But most millionaires are made in the stock market. You use fear but most people live on hope. Teach people to be disciplined and save so they won’t get foreclosure on instead of telling them to pay off a home early
@@bjmcintyre5080 Where do you think money goes after you pay off a home? You have 2.5 decades of compound growth with thousands of extra dollars deposited per year afterwards. Plus your typical highest expense is reduced to property tax (1.4% in a good state) and home insurance is surprisingly cheap.
In 2008 a lot of people lost their jobs. Their stocks also went down. Guess what happened to a lot of those people who had a mortgage? They lost their homes. The ones who had their homes paid off made it through just fine.
What? Lol the math doesnt lie If you paid off your home, you still put the money in the house payment Which if you would have invested you would still have Acess to it Dave ramsey its wrong Its math
Ppl default their mortgage in 2009 because their house value drop below their mortgage by like 100-200k. It's actually good to default. If you buy a house with cash in 2008. Your net worth would drop 50% with house value too, you are not "fine"...
Owing nothing to anyone is so freeing. You cannot know what it feels like until you are in that boat. The stress that is lifted off your shoulders is measurable- You feel it !! Looking at our savings account and seeing it grow by thousands of dollars a month is awesome. Having money for trips, fixing things, upgrading things and giving to others gives you a quality of life higher than anything you may have thought it would.
That means you are treating the money as disposable income, not investing it. That is not growing wealth. It’s not a comparison to investing instead of paying down the low-interest mortgage.
My grandfather lived through the Great Depression, he warned his children and grandchildren that the banker would call your loan at the moment you had no means to pay it off. I lived that situation in 2009 when the FDIC closed our local ag bank. I now live and thrive operating my business and personal life with cash. I watch this videos daily and always learn from them.
If you have a 30 year fixed rate the banks can’t just come and make you pay your entire mortgage. Even if you are upside down on your house, as long as you can make the monthly you can ride out the storm…
Its worth mentioning. The Ramsey plan is “financial peace”, peace being the operative word. It is not a profit maximization plan necessarily. In addition to living and giving like no one else, the overarching goal is to take control of your financial situation and dont let it be the cause of stress/pain/anxiety in your relationships.
My peace comes from knowing basic math, where I dont give up on 12% annual compound gains on the SP500, to service a 5% reducing balance simple interest mortgage. If YOU dont understand basic math, life will not be peaceful no matter how many times you pay off your mortgage. The "millionaires" Dave has interviewed, must have also told him that leverage was one of their pillars to their first million BEFORE they paid off their homes - but for some stupid reason, he wont mention that. Cheers.
@@ananditagangwar9988 I agree when discussing millionaires especially in the 5 million plus range. Yes they used borrowed money no doubt about it. However Dave's approach is for the vast majority who are clueless and desires simplicity!
Bought my house in mid 2018. Just paid it off 100% May 19th of 2022. The peace of mind you get is unexplainable. You will look different at life when your debt free w/ no mortgage w/ nice income. I recommend everyone to go after it. Pay it off !!!!
2 year old comment but when you got money, life is easier than having no money. Lucky you can pay it off in a few years. Most people in Asia, people have 40 year mortgages.
It’s a math vs psychological dilemma. The advice is not wrong mathematically, but George is right from an emotional perspective. Being debt free has a ton of value, but the math says start investing as much as you can as early as you can for compound interest.
@@cosmic_giant1523 no doubt about it. But there is also risk in not investing sooner rather than later. All of life is just a collection of calculated risks, all we can do is try to make the right calls! No right or wrong here… George’s point has merit (the psychological value of being debt free) and so does the woman in the clip (greater long term returns).
It's not just math vs psychological. It's math vs math. It could be wrong mathematically, if someone can't afford payments, is in danger of not affording payments, or is tempted to take on even more debt...which is usually how greed works. This is why behavioral finance is so important. Rarely does a person stop after the first debt, if they think they can keep parlaying this concept and get richer. Greed. Addiction. And as you build more and more debt, you become unable to have the cash flow liquidity to pay all the payments.
Also it’s good to note that paying off your home is investing. And your investing in something that you can almost guarantee will give you profit. We bought our first home 7 years ago and when we sold it this past summer, I was shocked that the value doubled. I can’t stress enough how important home ownership is. Besides stability, it is one of your greatest investments. When you pay off your home, you’re not throwing your money away, you’re literally investing in your future.
You invested when you bought the house. If you pay it off faster, you will own more of that house, you won't own additional house. Paying off debt isn't investing...it's paying off debt.
However, my house has doubled in value in 6 years. I paid off the original debt, so my equity in my houae is actually twice what I paid for it. I think I got a pretty good investment going on if I end up selling my house. Especially if I end up downsizing. I'll get another paid up house that can build up more equity AND CASH in my pocket to boot. That's the beautiful math of a paid up house, not to mention the peace of mind of having NO DEBT! 5:22
@@jeffah3103 The house doubled in value and the real estate market didn't care if you owned all of it, or half of it or 5% of it and the bank owned the rest. One could argue that if you owned 5%, you made 20 times your investment. If you paid 100% you only doubled your money. I won't make that argument, as it's not a good way to think about it. Nothing wrong with peace of mind, though.
@andrewdiamond2697 @jeffah3103 I can't say the same thing for myself, who bought at the top of the market in 2022 in Orange County. I defined my "investment" not in financial terms because I knew prices were already at absurd prices. From a financial standpoint, there is so little probability to no probability I will ever profit from purchasing my home, especially if I ever take into account the interest that comes with my payments. My purchase price was a little over $1m with a 25% down payment. If I paid off my mortgage early, it's purely for the state of mind because from a financial standpoint, I think of it simply as paying off debt owed, nothing more. I think people also forget that people can invest in mental health. As long as I have my mortgage of >$5k a month, I have a chance of losing my home if let's say i lose my job. If i have it paid off, unemployment would be able to cover property taxes and I will still have a roof over my head.
The biggest anxiety for me when I had a mortgage was losing my job and then losing my house due to not paying. If the advocates of not paying the mortgage off are so set on this idea why not just rent? In the UK the rent is normally less than the mortgage each month so invest the rest of it without the council and other bills. Or if you want get your mortgage interest free? You have a big bill at the end but who cares you have made up the rest in your investments. Or have you? A house is an asset and if owned outright can be used by your family for a better future.
I believe part, if not the majority, of the mentality is that people would rather see something going up (their investment account) than something going down (their debt). People think more highly of the amount they “have” rather than the amount they owe
True, the going up part over a decade is much faster than the lowering of the balance. So you can payoff your house faster over a decade by investing instead
@@abrahamflores2566 correct. The Ramsay philosophy is you’re too stupid and undisciplined to stick to an investment plan so the best thing you can do is dump it into your house to protect your from your own stupidity. I’m not saying that’s not valid for some people, but the fact is that the math support the approach of minimum payments on your mortgage with steady investment into index funds. Whether or not you’re too dumb to follow the plan is a different conversation.
Yep imagine you don’t lay it off you lose your job and now they took your home. You lose your job you can borrow against your house if needed. But by then you should have money saved in the bank and stocks to by time to get a home. Go head stay in debt then
@@anthonyyaboytone5not where I live (sweden). If you dont have a job you will not be able to get a loan. Doesn't matter if you own a paid off mansion
My father told me his mother would tell him the old "a penny saved is a penny earned." but what he learned and told me was "a penny saved is a penny earned because you don't owe it to nobody" Debt is bad, never owe unless your life depends on it.
@@JM4lyfe92 Yes that is what she said but given the context implied that that is the way everyone listening to her should do it. If not then she would not have use the word "actually."
That is how it works. It’s the Ramsey people that pretend like there is only one way to do things. If you want to pay down a mortgage early, that’s cool, but understand that it is likely costing you hundreds of thousands of dollars. Ramsey won’t ever acknowledge that.
Yea and people lose millions because these morons tell you to pay off you mortgage early Most people now have a 3% mortgage rate which is insanely low Why would you pay it off?
Debt free is nice. We can retire now, we’re in our 40’s, but keep working to stay busy and pay for fun stuff. Sleep well at night lining we can stop working at any time. Working when your debt free is a really good feeling.
Let me preface this by saying I love listening to the show. I listen almost every day and think that, if you follow his plan perfectly, you can’t fail. With that being said, it annoys me that they dismiss any alternative as dumb when it’s oftentimes a totally reasonable thing to consider. There was nothing wrong with that TikTok. It’s a very common and smart strategy that isn’t very risky. Paying off your mortgage quicker is also a smart strategy. It just depends on your priorities and risk tolerance. I just wish sometimes they’d go deeper on the pros and cons of each instead of immediately dismissing everything that’s not exactly to their plan as stupid.
Agreed, it is easily their biggest weakness as personal finance coaches. You can’t flat out dismiss every other idea out there just because it’s different than yours. Sometimes there are other great ideas too.
His snide derision just disgusted me. I know people love these Ramsey personalities but this guy strikes me as a total tool. My wife and I will be paying off our mortgage early because we think it will be a cool thing for our family to have. We understand the math isn't great. And we acknowledge it because we're not stupid. But ya we are choosing the psychology and recognize that. However if we just went thr route of investing we will be in no less risk because those funds would be LIQUID unlike money in a house is. Pros and cons to both routes. I hate how in this show they get all snide and self righteous at people that follow perfectly viable financial routes that lead people to being extremely wealthy.
One thing to consider on Investing vs Paying off Mortgage is liquidity; even if the end numbers were the same investing that money on an regular brokerage account gives you a lot of liquidity while putting everything on your house ties it up on a very illiquid asset you wouldnt want to sell anyways. Paying off your mortgage is fine, but one thing to consider is to remain liquid while doing so, otherwise a shock to your life such as losing a job or a life changing injury can destroy everything you worked for.
Yep, if you really are stuck you can sell. Even if they're down and you lose some money, it might get you out of a bind. If you really do want to throw money at the mortgage, put your cash in an offset account. That way you get the reduced interest, but still have liquidity.
that's why they teach the baby steps and baby step #3 - having a fully funded emergency fund prior to paying off the house addresses the concern of remaining liquid.
Most of the people I know that's bought a home and said I'll just make extra payments also believe that debt is a tool.. they also buy a new car every few years go on vacations to get away from work all to never realize the reason why they gotta go on vacations is because their sooo stressed out from Asking Alexa what "PAYMENT" is due today!!? Will they be ok, sure, maybe who knows!!? I'd just rather not deal with the stress myself
She made a mistake in her calculation… after 13 years you pay off the house and if you continue that model and use your mortgage payment amount on investing for the next 17 years you’ll get a different number
She is right mathematically, but it’s about the emotion side of the equation which is 80% of finance. I feel like they should have given her at least that.
@@wemustdissent because mathematically I could invest my money in something and not touch it until I’m retired but emotions are what makes someone pull the money out prematurely. Or emotions are what make people invest into things they shouldn’t. Which is just a couple examples of many of how emotions get in our way of being wealthy.
She's not even right mathematically, as good applied math requires taking into account the right parameters... sure. She knows how to work with exponents and compound interest, but if you are using mathematical models, you need to account for risk in some way such as job loss, or sudden huge bills, or unexpected fluctuations. Like what actuaries do. It's not even a math vs emotions thing, but rather a idealism vs reality thing.
Here's a thought, why not do both. If you have an extra $1,000 a month you invest $500 and you pay $500 on your mortgage. That way if the stock market out performs your mortgage, great. If not you've still saved interest on your mortgage. Also it's a little more complicated here in the UK since we don't have fixed mortgages for the entire term. The interest rates are generally fixed for 2-5 years, and therefore the interest varies over the lifetime of your mortgage.
This is what I do. But it's more so my way of "timing the market". Rather than selling stock or not buying more because I'm scared there's going to be a crash, I put extra towards my mortgage. I don't feel like either way is wrong. What's wrong is not doing one of the two. Letting that extra money sit in cash or be wasted on unnecessary things is objectively wrong.
What country do you think most of us are living in??? It's one extreme or the other here!!! Then again, having some money in an investment account in case life happens may not be such a bad thing (good luck pulling your extra equity out of the house in a timely manner)....shhhh...if people start thinking logically, the whole economy will crash.
We just paid off our mortgage a week and a half ago, we have retirement , savings, and just for the hell of it fund, and no debt, guess what it’s FREAKIN AWESOME AFTER 24 1/2 years it’s something we have strived for since we built it.😊
@@johndone8045 That's not a debt though...that's a tax bill. We're always going to have bills like water, electricity, etc. and tax bills are just another bill, just like insurance bills are just another bill.
I choose peace of mind, knowing I could lose my job and take a 5 year hiatus from work vs having 300k extra in 30 years. Knowing if I die tomorrow my wife only has to come up with property taxes, insurance, utilities and food to survive. Zero debts of any kind, her not having the stress of debt if I were to pass, while I'm alive I don't have that stress either :) Your job feels different once you're debt free, your grass does, everything does.
My two cents: only my opinion, I would get life insurance for 100k just to be on safe side and get ROP so you get your money back after x amount of years. This will give really peace of mind for family. Good luck and congratulations on being debt free. I’m 3yrs away from paying off mortgage and then I’ll go bananas with investing. You made a smart move, bravo!
@@archeanchaos-s4ci dont fully trust insurance companies. They will find every way possible to not pay out. If you have a "preexisting condition" they didnt know about? No payout
@yep3172 But if something happens and they don't have income for five years they will either sell that house or get foreclosed. They have no backup plan. I have a mortgage and life insurance to cover more then the remaining balance. Having debt is not a bad thing. I could easily pay off my mortgage, but choose to invest for my retirement. House rich is not rich.
You have to think about this as well. If you pay off that home early all the extra interest could go towards home repairs or to buy a car in cash. A lot of people that say pay off later and you have a bad leak or you need a new roof and they start taking out home equity loans or HELOC creating more debt to pay for the repair it’s like a domino effect.
Which is why you have an emergency fund🤔. I don't understand why people think that just because you are doing the mathematically correct thing it means you are screwing up in all other areas of your financial life.
There are multiple ways to make money, it really all comes down to your risk aversion . The Ramsey plan is zero debt zero risk it’s a great plan and a successful one it’s not the only one that works though.
No plan is zero risk. What about the risk you lose your job before your mortgage is paid off and burn through your emergency fund. In that case you will be forced to sell.
It is not zero risk. Debt is not the only risk; insufficient retirement income is a much bigger risk that should take priority in your plan. Becoming debt free is a want, having enough income to live in dignity is a need.
You are 100% correct George! The other two points that I think about concerning this dilemma is while you're paying off your home - YOU DONT OWN IT, but if you go ahead and pay it off sooner YOU WILL OWN IT and it can be a great resource for cash if something happens - which we all know WILL HAPPEN. It's called life. The thought of me owning my home and no one can take it from me gives me a great sense of peace.
Feels much better having a $0 remaining balance on a home than it does having a higher investment balance. Corners cut, sacrifices made might be tough at the time, but I'll never look back in regret for striving to become debt free on a single income while raising three kiddos. Especially during these current times.
Good for you! I love seeing my portfolio outperform my 3.2% fixed rate tenfold 😎 I'm only here to laugh at these people on the radio while driving to the 🏦 I'd without a shadow of a doubt be poorer if I cut a big check for my home today 💯
@@15KHPCLUB 🎯 2.75% fixed here and cash is invested. But my job is very secure. This lady has a lot on her shoulders and it sounds like she’s sleeping better at night.
Math works out pretty good... she rouded it up a little bit... but still got the point across. Also, compared to advice that other influences and gurus are giving... that girl was pretty spot on...
Amen George!! Drinking the DR Cool-Aid here, every extra penny is going to payoff our mortgage, while still having an FFEF, a Sinking Fund, and a Home Improvement Fund. Only $94k left on the mortgage...can't wait to be FREE!!
Nice condescending tone🤦🏾♂️ even though the she's absolutely correct about the numbers. If all those numbers she is throwing out is too much for you follow then why are you even offering financial advice? Any person with a basic understanding of finances and uses a mortgage calculator can understand the "many" numbers she threw out.
Amen. Agreed. This show is selling snake oil. Debt is a tool, you can learn to use it to your advantage or bury your head in the sand because "numbers confusing"
Paid off our mortgage 2 years ago and best decision ever made. Now we have 0 debt of any kind, max out retirement accounts, fund two kids 529 monthly, saved up 2 year worth of emergency fund, and fund even an extra taxable account and sleep peacefully at night. We are millennials so we will stay at our house even during our retirement when kids go to college 15-16 years from now as the house is perfect size with 2 bed 3 bath with an office in excellent schools. We don’t have to downsize the house when they happens and already set. We are just focusing on early retirement. The number one reason to pay off mortgage is saving time. Meaning we are living like we are semi retired at 65 but in our mid to late 30s now! No one mentions this and it gives us so much flexibility that we can do things we normally couldn’t. For example take some risks like changing career if we wanted to down the line and my wife now only works 2 times a week part time job to take care of the kids.
I’m working so hard to pay off my home… my mortgage payment is my largest expense. If I pay off my mortgage, I would still direct deposit the money into an account I don’t have daily access to. Subtract annual payment of taxes, insurance, and 10% debit for ( upkeep & maintenance), I will still have left over money 💴.
It's not wrong and not a trap if you are disciplined. It is good advice and not hurtful to young people or bad math. Why do you need to say that? Just say you like the peace of having no debt but realize the math doesn't support your position.
Seriously. The only time I can see paying off the mortgage early is if someone bought way more house than they really could afford and now have a monthly payment above 35% their budget. If you buy what you really need and not what you want you can cash flow better
I was very curious about this. My goal is to pay my house off early because I don’t want a huge house payment in my later years of life. My mother-in-law advised not to do that because you can’t write off the interest. Yes, the write off is nice but I would much rather eliminate mortgage payments. Thoughts?
George just addressed this in the video. It's bad math. Why are we okay with giving our lender 10k in interest to save 2.5k from going to the IRS? Doesn't make sense.
Mortgage interest isn't claimed very often since the standard deduction is so big. If you don't itmeize on your taxes, there is ZERO benefit to having a mortgage.
Well you addressed your first concern which is huge payments. What if you got your mortgage payments to $750 a month? Sounds like you are overleveged. If you have a low interest rate I would look to paying down your principal to $175k and recast your mortgage to lower your payments to where you are comfortable. It's the best of both worlds
Okay George, the question is moot if everyone is broke and doesn't have the extra $1000. That's not an argument for or against paying off the house early.
Yes, that was a bit disingenuous. The $1k is the money being used to pay off the mortgage early. If you don’t have that, the whole issue is irrelevant.
That’s why they suggest a 15 yr mortgage that is not more than 25% of take home pay… that’s why they say get debt free and invest in 401k…and only then pay off house early
He missed one of Dave's best points which is you should pay off your mortgage now because you don't know for certain that you will have the opportunity to do so in perpetuity. Divorce, Medical problems, job market changes, and financial market reversals all happen. Pay off your mortgage now before something unexpected happens.
Having your home paid off gives freedom from fear. It enables you to make better money decisions because your home is paid off. You know that piece of your life is settled.
I agree with her. My biggest regret is paying the house off. I paid it off for years ago. My interest rate was 1.9%. that was free money if you think about it. I have a paid off house with dead equity. I regret not refinancing at those rates and max it out to reinvest. Even after paying the house off I still assumed escrow -taxes, specials, insurance, almost 1000 a month, to me the trade was not worth. I don't feel any richer nor do I have any extra money saved. In America you never really own your house, it's either the bank through mortgage or the county through taxes. So you'll either have a mortgage or rent for the rest of your life.
Yeah, I certainly dont feel foolish being 100% debt free with having 100% equity in my home that has doubled since purchase. These banks have skyscrapers in every large city in America. I ain't paying for them.
So I'm one of those who does give you crap about paying off mortgages.... however.... I largely do actually agree with you. Its your unwillingness to see and respond to nuances. If you can never take on debt, you often times are better off. And it is more than just a numbers game as you hint. I've calculated previously that in some situations, it can be more financially smarter to only rent for your entire life. Mathematically, in some situations. But... as an example in one of the areas I've previously lived. All rentals were in unsafe gang lands. If you want out of the gutter. You buy. And if that means you take on a loan. You do that. Because there's more at stake than a few 100k. My issue with your stance is that your 100% all into completely debt free concepts that there are money techniques you completely miss or you miss context. Like this tac tok video. You go on a rant on how they shouldn't have taken debt. Ok. Agreed. But they did. The question isn't how to undo that. The question is, what's the right fit for that person. So, instead of focusing on the pros and cons, you completely reject all strategies that are not your own. Which isn't constructive. You're fine to have an opinion. But rejecting all options, especially in the cases where it's likely the ones you reject are better mathematically. Its just dumbfounding. I've listened to you tell a 70 year old who was just starting to save with a house payment that they need to do the baby steps. There was no room for nuances. I forget the particulars, so it is possible I might have agreed. But at 70. I don't care about the house payment. I need to make life marginally better at 75 & 80. If it takes me 15 years to pay off the house. It's simply moronic to say that absolutely. Always. In every case, we should pay off the house first. But that's the stance you tend to take. I generally like your teams messages, really. Because yeah. Like having a paid off house is freeing. And to me. That is worth money. So if that costs 200k and my retirement isnt really hurt by doing it. Im with you here. Its just Again. It's the nuances I think you're team completely misses. Sometimes I wonder why people even call in. Your going to preach unwaveringly the baby steps. Oh. And btw. You absolutely can leverage debt to put yourself in a better position. And rich people do infact use debt to get richer. These things absolutely do happen. So it frustrates me when you bold face lie about this 😂. I get your survey... but it's happening all the time. I personally don't like those strategies.
This lady actually makes a lot of sense. I respect Dave Ramsey show and listen to it all the time, but there's no point of knocking everybody. People outside of the show can sometimes make a good point as well
If you only make the minimum payments for 30 years, the interest the mortgage company collects from you is equivalent to buying three house. Pay off your mortgage soon as possible!
Paying off our mortgage is one of the best things we have ever done. There is so much more money in our accounts every month, and we never have to worry about being able to afford something.
I agree here. What u get in return by paying your house off cannot have a monetary value put on it. Being able to sleep & wake up knowing I don't owe anything on my house, its mine... thats priceless
@@genxx2724 Thankfully I don't live in a community with an HOA and probably never would. You pay your house/condo off and then still have a monthly payment in fees. no thank you
A simple compound interest calculator sure can put a price on it. It's in the hundreds of thousands by retirement and in the millions at the end of your life that your giving up leaving to your heirs. That math helps me sleep just fine with my mortgage.
People act like you can’t invest AND make accelerated payments on the mortgage at the same time. Sure, it won’t be optimal but it doesn’t have to be one or the other. I think telling people to not invest anything at all until they pay the mortgage off could be a sort of trap for some people. I can’t imagine not investing at all for the next 15 years to pay off my mortgage. There is no way I could catch up to where I should be to retire if I did that.
I love when you show a video of them totally in the right and then proceed to deflect with your own personal experience of how you "struggle to sleep". You'd sleep better with a mortgage and your mortgage amount in a brokerage account working for you. But yeah, cash out a productive asset for one that isn't for "peace of mind"
How he explains this is such a smoke screen. He may not like her advice but mathematically, she isn’t wrong. So I think it’s alittle hypocritical to push a narrative that “we go by the numbers on this show” but then when someone puts out advice based on numbers, now it’s all about “emotions and psychological feelings”. 🙄. Also, he took this way left. If someone has an extra $1000, and is in this position, they don’t have a problem with money like most Americans. The scenario is the scenario. You can’t just say “well most people can’t do that so the advice is bad.” While I agree that paying off your mortgage is good, you can’t just diminish advice just because it doesn’t fit your narrative.
Imagine when you are 50, still paying for a mortgage with chance of you got layoff. Remember that avg age of getting layoff is around 45 years old as current US census bureau statistics.
I'm working hard towards that goal - should be done by early-next year. Unlike someone else who responded to this post in a boastful manner, I acknowledge that you are using an expression when saying you sleep much better.
@@batman9512 I know I'll be sleeping on an additional $1.3-$1.7M by the mortgage maturity date NOT listening to George the 🤡 who has absolutely no risk tolerance whatsover and wants everyone else to be the same. He reminds me of this socially awkward kid down the block from me who still has his mommy and daddy drive him around all day long cause he's too scared to get behind the wheel of a 🚗 Weakness keeps people poor👎
“Oh is that how personal finance actually?”…. “That’s TikTok for you”… I know you are not trying to discredit Scarlet’s financial knowledge and EXPERTISE like she is just some TikToker who knows nothing. You can disagree without being disrespectful.
unless you are young, healthy with great cash flow and large emergency fund; debt on house is close to 50% or less with low interest rate 4% or less, then yes. invest extra cash index fund for 10 or more years would put you ahead. Not paying off mortgage first is llimited to very special conditions, having at least 1 house paid off is a big emotional and stress impact.
Mathematically, you shouldn’t pay off your house early. The dollar is debasing by 15-20% a year on top of the high inflation we have. You better off taking that money and invest as opposed to taking it and paying off cheap debt.
I would never pay extra towards my mortgage over investing. At a 2% mortgage I would be shooting myself in the foot. I do always send $100 extra per payment but I also invest 2k minimum monthly. That 100$ on mortgage is basically me rounding up per payment.
You can invest and pay off your mortgage early, isn't 15% investing a part of the strategy? You are correct, life happens and those numbers don't account for LIFE and bills and everything else. "For every argument there is a counter-argument, but who can argue against life?" - St. Gregory Palamas.
A lot of financially correct videos ignore human psychology. We are not robots...rarely do people use extra money to invest, which is why paying off debt faster makes so much sense.
If you have a locked interest rate that is below the rate of inflation, YES it is a absolutely a mistake. Your buying power is being stripped away day by day. Inflation has never been like this in the “Ramsey Show Era” and I’ve always been disappointed in Dave’s ninety advice when it comes to inflation
This is like teaching people not to be greed.. I was tempted to aqcuire debt and leverage on it, however, dave change my mind and it feels much more better
I love when they do these examples and leave out the appreciate on the real estate. Peace of mind and stability is more my style. Good luck out there everyone!
There is a lot to the peace aspect that people easily look past to focus on the dollar signs. Like Dave says, people don't factor in risk. One spouse loses a job, one wants to focus on school and work part time, mom wants to stay at home... These are all things that could be possible with a fairly average single income with no house payment. With a house payment, probably not. Not to mention having more money in the now by not having the mortgage payment. For those making closer to the average household income, that extra money freed up is huge.
I was thinking about this girl and her channel the other day. I was like "what in the world is her channel....I wonder what they're up to these days". Could NOT, for the life of me remember. But Dave's channel saved the day. 🙂
Every time this debate comes up, Dave or his cohost dismisses the argument for investing as "wrong", without actually refuting anything from a mathematical standpoint, and immediately shifts the conversation to feelings. I sure hope that 'feeling' is worth hundreds of thousands of dollars to you, because that's what you've given up by following Dave's one-size-fits-all financial advice.
I agree with the Ramsey take on this issue, but am never quite satisfied with their explanation, as they have tackled this in previous videos as well. The hard truth is that the math in the "invest" example checks out for most people - you will make more money in the long run. It's also possible to do both at the same time - in the hypothetical tiktok video, why not put $500 toward early home payoff and $500 to investing? By the way, George is right about the "extra" money - most people will not invest it. Paying off the mortgage early is like a "forced savings", you just don't make much in saved interest.
If you follow the baby steps you're investing 15% for retirement plus x% for kids' education before you put extra towards the mortgage. Dave does not tell people to pay off the house before investing. His approach balances the two.
I’d always suggest investing the difference until that balance reaches the payoff amount of the mortgage. When you get there sooner than expected you won’t want to sell off to finish off the mortgage. The ability to pay it off at anytime but having my money work for me feels way better than having no mortgage and no investments
"That is your opinion, and you're entitled to be wrong." No less than 30 seconds prior, he was agreeing with the lady. She also said to find out what works best for you. News flash DR, your system doesn't work for everyone.
If that was the case (borrow at 4% and invest at 8) I'd be borrowing 3 or 4 million (in the name of house buying) and invest 'ALL' of that, and become a billionaire! Where on earth, yes, on this planet, can you get 8% interest? We (here in New Zealand) have "ALWAYS" been the other way around, we're currently on 8.5% interest on our home loans, and a top investment rate is 6% I think? And the only way to achieve that 6% investment return is to pay off the 8.5% mortgage loan first. It 'has to' be that way otherwise banks just won't make any money!
If life happens and people aren’t going to consistently invest $1000 then the same goes for paying that extra $1000 to their house lol. I understand paying off your home is the best peace of mind you can have, but don’t try to make up some bs that contradicts yourself.
We invest 15% of gross income, and extra money goes toward paying off the house early. We started getting more serious about retirement investing a little later than most, so going into retirement w no mortgage is our goal. Retirement will take care of itself w no mortgage.
This is a case of the message of freedom vs the message of greed. With this plan you are not trapped in a job you hate to pay payments that you have to make. Using debt as a tool only ensures that you will be stuck in a miserable situation.
I don't understand his argument that people won't actually contribute to their investments accounts while making minimum payments because of lifestyle creep, weddings, and vacations. Aren't those all the same reasons people won't actually pay extra on their mortgage? People who aren't disciplined enough to consistently invest aren't disciplined enough to consistently pay extra on their mortgage either.
There's a lot more going on, the decision to pay off a morgage early isnt just a calculation of returns, there's cash flow, liability, etc. Finances arent just your net worth
Everyone is saying that it’s better emotionally to pay off your house early and be debt free. Well what about the people that feel more free by knowing they’re not throwing away loads of money by paying off the house early? Why do we act like debt is the only thing that affects us emotionally? Opportunity cost affects me even more. It’s not a one size fits all solution.
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100% of foreclosures happen to houses with mortgages.
99% actually.
HOA can kick you out for unpaid fees
But most millionaires are made in the stock market. You use fear but most people live on hope. Teach people to be disciplined and save so they won’t get foreclosure on instead of telling them to pay off a home early
@@bjmcintyre5080
Where do you think money goes after you pay off a home? You have 2.5 decades of compound growth with thousands of extra dollars deposited per year afterwards. Plus your typical highest expense is reduced to property tax (1.4% in a good state) and home insurance is surprisingly cheap.
@@alexpietsch7997HOAs should be illegal. I don’t know how we’re a “free” country but allow HOAs.
I was on an HOA board and we foreclosed on a unit in our building for owing over 30k in dues, the guy disappeared and stopped paying
In 2008 a lot of people lost their jobs. Their stocks also went down. Guess what happened to a lot of those people who had a mortgage? They lost their homes. The ones who had their homes paid off made it through just fine.
What? Lol the math doesnt lie
If you paid off your home, you still put the money in the house payment
Which if you would have invested you would still have Acess to it
Dave ramsey its wrong
Its math
Ppl default their mortgage in 2009 because their house value drop below their mortgage by like 100-200k. It's actually good to default. If you buy a house with cash in 2008. Your net worth would drop 50% with house value too, you are not "fine"...
@@Go88888 Yet if that person held their home from then until now they would be fine
@@lovyng yes but still putting more money into your 401k from 2008 to now gives your more yield than paying off your mortgage early.
@@Go88888 🤔, OK
Owing nothing to anyone is so freeing. You cannot know what it feels like until you are in that boat. The stress that is lifted off your shoulders is measurable- You feel it !! Looking at our savings account and seeing it grow by thousands of dollars a month is awesome. Having money for trips, fixing things, upgrading things and giving to others gives you a quality of life higher than anything you may have thought it would.
No one can know because you will always owe property tax.
@@thedopplereffect00 Would you rather pay a $100 per month property tax bill or a $1,200 per month mortgage payment?
That means you are treating the money as disposable income, not investing it. That is not growing wealth. It’s not a comparison to investing instead of paying down the low-interest mortgage.
@@genxx2724 A risk free 1-2% isn't an investment to you?
@@thedopplereffect00 No, that’s losing money because it doesn’t even keep up with inflation.
My grandfather lived through the Great Depression, he warned his children and grandchildren that the banker would call your loan at the moment you had no means to pay it off. I lived that situation in 2009 when the FDIC closed our local ag bank. I now live and thrive operating my business and personal life with cash. I watch this videos daily and always learn from them.
Are you a farmer?
Its not the debt that is bad, its the over leveraging thats bad. Don’t get over leveraged.
If you have a 30 year fixed rate the banks can’t just come and make you pay your entire mortgage. Even if you are upside down on your house, as long as you can make the monthly you can ride out the storm…
Ummm not sure what era or bank that you had but they won’t call your loan the second you can’t pay it.
@@andrewp4220 Larry borrowman is 130 years old.
Its worth mentioning. The Ramsey plan is “financial peace”, peace being the operative word. It is not a profit maximization plan necessarily. In addition to living and giving like no one else, the overarching goal is to take control of your financial situation and dont let it be the cause of stress/pain/anxiety in your relationships.
💯💯📌📌 excellent point.
My peace comes from knowing basic math, where I dont give up on 12% annual compound gains on the SP500, to service a 5% reducing balance simple interest mortgage.
If YOU dont understand basic math, life will not be peaceful no matter how many times you pay off your mortgage.
The "millionaires" Dave has interviewed, must have also told him that leverage was one of their pillars to their first million BEFORE they paid off their homes - but for some stupid reason, he wont mention that.
Cheers.
@@ananditagangwar9988 Could not have missed the point more.
@@ananditagangwar9988 I agree when discussing millionaires especially in the 5 million plus range. Yes they used borrowed money no doubt about it. However Dave's approach is for the vast majority who are clueless and desires simplicity!
Bought my house in mid 2018. Just paid it off 100% May 19th of 2022. The peace of mind you get is unexplainable. You will look different at life when your debt free w/ no mortgage w/ nice income. I recommend everyone to go after it. Pay it off !!!!
2 year old comment but when you got money, life is easier than having no money. Lucky you can pay it off in a few years. Most people in Asia, people have 40 year mortgages.
The psychological benefits of a paid off mortgage is paramount.
Yes but running out of money because you got focused on paying off a low interest mortgage to the detriment of investing kind of sucks too
@eboy2382 I paid off my mortgage in 7 years and have never been broke since rather the opposite.
@@lettuceboy2382 hopeless..
that does not make sense @@lettuceboy2382
@@lettuceboy2382 I agree, kind of funny how Dave got his career started by not following his own advice :D
It’s a math vs psychological dilemma. The advice is not wrong mathematically, but George is right from an emotional perspective. Being debt free has a ton of value, but the math says start investing as much as you can as early as you can for compound interest.
But it's not even mathematical. Math takes into account all statistics. These people are assuming a perfect world
Risk... even people that believe in debt knows there's risk
@@cosmic_giant1523 no doubt about it. But there is also risk in not investing sooner rather than later. All of life is just a collection of calculated risks, all we can do is try to make the right calls!
No right or wrong here… George’s point has merit (the psychological value of being debt free) and so does the woman in the clip (greater long term returns).
It's not just math vs psychological. It's math vs math. It could be wrong mathematically, if someone can't afford payments, is in danger of not affording payments, or is tempted to take on even more debt...which is usually how greed works. This is why behavioral finance is so important. Rarely does a person stop after the first debt, if they think they can keep parlaying this concept and get richer. Greed. Addiction. And as you build more and more debt, you become unable to have the cash flow liquidity to pay all the payments.
@@Ghidorah00 yeah I, agree. Time is your friend in investing and you can't get time back, what's your thoughts about it?
Also it’s good to note that paying off your home is investing. And your investing in something that you can almost guarantee will give you profit. We bought our first home 7 years ago and when we sold it this past summer, I was shocked that the value doubled. I can’t stress enough how important home ownership is. Besides stability, it is one of your greatest investments. When you pay off your home, you’re not throwing your money away, you’re literally investing in your future.
You invested when you bought the house. If you pay it off faster, you will own more of that house, you won't own additional house. Paying off debt isn't investing...it's paying off debt.
However, my house has doubled in value in 6 years. I paid off the original debt, so my equity in my houae is actually twice what I paid for it. I think I got a pretty good investment going on if I end up selling my house. Especially if I end up downsizing. I'll get another paid up house that can build up more equity AND CASH in my pocket to boot.
That's the beautiful math of a paid up house, not to mention the peace of mind of having NO DEBT! 5:22
@@jeffah3103 The house doubled in value and the real estate market didn't care if you owned all of it, or half of it or 5% of it and the bank owned the rest.
One could argue that if you owned 5%, you made 20 times your investment. If you paid 100% you only doubled your money. I won't make that argument, as it's not a good way to think about it.
Nothing wrong with peace of mind, though.
@andrewdiamond2697 @jeffah3103 I can't say the same thing for myself, who bought at the top of the market in 2022 in Orange County. I defined my "investment" not in financial terms because I knew prices were already at absurd prices. From a financial standpoint, there is so little probability to no probability I will ever profit from purchasing my home, especially if I ever take into account the interest that comes with my payments.
My purchase price was a little over $1m with a 25% down payment. If I paid off my mortgage early, it's purely for the state of mind because from a financial standpoint, I think of it simply as paying off debt owed, nothing more. I think people also forget that people can invest in mental health. As long as I have my mortgage of >$5k a month, I have a chance of losing my home if let's say i lose my job. If i have it paid off, unemployment would be able to cover property taxes and I will still have a roof over my head.
@@andrewdiamond2697you won’t own additional house but you will owe much less in interest depending on how much you can put toward it.
Paid off my mortgage this January. Haven't regretted it once! Peace of mind doesn't have a price.
Just did the same a couple weeks ago. Love it!!!
The biggest anxiety for me when I had a mortgage was losing my job and then losing my house due to not paying. If the advocates of not paying the mortgage off are so set on this idea why not just rent? In the UK the rent is normally less than the mortgage each month so invest the rest of it without the council and other bills. Or if you want get your mortgage interest free? You have a big bill at the end but who cares you have made up the rest in your investments. Or have you? A house is an asset and if owned outright can be used by your family for a better future.
It's because in the US the rent is normally more than the mortgage
I believe part, if not the majority, of the mentality is that people would rather see something going up (their investment account) than something going down (their debt). People think more highly of the amount they “have” rather than the amount they owe
This‼️
No the math is that debt at 2-3% is cheap. The mentality is “feeling better at night because there’s no mortgage”.
True, the going up part over a decade is much faster than the lowering of the balance. So you can payoff your house faster over a decade by investing instead
@@abrahamflores2566 correct. The Ramsay philosophy is you’re too stupid and undisciplined to stick to an investment plan so the best thing you can do is dump it into your house to protect your from your own stupidity. I’m not saying that’s not valid for some people, but the fact is that the math support the approach of minimum payments on your mortgage with steady investment into index funds. Whether or not you’re too dumb to follow the plan is a different conversation.
No, it's simple math.
Paying off my house was worth every minute of “peace of mind.”
bruh peace of mind is worth 400k?
Yep imagine you don’t lay it off you lose your job and now they took your home. You lose your job you can borrow against your house if needed. But by then you should have money saved in the bank and stocks to by time to get a home. Go head stay in debt then
So worth it. We were able to retire early because of being totally out of debt.
@@anthonyyaboytone5not where I live (sweden). If you dont have a job you will not be able to get a loan. Doesn't matter if you own a paid off mansion
My father told me his mother would tell him the old "a penny saved is a penny earned." but what he learned and told me was "a penny saved is a penny earned because you don't owe it to nobody" Debt is bad, never owe unless your life depends on it.
A penny saved is about 1.3 pennies earned, since no income tax, social security tax, or Medicare taxes to pay on it.
Love how she’s says “that’s how personal finance actually works”
Actually personal finance is personal… individual to each person.
But thats what she said. Learn so that you can know what is best for you and your situation.
@@JM4lyfe92 Yes that is what she said but given the context implied that that is the way everyone listening to her should do it. If not then she would not have use the word "actually."
That is how it works. It’s the Ramsey people that pretend like there is only one way to do things. If you want to pay down a mortgage early, that’s cool, but understand that it is likely costing you hundreds of thousands of dollars. Ramsey won’t ever acknowledge that.
@@sobeliever1638 Agreed, people hear what they want to hear.
Yea and people lose millions because these morons tell you to pay off you mortgage early
Most people now have a 3% mortgage rate which is insanely low
Why would you pay it off?
What she fails to mention is that the 120k earned in saved interest is a guarantee. The 8% yield on investments is not.
Very true!
Also, capital gains tax.
While owning a home is a blessing, debt no matter cheap it is is still debt. Being debt free is infinitely better than having debt.
So having 1M net worth with 25 cents debt is infinitely worse than having 500k net worth and no debt?
@@tcgtpl in the mind of Ramsey listeners: yes.
Debt free is nice. We can retire now, we’re in our 40’s, but keep working to stay busy and pay for fun stuff. Sleep well at night lining we can stop working at any time. Working when your debt free is a really good feeling.
Let me preface this by saying I love listening to the show. I listen almost every day and think that, if you follow his plan perfectly, you can’t fail.
With that being said, it annoys me that they dismiss any alternative as dumb when it’s oftentimes a totally reasonable thing to consider. There was nothing wrong with that TikTok. It’s a very common and smart strategy that isn’t very risky. Paying off your mortgage quicker is also a smart strategy. It just depends on your priorities and risk tolerance.
I just wish sometimes they’d go deeper on the pros and cons of each instead of immediately dismissing everything that’s not exactly to their plan as stupid.
Agreed, it is easily their biggest weakness as personal finance coaches. You can’t flat out dismiss every other idea out there just because it’s different than yours. Sometimes there are other great ideas too.
@@douglassmith9445Hold my beer 🍺
Well said
His snide derision just disgusted me. I know people love these Ramsey personalities but this guy strikes me as a total tool.
My wife and I will be paying off our mortgage early because we think it will be a cool thing for our family to have. We understand the math isn't great. And we acknowledge it because we're not stupid. But ya we are choosing the psychology and recognize that. However if we just went thr route of investing we will be in no less risk because those funds would be LIQUID unlike money in a house is. Pros and cons to both routes.
I hate how in this show they get all snide and self righteous at people that follow perfectly viable financial routes that lead people to being extremely wealthy.
One thing to consider on Investing vs Paying off Mortgage is liquidity; even if the end numbers were the same investing that money on an regular brokerage account gives you a lot of liquidity while putting everything on your house ties it up on a very illiquid asset you wouldnt want to sell anyways.
Paying off your mortgage is fine, but one thing to consider is to remain liquid while doing so, otherwise a shock to your life such as losing a job or a life changing injury can destroy everything you worked for.
Yep, if you really are stuck you can sell. Even if they're down and you lose some money, it might get you out of a bind.
If you really do want to throw money at the mortgage, put your cash in an offset account. That way you get the reduced interest, but still have liquidity.
Exactly, peace of mind is nice but flexibility is even better in my regard.
that's why they teach the baby steps and baby step #3 - having a fully funded emergency fund prior to paying off the house addresses the concern of remaining liquid.
Most of the people I know that's bought a home and said I'll just make extra payments also believe that debt is a tool.. they also buy a new car every few years go on vacations to get away from work all to never realize the reason why they gotta go on vacations is because their sooo stressed out from Asking Alexa what "PAYMENT" is due today!!? Will they be ok, sure, maybe who knows!!? I'd just rather not deal with the stress myself
So the math IS right, and having a mortgage while being smart with money otherwise isnt a bad idea by default
This Tik Toker started here on TH-cam One Big Happy Life
She made a mistake in her calculation… after 13 years you pay off the house and if you continue that model and use your mortgage payment amount on investing for the next 17 years you’ll get a different number
This will forever be one of my favourite Ramsey videos.
She is right mathematically, but it’s about the emotion side of the equation which is 80% of finance. I feel like they should have given her at least that.
Or just let math and logic control your finances and leave the feelings out of it.
No...finance is just math. But feelings are allowed in life, not dismissing that. But not sure why you would claim finance is feelings.
@@wemustdissent because mathematically I could invest my money in something and not touch it until I’m retired but emotions are what makes someone pull the money out prematurely. Or emotions are what make people invest into things they shouldn’t. Which is just a couple examples of many of how emotions get in our way of being wealthy.
Then dave wouldn't much of a show. Lo
She's not even right mathematically, as good applied math requires taking into account the right parameters... sure. She knows how to work with exponents and compound interest, but if you are using mathematical models, you need to account for risk in some way such as job loss, or sudden huge bills, or unexpected fluctuations. Like what actuaries do. It's not even a math vs emotions thing, but rather a idealism vs reality thing.
Here's a thought, why not do both. If you have an extra $1,000 a month you invest $500 and you pay $500 on your mortgage. That way if the stock market out performs your mortgage, great. If not you've still saved interest on your mortgage.
Also it's a little more complicated here in the UK since we don't have fixed mortgages for the entire term. The interest rates are generally fixed for 2-5 years, and therefore the interest varies over the lifetime of your mortgage.
This is what I do. But it's more so my way of "timing the market". Rather than selling stock or not buying more because I'm scared there's going to be a crash, I put extra towards my mortgage.
I don't feel like either way is wrong. What's wrong is not doing one of the two. Letting that extra money sit in cash or be wasted on unnecessary things is objectively wrong.
What country do you think most of us are living in??? It's one extreme or the other here!!! Then again, having some money in an investment account in case life happens may not be such a bad thing (good luck pulling your extra equity out of the house in a timely manner)....shhhh...if people start thinking logically, the whole economy will crash.
We just paid off our mortgage a week and a half ago, we have retirement , savings, and just for the hell of it fund, and no debt, guess what it’s FREAKIN AWESOME AFTER 24 1/2 years it’s something we have strived for since we built it.😊
I agree. We're in the same boat. I feel bad not helping these banks pay for their skyscrapers in all of the major cities in the US. LOL
This is one of the best takes in life. I have no debt and I feel so peaceful
Haha your property tax bill still coming from the mail
@@johndone8045 That's not a debt though...that's a tax bill. We're always going to have bills like water, electricity, etc. and tax bills are just another bill, just like insurance bills are just another bill.
@@johndone8045 Would you rather pay a $100 per month property tax bill or a $1,200 per month mortgage payment?
@@M-zg2sg 👍
@@M-zg2sg OK, take ~$250K in non-retirement savings making 8-10% and
pay off a home with a 2.5% mortgage
We paid off our house! Best financial feeling to have!!!!!!
Completely debt free. No regrets!
I choose peace of mind, knowing I could lose my job and take a 5 year hiatus from work vs having 300k extra in 30 years. Knowing if I die tomorrow my wife only has to come up with property taxes, insurance, utilities and food to survive. Zero debts of any kind, her not having the stress of debt if I were to pass, while I'm alive I don't have that stress either :) Your job feels different once you're debt free, your grass does, everything does.
My two cents: only my opinion, I would get life insurance for 100k just to be on safe side and get ROP so you get your money back after x amount of years. This will give really peace of mind for family. Good luck and congratulations on being debt free. I’m 3yrs away from paying off mortgage and then I’ll go bananas with investing. You made a smart move, bravo!
@@mrunalshah2136 Congratulations on tackling your debt!!!!!
Thats why i have insurance.
@@archeanchaos-s4ci dont fully trust insurance companies. They will find every way possible to not pay out. If you have a "preexisting condition" they didnt know about? No payout
@yep3172 But if something happens and they don't have income for five years they will either sell that house or get foreclosed. They have no backup plan. I have a mortgage and life insurance to cover more then the remaining balance. Having debt is not a bad thing. I could easily pay off my mortgage, but choose to invest for my retirement. House rich is not rich.
You have to think about this as well. If you pay off that home early all the extra interest could go towards home repairs or to buy a car in cash. A lot of people that say pay off later and you have a bad leak or you need a new roof and they start taking out home equity loans or HELOC creating more debt to pay for the repair it’s like a domino effect.
Which is why you have an emergency fund🤔. I don't understand why people think that just because you are doing the mathematically correct thing it means you are screwing up in all other areas of your financial life.
There are multiple ways to make money, it really all comes down to your risk aversion . The Ramsey plan is zero debt zero risk it’s a great plan and a successful one it’s not the only one that works though.
No plan is zero risk. What about the risk you lose your job before your mortgage is paid off and burn through your emergency fund. In that case you will be forced to sell.
It is not zero risk. Debt is not the only risk; insufficient retirement income is a much bigger risk that should take priority in your plan. Becoming debt free is a want, having enough income to live in dignity is a need.
Dave's plan carries the risk of not have enough time for compounding interest to work.
You are 100% correct George! The other two points that I think about concerning this dilemma is while you're paying off your home - YOU DONT OWN IT, but if you go ahead and pay it off sooner YOU WILL OWN IT and it can be a great resource for cash if something happens - which we all know WILL HAPPEN. It's called life. The thought of me owning my home and no one can take it from me gives me a great sense of peace.
technically you don't own it if you stop paying property taxes
But when we talk numbers, it works the way she presented it. It comes down if you can handle the stress of having the monthly payment.
Feels much better having a $0 remaining balance on a home than it does having a higher investment balance. Corners cut, sacrifices made might be tough at the time, but I'll never look back in regret for striving to become debt free on a single income while raising three kiddos. Especially during these current times.
Good for you!
I love seeing my portfolio outperform my 3.2% fixed rate tenfold 😎
I'm only here to laugh at these people on the radio while driving to the 🏦
I'd without a shadow of a doubt be poorer if I cut a big check for my home today 💯
@@15KHPCLUB if that works for you, that's all that matters. We're all more blessed than we deserve; that's for sure. 🙌
If you don't hold it, you don't own it.
@@15KHPCLUB 🎯 2.75% fixed here and cash is invested. But my job is very secure. This lady has a lot on her shoulders and it sounds like she’s sleeping better at night.
When George says he can't keep up with the numbers it means that the math doesn't favor his point of view.
Exactly, I was like : there is almost no number here bro
Math works out pretty good... she rouded it up a little bit... but still got the point across. Also, compared to advice that other influences and gurus are giving... that girl was pretty spot on...
Agreed
@@KeyvonGreen risk
Damn right. Math is simple, but he chooses not to keep ups
Amen George!! Drinking the DR Cool-Aid here, every extra penny is going to payoff our mortgage, while still having an FFEF, a Sinking Fund, and a Home Improvement Fund. Only $94k left on the mortgage...can't wait to be FREE!!
Nice condescending tone🤦🏾♂️ even though the she's absolutely correct about the numbers. If all those numbers she is throwing out is too much for you follow then why are you even offering financial advice? Any person with a basic understanding of finances and uses a mortgage calculator can understand the "many" numbers she threw out.
Amen. Agreed. This show is selling snake oil. Debt is a tool, you can learn to use it to your advantage or bury your head in the sand because "numbers confusing"
Paid off our mortgage 2 years ago and best decision ever made. Now we have 0 debt of any kind, max out retirement accounts, fund two kids 529 monthly, saved up 2 year worth of emergency fund, and fund even an extra taxable account and sleep peacefully at night. We are millennials so we will stay at our house even during our retirement when kids go to college 15-16 years from now as the house is perfect size with 2 bed 3 bath with an office in excellent schools. We don’t have to downsize the house when they happens and already set. We are just focusing on early retirement.
The number one reason to pay off mortgage is saving time. Meaning we are living like we are semi retired at 65 but in our mid to late 30s now! No one mentions this and it gives us so much flexibility that we can do things we normally couldn’t. For example take some risks like changing career if we wanted to down the line and my wife now only works 2 times a week part time job to take care of the kids.
Peace of mind is priceless ❤ I’d rather forego the supposed windfall and be debt free.
I’m working so hard to pay off my home… my mortgage payment is my largest expense. If I pay off my mortgage, I would still direct deposit the money into an account I don’t have daily access to. Subtract annual payment of taxes, insurance, and 10% debit for ( upkeep & maintenance), I will still have left over money 💴.
It's not wrong and not a trap if you are disciplined. It is good advice and not hurtful to young people or bad math. Why do you need to say that? Just say you like the peace of having no debt but realize the math doesn't support your position.
Seriously. The only time I can see paying off the mortgage early is if someone bought way more house than they really could afford and now have a monthly payment above 35% their budget. If you buy what you really need and not what you want you can cash flow better
I was very curious about this. My goal is to pay my house off early because I don’t want a huge house payment in my later years of life. My mother-in-law advised not to do that because you can’t write off the interest. Yes, the write off is nice but I would much rather eliminate mortgage payments. Thoughts?
George just addressed this in the video. It's bad math. Why are we okay with giving our lender 10k in interest to save 2.5k from going to the IRS? Doesn't make sense.
@@jackiechoate6163 Agreed!
Mortgage interest isn't claimed very often since the standard deduction is so big. If you don't itmeize on your taxes, there is ZERO benefit to having a mortgage.
Well you addressed your first concern which is huge payments. What if you got your mortgage payments to $750 a month? Sounds like you are overleveged. If you have a low interest rate I would look to paying down your principal to $175k and recast your mortgage to lower your payments to where you are comfortable. It's the best of both worlds
@@abrahamflores2566 $750 sounds lovely! I can manage that. Thank you for your reply!
This is peace of mind vs money
It's not just peace of mind, it's also risk management and behavior modification.
Paying off a mortgage is like getting a good night sleep.
Okay George, the question is moot if everyone is broke and doesn't have the extra $1000. That's not an argument for or against paying off the house early.
Yes, that was a bit disingenuous. The $1k is the money being used to pay off the mortgage early. If you don’t have that, the whole issue is irrelevant.
That’s why they suggest a 15 yr mortgage that is not more than 25% of take home pay… that’s why they say get debt free and invest in 401k…and only then pay off house early
stop using logic to their argument lol
I believe getting out of debt is best.
Me....2
He missed one of Dave's best points which is you should pay off your mortgage now because you don't know for certain that you will have the opportunity to do so in perpetuity. Divorce, Medical problems, job market changes, and financial market reversals all happen. Pay off your mortgage now before something unexpected happens.
Imagine being completely debt free being a hot take. 😂
This ladies math is right, but being debt free, just feels right. Being debt free I feel smarter,
@@cosmic_giant1523 her math is wrong. She assumes constants. Over 30 years, constants are super nonrealistic.
@@Lagann0 No you're wrong. She's not assuming constants. she is assuming averages using historical data. Averages are super realistic.
@@Jumpman67 she has a constant 1000 per month for 30 years in her math......
In 30 years, is it likely your income will stay the same?
@@cosmic_giant1523 its not right because the math says its not lol
How about both of them can be right? His tone is very condescending. 🤦🏾♂️
Having your home paid off gives freedom from fear. It enables you to make better money decisions because your home is paid off. You know that piece of your life is settled.
They both have good points. Choose the path that's works for you period
I agree with her. My biggest regret is paying the house off. I paid it off for years ago. My interest rate was 1.9%. that was free money if you think about it. I have a paid off house with dead equity. I regret not refinancing at those rates and max it out to reinvest. Even after paying the house off I still assumed escrow -taxes, specials, insurance, almost 1000 a month, to me the trade was not worth. I don't feel any richer nor do I have any extra money saved. In America you never really own your house, it's either the bank through mortgage or the county through taxes. So you'll either have a mortgage or rent for the rest of your life.
Yeah, I certainly dont feel foolish being 100% debt free with having 100% equity in my home that has doubled since purchase. These banks have skyscrapers in every large city in America. I ain't paying for them.
So I'm one of those who does give you crap about paying off mortgages.... however.... I largely do actually agree with you. Its your unwillingness to see and respond to nuances. If you can never take on debt, you often times are better off. And it is more than just a numbers game as you hint. I've calculated previously that in some situations, it can be more financially smarter to only rent for your entire life. Mathematically, in some situations. But... as an example in one of the areas I've previously lived. All rentals were in unsafe gang lands. If you want out of the gutter. You buy. And if that means you take on a loan. You do that. Because there's more at stake than a few 100k.
My issue with your stance is that your 100% all into completely debt free concepts that there are money techniques you completely miss or you miss context. Like this tac tok video. You go on a rant on how they shouldn't have taken debt. Ok. Agreed. But they did. The question isn't how to undo that. The question is, what's the right fit for that person. So, instead of focusing on the pros and cons, you completely reject all strategies that are not your own. Which isn't constructive. You're fine to have an opinion. But rejecting all options, especially in the cases where it's likely the ones you reject are better mathematically. Its just dumbfounding.
I've listened to you tell a 70 year old who was just starting to save with a house payment that they need to do the baby steps. There was no room for nuances. I forget the particulars, so it is possible I might have agreed. But at 70. I don't care about the house payment. I need to make life marginally better at 75 & 80. If it takes me 15 years to pay off the house. It's simply moronic to say that absolutely. Always. In every case, we should pay off the house first. But that's the stance you tend to take.
I generally like your teams messages, really. Because yeah. Like having a paid off house is freeing. And to me. That is worth money. So if that costs 200k and my retirement isnt really hurt by doing it. Im with you here. Its just Again. It's the nuances I think you're team completely misses. Sometimes I wonder why people even call in. Your going to preach unwaveringly the baby steps.
Oh. And btw. You absolutely can leverage debt to put yourself in a better position. And rich people do infact use debt to get richer. These things absolutely do happen. So it frustrates me when you bold face lie about this 😂. I get your survey... but it's happening all the time. I personally don't like those strategies.
This lady actually makes a lot of sense. I respect Dave Ramsey show and listen to it all the time, but there's no point of knocking everybody. People outside of the show can sometimes make a good point as well
With interest rates going up and inflation it probably makes sense to pay off debt early.
Because of Dave Ramsey, I paid my house off. Best decision I could have ever made. I’m now 42 yrs. old, and life just getting started.
Paid mine off and happy to have done it. I lost my job a few years after and sleep a lot better because I did not have that debt
If you only make the minimum payments for 30 years, the interest the mortgage company collects from you is equivalent to buying three house. Pay off your mortgage soon as possible!
Paying off our mortgage is one of the best things we have ever done. There is so much more money in our accounts every month, and we never have to worry about being able to afford something.
I agree here. What u get in return by paying your house off cannot have a monetary value put on it. Being able to sleep & wake up knowing I don't owe anything on my house, its mine... thats priceless
If u are that weak mentally u should just rent
What if it’s a condo with an HOA deciding when to handle things you need and when to ignore you. Would you feel differently?
@@genxx2724 Thankfully I don't live in a community with an HOA and probably never would. You pay your house/condo off and then still have a monthly payment in fees. no thank you
A simple compound interest calculator sure can put a price on it. It's in the hundreds of thousands by retirement and in the millions at the end of your life that your giving up leaving to your heirs. That math helps me sleep just fine with my mortgage.
@@aaront936 I have no heirs.
People act like you can’t invest AND make accelerated payments on the mortgage at the same time. Sure, it won’t be optimal but it doesn’t have to be one or the other. I think telling people to not invest anything at all until they pay the mortgage off could be a sort of trap for some people. I can’t imagine not investing at all for the next 15 years to pay off my mortgage. There is no way I could catch up to where I should be to retire if I did that.
We paid our mortgage in February and then everything started to break down.
I love when you show a video of them totally in the right and then proceed to deflect with your own personal experience of how you "struggle to sleep". You'd sleep better with a mortgage and your mortgage amount in a brokerage account working for you. But yeah, cash out a productive asset for one that isn't for "peace of mind"
How he explains this is such a smoke screen.
He may not like her advice but mathematically, she isn’t wrong. So I think it’s alittle hypocritical to push a narrative that “we go by the numbers on this show” but then when someone puts out advice based on numbers, now it’s all about “emotions and psychological feelings”. 🙄.
Also, he took this way left. If someone has an extra $1000, and is in this position, they don’t have a problem with money like most Americans. The scenario is the scenario. You can’t just say “well most people can’t do that so the advice is bad.”
While I agree that paying off your mortgage is good, you can’t just diminish advice just because it doesn’t fit your narrative.
Your personal finance! Your personal choice! Don’t let someone else make the decision for you to continue to be in debt vs being out of debt.
Your totally right. Paying it the best way to go.
Imagine when you are 50, still paying for a mortgage with chance of you got layoff.
Remember that avg age of getting layoff is around 45 years old as current US census bureau statistics.
Personal finance is exactly that, personal. There is no "one size fits all" in it at all.
I paid off my mortgage early and do not regret it. I sleep a whole much better.
My mortgage is probably a lot more than yours and I still get 8-10 hours of sleep 😴
Your stress and risk tolerance are extremely low
I'm working hard towards that goal - should be done by early-next year. Unlike someone else who responded to this post in a boastful manner, I acknowledge that you are using an expression when saying you sleep much better.
@@batman9512 I know I'll be sleeping on an additional $1.3-$1.7M by the mortgage maturity date NOT listening to George the 🤡 who has absolutely no risk tolerance whatsover and wants everyone else to be the same. He reminds me of this socially awkward kid down the block from me who still has his mommy and daddy drive him around all day long cause he's too scared to get behind the wheel of a 🚗
Weakness keeps people poor👎
I paid mine off 8 1/2 years early, and now I have tons of money stacking up in my bank account and don't know what to do with it.
“Oh is that how personal finance actually?”…. “That’s TikTok for you”… I know you are not trying to discredit Scarlet’s financial knowledge and EXPERTISE like she is just some TikToker who knows nothing. You can disagree without being disrespectful.
George acting like her math was that hard to follow😂 it's pretty straightforward and well laid out
George is Dave’s best investment
George immediately: umm yea let's just ignore the numbers
unless you are young, healthy with great cash flow and large emergency fund; debt on house is close to 50% or less with low interest rate 4% or less, then yes. invest extra cash index fund for 10 or more years would put you ahead. Not paying off mortgage first is llimited to very special conditions, having at least 1 house paid off is a big emotional and stress impact.
Mathematically, you shouldn’t pay off your house early. The dollar is debasing by 15-20% a year on top of the high inflation we have. You better off taking that money and invest as opposed to taking it and paying off cheap debt.
The dollar is debasing by 15-20%? What nutty world do you live in mate
@@DavidRamseyIII agreed. I think he should look into that more cause he's way off.
I would never pay extra towards my mortgage over investing. At a 2% mortgage I would be shooting myself in the foot. I do always send $100 extra per payment but I also invest 2k minimum monthly. That 100$ on mortgage is basically me rounding up per payment.
Finally someone who makes sense!!!
Finally someone who understands lol..
If 2% mortgage, I would not pay off my mortgage. But the world is dealing with +7%
@carkarlaw yeah if they buy now or have adjustable rate mortgages. That is less than 2% of current homeowners.
You can invest and pay off your mortgage early, isn't 15% investing a part of the strategy? You are correct, life happens and those numbers don't account for LIFE and bills and everything else.
"For every argument there is a counter-argument, but who can argue against life?" - St. Gregory Palamas.
A lot of financially correct videos ignore human psychology. We are not robots...rarely do people use extra money to invest, which is why paying off debt faster makes so much sense.
If you have a locked interest rate that is below the rate of inflation, YES it is a absolutely a mistake. Your buying power is being stripped away day by day. Inflation has never been like this in the “Ramsey Show Era” and I’ve always been disappointed in Dave’s ninety advice when it comes to inflation
Exactly
I agree with her for the most part.
This is like teaching people not to be greed.. I was tempted to aqcuire debt and leverage on it, however, dave change my mind and it feels much more better
I love when they do these examples and leave out the appreciate on the real estate. Peace of mind and stability is more my style. Good luck out there everyone!
Your house appreciates whether you pay it off early or not
There is a lot to the peace aspect that people easily look past to focus on the dollar signs. Like Dave says, people don't factor in risk. One spouse loses a job, one wants to focus on school and work part time, mom wants to stay at home... These are all things that could be possible with a fairly average single income with no house payment. With a house payment, probably not.
Not to mention having more money in the now by not having the mortgage payment. For those making closer to the average household income, that extra money freed up is huge.
Dave is wrong.
All of those scenarios are easier to deal with when you have easily accessible liquid assets that you can get at. You can't eat a house.
I was thinking about this girl and her channel the other day. I was like "what in the world is her channel....I wonder what they're up to these days". Could NOT, for the life of me remember. But Dave's channel saved the day. 🙂
Every time this debate comes up, Dave or his cohost dismisses the argument for investing as "wrong", without actually refuting anything from a mathematical standpoint, and immediately shifts the conversation to feelings. I sure hope that 'feeling' is worth hundreds of thousands of dollars to you, because that's what you've given up by following Dave's one-size-fits-all financial advice.
That sort of thinking is completely wrong. It assumes that you won't have another kind of payment, no emergencies, etc. No....pay off your home.
I agree with the Ramsey take on this issue, but am never quite satisfied with their explanation, as they have tackled this in previous videos as well. The hard truth is that the math in the "invest" example checks out for most people - you will make more money in the long run. It's also possible to do both at the same time - in the hypothetical tiktok video, why not put $500 toward early home payoff and $500 to investing? By the way, George is right about the "extra" money - most people will not invest it. Paying off the mortgage early is like a "forced savings", you just don't make much in saved interest.
If you follow the baby steps you're investing 15% for retirement plus x% for kids' education before you put extra towards the mortgage. Dave does not tell people to pay off the house before investing. His approach balances the two.
I’d always suggest investing the difference until that balance reaches the payoff amount of the mortgage. When you get there sooner than expected you won’t want to sell off to finish off the mortgage. The ability to pay it off at anytime but having my money work for me feels way better than having no mortgage and no investments
I love this!! Not just financial freedom but financial peace!! 😮💨🙌🏾💯
"That is your opinion, and you're entitled to be wrong." No less than 30 seconds prior, he was agreeing with the lady.
She also said to find out what works best for you. News flash DR, your system doesn't work for everyone.
If that was the case (borrow at 4% and invest at 8) I'd be borrowing 3 or 4 million (in the name of house buying) and invest 'ALL' of that, and become a billionaire! Where on earth, yes, on this planet, can you get 8% interest? We (here in New Zealand) have "ALWAYS" been the other way around, we're currently on 8.5% interest on our home loans, and a top investment rate is 6% I think? And the only way to achieve that 6% investment return is to pay off the 8.5% mortgage loan first.
It 'has to' be that way otherwise banks just won't make any money!
If life happens and people aren’t going to consistently invest $1000 then the same goes for paying that extra $1000 to their house lol. I understand paying off your home is the best peace of mind you can have, but don’t try to make up some bs that contradicts yourself.
Exactly. It seems like life only happens when you don’t follow the baby steps. Lol
We invest 15% of gross income, and extra money goes toward paying off the house early. We started getting more serious about retirement investing a little later than most, so going into retirement w no mortgage is our goal. Retirement will take care of itself w no mortgage.
This is a case of the message of freedom vs the message of greed. With this plan you are not trapped in a job you hate to pay payments that you have to make. Using debt as a tool only ensures that you will be stuck in a miserable situation.
You can't eat a house. Real financial freedom comes from having enough assets that can replace your w2 income.
Shes right.
I see benefits of both sides to be honest.
Life happens…. A lot of life happens it will be the pitfalls you never dreamed of would happen Will happen
I don't understand his argument that people won't actually contribute to their investments accounts while making minimum payments because of lifestyle creep, weddings, and vacations. Aren't those all the same reasons people won't actually pay extra on their mortgage? People who aren't disciplined enough to consistently invest aren't disciplined enough to consistently pay extra on their mortgage either.
Dave thinks we’re all stupid
There's a lot more going on, the decision to pay off a morgage early isnt just a calculation of returns, there's cash flow, liability, etc. Finances arent just your net worth
Everyone is saying that it’s better emotionally to pay off your house early and be debt free. Well what about the people that feel more free by knowing they’re not throwing away loads of money by paying off the house early? Why do we act like debt is the only thing that affects us emotionally? Opportunity cost affects me even more. It’s not a one size fits all solution.