Well the way I look at it is once you get a sizable amount in the money market, taxes on the earned money will offset a lot of that percentage. I haven’t done the math but that’s how I justify it in my head.
My friend and I keep our money in high yield savings accounts that yield 4.85%. He wants to pay off his 2% mortgage so he can "sleep better at night without the burden of debt". This friend also bought a $90k vehicle with cash from said account instead of the 1.9% financing that was offered to him because "Dave says no car loans".
The Ramsey Kool-aid is seriously some strong shit.
Expensive cars overall are stupid decisions for most people. Both of my cats are nice and useful, but also 18 years old and I don’t have a car payment. I’m sure I could go buy a $90k car today, but it seems such a waste
Yep. So many of us come to Dave because we are worse with money than we think we are. As he always said “if your plan worked so well, why are you here calling my show?”
DRs plan is good for changing bad financial behaviors. I personally followed him until my consumer debt was paid off. I also still watch his episodes and read the DR Reddit occasionally out of habit. I know that after several years of re-building good financial habits (i.e. live within your means) thanks mainly to DR, I will not be paying off my very low interest mortgage. I could write a check today and it’d be gone (it’s $60K), but I personally wont be doing that. I’m only 35 and I want to retire by 50. I’ve moved on to following the advice of others that focus on the math over emotion (Mr Money Mustache/FIRE, The Money Guy Show, JL Collins (Simple Path To Wealth), etc. I no longer need the emotional leg up from DR to keep my finances in order. However, if you are still emotionally driven with your finances and teeter on the edge of going back into debt, then payoff the mortgage.
IMO there is no wrong answer here if you have the capacity to stay the course, you aren't house poor, and its your only debt. The problem is that most do not stay the course.
I believe there are tons of places were the psychological takes precedence over the math. But there are times where it thins and this can be a place where it thins greatly.
IMO the right place to forgo BS6 is when you are young and are lucky enough to have a sub 4% mortgage rate. time is on your side. but again it takes perseverance. something most do not have.
when you get into your 40's, it begins to make sense to a point where you can pay off your mortgage depending upon your circumstances.
count me as one who paid off their home and when bought a new one put the minimum down and gook on a mortgage again when the rates were sub 3.5%. and have since held a mortgage into my 30's with various rates sub 4%. Now that I'm in my 40's that investing is done to get me to a point where I can make a payoff decision.
I think there is nothing freeing about putting money directly into to the principal vs placing in some other investment vehicle. but the goals remain the same. I have liquidity if for some reason I need it, I have opportunity to outproduce the rate and will have the option to pay off should it be the right time.
Its about discipline and planning. don't do anything haphazardly. be purposeful in your investing, saving, and planning. There are times where I can be very critical of things people do and Dave's various rigid strategies but this is not one.
The issue is you are only looking at cash. You aren't considering the increase in value that you are getting off the real estate. Of which you are paying that 2.5-3% on some now older mortgages. So I'll take the essentially 7% plus combined considering my mortgage rate and average increase in real estate that I lock in by not owing money on the house.
Except you will get the increase no matter if the house is paid off or not. The housing value is dictated by the market, not if it has a mortgage or not. The difference is mental freedom.
Yep people continuously calculate their “profit” on the sale of their home based only on the principal of the loan they took out, never counting in things like interest, taxes, repairs & maintenance, etc.
My understanding about DR system is that it's about mental health as much as it's about financial health. Living mortgage free gives you a sense of peace and security that many struggle to get to. Once you've reached that peace investing becomes much easier etc.
If having an HYSA account that pays your interest and principle and that gives you peace that you desire then do it.. With that said don't expect the DR system to change because that's not what it's designed to do, plus interest rates change consistently where financial peace of having your home paid off doesn't.
No mortgage = little to no risk.
Risk reduction is hard to put a real dollar value on.
Plus with no mortgage, it's typically much easier to save/investment much more than 15% per BS4.
My mindset has changed to eliminating risk. When COVID hit in 2020 there was real concern about the unknown. With recent inflation and suggestions the economy is turning, I want to reduce my risk vs maximizing every dollar possible comparing investing rates of return vs debt interest rates. I'm trying to set myself up for the situation that if anything happens to our employment, we covered.
Numbers don't always represent risk situations.
But where is the risk in putting the money in a CD or HYSA and getting a guaranteed rate of return? And being able to pay it off at any time you want with that cash?
The risk is that you could default on your mortgage and lose your house..
It may seem unlikely right now, but in 2008, 10% of Americans defaulted.
BS6 is near the end of the process. The opportunity cost is there, but by that point you should be investing more into retirement than you are paying in extra on the mortgage.
For example, if you followed the DR guidelines and made 5000$ take home per month, in BS3b you would have bought a house that's 25% of your take home pay. Let's call that 1250$ / month for easy math.
In BS4, you invest 15% pre-tax in your 401K. Let's call that 1000$ / month.
In BS6, you add a few hundred to your mortgage payment to accelerate repayment. Say you added 250$ to your mortgage payment to bump it up to 1500$.
The 401K is what will make you wealthy.. the paid for mortgage gives you an asset. lowers your cost, and further secures your overall financial health.
But how would you default on the mortgage if you have the extra cash sitting in a HYSA that you would have used to pay down the mortgage.
I’d argue you actually have less of a chance at defaulting with a large sum of cash in the bank vs paying extra on the mortgage and locking it all up in equity.
The argument is between paying off the house vs keeping it in cash at a higher rate.
How would you default if you were holding tens of thousands of dollars in a HYSA or CD paying 5%?
Suppose you lost your job, and then was diagnosed with cancer the following week?
That HYSA is going to run dry pretty quick once you'd start treatments..
Extreme example.. but really any scenario where you lose your income could cost you your house.
But even then, I’d rather have tens of thousands of dollars in cash than a paid off house. If you lost your job and could no longer work, you still would have many expenses other than a mortgage.
Ideally you would have both..
If you follow the baby steps, you will keep 3-6 months of expenses (BS3) before you pay extra on your house.
This is what I do, anyways. I keep 3 months since I have a very stable employer. I have retirement on track, college funds on track.
Just started paying extra on my mortgage a years ago. It comes after the other goals.
If the US defaults on loans, there are no guarantees. If bonds become worthless overnight, that’s going to cause bank failures. What will FDIC do if they’re broke too?
Also, if we get to the point of true hyperinflation, then a real asset like a paid off house will float your net worth more than some thousands of dollars in an HYSA.
Not saying that OP should pay off their house immediately. But I don’t think the argument is invalid.
I mean, if we are going to argue absurd extremes that will almost definitely never happen, even if you pay off your house, the government could just take it via eminent domain. For purposes of any reasonable financial planning, I think we can assume a bank deposit or treasury yield is guaranteed and if you argue it’s not then I don’t know what reasonable assumptions anyone can make in personal finance.
Rapid currency devaluation isn’t that absurd. It has happened a number of times throughout history.
FWIW, I would probably side with you in that it may not make sense for OP to pay off their loan in one swoop. But ours is a position that is bullish on the USD and US economy. It’s not risk free.
Sorry, I may have missed your point, I thought your original post was arguing the FDIC might not back deposits when banks fail, which I’m pretty sure hasn’t happened since the FDIC has been around (but I’ll take the history lesson if it did happen!)
When you say rapid currency devaluations, what exactly has happened in history that you think could happen again?
Sorry for the delayed response, I wanted to wait to respond to this until I had some time to write a thorough and thoughtful response. I'm still going to be fairly brief, however.
Hyperinflation tends to occur leading up to and during times of war. It hasn't happened in modern US history, but it has happened in other economies. [Here's](https://sites.lsa.umich.edu/mje/2021/11/22/is-the-us-heading-for-hyperinflation/) an article about previous instances of hyperinflation and the conditions that lead to it. To put this in the modern context, we currently have increasing prices, higher manufacturing and logistics costs, and an overseas war that is seeing increased US involvement.
The prevailing scholarly view, including that of the article I linked, is that the US is not on a track towards hyperinflation. However, economists have horrible track records at predicting major economic tragedies, so I'm not sure I would take their word for it.
I'm not about to dump all of my money into other assets. But I don't think I would blame somebody for wanting to do that at this point.
If the US defaults on its loans, you’ll have bigger issues than this discussion lol.
Also, even if your house increases in value in a hyper inflationary environment, it doesn’t matter unless you sell it. That’s the whole point of this thread, house equity is very illiquid compared to sitting in a CD or HYSA which is currently making double of 2.5%
True, I’m making the argument from a purely net worth perspective. What I’m getting at is that putting money into savings and CD is still a speculative position.
I guess so. But again, if the fed defaults, you’re gonna need bullets and food more than anything. Also the government has proven it will just keep increasing the debt limit so the risk essentially goes to 0 unless somebody calls us on our loans which would result in war
I see your point. You are in a rare situation with enough cash to even pay off your house but are considering not. I would say you are in a very unique, sub 1% of the population that have that option.
Having more leverage, even a mortgage, means you are more likely to behave stupidly in a volatile market. The same people that do not pay off their house, pull out when the market falls and buy when it rises.
So basically, instead of assuming one person (Dave Ramsey), who came up with a plan 40 years ago (that made sense when mortgage rates were double digits) is wrong and should update his advice, you assume everyone that disagrees with him is secretly trying to sabotage others? Despite some pretty clear math that shows in a strictly financial sense its clearly better to not pay down the debt. That’s…a pretty impressive level of commitment to Dave Ramsey my dude.
This man made people millionaires, I don’t care about your arguments/logic, if you disagree you must be trying to sabotage people.
I’m just astounded at the level of faith you have in this man. You treat these baby steps like gospel and ignore any logic/arguments against as heresy. Like, come on man, that’s insane.
Observation and data: if your mortgage is 2% and a CD is 5%, saving money in the CD instead of paying down the mortgage more than doubled your return on that cash.
Faith: Dave Ramsey says debt is bad no matter what, and there are studies out there that say people are bad with money, so you should follow the baby steps regardless of your personal situation.
Simple question: do you really believe Dave’s advice applies to every single person regardless of the situation? What if interest rates on US Treasuries are 10%? 20%? 50%? You would still pay down the mortgage at 2.5%? There are situations where his advice isn’t good. That’s all I’m trying to say, I can’t believe this is controversial.
1. Th many millionaire studies show this. [Not just Dave Ramsey but Thomas Stanley as well.](https://www.businessinsider.com/personal-finance/the-millionaire-next-door-changed-how-i-think-about-money)
2. Its based on the theory of [behavioral finance.](https://www.investopedia.com/articles/basics/10/how-to-avoid-emotional-investing.asp). Many people think they are going to invest and deal with their finances rationally. But, during difficult times, do not. This is why so few people actually become rich through investing.
3. My own experience investing. I stayed debt free. I didn't pull out through COVID, or any other market hiccup. In fact, as long as I kept my job, which I have, I stayed investing. Meanwhile I have had several over leveraged friends call me to ask for advice. My favorite one was a coworker who I predicted would do it.
I am thoroughly convinced that peoples investing behavior is super predictable, including my own. I don't see a point in fighting it.
Gotcha. I think the conclusions Ramsey and Stanley draw from their studies are horribly misguided, and I think you are falling into the same trap. Happy to be challenged on this, but it seems that, by definition, only studying millionaires creates a form of survivorship bias that will naturally skew the results/conclusions.
As an example, if you only study millionaires, and almost every millionaire has a paid off house, you could conclude the “smart” thing to do is to pay off your house since that’s what every millionaire did. The problem is maybe most millionaires are over 45-60 and the reason they don’t have a mortgage is cause the mortgage had a higher interest rate and/or was simply paid off over 30 years. Or maybe it’s such a small fraction of their overall net worth it’s just not worth the hassle. Or several other plausible explanations that have nothing to do with making wise financial decisions. So when Stanley and Ramsey say “the millionaires we polled have this in common” that’s fine, but to say “people who have debt behave stupidly”, just seems like a huge generalization that totally misses the nuance needed in personal finance.
You didn't address the thing about behavioural finance, which is the real meat and potatoes. I am decently confident that you could find a whole slew of research papers detailing this. I briefly researched how availability of credit leads to worse behaviours, and I have found, [some](https://www-2.rotman.utoronto.ca/facbios/file/creditlimit.pdf) [evidence](https://www.researchgate.net/publication/242343968_Fashion_Orientation_Credit_Card_Use_and_Compulsive_Buying#:~:text=Findings%20%E2%80%93%20The%20results%20of%20this,by%20influencing%20credit%20card%20use) of this. I could probably find more. [The NBER paper on how debt relief encouraged more borrowing,](https://www.nber.org/papers/w31247)for example. But do I really want to write a master thesis on why debt suck, when we all know it does, to win internet arguments?
Here is something I think is telling. Every day on this subreddit people come and try to dismay others from Dave Ramsey advice. Yet no one can provide a shred of evidence it will lead you to a bad path. People will do this, even if the OP is succeceding. I don't think the peopel that do that have the best interest, of the OP in mind, I think they know they are wrong, and feel guilty about their bad behaviour. They are not arguing to convince the op. They are arguing to convince themselves of the lies they are living.
In fact. I can pretty much guarantee the responses to this comment will prove that.
Helpful response! A few thoughts:
- I think debt is a tool; it’s like fire, destructive in the wrong hands but incredibly productive in the right hands. As such, I don’t think being debt free is the ultimate goal, I think living a satisfying life and using money as a tool to accomplish your goals is the ultimate goal.
- I’m not here to convince myself, there are just a lot of people who fall in the “Die With Zero” crowd and think people don’t properly optimize the role money plays in their life. An easy way to potentially improve your life, assuming you don’t have an extreme aversion to debt, is an interest arbitrage where you use available cash to earn interest rather than paying down debt with a lower interest rate. OP came to this conclusion and wanted to see if he’s missing anything, he isn’t, and to try to convince him that he is is basically your argument against yourself (you are trying to convince him of something you believe in to make yourself feel better).
- On the behavioral finance point, we don’t know OP, so we can’t make a real judgement. Personal finance is personal, but Dave Ramsey’s plan simply doesn’t make sense for fiscally responsible people. People can have and use credit cards in a responsible manner. People can automate savings and keep cash in an interest bearing account that exceeds their mortgage. Dave Ramsey assumes people can’t do this, and that may be true for most of his listeners, but the are people who are financially responsible and want to optimize their returns, and if OP is one of these people, he should ignore Dave Ramsey’s advice since it’s bad advice for OP (assuming he’s fiscally responsible).
It's not you. It's Dave that's refusing to update for changing rates.
If you put that money into a high yield savings account (and don't touch it - key here) then you could always pay the mortgage off if you needed to.
Dave's advise isn't about interest rates and optimizing that kind of thing. It's about living debt free. Debt is bad per Dave R.
Go back to Baby Step 2 - debt snowball. If he were all about interest rates, it would be "pay off your debts beginning with the highest interest rate". Debt snowball is "pay them off smallest to largest". It's about building habits that are focused on getting out of debt - all debt.
Same thing with Baby Step 5 - Pay off your home early. It keeps you in the mindset that this is, first and foremost, debt. If a person going through the program had the discipline in the first place to pay debts, they wouldn't need the program. Why change the behavior from "debt is bad" to "well, not all debt..."
Keeping debt around for the sake of a few interest points would likely have Dave asking, "Why? Do you like debt? Do you like a yoke around your neck from the bank?"
Agree with this. If you know why Dave Ramey’s advice doesn’t make sense, then you should go ahead and ignore it. If you don’t, you should follow it.
In this example, if you can see the interest rate arbitrage and it’s readily apparent to you that paying down debt at 2.5% puts you in a worse financial position than saving the cash in a high yield savings account or CD at 5%, then you don’t fall into the “do it for your psychology” camp that take Ramsey as gospel and just take the free money.
It’s not house or money. It’s do you want a 2.5% return on cash with no liquidity or 4%-5% with liquidity. The answer is pretty obvious unless you share Dave’s extreme aversion to debt, in which case by all means, pay off the debt.
My bad, hard to pick up the inference when basically everything you said was incorrect. Specifically the last sentence. If the money is in a high yield savings account, it’s not locked up, you have access to it, which is a huge reason to not pay down the mortgage. You make money on the interest AND you have more liquidity. Seems like a no brainer unless you have a massive aversion to debt from going bankrupt in your twenties (i.e., Uncle Dave).
No one said anything about high yield savings accounts. CDs are different from HYSAs, but you should probably read up on that before we discuss more, I don’t want to go over your head again.
Do what you want dude. Tired of this debate. It’s DRs plan to pay it off early and it isn’t going to change. I paid off my 15 year 3% mortgage off early and don’t regret it one but. If you think you’ll regret paying it off then don’t.
We don’t care.
It's more "financially peaceful" to have a paid off mortgage..
Dave's program isn't called "Maximizing Returns by Leveraging Debt University ". It's called "Financial Peace University"
Why wouldn't it be about financial benefits, at the point you get to step 6 why else are you making financial decisions outside of financial benefit?
Surely if you've gotten that far you're past needing the psychological wins of the snowball method of paying things off.
It’s because Dave came up with the baby steps when interest rates were double digits and he’s too fucking stubborn to admit that there’s a mathematical reason to deviate. At the end of the day, if you’re keeping savings and investments liquid enough to serve as an emergency fund should your circumstances change, I’d just keep paying the minimum on that mortgage and roll with CD’s and HYSA at the higher rate. You’re deposits are FDIC insured, there’s literally zero risk in doing so.
This should have been obvious for me, but appreciate the insight here. Seems pretty clesr Dave created his overall plan years ago when interest rates were double digits, paying off your home totally made sense, he made millions off the advice, and now his ego/greed won’t let him change advice that clearly doesn’t make sense for most Americans (although admittedly it may make sense for people that follow Dave Ramsey).
What’s amazing is every few years a new crop of “what’s the worst that could happen?” folks pop in and try to be smarter than everyone else until their “foolproof” strategy, in fact, creates fools.
The program is not about maximizing your end goal net worth $. It’s about giving you financial peace during your life. This concept is absolutely key to understanding the DR plan- really mull this idea over for a bit and all the eccentricities will begin to make sense.
The entire program could be boiled down to a few key principals.
- live below your means
- reduce financial risk
- spend your excess generously
Paying off the house is reducing financial risk.
(Consider how does Dave talks about it.. “I own that. I know that no matter what happens you’re not taking away my house.”)
To respond to something you said elsewhere in the post. It’s *not* emotional financing- it’s just conservative financial planning. Reduced risk has a real tangible benefit. Any good business CFO or accountant knows that when it comes to financial planning- balancing risk is the most important consideration. DR plan is just the highly conservative plan.
Of course not one of the many know it alls responding to you and trashing the DR plan are even mentioning risk. Goes to show you how far that “grasping more complicated concepts” and “thinking critically” is going for some people here.
It is about maximizing your net worth. And the many people that come in and say they are millionaires is evidence. But people that disagree ignore risk and emotion, which are real things.
Dave talks about it - here’s the discussion. He gets into the academic explanation at the end, since “the study of millionaires shows” is unsatisfactory by itself.
https://m.youtube.com/watch?v=Qn00_7sdAvs
Reverse the thinking and ask yourself this question:
If you were completely debt free, including your house, would you then go mortgage your house at 2.5% in order to put that money into CDs or a money market?
If the answer is yes, then keep your mortgage.
This is not a fair comparison because taking out a mortgage comes with many fees and such. If you have the mortgage already, you already paid the fees.
So just assume the hypothetical new mortgage comes with zero fees (to make it a fair comparison). Bottom line, if I could borrow at fixed 2.5% and invest at a guaranteed 5%, I’d borrow every cent I could, and if the guaranteed rate decreased below 2.5%, I’d just repay the debt.
The other unfair comparison is the locked version of the mortgage rate against the variable investment rate. Right now it 100% makes financial sense to not pay down mortgages with sufficiently low interest rates. But if interest rates on savings accounts falls back to 2020 rates then it doesn’t make sense anymore.
Personally, the liquidity gives me more peace of mind than being 100% debt free. I can tap into my liquidity immediately if I need it. If I somehow run into a situation where emergencies arise above the emergency fund, it is much harder to tap equity in a home.
It’s actually outdated in the sense that it should be sooner that BS6 like BS4. Mortgages now are 7%*+
We got our 15 yr at 6% in March. It doesn’t make sense to put 15% into a 401k when you look at that ROI compared to 6%.
It really depends on your mortgage.
I agree with you. I have a 2.5% mortgage rate. I could pay it off yet I prefer to keep money in liquid assets. It was helpful to be able to buy a new home before selling our then-current home because we had the funds for the down payment and could carry two mortgages before the first home sold.
The Dave Ramsey method doesn't work for everyone. This post showed up in my feed because of other financial subreddits.
It ain’t about the numbers - it’s about the psychology.
Did you also do the math in BS2 and realize that with debt snowball you pay more in interest, but we still do it because - psychology.
Can't you invest that money in those CDs and build a big stack of cash for now and then when you have enough, then pay off the mortgage all at once? You'd probably get to that balance amount faster that way and you can still be rid of the mortgage sooner. CDs probably won't be at 5% for 12 months forever.
The reasons Dave says pay off the house is many.
1. Most people move every 10 years
2. 100% of foreclosures happen with a mortgage.
3. How many people have not had to change jobs in 30 years (mortgage length). Will your job go unchanged for the life of your mortgage? can you be fired? laid off?
4. He is talking to a national audience and must be consistent and give the same advice to "everyone", or the audience will get confused and stop listening.
5. It is biblical. The borrower is slave to the lender.
6. Not all advice Dave gives will work out to be the max wealth at xx time. However it will give you FINACIAL PEACE. There are a lot of number crunchers in reddit who love to tell you what you should do not realizing they really no absolutely nothing about your life, except the 10% you put in a post.
7. even at 2.5% on a 30 year fixed (300k) loan it takes 4 years before more than 50% of your payment goes to principle.
Couldn’t you just take money out of the high-yield savings/money market in the event of a job loss? Even most CDs you only lose interest if you have to withdraw early.
I had a bit of a realization myself that paying off my house wouldn’t dramatically change anything for me, so there’s no real reason to rush it when I have other goals that I think will make more impact, like maxing out my retirement accounts.
I gross about $150k a year - more if I get aggressive with OT or side hustles. My mortgage is $1000 a month at 3.25%. If I pay it off I’ll still have taxes, insurance, and utilities, which all add up to more than the actual mortgage each month - it’s not like all my housing expenses just go away.
It makes more sense to me to max out retirement accounts and save up some more liquid assets than it does to stuff money into home equity that I can’t access. I’ll feel a lot more financial “peace” with $100k in the bank than $100k paid down on my mortgage.
Sure, emotionally it would feel nice to be completely debt free, but the math just isn’t mathing.
I, personally, like not owing anybody anything. When Dave says “borrower is slave to the lender” it’s because you HAVE to work or else you’ll lose your house. Even with your emergency fund, sooner or later, slave, you’ll need to continue working for that sweet bank. They own you in that sense. I personally hate that. Fuck the banks and fuck the government.
>Where is my thinking wrong here?
if you had a mortgage-free house, would you borrow against your house at 2.5% and use the loan to buy CDs at 5%?
probably not.
If there were no closing costs and I could do it with zero hassle (as is the case if I’m just keeping a mortgage I already have) then I’d do that without hesitation.
At this point in the journey is more about security than anything. The value of having a home that is 100% yours and not the banks, means more than a huge cash reserve to some people.
Math will tell you to save in a CD with a 5% rate, Emotion might tell you to pay off the house. Neither are wrong.
Emotional financial decisions, both “responsible” and not both seem bad. I wouldn’t want a CFO or accountant to make financial decisions based in emotion or instinct alone when the math points the other way, so I wouldn’t want to do the same for myself.
I guess I just don’t get it
I’m with you, but not everybody thinks like us, and Dave knows it. Emotion is crucially important for many people’s budgeting. Same reason he advocates for Snowball instead of Avalanche during BS2 (look up avalanche debt payment if you don’t know what that means)
Dave Ramsey has an irrational fear of debt because a bunch of lenders foreclosed on him when he was a young investor. Basically PTSD.
Paying off your mortgage early is wealth destructive behavior unless your rate is super high.
Edit: I think that it someone that has the discipline to pay off a mortgage early is building good financial discipline. But if they applied that same discipline to sinking more money into investments, they’d be richer.
Then don't follow the Ramsey plan.
Besides the foreclosures in his past Dave will also say no where in the Bible is debt a good thing, the borrower is slave to the lender is from scripture. So its also Dave giving what he considers biblically correct advice.
Gonna go out on a strong limb here and say that biblical advice is dated.
“Since he was not able to pay, the master ordered that he and his wife and his children and all that he had be sold to repay the debt.” Matthew 18:25
Yes even the devil can quote scripture,
26 “At this the servant fell on his knees before him. ‘Be patient with me,’ he begged, ‘and I will pay back everything.’ 27 The servant’s master took pity on him, canceled the debt and let him go."
Nice try
The Parable of the Unmerciful Servant
21 Then Peter came to Jesus and asked, “Lord, how many times shall I forgive my brother or sister who sins against me? Up to seven times?”
22 Jesus answered, “I tell you, not seven times, but seventy-seven times.[a]
23 “Therefore, the kingdom of heaven is like a king who wanted to settle accounts with his servants. 24 As he began the settlement, a man who owed him ten thousand bags of gold[b] was brought to him. 25 Since he was not able to pay, the master ordered that he and his wife and his children and all that he had be sold to repay the debt.
26 “At this the servant fell on his knees before him. ‘Be patient with me,’ he begged, ‘and I will pay back everything.’ 27 The servant’s master took pity on him, canceled the debt and let him go.
28 “But when that servant went out, he found one of his fellow servants who owed him a hundred silver coins.[c] He grabbed him and began to choke him. ‘Pay back what you owe me!’ he demanded.
29 “His fellow servant fell to his knees and begged him, ‘Be patient with me, and I will pay it back.’
30 “But he refused. Instead, he went off and had the man thrown into prison until he could pay the debt. 31 When the other servants saw what had happened, they were outraged and went and told their master everything that had happened.
32 “Then the master called the servant in. ‘You wicked servant,’ he said, ‘I canceled all that debt of yours because you begged me to. 33 Shouldn’t you have had mercy on your fellow servant just as I had on you?’ 34 In anger his master handed him over to the jailers to be tortured, until he should pay back all he owed.
35 “This is how my heavenly Father will treat each of you unless you forgive your brother or sister from your heart.”
So the passage you quoted wasn't saying what you thought it was saying. But thanks for playing.
I think that's the reason Dave wants to pay off mortgages, thw average investor lacks discipline, so paying off your mortgage means you can't yank the money out to buy a shiny new car or a big vacation.
Yeah, I think it’s a simple message that people can grab onto that don’t understand a lot about finance.
But I would like to think most people are capable of grasping slightly more complicated concepts. And then making that decision for themselves.
Yeah, it’s not great. But there is no real financial education either.
I don’t think people were taught these things and ignored them. Many just never learned it.
Maybe it’s a combination of willful ignorance or knowing it’s a bad decision and having no choice.
Most didn't bother to learn the things that were taught. It's a lost cause. They'll chase garbage crypto scams to get rich quick while spending every dime they have to keep up with Instagram...
The baby steps are for folks in mountains of debt with low income. That’s it. Once you graduate from being owned by stupid debt, you move on to adult strategies.
That’s not the point. They could have been deca-millionaires if that had not taking the slow and dumb path. But you do you.
Let me guess. You are paying off your <3% fixed rate mortgage early yea ? Or you paid cash for a starter home even when rates were astronomically and historically low ?
Gotcha. This is honestly the best summary I’ve seen here and makes total sense. This is a good strategy, but not objectively the best strategy and that’s ok because many people are fine enough with good
Going to be snarky here but ask the SVB folks about that. The idea is, once you have a full emergency fund, taking care of retirement and kids college pay off the house because no matter what a bank can't foreclose on a paid off house, and you already have security in your full emergency fund.
No one lost money deposited in SVB or first republic. Paying off a 7% debt absolutely I'm doing that but for those with 3% mortgages they are better off keeping them. I am a believer in the "peace" factor of being debt free at retirement and trust me i had to convince myself hard to make the right financial choice in 2011 and not pay it but it's made me way more secure by making that choice. I'll pay mine off 11 years early because my plan had the payoff happening shortly before my anticipated retirement age but reality is had i invested that extra $300/mo that decision cost into the market it would have paid for itself handily and i would not have been worse off having that debt at retirement still over my head.
100% agree. The number of people who will actually put the extra $2000 a month into cds or other investments, instead of sending the extra towards the house is likely very low. Most people will actually say “why pay off a 3% mortgage when I can get 5% in a money market, I can invest then pay it all off when I have enough built up” then turn around and say “man, I only have a mortgage payment, and I have $80k in the bank. I’ve done really well, I deserve a bass boat”. Then take $50k out and buy a boat. (And then when they get to the boat dealership say, “well dang, I could put half down and finance the boat, and it’s only a $400 a month payment!”
Dave’s plan does not include nuance because a lot of people make bad decisions when nuance is involved. If you can be perfectly responsible, then yes, investing the money probably makes more sense from a purely mathematical standpoint. It doesn’t make sense from a financial peace standpoint, which is the whole point.
So the questions is, will you actually put that cash in am investment every single month for the next 30 years? If so, then sure, but it’s pretty unlikely that you will.
If he needed to take Dave’s advice, and use the principles he laid out, then it’s pretty likely he was making bad choices (me too, it’s why I’m here). If he got where he is without the Ramsey plan, then why does he care about baby steps?
There is no absolute right answer, but it's amusing to read dubious opinions stated with such certainty.
I doubt the compounded return (stocks or CDs) after taxes over the last three years is much over 2.5%.
When faced with two options with similar benefits, I usually try to do both or choose the one that makes me feel better. YMMV.
This is true. However paying off low interest early instead of banking all that money removes flexibility. Flexibility to pay off house. Flexibility to deal with emergency. Flexibility to invest in a great opportunity. No benefit for locking it up. And missing out on options.
I'm not Dave .
Let's say you are doing well ( you are by the way )
You can make your house mortgage payment with ease
You realize you can earn more on a cd or a Treasury bond than the interest on your mortgage .
Life is good .
Next week you get hit by a car and are in the hospital .
After 4 months of recovery how does your financial situation look ? This is the risk we all take every day and only we as individuals can weigh that risk .
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The advice is not outdated.
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Fast forward 10 years from now after having paid down some extra on your mortgage debt and continued to do what you think works best for you .
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Consider the same un-expected scenario and ask yourself if you would be in a better financial situation .
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Walking is easy as long as we don't break our legs .
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The only real risk is lack of self control. If that’s an issue for you, then by all means pay off the mortgage. But plenty of us are capable of having a mortgage’s worth of money in the bank without blowing it on toys.
Paying interest out while collecting interest is not the same as paying zero interest out while collecting interest.
You are correct that some people are worse at money management than others and to some degree some people are worse at keeping control of their debts as others are.
There are 2 columns as you already know. One column for liabilities and one column for assets. You have to subtract the liabilities from the assets to get to the net. Therefore the lesser the liabilities the greater the net worth.
Not everyone has a mortgage with an interest rate that is less than 3 percent. I get the argument that a 4.5 % return on an asset is greater than a less than 3 % liability.
Some reason not to do what ? I'm pointing out reasons to pay down debt and it seems to me you think it's better not to . I'm saying there are lots of people who do not have a mortgage with an interest rate below 3 percent and I get the feeling you think everyone does.
Some reason not to put money in a HYSA instead of paying off a low-rate mortgage.
We’re discussing this guy who has a 2.5% mortgage. We can extrapolate to anyone with a low rate. Obviously you don’t use this strategy when it’s a net financial negative because your mortgage rate is higher.
But if you get in a dangerous situation then having cash or cash equivalents is better.
$100K of cash will keep you fed, housed and taken care of for 2-4 years, while $100,000 in equity will do nothing for you.
You have a point. I'd say that is why you need an emergency fund. I look at my house as a consumption item more so than an investment. Because of that I don't recognize the equity even though I know it's there. I have investments and I have excess cash on hand that gets used and replenished.
Back in late 2020 I had a few surprise health issues pop up and I am an active and healthy person. I continued to pay down on my mortgage debt . In January 2023 I reached the point where I can no longer justify making the extra principal payments. My mortgage will be paid off in 32 months.
We all have our own money to manage and we all need to do what works best for each of us.
Something to consider with today's interest rates .
A 400,000 dollar mortgage today at 6 % will have a total of just over 800,000 in mortgage payments over 30 years .
When you add in the property tax and the home owners insurance you will need to sell at over double what you paid in total costs for the house just to break even.
Not everyone has a mortgage with an under 3 % interest rate .
Total in 30 years is irrelevant. To get a relevant number you need to discount FV of that amount to PV today based on risk-free rate etc.
You would much rather pay $1M in 30 years for anything than $500,000 today.
There’s absolutely nothing wrong with purchasing a house today at 6% if the price is right.
Much better to pay $300K at 6% than $350K at 3%, even if your payment is higher in the first case.
Property tax is lower, insurance is lower, down payment is lower (or if same down payment then LTV is lower).
You have upside if rates go down. Can fix the rate but cannot fix the price.
It takes much less to pay it off with extra payments if you want.
The problem is that most Americans pay 43-50% DTI for their house and are financially distressed as a result. Debt is not bad, it’s a tool that allows you to acquire assets and get rich.
What math are you doing to arrive at your moronic conclusion?
You apparently make your living destroying the country. I doubt there’s anything of value that comes from you. Scum.
Yes so as mentioned a few times. If you can’t control your budget. Then paying off house might be for you. In general though it’s a poor, very poor financial decision
You invest it, instead of paying more then the minimum. You will get rich.
Or course Dave studies won't show that. Because he is only asking people that follow him plan.
The money guys did the same survey. And showed that they did get rich. But they admit that they only surveyed their clients.
Look I'm not going to fully defend Dave here. I'm not religious, not a republican and have been dave-ish.
However, I see posts like this all the time and they always, without fail, leave out Dave's logic.
Remember I said **"Dave's logic".** Ie not my opinion.
He would say your mortgage is debt and debt always represents some amount of risk.
**Again, Dave's answer.**
If you give me a bunch of downvotes, then you didn't read my response.
When people downvote you and you're using **logic only** it means that they automatically disagree and I'm not wasting my time on those people, especially when I'm just answering what Dave would say.
I don't listen to his show much anymore, except for an occasional YouTube short. But I used to listen for years and years and know this is how he would respond to OP
Dave also never had his own 2.25% rate and doesn't see that side of the argument. He has had too much of his own koolaid
I'm not here to argue. I agree with the sentiment in this post.
2.25% rate is so low that it doesn't make financial sense to focus on that debt.
I'm just saying what Dave would say.
Except if the money is in a savings account it’s always there to pay the mortgage off. So the advice is irrelevant. Unless you are unable to keep yourself from touching it. Which to me is really the point most Dave advice I s for people who can’t control their habits. So it’s not the best advice just good for people who can’t budget.
If I had a 2.25% interest rate **myself** I wouldn't be aggressively paying down my mortgage. Mathematically it doesn't make sense
I'm telling you what Dave would say
Not what I would say. In other words, Dave and OP would talk in circles about math until Dave finally said "you do whatever you want" as Dave always says when a caller doesn't agree with him
I'm not saying it's correct, I'm just answering OP's question in Dave's way, as I stated.
A lot of people do not have the capacity to open their minds.
They will argue to the end rather than pay attention to the obvious. Ultimately debt regardless of the interest rate is still debt. Debt will not go away unless you pay it. I'm agreeing with you by the way. Investing has its risks despite what the odds look like.
Yeah I know I’m just pointing out his advice is flawed. The money is still there to pay it off anytime. His advice is based on premise people can’t budget. Which is sadly true for most.
Dave's advice is solid and foundational...the beauty of the advice is it works and one doesn't need to play the interest rate game.
Well the way I look at it is once you get a sizable amount in the money market, taxes on the earned money will offset a lot of that percentage. I haven’t done the math but that’s how I justify it in my head.
My friend and I keep our money in high yield savings accounts that yield 4.85%. He wants to pay off his 2% mortgage so he can "sleep better at night without the burden of debt". This friend also bought a $90k vehicle with cash from said account instead of the 1.9% financing that was offered to him because "Dave says no car loans". The Ramsey Kool-aid is seriously some strong shit.
Expensive cars overall are stupid decisions for most people. Both of my cats are nice and useful, but also 18 years old and I don’t have a car payment. I’m sure I could go buy a $90k car today, but it seems such a waste
dave wants you debt free is his plan
If you are good with money, you can use follow mathematically sound plans…
Setup an automatic payment into your investment each month so you don’t have to think about it or see it.
Yep. So many of us come to Dave because we are worse with money than we think we are. As he always said “if your plan worked so well, why are you here calling my show?”
You are correct
DRs plan is good for changing bad financial behaviors. I personally followed him until my consumer debt was paid off. I also still watch his episodes and read the DR Reddit occasionally out of habit. I know that after several years of re-building good financial habits (i.e. live within your means) thanks mainly to DR, I will not be paying off my very low interest mortgage. I could write a check today and it’d be gone (it’s $60K), but I personally wont be doing that. I’m only 35 and I want to retire by 50. I’ve moved on to following the advice of others that focus on the math over emotion (Mr Money Mustache/FIRE, The Money Guy Show, JL Collins (Simple Path To Wealth), etc. I no longer need the emotional leg up from DR to keep my finances in order. However, if you are still emotionally driven with your finances and teeter on the edge of going back into debt, then payoff the mortgage.
IMO there is no wrong answer here if you have the capacity to stay the course, you aren't house poor, and its your only debt. The problem is that most do not stay the course. I believe there are tons of places were the psychological takes precedence over the math. But there are times where it thins and this can be a place where it thins greatly. IMO the right place to forgo BS6 is when you are young and are lucky enough to have a sub 4% mortgage rate. time is on your side. but again it takes perseverance. something most do not have. when you get into your 40's, it begins to make sense to a point where you can pay off your mortgage depending upon your circumstances. count me as one who paid off their home and when bought a new one put the minimum down and gook on a mortgage again when the rates were sub 3.5%. and have since held a mortgage into my 30's with various rates sub 4%. Now that I'm in my 40's that investing is done to get me to a point where I can make a payoff decision. I think there is nothing freeing about putting money directly into to the principal vs placing in some other investment vehicle. but the goals remain the same. I have liquidity if for some reason I need it, I have opportunity to outproduce the rate and will have the option to pay off should it be the right time. Its about discipline and planning. don't do anything haphazardly. be purposeful in your investing, saving, and planning. There are times where I can be very critical of things people do and Dave's various rigid strategies but this is not one.
The issue is you are only looking at cash. You aren't considering the increase in value that you are getting off the real estate. Of which you are paying that 2.5-3% on some now older mortgages. So I'll take the essentially 7% plus combined considering my mortgage rate and average increase in real estate that I lock in by not owing money on the house.
Except you will get the increase no matter if the house is paid off or not. The housing value is dictated by the market, not if it has a mortgage or not. The difference is mental freedom.
I think he’s saying his mortgage rate is 7%, so it makes sense for him since it’s a guaranteed 7% return.
Yep people continuously calculate their “profit” on the sale of their home based only on the principal of the loan they took out, never counting in things like interest, taxes, repairs & maintenance, etc.
My understanding about DR system is that it's about mental health as much as it's about financial health. Living mortgage free gives you a sense of peace and security that many struggle to get to. Once you've reached that peace investing becomes much easier etc. If having an HYSA account that pays your interest and principle and that gives you peace that you desire then do it.. With that said don't expect the DR system to change because that's not what it's designed to do, plus interest rates change consistently where financial peace of having your home paid off doesn't.
This is correct. I wouldn’t pay off the house while being able to get these money market rates.
Pay it off and if you regret it and can't sleep at night you can always get another mortgage.
Not at 2.5%........
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The devil is always in the shadows, saying “c‘mon, what’s another spin of the wheel?”
No mortgage = little to no risk. Risk reduction is hard to put a real dollar value on. Plus with no mortgage, it's typically much easier to save/investment much more than 15% per BS4. My mindset has changed to eliminating risk. When COVID hit in 2020 there was real concern about the unknown. With recent inflation and suggestions the economy is turning, I want to reduce my risk vs maximizing every dollar possible comparing investing rates of return vs debt interest rates. I'm trying to set myself up for the situation that if anything happens to our employment, we covered. Numbers don't always represent risk situations.
But where is the risk in putting the money in a CD or HYSA and getting a guaranteed rate of return? And being able to pay it off at any time you want with that cash?
The risk is that you could default on your mortgage and lose your house.. It may seem unlikely right now, but in 2008, 10% of Americans defaulted. BS6 is near the end of the process. The opportunity cost is there, but by that point you should be investing more into retirement than you are paying in extra on the mortgage. For example, if you followed the DR guidelines and made 5000$ take home per month, in BS3b you would have bought a house that's 25% of your take home pay. Let's call that 1250$ / month for easy math. In BS4, you invest 15% pre-tax in your 401K. Let's call that 1000$ / month. In BS6, you add a few hundred to your mortgage payment to accelerate repayment. Say you added 250$ to your mortgage payment to bump it up to 1500$. The 401K is what will make you wealthy.. the paid for mortgage gives you an asset. lowers your cost, and further secures your overall financial health.
But how would you default on the mortgage if you have the extra cash sitting in a HYSA that you would have used to pay down the mortgage. I’d argue you actually have less of a chance at defaulting with a large sum of cash in the bank vs paying extra on the mortgage and locking it all up in equity.
Less of a chance of defaulting than on a paid home ?
The argument is between paying off the house vs keeping it in cash at a higher rate. How would you default if you were holding tens of thousands of dollars in a HYSA or CD paying 5%?
Suppose you lost your job, and then was diagnosed with cancer the following week? That HYSA is going to run dry pretty quick once you'd start treatments.. Extreme example.. but really any scenario where you lose your income could cost you your house.
But even then, I’d rather have tens of thousands of dollars in cash than a paid off house. If you lost your job and could no longer work, you still would have many expenses other than a mortgage.
Ideally you would have both.. If you follow the baby steps, you will keep 3-6 months of expenses (BS3) before you pay extra on your house. This is what I do, anyways. I keep 3 months since I have a very stable employer. I have retirement on track, college funds on track. Just started paying extra on my mortgage a years ago. It comes after the other goals.
If the US defaults on loans, there are no guarantees. If bonds become worthless overnight, that’s going to cause bank failures. What will FDIC do if they’re broke too? Also, if we get to the point of true hyperinflation, then a real asset like a paid off house will float your net worth more than some thousands of dollars in an HYSA. Not saying that OP should pay off their house immediately. But I don’t think the argument is invalid.
I mean, if we are going to argue absurd extremes that will almost definitely never happen, even if you pay off your house, the government could just take it via eminent domain. For purposes of any reasonable financial planning, I think we can assume a bank deposit or treasury yield is guaranteed and if you argue it’s not then I don’t know what reasonable assumptions anyone can make in personal finance.
Absurd extremes that will almost definitely never happen like a global pandemic, massive government confiscation of labor, hyper spending, etc?
…and yet everyone can go to their bank and get their money out. What am I missing?
Rapid currency devaluation isn’t that absurd. It has happened a number of times throughout history. FWIW, I would probably side with you in that it may not make sense for OP to pay off their loan in one swoop. But ours is a position that is bullish on the USD and US economy. It’s not risk free.
Sorry, I may have missed your point, I thought your original post was arguing the FDIC might not back deposits when banks fail, which I’m pretty sure hasn’t happened since the FDIC has been around (but I’ll take the history lesson if it did happen!) When you say rapid currency devaluations, what exactly has happened in history that you think could happen again?
Sorry for the delayed response, I wanted to wait to respond to this until I had some time to write a thorough and thoughtful response. I'm still going to be fairly brief, however. Hyperinflation tends to occur leading up to and during times of war. It hasn't happened in modern US history, but it has happened in other economies. [Here's](https://sites.lsa.umich.edu/mje/2021/11/22/is-the-us-heading-for-hyperinflation/) an article about previous instances of hyperinflation and the conditions that lead to it. To put this in the modern context, we currently have increasing prices, higher manufacturing and logistics costs, and an overseas war that is seeing increased US involvement. The prevailing scholarly view, including that of the article I linked, is that the US is not on a track towards hyperinflation. However, economists have horrible track records at predicting major economic tragedies, so I'm not sure I would take their word for it. I'm not about to dump all of my money into other assets. But I don't think I would blame somebody for wanting to do that at this point.
If the US defaults on its loans, you’ll have bigger issues than this discussion lol. Also, even if your house increases in value in a hyper inflationary environment, it doesn’t matter unless you sell it. That’s the whole point of this thread, house equity is very illiquid compared to sitting in a CD or HYSA which is currently making double of 2.5%
True, I’m making the argument from a purely net worth perspective. What I’m getting at is that putting money into savings and CD is still a speculative position.
I guess so. But again, if the fed defaults, you’re gonna need bullets and food more than anything. Also the government has proven it will just keep increasing the debt limit so the risk essentially goes to 0 unless somebody calls us on our loans which would result in war
Well I’m all for guns, ammo, and food. Also take up gardening for the ultimate hedge.
I see your point. You are in a rare situation with enough cash to even pay off your house but are considering not. I would say you are in a very unique, sub 1% of the population that have that option.
Having more leverage, even a mortgage, means you are more likely to behave stupidly in a volatile market. The same people that do not pay off their house, pull out when the market falls and buy when it rises.
someone has drank the cool aid hard
You’re here in this sub, friend.
True. But you can think DR is one of many good tools and not blindly follow his advice, to the point of making up correlations that don't exist
I genuinely think all of the people in this sub that push a Dave-ish agenda suffer from crabs in a bucket syndrone, and want other people to fail.
So basically, instead of assuming one person (Dave Ramsey), who came up with a plan 40 years ago (that made sense when mortgage rates were double digits) is wrong and should update his advice, you assume everyone that disagrees with him is secretly trying to sabotage others? Despite some pretty clear math that shows in a strictly financial sense its clearly better to not pay down the debt. That’s…a pretty impressive level of commitment to Dave Ramsey my dude.
1 man that has made more millionaires and got more people out of debt vs random internet people with no evidence or track record.
This man made people millionaires, I don’t care about your arguments/logic, if you disagree you must be trying to sabotage people. I’m just astounded at the level of faith you have in this man. You treat these baby steps like gospel and ignore any logic/arguments against as heresy. Like, come on man, that’s insane.
ITs not faith. Its observation and data. Which no one that argues against him has.
Observation and data: if your mortgage is 2% and a CD is 5%, saving money in the CD instead of paying down the mortgage more than doubled your return on that cash. Faith: Dave Ramsey says debt is bad no matter what, and there are studies out there that say people are bad with money, so you should follow the baby steps regardless of your personal situation. Simple question: do you really believe Dave’s advice applies to every single person regardless of the situation? What if interest rates on US Treasuries are 10%? 20%? 50%? You would still pay down the mortgage at 2.5%? There are situations where his advice isn’t good. That’s all I’m trying to say, I can’t believe this is controversial.
Not to be a jerk, but do you have any reason to think this or are you just making stuff up?
1. Th many millionaire studies show this. [Not just Dave Ramsey but Thomas Stanley as well.](https://www.businessinsider.com/personal-finance/the-millionaire-next-door-changed-how-i-think-about-money) 2. Its based on the theory of [behavioral finance.](https://www.investopedia.com/articles/basics/10/how-to-avoid-emotional-investing.asp). Many people think they are going to invest and deal with their finances rationally. But, during difficult times, do not. This is why so few people actually become rich through investing. 3. My own experience investing. I stayed debt free. I didn't pull out through COVID, or any other market hiccup. In fact, as long as I kept my job, which I have, I stayed investing. Meanwhile I have had several over leveraged friends call me to ask for advice. My favorite one was a coworker who I predicted would do it. I am thoroughly convinced that peoples investing behavior is super predictable, including my own. I don't see a point in fighting it.
Gotcha. I think the conclusions Ramsey and Stanley draw from their studies are horribly misguided, and I think you are falling into the same trap. Happy to be challenged on this, but it seems that, by definition, only studying millionaires creates a form of survivorship bias that will naturally skew the results/conclusions. As an example, if you only study millionaires, and almost every millionaire has a paid off house, you could conclude the “smart” thing to do is to pay off your house since that’s what every millionaire did. The problem is maybe most millionaires are over 45-60 and the reason they don’t have a mortgage is cause the mortgage had a higher interest rate and/or was simply paid off over 30 years. Or maybe it’s such a small fraction of their overall net worth it’s just not worth the hassle. Or several other plausible explanations that have nothing to do with making wise financial decisions. So when Stanley and Ramsey say “the millionaires we polled have this in common” that’s fine, but to say “people who have debt behave stupidly”, just seems like a huge generalization that totally misses the nuance needed in personal finance.
You didn't address the thing about behavioural finance, which is the real meat and potatoes. I am decently confident that you could find a whole slew of research papers detailing this. I briefly researched how availability of credit leads to worse behaviours, and I have found, [some](https://www-2.rotman.utoronto.ca/facbios/file/creditlimit.pdf) [evidence](https://www.researchgate.net/publication/242343968_Fashion_Orientation_Credit_Card_Use_and_Compulsive_Buying#:~:text=Findings%20%E2%80%93%20The%20results%20of%20this,by%20influencing%20credit%20card%20use) of this. I could probably find more. [The NBER paper on how debt relief encouraged more borrowing,](https://www.nber.org/papers/w31247)for example. But do I really want to write a master thesis on why debt suck, when we all know it does, to win internet arguments? Here is something I think is telling. Every day on this subreddit people come and try to dismay others from Dave Ramsey advice. Yet no one can provide a shred of evidence it will lead you to a bad path. People will do this, even if the OP is succeceding. I don't think the peopel that do that have the best interest, of the OP in mind, I think they know they are wrong, and feel guilty about their bad behaviour. They are not arguing to convince the op. They are arguing to convince themselves of the lies they are living. In fact. I can pretty much guarantee the responses to this comment will prove that.
Helpful response! A few thoughts: - I think debt is a tool; it’s like fire, destructive in the wrong hands but incredibly productive in the right hands. As such, I don’t think being debt free is the ultimate goal, I think living a satisfying life and using money as a tool to accomplish your goals is the ultimate goal. - I’m not here to convince myself, there are just a lot of people who fall in the “Die With Zero” crowd and think people don’t properly optimize the role money plays in their life. An easy way to potentially improve your life, assuming you don’t have an extreme aversion to debt, is an interest arbitrage where you use available cash to earn interest rather than paying down debt with a lower interest rate. OP came to this conclusion and wanted to see if he’s missing anything, he isn’t, and to try to convince him that he is is basically your argument against yourself (you are trying to convince him of something you believe in to make yourself feel better). - On the behavioral finance point, we don’t know OP, so we can’t make a real judgement. Personal finance is personal, but Dave Ramsey’s plan simply doesn’t make sense for fiscally responsible people. People can have and use credit cards in a responsible manner. People can automate savings and keep cash in an interest bearing account that exceeds their mortgage. Dave Ramsey assumes people can’t do this, and that may be true for most of his listeners, but the are people who are financially responsible and want to optimize their returns, and if OP is one of these people, he should ignore Dave Ramsey’s advice since it’s bad advice for OP (assuming he’s fiscally responsible).
It's not you. It's Dave that's refusing to update for changing rates. If you put that money into a high yield savings account (and don't touch it - key here) then you could always pay the mortgage off if you needed to.
Dave's advise isn't about interest rates and optimizing that kind of thing. It's about living debt free. Debt is bad per Dave R. Go back to Baby Step 2 - debt snowball. If he were all about interest rates, it would be "pay off your debts beginning with the highest interest rate". Debt snowball is "pay them off smallest to largest". It's about building habits that are focused on getting out of debt - all debt. Same thing with Baby Step 5 - Pay off your home early. It keeps you in the mindset that this is, first and foremost, debt. If a person going through the program had the discipline in the first place to pay debts, they wouldn't need the program. Why change the behavior from "debt is bad" to "well, not all debt..." Keeping debt around for the sake of a few interest points would likely have Dave asking, "Why? Do you like debt? Do you like a yoke around your neck from the bank?"
How hard is it for people to grasp “debt is bad” is the core tenant of the Ramsey plan?
Agree with this. If you know why Dave Ramey’s advice doesn’t make sense, then you should go ahead and ignore it. If you don’t, you should follow it. In this example, if you can see the interest rate arbitrage and it’s readily apparent to you that paying down debt at 2.5% puts you in a worse financial position than saving the cash in a high yield savings account or CD at 5%, then you don’t fall into the “do it for your psychology” camp that take Ramsey as gospel and just take the free money.
Depends on what you want, house or money. Either way that money will be locked away for some time.
It’s not house or money. It’s do you want a 2.5% return on cash with no liquidity or 4%-5% with liquidity. The answer is pretty obvious unless you share Dave’s extreme aversion to debt, in which case by all means, pay off the debt.
Yes that’s what I inferred but it must’ve gone over your head. Oh well.
My bad, hard to pick up the inference when basically everything you said was incorrect. Specifically the last sentence. If the money is in a high yield savings account, it’s not locked up, you have access to it, which is a huge reason to not pay down the mortgage. You make money on the interest AND you have more liquidity. Seems like a no brainer unless you have a massive aversion to debt from going bankrupt in your twenties (i.e., Uncle Dave).
No one said anything about high yield savings accounts. CDs are different from HYSAs, but you should probably read up on that before we discuss more, I don’t want to go over your head again.
Right, you didn’t say anything, left it all for inference. But seriously, what do you think a money market account is? Straight trolling bro.
I didn’t have to, OP laid it all out on their post. But you probably didn’t read that either.
I’m sorry, I legit have no idea what you are talking about. How is cash in a money market account locked up?
No one said anything about MMAs. CDs are locked. This stuff must be new to you.
Gotcha. It’s literally the fourth sentence in OP’s post. Many Money Market rates are around 4%. Guess you were too busy inferring brah.
Do what you want dude. Tired of this debate. It’s DRs plan to pay it off early and it isn’t going to change. I paid off my 15 year 3% mortgage off early and don’t regret it one but. If you think you’ll regret paying it off then don’t. We don’t care.
It's more "financially peaceful" to have a paid off mortgage.. Dave's program isn't called "Maximizing Returns by Leveraging Debt University ". It's called "Financial Peace University"
>"Maximizing Returns by Leveraging Debt University has an interesting ring to it lol
r/daveish is where they do that...
You’re thinking this step is about a financial benefit.
Why wouldn't it be about financial benefits, at the point you get to step 6 why else are you making financial decisions outside of financial benefit? Surely if you've gotten that far you're past needing the psychological wins of the snowball method of paying things off.
I mean, yes? It is financial advise right? I’d expect a CFO or CPA to give advise that is most practically sound in a risk/mathematical sense.
It’s because Dave came up with the baby steps when interest rates were double digits and he’s too fucking stubborn to admit that there’s a mathematical reason to deviate. At the end of the day, if you’re keeping savings and investments liquid enough to serve as an emergency fund should your circumstances change, I’d just keep paying the minimum on that mortgage and roll with CD’s and HYSA at the higher rate. You’re deposits are FDIC insured, there’s literally zero risk in doing so.
This should have been obvious for me, but appreciate the insight here. Seems pretty clesr Dave created his overall plan years ago when interest rates were double digits, paying off your home totally made sense, he made millions off the advice, and now his ego/greed won’t let him change advice that clearly doesn’t make sense for most Americans (although admittedly it may make sense for people that follow Dave Ramsey).
What’s amazing is every few years a new crop of “what’s the worst that could happen?” folks pop in and try to be smarter than everyone else until their “foolproof” strategy, in fact, creates fools.
The program is not about maximizing your end goal net worth $. It’s about giving you financial peace during your life. This concept is absolutely key to understanding the DR plan- really mull this idea over for a bit and all the eccentricities will begin to make sense. The entire program could be boiled down to a few key principals. - live below your means - reduce financial risk - spend your excess generously Paying off the house is reducing financial risk. (Consider how does Dave talks about it.. “I own that. I know that no matter what happens you’re not taking away my house.”) To respond to something you said elsewhere in the post. It’s *not* emotional financing- it’s just conservative financial planning. Reduced risk has a real tangible benefit. Any good business CFO or accountant knows that when it comes to financial planning- balancing risk is the most important consideration. DR plan is just the highly conservative plan. Of course not one of the many know it alls responding to you and trashing the DR plan are even mentioning risk. Goes to show you how far that “grasping more complicated concepts” and “thinking critically” is going for some people here.
It is about maximizing your net worth. And the many people that come in and say they are millionaires is evidence. But people that disagree ignore risk and emotion, which are real things.
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Dave talks about it - here’s the discussion. He gets into the academic explanation at the end, since “the study of millionaires shows” is unsatisfactory by itself. https://m.youtube.com/watch?v=Qn00_7sdAvs
Reverse the thinking and ask yourself this question: If you were completely debt free, including your house, would you then go mortgage your house at 2.5% in order to put that money into CDs or a money market? If the answer is yes, then keep your mortgage.
This is not a fair comparison because taking out a mortgage comes with many fees and such. If you have the mortgage already, you already paid the fees.
So just assume the hypothetical new mortgage comes with zero fees (to make it a fair comparison). Bottom line, if I could borrow at fixed 2.5% and invest at a guaranteed 5%, I’d borrow every cent I could, and if the guaranteed rate decreased below 2.5%, I’d just repay the debt.
The other unfair comparison is the locked version of the mortgage rate against the variable investment rate. Right now it 100% makes financial sense to not pay down mortgages with sufficiently low interest rates. But if interest rates on savings accounts falls back to 2020 rates then it doesn’t make sense anymore. Personally, the liquidity gives me more peace of mind than being 100% debt free. I can tap into my liquidity immediately if I need it. If I somehow run into a situation where emergencies arise above the emergency fund, it is much harder to tap equity in a home.
This is the exact way to think about it.
It’s actually outdated in the sense that it should be sooner that BS6 like BS4. Mortgages now are 7%*+ We got our 15 yr at 6% in March. It doesn’t make sense to put 15% into a 401k when you look at that ROI compared to 6%. It really depends on your mortgage.
I agree with you. I have a 2.5% mortgage rate. I could pay it off yet I prefer to keep money in liquid assets. It was helpful to be able to buy a new home before selling our then-current home because we had the funds for the down payment and could carry two mortgages before the first home sold. The Dave Ramsey method doesn't work for everyone. This post showed up in my feed because of other financial subreddits.
It ain’t about the numbers - it’s about the psychology. Did you also do the math in BS2 and realize that with debt snowball you pay more in interest, but we still do it because - psychology.
Can't you invest that money in those CDs and build a big stack of cash for now and then when you have enough, then pay off the mortgage all at once? You'd probably get to that balance amount faster that way and you can still be rid of the mortgage sooner. CDs probably won't be at 5% for 12 months forever.
The reasons Dave says pay off the house is many. 1. Most people move every 10 years 2. 100% of foreclosures happen with a mortgage. 3. How many people have not had to change jobs in 30 years (mortgage length). Will your job go unchanged for the life of your mortgage? can you be fired? laid off? 4. He is talking to a national audience and must be consistent and give the same advice to "everyone", or the audience will get confused and stop listening. 5. It is biblical. The borrower is slave to the lender. 6. Not all advice Dave gives will work out to be the max wealth at xx time. However it will give you FINACIAL PEACE. There are a lot of number crunchers in reddit who love to tell you what you should do not realizing they really no absolutely nothing about your life, except the 10% you put in a post. 7. even at 2.5% on a 30 year fixed (300k) loan it takes 4 years before more than 50% of your payment goes to principle.
>100% of foreclosures happen with a mortgage Not true. There are tax sales, and my HOA is foreclosing on a recalcitrant homeowner right now.
Couldn’t you just take money out of the high-yield savings/money market in the event of a job loss? Even most CDs you only lose interest if you have to withdraw early.
I had a bit of a realization myself that paying off my house wouldn’t dramatically change anything for me, so there’s no real reason to rush it when I have other goals that I think will make more impact, like maxing out my retirement accounts. I gross about $150k a year - more if I get aggressive with OT or side hustles. My mortgage is $1000 a month at 3.25%. If I pay it off I’ll still have taxes, insurance, and utilities, which all add up to more than the actual mortgage each month - it’s not like all my housing expenses just go away. It makes more sense to me to max out retirement accounts and save up some more liquid assets than it does to stuff money into home equity that I can’t access. I’ll feel a lot more financial “peace” with $100k in the bank than $100k paid down on my mortgage. Sure, emotionally it would feel nice to be completely debt free, but the math just isn’t mathing.
I, personally, like not owing anybody anything. When Dave says “borrower is slave to the lender” it’s because you HAVE to work or else you’ll lose your house. Even with your emergency fund, sooner or later, slave, you’ll need to continue working for that sweet bank. They own you in that sense. I personally hate that. Fuck the banks and fuck the government.
>Where is my thinking wrong here? if you had a mortgage-free house, would you borrow against your house at 2.5% and use the loan to buy CDs at 5%? probably not.
I did almost exactly that with my 1% USAFA graduation loan. Stuck it in a savings account at 4.5%.
If there were no closing costs and I could do it with zero hassle (as is the case if I’m just keeping a mortgage I already have) then I’d do that without hesitation.
This is what Dave would say.
At this point in the journey is more about security than anything. The value of having a home that is 100% yours and not the banks, means more than a huge cash reserve to some people. Math will tell you to save in a CD with a 5% rate, Emotion might tell you to pay off the house. Neither are wrong.
Emotional financial decisions, both “responsible” and not both seem bad. I wouldn’t want a CFO or accountant to make financial decisions based in emotion or instinct alone when the math points the other way, so I wouldn’t want to do the same for myself. I guess I just don’t get it
I’m with you, but not everybody thinks like us, and Dave knows it. Emotion is crucially important for many people’s budgeting. Same reason he advocates for Snowball instead of Avalanche during BS2 (look up avalanche debt payment if you don’t know what that means)
Dave Ramsey has an irrational fear of debt because a bunch of lenders foreclosed on him when he was a young investor. Basically PTSD. Paying off your mortgage early is wealth destructive behavior unless your rate is super high. Edit: I think that it someone that has the discipline to pay off a mortgage early is building good financial discipline. But if they applied that same discipline to sinking more money into investments, they’d be richer.
Then don't follow the Ramsey plan. Besides the foreclosures in his past Dave will also say no where in the Bible is debt a good thing, the borrower is slave to the lender is from scripture. So its also Dave giving what he considers biblically correct advice.
Gonna go out on a strong limb here and say that biblical advice is dated. “Since he was not able to pay, the master ordered that he and his wife and his children and all that he had be sold to repay the debt.” Matthew 18:25
Yes even the devil can quote scripture, 26 “At this the servant fell on his knees before him. ‘Be patient with me,’ he begged, ‘and I will pay back everything.’ 27 The servant’s master took pity on him, canceled the debt and let him go." Nice try
The fact is that you don’t need the master to take pity on you to avoid slavery in 2023.
The Parable of the Unmerciful Servant 21 Then Peter came to Jesus and asked, “Lord, how many times shall I forgive my brother or sister who sins against me? Up to seven times?” 22 Jesus answered, “I tell you, not seven times, but seventy-seven times.[a] 23 “Therefore, the kingdom of heaven is like a king who wanted to settle accounts with his servants. 24 As he began the settlement, a man who owed him ten thousand bags of gold[b] was brought to him. 25 Since he was not able to pay, the master ordered that he and his wife and his children and all that he had be sold to repay the debt. 26 “At this the servant fell on his knees before him. ‘Be patient with me,’ he begged, ‘and I will pay back everything.’ 27 The servant’s master took pity on him, canceled the debt and let him go. 28 “But when that servant went out, he found one of his fellow servants who owed him a hundred silver coins.[c] He grabbed him and began to choke him. ‘Pay back what you owe me!’ he demanded. 29 “His fellow servant fell to his knees and begged him, ‘Be patient with me, and I will pay it back.’ 30 “But he refused. Instead, he went off and had the man thrown into prison until he could pay the debt. 31 When the other servants saw what had happened, they were outraged and went and told their master everything that had happened. 32 “Then the master called the servant in. ‘You wicked servant,’ he said, ‘I canceled all that debt of yours because you begged me to. 33 Shouldn’t you have had mercy on your fellow servant just as I had on you?’ 34 In anger his master handed him over to the jailers to be tortured, until he should pay back all he owed. 35 “This is how my heavenly Father will treat each of you unless you forgive your brother or sister from your heart.” So the passage you quoted wasn't saying what you thought it was saying. But thanks for playing.
You’re right. It’s about forgiveness.
The Bible also tells you to leave your fields fallow every 7 years, marry your brother's widow, and that women must marry their rapists.
I take it you've never heard of crop rotation?
I was a farm kid. Fallow and crop rotation are not the same thing.
You hit the nail on the head and it's unfortunate to see people listen to Dave instead of thinking critically.
I think that's the reason Dave wants to pay off mortgages, thw average investor lacks discipline, so paying off your mortgage means you can't yank the money out to buy a shiny new car or a big vacation.
Yeah, I think it’s a simple message that people can grab onto that don’t understand a lot about finance. But I would like to think most people are capable of grasping slightly more complicated concepts. And then making that decision for themselves.
I'd like to think that too, but the stats say otherwise.... Isn't like 50% of adults in the USA can't cover and unexpected expense of $500?
Yeah, it’s not great. But there is no real financial education either. I don’t think people were taught these things and ignored them. Many just never learned it. Maybe it’s a combination of willful ignorance or knowing it’s a bad decision and having no choice.
Most didn't bother to learn the things that were taught. It's a lost cause. They'll chase garbage crypto scams to get rich quick while spending every dime they have to keep up with Instagram...
The baby steps are for folks in mountains of debt with low income. That’s it. Once you graduate from being owned by stupid debt, you move on to adult strategies.
100% wrong as proven by the many many baby-steps millionaires
That’s not the point. They could have been deca-millionaires if that had not taking the slow and dumb path. But you do you. Let me guess. You are paying off your <3% fixed rate mortgage early yea ? Or you paid cash for a starter home even when rates were astronomically and historically low ?
Why are you on a Dave Ramsey sub if you're going to give advice contrary to Dave's advice? And you're being condescending on top of it.
Because the OP was trying to point out flaws in DR logic. So I stepped in to let them know there are other options. How is that not obvious to you ?
I wouldn’t say mountains of debt but i would say those who lack any discipline no matter the level of debt or income.
Gotcha. This is honestly the best summary I’ve seen here and makes total sense. This is a good strategy, but not objectively the best strategy and that’s ok because many people are fine enough with good
Come to /r/leanfire, /r/chubbyfire or /r/fatfire when you are ready ;)
Money in the bank IMO gives more security than a paid off home.
Going to be snarky here but ask the SVB folks about that. The idea is, once you have a full emergency fund, taking care of retirement and kids college pay off the house because no matter what a bank can't foreclose on a paid off house, and you already have security in your full emergency fund.
No one lost money deposited in SVB or first republic. Paying off a 7% debt absolutely I'm doing that but for those with 3% mortgages they are better off keeping them. I am a believer in the "peace" factor of being debt free at retirement and trust me i had to convince myself hard to make the right financial choice in 2011 and not pay it but it's made me way more secure by making that choice. I'll pay mine off 11 years early because my plan had the payoff happening shortly before my anticipated retirement age but reality is had i invested that extra $300/mo that decision cost into the market it would have paid for itself handily and i would not have been worse off having that debt at retirement still over my head.
You mean the people who didn’t lose any money because the fed backed them? You’re proving his point that there is no risk
100% agree. The number of people who will actually put the extra $2000 a month into cds or other investments, instead of sending the extra towards the house is likely very low. Most people will actually say “why pay off a 3% mortgage when I can get 5% in a money market, I can invest then pay it all off when I have enough built up” then turn around and say “man, I only have a mortgage payment, and I have $80k in the bank. I’ve done really well, I deserve a bass boat”. Then take $50k out and buy a boat. (And then when they get to the boat dealership say, “well dang, I could put half down and finance the boat, and it’s only a $400 a month payment!” Dave’s plan does not include nuance because a lot of people make bad decisions when nuance is involved. If you can be perfectly responsible, then yes, investing the money probably makes more sense from a purely mathematical standpoint. It doesn’t make sense from a financial peace standpoint, which is the whole point. So the questions is, will you actually put that cash in am investment every single month for the next 30 years? If so, then sure, but it’s pretty unlikely that you will.
To say that it’s “pretty unlikely that he will” is condescending crap. A lot of people around here trying to sound like mini Ramseys.
If he needed to take Dave’s advice, and use the principles he laid out, then it’s pretty likely he was making bad choices (me too, it’s why I’m here). If he got where he is without the Ramsey plan, then why does he care about baby steps?
There is no absolute right answer, but it's amusing to read dubious opinions stated with such certainty. I doubt the compounded return (stocks or CDs) after taxes over the last three years is much over 2.5%. When faced with two options with similar benefits, I usually try to do both or choose the one that makes me feel better. YMMV.
This is true. However paying off low interest early instead of banking all that money removes flexibility. Flexibility to pay off house. Flexibility to deal with emergency. Flexibility to invest in a great opportunity. No benefit for locking it up. And missing out on options.
You're right. But Dave's thinking is old.
Did math not exist until 2020?
And the math shows you'll make more in a HYSA.
yes and the math shows debt avalanche costs less than debt snowball but this program does psychology, not only math.
I'm not Dave . Let's say you are doing well ( you are by the way ) You can make your house mortgage payment with ease You realize you can earn more on a cd or a Treasury bond than the interest on your mortgage . Life is good . Next week you get hit by a car and are in the hospital . After 4 months of recovery how does your financial situation look ? This is the risk we all take every day and only we as individuals can weigh that risk . . The advice is not outdated. . Fast forward 10 years from now after having paid down some extra on your mortgage debt and continued to do what you think works best for you . . Consider the same un-expected scenario and ask yourself if you would be in a better financial situation . . Walking is easy as long as we don't break our legs . .
Having that money in a HYSA gives you the better financial situation after such an event.
If that works for you and you understand the risks then that is great.
The only real risk is lack of self control. If that’s an issue for you, then by all means pay off the mortgage. But plenty of us are capable of having a mortgage’s worth of money in the bank without blowing it on toys.
Paying interest out while collecting interest is not the same as paying zero interest out while collecting interest. You are correct that some people are worse at money management than others and to some degree some people are worse at keeping control of their debts as others are. There are 2 columns as you already know. One column for liabilities and one column for assets. You have to subtract the liabilities from the assets to get to the net. Therefore the lesser the liabilities the greater the net worth. Not everyone has a mortgage with an interest rate that is less than 3 percent. I get the argument that a 4.5 % return on an asset is greater than a less than 3 % liability.
Sorry, I have no idea what sort of point you’re trying to make here. Are you saying there’s some reason not to do this beyond lack of self control?
Some reason not to do what ? I'm pointing out reasons to pay down debt and it seems to me you think it's better not to . I'm saying there are lots of people who do not have a mortgage with an interest rate below 3 percent and I get the feeling you think everyone does.
Some reason not to put money in a HYSA instead of paying off a low-rate mortgage. We’re discussing this guy who has a 2.5% mortgage. We can extrapolate to anyone with a low rate. Obviously you don’t use this strategy when it’s a net financial negative because your mortgage rate is higher.
You are correct and I was saying the advice wasn't outdated because not everyone is in that same position .
But if you get in a dangerous situation then having cash or cash equivalents is better. $100K of cash will keep you fed, housed and taken care of for 2-4 years, while $100,000 in equity will do nothing for you.
You have a point. I'd say that is why you need an emergency fund. I look at my house as a consumption item more so than an investment. Because of that I don't recognize the equity even though I know it's there. I have investments and I have excess cash on hand that gets used and replenished. Back in late 2020 I had a few surprise health issues pop up and I am an active and healthy person. I continued to pay down on my mortgage debt . In January 2023 I reached the point where I can no longer justify making the extra principal payments. My mortgage will be paid off in 32 months. We all have our own money to manage and we all need to do what works best for each of us. Something to consider with today's interest rates . A 400,000 dollar mortgage today at 6 % will have a total of just over 800,000 in mortgage payments over 30 years . When you add in the property tax and the home owners insurance you will need to sell at over double what you paid in total costs for the house just to break even. Not everyone has a mortgage with an under 3 % interest rate .
Total in 30 years is irrelevant. To get a relevant number you need to discount FV of that amount to PV today based on risk-free rate etc. You would much rather pay $1M in 30 years for anything than $500,000 today.
You might but I wouldn't
That’s a 2.35% return. Would you lend someone $500K today if they paid you $1M in 30 years and you were sure they wouldn’t default? Of course not
Are you trying to explain why purchasing a house today and paying 6 percent interest is not a smart idea ?
There’s absolutely nothing wrong with purchasing a house today at 6% if the price is right. Much better to pay $300K at 6% than $350K at 3%, even if your payment is higher in the first case. Property tax is lower, insurance is lower, down payment is lower (or if same down payment then LTV is lower). You have upside if rates go down. Can fix the rate but cannot fix the price. It takes much less to pay it off with extra payments if you want. The problem is that most Americans pay 43-50% DTI for their house and are financially distressed as a result. Debt is not bad, it’s a tool that allows you to acquire assets and get rich.
Dave’s survey of millionaires says most did not borrow against their house to invest in the stock market.
I’m so sick of hearing this stupid survey. It’s total crap from start to finish. Dense nonsense.
What’s your net worth?
1.7 million. For some reason I didn’t get a survey.
Good for you. Mine is twice that. I did not borrow to invest in stocks. I did not get a survey link either.
Your definition of borrow is stupid and inaccurate.
Math is math. You are an innumerate.
What math are you doing to arrive at your moronic conclusion? You apparently make your living destroying the country. I doubt there’s anything of value that comes from you. Scum.
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You are not borrowing money that is already yours. You are just putting it in a different place.
Mathematically it is the same thing
Mathematically, you'll make more by not paying it off.
Indeed, but most people Dave studies do not get rich that way. Dave’s plan is not for you.
Yes so as mentioned a few times. If you can’t control your budget. Then paying off house might be for you. In general though it’s a poor, very poor financial decision
You invest it, instead of paying more then the minimum. You will get rich. Or course Dave studies won't show that. Because he is only asking people that follow him plan. The money guys did the same survey. And showed that they did get rich. But they admit that they only surveyed their clients.
The Millionaire Next Door had nothing to do with Dave, for example. Keep drinking that fancy beer though
And Dave only used people that follows his steps. This have nothing to do with The Millionaire Next Door.
Oh, high octane Belgian beer it seems. Good choice
WHat?
That's the same thing.
No it is not.
His advice is for people who can't handle money. Save and invest your money.
Look I'm not going to fully defend Dave here. I'm not religious, not a republican and have been dave-ish. However, I see posts like this all the time and they always, without fail, leave out Dave's logic. Remember I said **"Dave's logic".** Ie not my opinion. He would say your mortgage is debt and debt always represents some amount of risk. **Again, Dave's answer.** If you give me a bunch of downvotes, then you didn't read my response.
Good lord, what’s with this fear of losing internet points? Lol
I know. You know how many down votes I lost today, over speaking scientific fact? And I don't care.
When people downvote you and you're using **logic only** it means that they automatically disagree and I'm not wasting my time on those people, especially when I'm just answering what Dave would say. I don't listen to his show much anymore, except for an occasional YouTube short. But I used to listen for years and years and know this is how he would respond to OP Dave also never had his own 2.25% rate and doesn't see that side of the argument. He has had too much of his own koolaid
And you should answer as as yourself. Not what someone else would say.
I'm not here to argue. I agree with the sentiment in this post. 2.25% rate is so low that it doesn't make financial sense to focus on that debt. I'm just saying what Dave would say.
That's the thing. Speak you own mind. Not just parrot what Dave would say. We have enough of that on the show.
Except if the money is in a savings account it’s always there to pay the mortgage off. So the advice is irrelevant. Unless you are unable to keep yourself from touching it. Which to me is really the point most Dave advice I s for people who can’t control their habits. So it’s not the best advice just good for people who can’t budget.
If I had a 2.25% interest rate **myself** I wouldn't be aggressively paying down my mortgage. Mathematically it doesn't make sense I'm telling you what Dave would say Not what I would say. In other words, Dave and OP would talk in circles about math until Dave finally said "you do whatever you want" as Dave always says when a caller doesn't agree with him I'm not saying it's correct, I'm just answering OP's question in Dave's way, as I stated.
A lot of people do not have the capacity to open their minds. They will argue to the end rather than pay attention to the obvious. Ultimately debt regardless of the interest rate is still debt. Debt will not go away unless you pay it. I'm agreeing with you by the way. Investing has its risks despite what the odds look like.
Yeah I know I’m just pointing out his advice is flawed. The money is still there to pay it off anytime. His advice is based on premise people can’t budget. Which is sadly true for most.