Before making a big luxury purchase, personal finance expert Dave Ramsey says to pause and ask yourself one simple question: “If we take the amount of money we’re getting ready to blow on this toy and burned it in the middle of the floor, would our life change at all?” If the answer is no, then you’re likely in a financial position to make that purchase, ethically, spiritually, and practically.
A recent caller to “The Ramsey Show” got an answer to that very question. Greg, a business owner from Phoenix, asked whether it was OK to spend $5 million on fractional ownership of a private jet. In other words, whether it was the right time to start enjoying some of the wealth he and his wife had accumulated.
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$45 Million Net Worth And One Big Question
Greg explained that, excluding the value of his business, he and his wife had around $45 million in net worth and $50 million in assets. If he included his business, their total value would jump to $150 million. “We've created quite a bit of wealth,” he said. “We are looking at taking advantage of the bonus depreciation for our business and we're really interested in some private travel.”
Ramsey didn't flinch. “You qualify financially to be able to do that. It makes sense,” he said. But he emphasized the key question about whether losing the money would change anything in Greg’s life. For Greg, Ramsey said the answer is clearly no. “It's not that much money” in the context of his overall wealth, Ramsey explained.
Greg's $5 million commitment over three years was structured with a guaranteed buyback, making the net cost around $3 million, even before any tax benefits.
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Ramsey added that in Greg's financial world, spending $1 million a year is like “other people buying a biscuit,” and said bluntly, “it ain't spit.” He also told Greg, “It makes sense for you in your world to never see another TSA agent,” echoing a comment Greg said his wife had made.
However, Ramsey didn't like tax breaks as the primary motivator. “Don’t use that to justify it. Do it because it makes sense and then take the tax benefits,” he said.
It’s Not About Impressing Others
Greg admitted that spending that kind of money makes him feel a little guilty because of his modest upbringing. Ramsey understood completely, saying that emotional discomfort is common when someone from a working-class background starts enjoying luxury.
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Ramsey explained that when he and his wife, Sharon, consider making large purchases, they ask themselves whether their generosity is in a good place, whether their life would change if they lost the money entirely, whether they’re trying to impress anyone, and whether they’d still go through with the purchase even if no one ever knew about it.
“[If your] generosity is probably far superior to this small purchase ratio-wise, then you are not spiritually or ethically or morally out of line,” Ramsey said. “You’re supposed to enjoy some of your money.”
Ramsey also reminded listeners that public opinion doesn’t matter much in these situations. “Critics don’t get a vote. They haven’t done what you’ve done. It’s not their money. It’s your money. God didn’t trust them with it. He trusted you with it.”
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