Leveraging investment gains for debt repayment remains a financially sound strategy, aligning with traditional financial prudence and risk management principles.