Why You Should Focus On Paying Down The Mortgage Over Investing
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- Опубликовано: 8 май 2024
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The Dave Ramsey Show mr Dave Ramsey I need you help I need to buy a newer car and I have a mortgage payment of $500 a month and bills up to 550 a month I make around 30,000 a year (in Arizona ) I want a 25,000 dollar car and I have save $11,000 cash you think I will still be good with a $500 car payment. Or it’s a bad decision can you please steer me in a right direction. I also have what I call an emergency fund of 5,000 dollars
i need helppppppppppppp . baloon payment questions
@@martingonsalez6635 here let me help you. Buy the cheapest most reliable car you can for cash.
J Faulk I did bought a super clean car for ten thousands dollars and we are really happy with it
@Martin Gonsalez congratulations on your maturity and discipline. If only I could have convinced my sister do not take a car payment
I just sold a property in Portland and I'm thinking to put the cash in stocks, I know everyone is saying its ripe enough, but Is this a good time to buy stocks? How long until a full recovery? How are other people in the same market raking in over $450k gains with months, I'm really just confused at this point.
Yes, a good number of folks are raking in huge 6 figure gains in this downtrend, but such strategies are mostly successfully executed by folks with in depth market knowledge
You're correct; I always advise new investors to seek guidance from professionals and to invest under their supervision for successful long-term gains.
I diversified my $400K portfolio across multiple market with the aid of an investment advisor, I have been able to generate over $900k in net profit across high dividend yield stocks, ETF and bonds in few months.
@@_LauraRowley How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?
Wow...I know her she is a licensed broker and a FINRA agent she is popular in US and Canada she is really amazing woman with good skills and experience
I’m paying off my mortgage this month. Single female 45. Yas.
God bless you 🙏🙏🙏
Nice, I paid off my first when I was 43, the second will be paid for at 54 or sooner and the third I shooting to have it paid off by 60.
StirCrazy congrats
U still single ;)
@Leerik Yasuas🤣🤣🤣🤣🤣
Anyway Congratulations for paying off your mortgage, be careful there are a lot of men out here looking for a sugar mama. My mortgage is paid off too but I will never let anyone in my real life no that!
A year and a half ago I came across Dave on RUclips. Yesterday I paid off my house, and all my other debts are long gone. 30 years old. Thankful for Dave.
What's your yearly income?
@@TT-by7tv I have a pretty good income now.. I live in India so I doubt the numbers will make sense compared to US.
Wow
Impressive!
Am going to focus on paying my mortgage
I paid off my house when I was 39. I'm 52 now. It was the best investment I ever made...in terms of emotional health and financial stability. We have been debt free since...we live in California so not a cheap place and my Wife was a sahm...what did we give up to do it? New cars, eating out, fancy vacations and so on...now we have newer cars, eat out often, have great vacations, and a secure retirement. My peers, who thought we were nuts driving those beat up cars, are STILL paying on their houses and can't afford to do what we do...so, save early and avoid debt early for a nice long term life!
Love this! Truly inspirational! May God continue to bless u and your family🙏.
Thanks for sharing your success. Everyone in 30s and younger feel like they have to be 20 to enjoy the world, as if civilization will end.
Sacrafice comes early or late for sure
@@markcrisp07 To be honest...The sacrifice was not major...My car drove, it had AC, it started most of the time...we bought 80 percent the house we could "afford"and it was a fixer. (Still there!) We went to the beach, lake, river, community pool, instead of Disneyland... Looking back I don't feel like we gave up that much...is eating at the bar and grill better then sitting at the table with your family? Is WAITING till the kids could actually ride the rides at Disneyland horrible? Is WAITING a few years to buy a three year old Honda Civic terrible? For me it was fine. I live my life and married my wife...I'm not out to impress anyone but her; if she is in the mood to be impressed! (BTW...when the kiddos got older my Wife went back to work...first part time and now full-time since the kiddos can drive. The money she earns is not for core bills or core savings. It is for "fun"...as her income increased so has our fun budget.)
Absolutely...great advice!
We are two months away from paying off our mortgage. It’s worth the challenge guys. Age 39 and debt free with three kiddos.
How??!
BrewersArcade sound like you did a 15 year note!
Congratulations! I'm 30 with two kids, hope my wife and I can do the same by that age.
Shed some details. 33 here with three kids and would like to do the same
Keep at it and then given yourself a debt free scream.
So the message Dave is trying to send here is: yes you can mathematically earn more money by aggressively investing more while paying down your mortgage. However, history has shown us that human nature and unpredictability is more powerful than mathematical equations. You may lose your job, or go through some kind of financial crisis. You would rather have that house paid off rather than trying to cash out your investments during a financial downturn. Life is unpredictable, so paying off your debts give you a peace of mind.
I would rather lose my job with a 30 year mortgage and have a bunch of money in addition to my emergency fund sitting in non-retirement investments than lose a job and have a 15 year mortgage I’ve been aggressively paying on with no non-retirement investments
My plan therefore is to get on a 30 year mortgage, use the lower payment to invest more, and eventually I will reach a point where that investment account could pay off the house entirely. At that point I will decide if I want to, or if I’m happier with keeping the investment and let it grow
@@jerrydixon3862 good idea, but there's also a possibility that your investments won't grow. Not everybody is good at investing. For some it's better to just pay off the house, and at least save money from interest, and then they can "learn investing" by failing multiple times, but whatever loss happens, they will still have a house to live in
@@jerrydixon3862 I agree, keep the mortgage and continue to invest. Ironic that the show that says cash is king tells us to put all our cash into the mortgage rather than keep it!
I dont see why you can't just do a little of both
For newbies, be aware that this is a grossly oversimplified scenario. For one thing, you can't get a mortgage on an investment property without at least 25% down payment. Two, it's easy to see comps for house purchase prices, but it takes a lot of research to understand the comps on rent prices. The trick is to find a place where renting is more expensive than buying, but those places are less common because of this very type of scenario. Three, you have to remember that rent number he's using is supposed to be net income, not gross. So you have to think about costs for taxes, insurance, maintenance and vacancy when you're researching investments. All that said, real estate investing is a good tool for wealth accumulation. But it isn't foolproof.
Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Personally, I can connect to that. When I began working with "Colleen Janie Towe’’ a fiduciary financial counsellor, my advantages were certain. In these circumstances, I would always advise getting professional help so they can steer you through choppy markets and just give you indicators and strategies for knowing when to enter and exit the market.
@@rogerwheelers4322 I will be happy getting assistance and glad to get the help of one, but just how can one spot a reputable one?
@@eloign7147 My advisor “Colleen Janie Towe” is a highly respected financial consultant in the industry. For further information or to connect with her, a simple online search with her name will suffice. I wish you every success in your endeavors
I just paid off my mortgage in less than 15 years and I just turned 49 ,such a great feeling not having a mortgage anymore!!!!
Paid off mine in ten years and retired 10 years earlier than usual.
had you not paid it off, you could have retired even sooner... the math doesn't lie.
If you feel the emotional need to remove debt first, go for it. But maths are facts, better to invest.
Chris Banana retire with a mortgage...good idea.
@@ElectricBlueIX right
Chris Banana if you pay off the mortgage you have an insane increase in cash flow. Investing an extra 1000 a month compared to having to keep paying the mortgage minimum every month
@@jalenmalone7808 agree
I admire the financial independence of people, But you can live better if you work a little more. After watching this I think there are people out there, on the extreme, who plan to die early just to be able to retire early. To each their own but to me, retirement isn't just about not having to work, it's about having the freedom to do whatever you might reasonably want, such as travel, buying things, enjoying life, etc. I don't think I could retire with less than $3m in income-generating investments, maybe $2m at the very minimum. I plan to work until I'm at least 45
Nobody knows anything, you need to create your own process, manage risk and stick to the plan, through thick or thin while also continuously learning from mistakes and improving
@@MarcelPhilips Having an investment adviser is the best way to go about the market right now, especially for near-retirees, I've been in touch with a coach for a while now mostly cause I lack the depth knowledge and mental fortitude to deal with these recurring market conditions, I netted over $220K during this dip, that made it clear there's more to the market that we avg joes don't know
@@harrisonjamie794 Who’s the person guiding you
@@MarcelPhilips credits to KRISTIN GAIL CUNNINGHAM, one of the best portfolio managers out there. she's well known, you should look her up
@@harrisonjamie794 Thank you, I just checked her out and I have sent her an email. I hope she gets back to me soon.
I had to make this decision also. I did a hybrid approach, maxed qualified retirement savings, cut unnecessary spending, and threw everything else at the 6.25% mortgage. I definitely noticed that during the Great Recession, those with paid off house who lost their good job could take any low paying position and still pay bills.
refinance!!
6.25 is very high, I refined mine years ago at 2.875. Paid off now, saved 50k in interest even with that low rate...
@@Nolaman70 Sounds like this might have been awhile ago, like finished paying it off before 2008, but I could be wrong.
We paid off our house asap.
It was paid off by the time I was 35.
Nothing is more valuable than "peace of mind".
No obligations.
No debt.
That is real freedom.
Property tax and escrow is a monthly obligation forever...and your house will be taken if you don't pay them...that's eternal indebtedness
@@daveshilling2673 Luckily I live in Spain. It is an easily manageable 600 Euros per year, so like 50 a month.
Stop paying the taxes and you will see who really owns your home. Taxes is debt idiot.
@@daveshilling2673 not quite that is a good debt to have but dave failed to teach you that
it's always better to own than to rent
Absolutely! Well done 👍🏼
Banks are selling mortgages. People always say it's a good option to buy at discount, but with the market turmoil and everything at stake in present economy, I'm thinking of buying stable coin to hedge against inflation, or is it all right saving over 350k ?
There are options that spread across multiple banks. I use a non-beginner broker that protest up to 3 million dollars and provide 4.58% returns on cash, it's always a good idea to consider working with an advisor for financial planning
Agreed, financial advisors play a key role in portfolio allocation and i've been using one since late 2019 just before rona outbreak. So far, I'm barely 25% short of $1m ballpark goal after subsequent investments.
@@MarkGrimm8 please excuse my curiosity, would you mind sharing more info on your advisor? I’m in dire need of guidance
Benevolence, this reference seems valid.. Just inputted her full name on my browser and found her site without sweat, 20 years of experience is certainly striking! very much appreciate it
I paid my home off immediately! The big key to this argument for me was PEACE OF MIND! I have never had more peace of mind than when I paid off my mortgage. The rate of return on a paid off home is A LOT! Way more than nickle and diming a few percent!
You were the caller?
I paid off my 30 yr mortgage in 4 years.
I will be mortgage-free in just less than 4 years. Thank God.🙏🏿
Did you worry a lot about it before you paid it off? Personally I’ve never had trouble sleeping over a mortgage. (I amortise a lot but have quite a lot left and it's not like I walk around feeling weighed down by debt)
It's just a different feeling waking up in the morning knowing that the place is yours.
It's also nice knowing that if you lose your job. No bank will ever be calling and threatening foreclosure.
Worst case scenario. I can cut some lawns every month and pay utilities.
We're paying off the house in three more days!
🎉
Happy for you
Just paid off my mortgage of $179K today and had some reservations about it. I earn quite a bit and one of my businesses just underwent acquisition so I came into a large chunk of cash. Everyone was telling me to invest in the S&P, instead of paying off my mortgage, etc.. Sigh.. thanks for reaffirming me. Now I am 100% debt free. 29 married male.
YOOHOOOO. Sounds goood.
Pay it off save all that interest, you can invest now...good move!
Just curious what is a great idea? Does this put you in a different tax bracket paying off so much at one time. would it be better paying a couple thousand dollars a month to principal until it's paid off to stay in a lower tax bracket?
Yikes you just knee capped your financial ability for compound interest to pay down the cheapest mortgages in history.
Good choice. That S&P just dropped but you own that house 👍
This guy is killing it! Good for him! Dave, great advice! You have changed mine and my wife's life. We are 30 and 28 years old and just got our house paid off. No inheritance or anything. Just hard work. Keep up the good work Dave!
Literally the exact 5 words I said when the video ended! "This guy is killing it!"
Where do you live? If it’s not California, New York or any other big cities with expensive real estate, then it’s not that impressive. I bought a townhouse in SoCal and my dream is to pay it off. At 28 years old, the idea of paying it off right now is ludicrous
@@terrythompson1548 Right? Sounds like someone is salty because they cant do it because of where they choose to live. Good for them. I'll be about 40 before I pay mine off unfortunately, but no need to hate.
Daniel Altherr, Congratulations. One less outgoing bill and the bank no longer owns your house. Mortgages are amortized meaning the interest payment rate is much higher than 3.75 (example) in the first part of the loan.
Alan Nguyen - I totally hear you. Dave Ramsey’s advice really only works for a subset of people. It’s not for everyone. If my mortgage was $150-$200K in bumf*** nowhere...sure let’s plan on paying it in 10 years. I also live in SoCal and that’s just completely nonsensical.
Yes, “ The money is cheap, but the freedom is priceless”.
How am I more free with a paid off house but no investments making income versus carrying a mortgage but also having investments that out perform the mortgage rate by 10 fold?
Five Books ikr
@@fivebooks8498 I believe Mr. Ramsey answered your question in the video.
Stranger Danger
I didn’t hear it but If he did then it was a dumb answer. If investing my money out performs my mortgage payment then I am more free going that route. How can anyone dispute that? Numbers don’t lie.
@@fivebooks8498 exactly
We paid off our house and are investing like crazy!! It's a great feeling not having that debt.
@Al Ex Nope - we have a great retirement set up. In fact, if I retired now, I would get more money than I do working. But, I keep working so I can keep investing. We invest the house payment we used to have to pay. Why give money to the banks?
@Al Ex I know what you're saying, but the peace is worth a lot. And we're doing fine.
@@jimroscovius peace of mind is worth more that investing.
We purchased our home 10 months ago and plan on paying it off in 10-15 years. God willing once I retire from the military. I'll be 45 and my husband 53!
Safe jobs ar the best. You will retire early, establish a business and will lead a great life.
Military pays well.
@@akastenas MILITARY DOES NOT PAY WELL!!!
@@algorhythm4593 it does pay if you take advantage of your time in and the benefits. Plus if you get a retirement plus disability it really pays
Oh good luck to you and thank you so much for your service. Please keep safe.
Great job and thank you for your service.
I just want to pay off mortgage for that piece of mind and not relying so much on my employer.
*peace
Peace of mind? Try not paying your property taxes. The state owns us all unfortunately
Property tax can't be avoided. Mortgages can. control the things you can. Better to worry about a property tax bill rather than a property tax bill AND a mortgage. Both will take your house.
@@RagnarLothbrok2222 Homestead Act(can't lose a homestead to taxes), and I live in the Largest American city without a property tax.
the State may own You. not Us
I hear this stated a lot, look up Homestead Act, and file with your State
A Olvaar Unfortunately, for Californians, it only protects $75k.
I moved to my retirement area, built a house, and I paid off the mortgage 3 years before retirement. It makes being retired sooooooo much easier. Plus my property taxes are fairly low. I suggest this to anybody.
George Sealy that’s great advice but this guy is 35. He will probably work another 25 to 30 years.
We refinanced twice to reduce the time on the loan and got it down from 30 to 22 years. We currently have zero debt and the mortgage will be paid off next month! Dave, you have been an inspiration to both my wife and I and my son and his family.
This man don’t miss, two years later and he was absolutely right about home value and what the extra money should go to.
So I did some math regarding paying extra toward mortgage principle vs investing the money in a mutual fund that returns an average of 9% (e.g. like an S&P 500 index fund).
Over 30 years, it's a HUGE difference. Much more money made with the mutual fund that if you pay off the mortgage early, then invest it.
$1000/mo over 30 years = $1.7 million (1.3 mil pure profit)
$3500/mo over 14 years = $1.1 million (550k pure profit)
(numbers are based on my $2500/mo mortgage, incl insurance and property taxes)
This caller has his act together.
A real, solid guy. Must be a great father, saving up all that cash for his kids.
Dave Ramsey's insights have been a game-changer for me! His practical approach to financial management has empowered me to take control of my money and work towards a debt-free life. The Total Money Makeover is my go-to guide, and I appreciate how he breaks down complex concepts into easy-to-follow steps.
I'm surprised you mentioned her name. She is highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. You can check her out online. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
Paid off my mortgage back in June. Love being debt free!
Secured debt is good. Not all debt is bad. Rich get rich with interest arbitrage. Borrow cheaply and invest.
@@korswe ain’t no good debt
Could you use a 'companion'? 😉
@@korswe I bought my 1st home at 19. During the housing crash, I bought two nice single family homes. I combined both into one mortgage...that I paid off. If we ever have deals that make sense; I'll borrow and invest.
Smart girl.
In my early 20s someone gave me a advice about saving which I took, built my house when I was 30 and finished paying it off now at my 32. I got only 3 credit cards with no debt. I did not go out much I only went to college and had a normal life. I got 2 kids now and im so glad I took that advice seriously.
That's wonderful, Victor! Congratulations. What a great example you're setting for your kids.
You paid off a house in 2 years!?!
Oh my
@@razojacqueline He saved from when he was 20 to 32. So instead of paying a mortgage on a house of say 1000 dollars a month he took that and saved it for 12 years. That's 144,000 without even investing it. So he could easily buy a 200,000 dollar house and pay it off in 2 years
Are you romanian? That way.
Why do you need credit cards if you own your house and are debt free isn’t that what savings are for?
That is a really good point about being able to be flexible with your job. That house can chain you to a desk and take years from your life!!!!
If I thought I’d actually invest the money I’d wait to pay off my s with the 4% interest rate but i didn’t trust myself. I took the safe route and paid off my house.
crypto or stocks
@@jayleenrowe8337 crypto
@@onkelzzicke29 how do i earn from crypto trading
@@onkelzzicke29 how do i reach your trader
@@onkelzzicke29 I am convinced now to contact her , thank so much you all.
To sum it up - purely economically it's not the best decision, but psychologically it can give you an advtange that translate to a economically good decision.
That just means you are psychologically efficient. Ignoring mathematical truth for a false peaceful feeling is harmful. Though to be fair, the decision largely depends on the interest rate of the mortgage.
Ignoring the fact that money isn’t real and no amount of math can save you from your own Zimbabwean event… buy dirt.
Thank you for all of your great advice uncle Dave!
Just "bought" my home at 59! I am throwing all I can at the mortgage and have it figured out to be paid off in 12 yrs. May be late in life to do this but renting made no sense at all.
It's all about locking in your cost of living. When you rent, your housing cost tends to rise over time.
@@fgjf1079 at this point of my financial life it was a smart move, at least to me. I was renting to own. The house appraised at 172K and I was able to purchase it for 141! I didnt gain all my rent paid back, but the 30k in equity made it an easier decision.
@@fgjf1079 actually it's never completely locked in. The home payment is set if you have a fixed rate, however, taxes and home insurance can go up resulting in a higher payment
That's minimal compare to the grand scheme of things. I just went to an open house, and noticed that the previous owners were paying $700 in ANNUAL property taxes on a house that is worth 700k. I'm in California, so that's what I mean by locking in costs, as that person should really be paying 7-8k on that house, but Prop 13 helped them lock in that cost. Sure, certain expenses will go up, but you have a little more control, when you're the owner of the property. When you rent, the landlord can raise the rent for no reason.
Really? That makes me feel better. I'm in my mid-40s thinking about buying a house.
The main takeaways:
1. "Rainy day fund", 401k, and college fund come first, those are not "extra income"
2. Mathematically (based on mortgage APR vs investment Annual Return) investing should have a better outcome, BUT
3. Statistically, "successful" people paid off their loans early
4. Once debt-free, people can afford to take more risks, and more options in life choices open up
@@slmunney7760 Agreed. Its more like "they were successful first, and that allowed them to pay off their mortgage". Not "paying off their mortgage was a really good financial decision and therefore they became successful".
Moral of the story: paying off your mortgage won't make you successful, in fact its a suboptimal use of your money.
@@denisl2760 How is paying off your mortgage a suboptimal use of your money, if the bank makes the majority of the money from your keeping it?
@@Musicienne-DAB1995 there's way better use of capital than paying off a 2.5% mortgage
My plan is to have 100k in investment, 100k in a down for a house, then pay the house as quickly as possible
Suspecting folks invested in hot markets while holding low interest mortgages, when investments compounded there was ample (and more) cash on hand to pay off the mortgage, which is the unmentioned piece is this equation.
I paid my house off four years ago, no debt, decent regular income, careful personal expenditure, etc and I cannot begin to tell you the peace of mind I have now. Everything I earn is going towards my retirement, lifestyle and charity and life couldn’t be better. Without knowing about the Dave’s baby steps before, it’s almost as if I had followed them to reach the position I am in now. All the advice from this channel is 100% on point. I wish everyone all the best in their finances. Thank you Dave 🙏🙏
I paid my house off when I was 33. Best decision I ever made. Most of the house was paid for with a income of under 40k
How much was your house? Dear god.
Following in similar footsteps.. at 29 and 1/3 house paid.. hoping to get it paid by 33ish as well. House bought at 290k
ineedhoez 193k
Yasai Picles You can do it!
This is terrible advice. The opportunity cost is to great to pay off a mortgage charging 3.5% interest. Especially if the person he is using as example does not have the $$ to pay off the full mortgage. You know what home owner is more likely to get reposted. The one with the least $ left on their mortgage. Smh
Totally debt free including home with $70,000 in the bank 😁 saving about $1,500 per month
Invest that like crazy.
Time to hit the mutual funds hard. How old are you?
Congratulations
That is awesome!
You're saving in a month what some people bring home in a month.
Dave Ramsey would hang up on me. I buy a house, have a mortgage, then move and rent out the house and have a tenant pay the mortgage.. I've done this a few times over and have hundreds of thousands in equity. Of course there's some risk, but the cash flow more than covers any of my fears. Paying off one house won't let you retire early without a lot of aggressive investing for years after it's paid off.
I agree. I have done the same. Mortgage is a great debt to have because of the low interest rate. It is foolish to pay it off so quickly when the excess cash can be invested elsewhere for higher returns, so long as you have sufficient emergency cash.
He probably wouldn't hang up but he'd probably laugh.
Remember he used to do that? That's how he ended up bankrupt.
The truth is, such a method has left many by the way side, but the method he promotes now has not led anyone to bankruptcy.
It's about which method will most likely provide you with a stable future
On track to pay our house off in about 4 1/2 years. I'll just turn 36 and my wife will just turn 34. I want our 2 kids to one day inherit something. My wife and I started from scratch and didn't receive any inheritance. Paid off all of our debts including cars and student loans. All hard work and team work. I can't wait till the day when we're finally mortgage free and debt free!
I am in a similar situation except we will not be able to pay off our hone for another 15 years. In San Francisco the homes are very pricey. Our house has increased in value by $900,000 since we purchased it 17 years ago. We are thinking about selling it and moving 1.5 hours away and paying cash for a new house and banking $200,000. We would then be able to save $80,000 per year towards retirement.
@@mocheen4837 That sounds like a good idea. That kind of plan could set you free financially. That's the goal.
I paid over 80k in interest in the past 14 years. 😔Think of what I could have done with 80k!! I am still working on BS 6. Not having a house payment will be WONDERFUL!
After 14 years, you may have saved up enough to buy your house outright in cash, but you accelerated that timeline to buy it 14 years earlier by using the bank's services. If you had been renting you would have zero equity built up. How much equity do you have vs how much in interest you paid? Tell the whole story
@@krillansavillan I agree. A mortgage is a useful financial tool. Go use it to your advantage if you can. There's nothing wrong with a car loan either if the interest rate is reasonable. You'll be driving a car either way, so might as well take money and use it to your advantage
@@erikrohr4396 That's exactly right. If you're afraid of debt you will never get wealthy. Not unless you have a super high paying job. For the rest of us, if cheap loans are available you'd be wise to take advantage of it. No sense in paying off a 3% mortgage when that money could have been used to make 10% returns.
How much you would have paid in rent if you rented?
Property taxes and insurance still adds to 550/mo
I’m glad that I found your channel. You have great ideas and plan to adhere to them. 👍🏽
Ramsey uses bad math and bad logic when he cites his millionaire study.
He essentially says:
"85 percent of millionaires paid off their house quickly, therefore paying off your house quickly increases your chances of becoming a millionaire"
First off, at the very least he should survey the population of people who paid off their house early, millionaire or not, to see what percentage of those people become millionaires. Then, say he finds that "85 percent of people who pay off their house early become millionaires", he could at least say that "paying off your house early means there is a good chance that you become a millionaire". But he can't even say that with the current study because he is not sampling all the people who pay their house off early.
The second problem with the way he talks about the study is that even if he finds a correlation between paying off your house early and being a millionaire (which he doesn't because of the flawed design explained in the preceeding paragraph), correlation does not necessarily mean causation. Perhaps another factor, such as being financially prudent and having a good income leads to both millionaire status and paying off your mortgage early.
And the real problem is he may be right, that given the risk-profile of carrying a mortgage and the psychological effects of paying it off mean that it is sage advice to attack your mortgage aggressively-- but his flawed reasoning perpetuates poor mathematical, logical and scientific thinking.
We paid off our (duplex) home in August. What a great feeling pulling into the drive knowing we have no mortgage. Interestingly enough some "experts" advised us not to pay off mortgage and instead use money other ways. But in our gut we knew we needed to do this and we have no regrets.
That was the most realistic Dave caller I've ever heard. Soooooo happy to have heard that. The others make me feel like I'm not doing well at all.
Our house isn't big and many may consider it a starter home, but several years ago at the age of 41, I paid it off. Now, all I need to pay for is property tax and insurance. It's a great feeling and gives a lot of peace of mind
Plus maintenance. That's why you should always rent. Roof goes out, you're fine.
@@thomask8298 Folks who own a home dept free are usually net worth 10 X more than someone who stays in an apartment. If my roof goes out, home insurance will take care of that.
@@767bobthat is of your roof is damaged by a covered event. Eventually your roof will need replacing due to age, which is not covered by homeowners insurance. Also, you will at some point need new HVAC equipment, water heater etc. I don't know if renting is better than buying but every time I have to replace or repair something in my house, I wonder .
@@Srode1999 Life is not fair and free, planning for the bad things to happen is all part of the responsibility of owning a home. It is no different than owning a car. In the long run, it is cheaper to own a home, not paying for rent. It is hard to see this when someone is in their 20's and 30's but after the mortgage is paid off, and time goes by, the clear winner is owning a home. Start young, plan, save and invest (owning a home is part of the plan) it gets easier as we all get older. Most of these videos paint a dooms day scenario which is sad. It takes a while but the light at the end of the tunnel will get brighter. One more thing, do not become house rich and cash poor. Too many people focus on what their net worth is because of their home's equity meaning buying a home bigger than what they can afford. A smaller home with a ton of money in savings and investments is the way to go. Take it from me, by thinking this way the cost of maintaining a home looks small.
@@Srode1999 With a house, we have to plan by saving for things to happen. When this is done, then dealing with big repairs that are not covered by insurance will not become a big deal. The main thing to do is to make sure to plan, save and invest. The house is a major part of the plan which becomes less of a big deal as the savings and investments become much greater than the value of the home as the years go by. This is hard to see in the beginning but done correctly, it will all work out.
I agree that owning a house is not cheap when repairs have to be made. But believe me, in the long run, it ends up being a lot cheaper than handing cash out that you will never see again for rent. Many years ago a few of my friends did not like the whole thing about owning a home, they sold their homes and as they got close to retirement they had little saved. A mortgage stays fixed while paying off while inflation continues to make the rent go up. I know, taxes and insurance rates go up too but that is also part of the planning when buying a home. Right now for me, with my taxes, insurance and heat/electricity that I pay is nowhere near what the rents are going for now.
Our circumstances are such that we paid off our mortgage the year my wife retired and two years before I did. We didn't follow Dave's baby steps (not knocking the Ramsey system at all) but were already deep into living (marriage, jobs, children etc) before we even heard Dave Ramsey on the radio. However, paying off that mortgage has had a tremendously powerful psychological effect on living. Dave talks to it: you now own the property. It's all yours. No one else has a claim on it. No one can kick you out as long as you pay the state and municipal taxes. It's freedom, folks! And it is wonderful.
Desperately want to clear my mortgage. $198K to go. I’ve paid just over half already & at 46 I’m still plugging away. Will get there! 🤞🏼
Easiest reason to listen to this advice. In a recession or job loss what is the first thing you have trouble paying. The biggest expense is rent unless you take out more credit cards then your rent. Paid off my house at 35 and I promise you I have never felt so rich.
Well done. I’m trying to do the same. Security & peice of mind is paramount
I suppose there are some people who want the "peace of mind" & I understand that, but I prefer a calculator. My mortgage is costing me 2.7% & my stock portfolio is making 15-20%.
Yeah with current affairs, debt is pretty cheap and inflation melts the ice cube of cash
I work for a financial institution and I can tell you that they LOVE people like you.
Dang what you investing in to get 15-20%
With a 2.7% mortgage and inflation what it is, you are being paid to borrow in terms of real return. That mortgage payment will never go up even though your home value will. The longer your can take to pay the house off with effectively free leverage, the better. This is how the rich get richer.
You’re smart. Everyone else commenting aren’t there yet.
This is the best thing I ever saw. Ramsey is a gift, brothers and sisters.
Cedric Steven Irving so true. He’s a blessing to us all 🙏🏼 So much wisdom in this advice. Grateful for it.
Yep, good stuff
Changing lives!
I totally agree. I was struggling with this decision and he just helped me seal the deal.
@@danidtv5823 Can't lie with the results. His research reflects the psychological difference 'everyday millionilaires' develop practicing his principles. I wish I could get a scholarship...
I paid my house in cash at the age of 35; after the military, full time law enforcement and full time college! Three degrees later (AAS, BAAS, MBA) debt free, disposable income, passive income and living a good life
This guy would be proud of you
Awesome, thank you for your service.
This is the single best explanation for the part of this plan that sends the logical side of my brain to the moon. Kudos!
Ramsey’s advice is based on psychology, less on math. Good advice if you’re horrible with money. Subpar advice if you’re trying to maximize wealth.
Yeah, i don't understand. For example, if you can make a 10% return on stocks vs losing 3.5% on your mortgage, I'd rather invest and pay off the house less. Keep in mind this is an oversimplification that doesn't include PMI but i'd think that's minimal. Property taxes, and insurance shouldn't be factored in as they're charged regardless of if you're home is paid off or not.
I was having this exact thought.
For example, my mentality is to pay off real estate investments over my own private mortgage. Why? Well I bought and paid off a duplex that's generating income for me for the rest of my life and that investment is paying off my private mortgage eventually. Also, if I buy cash other investments/ real estate, they can also help with my living expenses. These are income generating investments, not liabilities like a private home.
Yeah most people are not good with money though. That’s why they watch this show or call in lol
👏🏾👏🏾 it’s interesting to see different mindsets .. a person seeking future wealth beyond after mortgage is not going to pay down his mortgage but rather TAKE the risk and invest .. flip side the person that just wants to be mortgage free pay down their mortgage but then what happens are that ? Still not much wealth you have built up .. option are low as you would have to save again .. mostly likely still be working .. Equity is stuck in the house (no liquid funds)
The variable that no one on this thread is considering is the individual person's price in perceived risk.
Your stocks make an average 10% return. That's nice. What happens if they don't?
That house gets paid off, it will always be paid off.
We might be more concerned about paying off our mortgage if it were larger (or if our jobs weren't as secure), but right now, investing offers a better return. Bloomberg and other finance media have been documenting stories of people making over $250k in a couple months.
Invest if you actually want to be wealthy. However, you should get guidance from a financial advisor if you want to create a successful long-term plan….
You're wasting valuable time when you're trying to clear your mortgage. I'm not the only one who realizes this,I started investing sometime in 2018 and by late 2019, I pulled a profit of over $850K, I was basically just following the guidelines set by the financial advisor I use
Please who is the FA that assist you with your investment and if you don't mind, how do I get in touch with them?
I started out with an FA named *Sharon Louise Count* Her honest approach gives me complete ownership and control over my position, and her rates are incredibly affordable given my ROI.
Thanks, I just googled her name and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
After a terrible 2022, shell-shocked financial backers have a lot to think about and losses to recover from. An expansion report and a wealth of other data did little to alter assumptions that the Central bank would likely keep raising interest rates regardless of whether the economy slows down. This implies that portfolios will experience more losses during the first quarter of 2023. I'm currently at a crossroads deciding whether to exchange my $250k security/stock portfolio; how might the continuous market volatility work to my advantage?
Concentrate on two main objectives. First and foremost, keep yourself safe by knowing when to sell stocks to reduce losses and maximize gains. Second, prepare yourself to gain from a market turnaround. I advise you to seek the advice of a representative or financial counselor
@@user-vk8vu4li2x In fact, ever since Coronavirus, I've been in regular communication with financial examiners. Nowadays, buying moving stocks is quite easy; the trick is knowing when to buy and when to sell. The section and leave orders for my portfolio are made by my counsel. accumulated more than $550,000 from a $150,000 savings that was initially stale.
@@ThomasWilliam-sw8ms Please provide the information for your investment advisor here. I really need it now.
@@user-vk8vu4li2x She is KRISTIN GAIL CUNNINGHAM , my consultant. Since then, she has devoted section and leave attention to safeguards that I have been keeping an eye out for. You can locate information about the chief online, on the off chance that you're interested. I made no regrets about substantially adhering to their exchange strategy.
@@ThomasWilliam-sw8ms sincerely thank you I looked her up on the internet and was awestruck by how qualified she was; I contacted her since I need all the help I can get with canning. I've just scheduled a call.
I just paid off my car, so I can only imagine the peace of mind of paying off a house and never having any debt ever again.
investing requires good experience and knowledge to carry out a good and successful trade, I have lost a lot trying to trade all by myself May I ask which investments are good??>>>>
I understand your concerns, my friend. I recommend exploring passive index fund investing and expanding your knowledge in this area. Personally, I experienced both successes and challenges when initially seeking a reliable passive income......,
how do I get in touch with this consultant that assist??>>>>
STEPHANIE KOPP MEEKS, that's whom i work with look her
Thanks for these recommendations.....,,,
Paid off two houses and totally debt free, 50 years old and wow does it feel good! thanks Dave Ramsey!!
This is huge, well done 👍🏼
@@Red_1976 thanks Red76!
This was really great, thanks Dave
2 kids, currently 39 and will pay off our 375,000 original mortgage loan in 4 years. Also maxing out my 401k ( putting the maximum allowed amount, $19,000 for 2019). There is so much controversy on paying off mtg early vs investing it’s making my head hurt. It’s nice to know Dave’s in the same lane of thinking, although I never employed his money strategy, simply lived within my means and stayed out of debt.
Man, that guy has been stashing away money like a squirrel with nuts.
Must be nice.
He has a 140k salary, which probably helps
@@kimpeater1 didn't he say he makes 140k a year
@@Iforgothowtodothis yes he did
@@lovedefeatsus Nope he said his house hold income is 140K. And I dont think that is a high income.
Totally agree with Dave on paying off the house/condo/townhouse to own where you live free and clear. You never have to worry about foreclosure and living costs are extremely low with no house or rent payment. Even with a modest income we can live a decent middle class life in retirement due to our paid off low overhead condo. I know lots of folks who struggle due to still having a mortgage in retirement. Good advice!!
Only part true. A significant portion of most mortgage payments are taxes & insurance. They never go away. Like health insurance, they've inflated the cost of those two by hiding the cost from the consumer.
@@rangerdoc1029 if you can't afford the property taxes, than you for sure can't afford the mortgage payment
@@rangerdoc1029 paying property taxes is still cheaper than paying rent!
His final points are good. We want to pay ours off so we don’t have to stay in jobs we that stress us out when we’re 40.
Ramsey uses bad math and bad logic when he cites his millionaire study.
He essentially says:
"85 percent of millionaires paid off their house quickly, therefore paying off your house quickly increases your chances of becoming a millionaire"
First off, at the very least he should survey the population of people who paid off their house early, millionaire or not, to see what percentage of those people become millionaires. Then, say he finds that "85 percent of people who pay off their house early become millionaires", he could at least say that "paying off your house early means there is a good chance that you become a millionaire". But he can't even say that with the current study because he is not sampling all the people who pay their house off early.
The second problem with the way he talks about the study is that even if he finds a correlation between paying off your house early and being a millionaire (which he doesn't because of the flawed design explained in the preceeding paragraph), correlation does not necessarily mean causation. Perhaps another factor, such as being financially prudent and having a good income leads to both millionaire status and paying off your mortgage early.
And the real problem is he may be right, that given the risk-profile of carrying a mortgage and the psychological effects of paying it off mean that it is sage advice to attack your mortgage aggressively-- but his flawed reasoning perpetuates poor mathematical, logical and scientific thinking.
I don’t pay rent or mortgage. I live in a van down by the river!
Sounds perfect.
Are you a motivational speaker by any chance?
Do you own the van outright?
Matt Foley lives rent free!
I got really frustrated living in a very expensive city. Housing prices went up by 35% this year. Mortgage rate 7%+ I can do a 35% down payment on a home, but I am thinking about moving to a city an hour away. Its around 40% cheaper there. I want a place to live that is paid off asap.
This guy is in amazing, got it all together! Good for him
Dave you are a smart guy. It is exactly what I have done over the years. Ive had 2 mortgages in my life on 2 different homes. Paid off one in 6 years the other in 4 years.
This is amazing. I’m trying to pay off my first home & it’s tough being a single parent. Takes double the time but I’m still plugging away.
Dave, you always recommend paying off your mortgage over investing. Please give an example where you break down the numbers. I have run mortgage and compound interest calculators, and can't find the way this makes sense. Aside from taking your word, the numbers don't add up. Thank you
Because it doesn't make sense. Dave gives terrible investment advice.
Dave is clear, it is not about math. It is about peace of mind and emotional health!
Key point: your mindset changes when you are debt free. Been following Dave and Chris, only have 15 yr mtg left and I do think differently now about money and life.
Wow this a great video, this helps me to better understand why you would pay off the house before investing. I know that people are going to ask this on my youtube channel, so this helps me better understand how to answer their questions. Thanks Dave!
I get math and why some people prefer to invest rather than paying off the house earlier. I personally sleep better at night and have less anxiety paying off the house early. My house will be paid off in three years and I'll be 30. Plenty of time to invest aggressively over the next 20-30 years. On top of that I can be a stay at home mom at 30 since I don't have a mortgage
I understand your peace of mind argument, but I don't see my investments (other than tax-specific retirement funds or college funds) as something I can't touch. If sh*t hits the fan, I can sell some of that stock to pay off my mortgage in an emergency, most assets you can sell in a matter of days. Having that money in investments gives me the same peace of mind to be able to pay off my mortgage. Yes, stocks and funds fluctuate, but there has been a housing bubble before, and at least in some areas, I can't believe those prices are tenable long-term.
But as long as you stay within your means, I don't think there's a really bad decision to make here.
he's right. people generally don't become millionaires until AFTER they pay off the house. do NOT listen to all those idiots telling you 'why payoff the house when money is so cheap?' do NOT listen to that garbage! paying off the house will give you piece of mind and a tranquility/happiness that VERY few people will ever know!
So well articulated and great points made. Bravo
Once debt free, one is able to handle more investment risk without fear of losing everything. As they say, no risk, no reward. I do, however, don't agree with paying off an investment property mortgage. Tenants pay the interest, principal and maintenance (repairs taxes, insurance) at minimum. If real estate values drop, who cares, the tenants have offset that risk. It's great to contribute to your retirement, it's AWESOME when someone else does.
Congrats. This guy is doing great!
Really appreciate his responses here. How perception changes and how that affects behavior.... not just 3.5%vs Mutual Funds RoR.
But in the end math is real. By paying his mortgage early he is losing money.
@@stefancoban59 No question about it. But the psychological benefits of having no debt will enable him to build a higher income overall without worrying about a mortgage.
@@Musicienne-DAB1995 what you are saying might be true for him. I come from a well off family so a mortgage or stock investments don't have a negative psychological affect.
I paid off my house 4 years ago, am 60 didn't had a good paying job until 8 years ago, I have saved 100k in IRA retirement in 6 years, I wish I started earlier, but all of my jobs were almost minimum wage, I got this job by the grace of God and looking forward to retire at 65....... And no children to take care of.
Yes! This is exactly why I cannot wait to throw everything at my mortgage! What a relief!!!
I'm listening to this, while looking for a stamp to pay off my mortgage to day 😁
Excellent advice and guidance! I'm going to check out your other videos. Thank you so much.
Something I really respect about this video is how clearly Dave explains specifically why he believes in paying off a mortgage. While some might disagree he is advocating that you model behavior off of someone successful with proven success, rather than attempting to generate returns on that money that consistently out perform the interest rate on your mortgage.
@Cody Neas This is the way.
This dude is so chill about making bank lol. I’m making 33 like geez.
Ethan Chorenziak in Chicago that’s what you need to buy a house. But after paying taxes. You feel robbed.
Yeah like 140k, it's like, whatever you know? *shrug*
Look into natural gas pipeline inspection. I’m 27 and make right around 250k a year out in West Texas working for a major gas company.
You have to have a college degree for that?
@@ethanchorenziak7875 nope
Lol wow that makes so much sense. My dad hated his job, but worked so hard to provide for his family and became a millionaire making less than 100k a year his whole life. A few years ago he threw a ton of money to finish paying off his house. Shortly after he quit his job to start his own little business, now makes more money per year than he’s ever made by FAR. Debt handcuffs people!!!
And how much money would he have if he took that money and invested it instead of paying off a low interest debt such as his house?
👏🏾👏🏾
Bad debt handcuffs people, but good debt can make you rich
Empire Textbooks. Hard to say. For all we know the market could’ve crash soon after. Losing his job and the house.
This brother is on a great path!! Good for him!!!
"It's mine, by God!" Love it.
Me: it's mine by g*d
State property tax: not so fast
Correct! You can NEVER “pay off” a mortgage.
I was just talking to someone about this today. I said I look at property taxes as the city's maintenance fee to keep the street lights on, streets paved & the sidewalks decent.
Yup, in the end you only rent it from daddy government.
Went from homeless is 2014 (after divorce) to a paid off 300k house in 2017, in IT and did multiple fixed fee side projects to pay off the house, have 300k in savings now thanks to the side gigs
Paid off the house 3 months ago
Yeah, this is excellent advice. Thank you.
This is great advice for those with debt problems or who cannot afford much risk. However, we are all in different situations. If you don't have dependent children and are doing very well, then this may not be the best way to accumulate wealth and will not give you anywhere near the best returns. The more risk you take, the higher your potential payback. During a time of high inflation, with money printing maniacs controlling the money supply, it makes a lot of sense to have a 3% loan that is paid back with inflated dollars, while earning some serious returns with certain assets. So, depending on your exact situation, assuming more risk could be a good idea.
I’m paying off my first rental property at the age of 27 this may. Sure it wasn’t a huge mortgage at 53k but I’m writing the final check this summer for 26k. I know people say to invest but I feel I’ll sleep better at night knowing I won’t have to carry a mortgage during turnover.
That's some nice going.
Awesome. I like your way of thinking 🌈
YES! YES! YES! This is what we are doing. Every extra dollar goes on our mortgage principal (all stimulus checks, income tax refunds, bonus any found money at all items sold, etc.) We are already retired, age 7778 and 72.and our income is limited-we are already drawing out from our IRA's. We already pay the full mortgage amount every month plus. We don't have a lot of freed-up cash income at this age/stage but anything we have extra is going on that mortgage principal. We do have money in an emergency funds in case of our one vehicle giving out or another unplanned emergency type issue,
Mathematically optimal: 10 year repayment schedule for the house and invest the excess you have in index funds. Paying extra off the house won’t save you more interest than you’d make with investments. Paying it off in longer than 10 years and putting more into shares means you pay more interest than you’d make investing, as interest on a mortgage is front loaded.
Most optimal for you: whichever helps you sleep better at night
This is where I disagree with Dave Ramsey’s philosophy. Put a portion of it on the house and a portion of it in investments. That way you are getting guaranteed return on the debt AND the upside of retirement investments. Diversification is the correct way to address risk not indulging in a house purchase. The millionaires he studied bought houses when rates were above 10%.
Your investment math only works if you take the 2008 crash and the global pandemics out of the equation. You're making a few extra percentage point on investments with the risk of a major crash/downturn. Pay off the house and then go hog wild!
You have seen the study? Where can I take a look at it?
@@ericsloan858 even still, losing your job when you have a 30 year mortgage but lots of money invested in non-retirement accounts in addition to your emergency fund is a much more feasible scenario than losing your job with a 15-year mortgage and no additional investments. Your monthly payment is more and you have less saved. Therefore, more risk.
@@ericsloan858 you can't eat a house. You're locking your money away in a non liquid asset.
@@aaront936 I don't understand that argument. If you are struggling to put food on the table, you are not going to be able to afdord a mortgage payment at all. Freeing up $1500 a month is hedge against life going wrong
A paid for house won't just allow you to cut off your risk, it will also allow you to undertake riskier endeavors that you would not have taken up otherwise. That's the beauty of it.
But you still have a monthly payment for taxes and insurance. So what's the advantage? Plus you may want a better house later and go back into debt.
@@crand20033 The advantage is way more margin and peace of mind.
@@crand20033 the advantage is that most home owners that are dept free end up with a net worth 10x greater than someone who does not own a home.
Paid off a few houses one in my 30s one in my 40s. Unfortunately I didn’t hold onto either of those and that’s not the best plan
Pay your house off and keep it
I hated my job each time and let that sway me into selling my house. Bad planning in life
“Recasting” the loan is the answer here. Interest rate and length of loan stay the same. Throw the lump sum at it and the mortgage company will recalculate your monthly payment based on what is remaining. It’s free for most mortgage companies but few people know about recasting. Saved me a lot of money in interest & helped me pay it off quickly.
I don’t know if I really agree with this, you’re missing out on huge compounding time by just dumping everything on the mortgage if the interest rates are really low
By this rational more debt is better than less debt. Sorry but Im not buying it.
@@DavidEVogel then you don’t understand math
Don't choose one or the other. Do both at the same time. You can chew gum and walk at the same time. Best part about doing both is that you won't have regrets no matter what happens. "Aw, I wish I'd done ___ instead of ___". Nope, do both at the same time. You'll win.
Great video. Thank you. As I find myself in a similar situation. So this helps me too. Thank u 😊
Ok so I just bought my first house and I don't understand this logic. The way I see it, I have two options: 1) Pay off my house now with the $150K I have in the bank. Invest the $670/month that I save by not having a mortgage payment. Assuming an 8% return in the the stock market, in 30 years I have $900K plus I own the house. 2) Invest the $150K now and pay off the house over 30 years. Assuming an 8% return in the stock market, in 30 years I have $1.5M plus I own the house. Why wouldn't I pick option 2?
I've been on this path awhile and have to agree. Its a better return on the money to keep paying the 670 a month and invest the extra money. There is more risk, and isn't for everyone, but option 2 is the smarter financial path.
You could also do a mix of them. The market doesn't consistently go up, so it might be advisable to sit some money on the side that you could use to pay toward your mortgage OR invest and then decide which to do based on what the actual market conditions are.
Yeah that's a good idea--and definitely wise to diversify my assets as much as possible. But the idea of putting all my money into the house where it's not generating interest and also not liquid in case of emergency just seems a little illogical. Thanks for the advice, it's good to know I'm not crazy here ;)
He raised this point at the end of the video: More stability, more peace of mind. To some (many? most?) people, that is worth more than money.
@@diferentgames Ok, good point; peace of mind. However, if I put the money into the house, then it's stuck there. If I have some sort of a massive emergency like a health crisis, I'm cash-poor and don't have any ability to handle the situation short of refinancing my house or taking out high-interest emergency loans. However if that money is in the stock market, it is far more liquid. I know it's not ideal to pull out of the stock market (and if it's down or in recession at the time, it's obviously a pretty bad option), but the money is available in an emergency in a way that home equity is not. Not to mention I have the peace of mind of knowing I *could* pay off my house if I needed to. If I lose my job, I can continue making house payments (as well as taxes and insurance) for decades without worrying about missing a payment. I'd say I have far more peace of mind knowing I have $150K+ in (semi) liquid assets at any given time.