'I Splatted. It Hurt,' Says Dave Ramsey, Referring To The Sudden Call On His $1.2 Million Loans That Turned His World Upside Down

Dave Ramsey is renowned for his no-nonsense money management approach and clear-cut financial advice. However, Ramsey experienced a financial disaster that destroyed him utterly before he rose to fame as the personal finance expert we know today. He summed it up in an honest reflection: “I splatted. It hurt.”

In the late 1980s, Dave Ramsey was riding high. At just 28 years old, he had amassed a $4 million real estate portfolio, had a successful business and appeared on a straight path to even greater wealth. But things took a sudden turn for the worse. 

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The Banking Act of 1986 changed the rules for bank ownership, triggering a wave of buyouts and consolidations. The local bank where Ramsey had obtained his loans was bought out and the new owners, who didn't know him or care about his past success, called in his loans and lines of credit. Dave suddenly found himself needing to repay $1.2 million fast.

Ramsey was forced to declare bankruptcy without enough time to sell his properties or come up with the cash. He lost everything he had worked so hard to build. "When I hit rock bottom, it wasn’t a bounce back," Ramsey recalled. "It was a splat and it hurt bad."

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Ramsey had to dig himself and his family out of that financial disaster, but it was anything but easy. Suddenly, he had just 90 days to unload $1.2 million worth of real estate, but he couldn’t do it fast enough. Defaults, numerous foreclosures and lawsuits followed and it took three years for everything to fully unwind.

He and his wife Sharon had to take a long, hard look at their financial habits. They had to admit that their choices had led them to that point – there were no villains to blame, just their own missteps. They decided then and there that things had to change.

In his interview on The Street, Ramsey said they had to ask themselves, “OK, what about us personally and what about our behaviors, our habits, our decisions and our values was wrong that brought us to this moment?” It was a moment of brutal honesty, but it was also the start of a transformation.

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The pair resolved to take serious measures. They completely gave up trying to borrow money. Ramsey promised himself never to take on debt again and canceled his credit cards. From then on, they lived on a strict budget, drove an old, beat-up car and worked hard to save up. “It was so bad that I was highly motivated to get out of that car as fast as I could,” Ramsey said.

It wasn’t long before people began to notice Ramsey’s changes in his life. People urged him to share his story with others and the rest is history.

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