Yahoo Finance Dave Ramsey Shoots Straight on Taking on Employer Debt: 'So Your Employer Is So Poor They Require You To Advance Them?'
Respected financial guru and bestselling author Dave Ramsey has directly addressed a financial issue that could potentially affect many employees, especially those who travel for work and may be asked to advance expenses. Here's what Ramsey said.
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During an episode of the Ramsey Show, a listener called in seeking advice on why she and her husband shouldn't take advantage of getting credit card points for travel expenses required for their work but will be reimbursed by their employer. Ramsey responds directly, "So your employer is so poor they require you to advance them for your own travel?"
The caller appears momentarily stumped by Ramsey's blunt answer and laughs nervously before answering no. This did not deter Ramsey, known for his blunt yet fair financial advice, as he continued, "Well, why do they require you to advance them for your own travel?" Ramsey points out the ridiculousness of the caller's employer, saying that the caller is traveling on behalf of the employer, yet they're not paying for this travel in advance. Ramsey asks the caller whether the employer is making them pay for it.
In response, the caller revealed that this was just the established protocol of the business, and they're not sure why either, as no one has ever asked them. Ramsey explains the serious danger of taking on loans on your employer's behalf. He elaborated that if her employer decides not to pay them for one month, their credit cards still need to be paid off, not the employer who is left sitting with that debt. The caller acknowledges this is true.
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Ramsey tells the caller, "You understand that I'm the guy who's been counseling and coaching people for 35 years." In those years, Ramsey has seen this type of employer debt go sideways and shares that he once had a guy come to him with $11,000 on his Amex that was supposed to be reimbursed. Ramsey explains that when this guy went into the office one day and there was a padlock on the door, the employer had filed for Chapter 11 bankruptcy. The man who had taken on a loan from his employer was now with $11,000 on his credit card. Ramsey revealed that "Amex didn't care if his company went broke. They wanted their money."
Ramsey and the caller agreed that this was a problem, and the caller told Ramsey that they had not experienced the situation that Ramsey had described. Ramsey quipped back, "I know, but you're exposed to the exact same risk," and added, "All for a couple of airline miles that are virtually impossible to use? No, thanks." According to Ramsey, this is an example of how corporate America has conned its employees into taking out loans on their behalf with a promise of repayment, and the employees end up taking on all the risk. Ramsey adds, "These companies act as if operating this way is no big deal. Well, it is a big deal. And it's not a good way to run a business or treat your employees."
Ramsey advises the caller that he wants her and her husband to protect their income as it is their number-one wealth-building tool, as no millionaire has successfully built their wealth on airline miles and credit cards. In closing, he also warned, "If you play with snakes, sooner or later, you'll get bitten."
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