Is Investing or Paying Off The House More Important?

[Music] jennifer is in washington dc to start off this hour hi jennifer how are you i'm doing great dave thank you so much for taking my call today our pleasure how can we help first of all oh yeah so i want to thank you guys number one for everything you do is awesome i just love your show and i've been listening for a couple years kind of off and on i wish i knew about you 20 years ago but hey at least i do now and i'm doing better so right now um so i'm 47 my husband's 54 we're both working full-time we owe um right now about 377 thousand on our house we have no other debt so we have everything else is paid we do are putting 15 percent uh for retirement good we do have a good amount in our 529 for our two kids we have a 19 year old and a six-year-old wonderful so we have about 70 grand for the 19 year old and about 20 so far for the six-year-old they've been pretty well um so my question for you is um i've talked my husband into uh close to it anyway of hey let's just pay our house right um so so number one i think that's the way to go but then how quickly do we do that and then or do i do i do that and mutual funds or that's where i'm kind of struggling um do we just dump everything into the house or do we look at maybe mutual funds as well or not look at that until after the house is paid do you mean above your 15 jennifer exactly yes sorry yes well i would i mean again the baby steps are there right so fifteen percent come to retirement you know you said your kids college is there so i would throw everything else at the house uh how much do you guys make we make about so after taxes a month it's about 14 grand so we do pretty well um and i don't want to work forever i want to retire early my husband thinks i'm crazy but i really i just want to get the house done but so because i had kind of figured out a plan i said hey we can pay it in like six or seven years doing the math but do i do i not do the math or just that you know kind of dump as much as we have left over or that's where i'm struggling i'm a finance person for my job and i'm kind of like i want the calculation how to do that well what we talk about is up through baby step three which you're through that you have to be intense you have to be intense you do nothing until you get those steps done out of debt and have your emergency fund in place and then when you move into baby steps four five and six those are simultaneous and you move from intense to intentional and what that means is you're um you're gonna say you're gonna set your finance person so let's just set a formula to this uh there's three things we can do with money we can give it be generous with it and you should you can enjoy it and you should that's lifestyle and purchases and so forth and we should invest it and you should and so paying off your home here is a type of a move an investment type move so the point is if you dump every little single thing out of your whole life and you have absolutely no life until you get the house paid off that is not our recommendation okay that's not intentional that's intense now if you had a bunch of credit card debt i would do that i said i set your hair on fire you get this done right but this is not here we're just going to be intentional so we're going to do our 15 of our income into retirement no more investing other than that other than if you're going to add do something to supplement the kids college and you may need to do a little of that and then beyond that money that we find every dollar we consume on a trip or a car purchase or a consumption means we don't reduce the house and every dollar we put on the house means we don't enjoy that money today we're going to enjoy that money later okay so you don't want to do all of either in other words enjoy it all and put nothing extra on the house bad idea but put so much on the house that the budget is so tight that it's no fun bad idea and so i would set myself budgets for lifestyle inside of your existing monthly budget and then just say any extra we're gonna throw it at the debt and right now that looks like five thousand dollars a month that looks like six thousand dollars a month whatever it is until we get the house paid off now when the house is paid off that's baby step seven then you load you max out all your mutual fund i mean all your retirement accounts and you you know you increase your outrageous generosity at that point and you increase your outrageous enjoyment of money at that point because then you've you know that's the touchdown now you do the touchdown dance so rachel's exactly right uh whatever found money you know if we want to go back to our old uh econ class disposable income that we have beyond our basic investments beyond our basic living and enjoyment of money every dollar we can find beyond that i'm gonna throw it at the house because i want to get done as fast as i can without putting my family in a strain and i'm gonna say with the numbers you've got it's probably about a five year mark you're going to be done and what happens to the one of the reasons that's in the baby steps versus just living with the mortgage for 30 years like most people do is because once you have no payments then you have suddenly to have so many options jennifer from you said you want to retire early and that's not crazy if you got a paid for house and no bills i mean yeah sure and by then you will have substantial investments as well yes absolutely so it just opens up a whole other level i mean obviously getting out of debt consumer debt does that but when you don't have a mortgage even not even a house payment it's on it's like tenfold it just gives you so many options and so i don't think you're crazy for one retire early dream for this great yeah get it paid off as fast as you can without sacrificing without pension down on everything to the point nobody can breathe yes and that's what we now if you can't breathe in baby steps one through three you're doing it right i mean you need to be wild on that one that's i mean you need to be in panic mode you don't have an emergency fund you got a bunch of car debt student loan debt uh credit card debt and that kind of stuff that that's when you're a normal american and you have a mess and you need to clean up your normal because normal sucks but that's not where you are you've moved from that intense section of one through three to intentional and this is where baby step to millionaires are born they get the home paid off uh last hour we had a debt-free call or a debt-free scream here in the st in the audience and they're 39 years old and eight hundred thousand dollars paid for oh yeah yeah yeah yeah before they're four years yes yes yes before and they paid off a 800 000 house in austin texas and we didn't ask them details about their investments but their investments are well in excess of 200 000 so they are not even 40 and they're millionaires why they've exactly followed what i just outlined for the last five minutes with her this this idea of intensity until you're debt-free and have the emergency fund then intentionality 15 of your income into retirement kids college is addressed and baby step 6 pay off the house with any disposable extra income we can squeeze out of our budget and throw at it without putting the family in some kind of a ridiculous strain yep absolutely and you'll do it in five years you really will and it's enjoyable that way yeah and you know it's you just wake up and you go well there it is i did it there it is i did it that's how it works

Channel: Ramsey Everyday Millionaires

Views: 397,547

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Id: c5pinmONgpc

Length: 7min 28sec (448 seconds)

Published: Mon Jul 19 2021