Why It Doesn't Make Sense To Delay Paying Off Your Mortgage

Brought to you by the EveryDollar app. Start budgeting for free today. So my wife and I, just a little context, we're 33 years old and we're on baby step like four, five, and six, somewhere in between there. We had a question, thank you. We have $150,000 in stocks from her old job that she's not in anymore and we were wondering if it was worthwhile to put that on the principle of our home. Yes. Um, okay. Yeah. I figured I'm in a little debate with my family right now. Uh, I don't know why your family gets a vote. Yeah. Sure. Yeah. Yeah. I agree. So here's the thing. Here's the way, here's the way, here's a couple of things on this to help you know that, that, that my suggestion is right. Here's why I'm telling you this. There's two reasons. One is if you reverse engineer some of these decisions and the Harvard investment newsletter causes sunk cost analysis. Okay. So reverse engineer it and say, if I had the opportunity to borrow, given my state of mind today, I'm working baby steps four, five, and six, which means you're putting 15% of your income into retirement. You're doing something on kids college and you're paying anything you can find reasonably on the house as baby step six to pay the house early. That's the stated goals of four or five and six. You know that don't you? Yeah. Okay. So if that's where your head is and you had the opportunity to borrow 150,000 on your home to buy stock in your wife's old company, you would never do that. Hey, George here with a quick interruption. If something were to happen to you tomorrow, would your family know where to find your life insurance policy, your will, even your Netflix password will knock box solves that it's a kit that organizes your financial accounts, estate plans, and everything your family would need all in one place. That way they don't have to hack into your laptop or locate some long lost thumb drive. So leave them a legacy, not a scavenger hunt with knockbox. Ramsey fans get the best discount available at knockbox.com slash Ramsey. That's knockbox.com slash Ramsey. You would never do that. No, no, we wouldn't. So keeping it is the exact same thing, only in reverse. It says, if you, if by not cashing it and paying it on the house, it says, if you borrowed on the house to buy it mathematically, does that make sense? Right. Yeah. So, so that's one thing. Go ahead. Go ahead. I'm sorry. Oh, sorry. I was just going to say the only thing is we right now we have a, we have an 18 month old and another child on the way. So our budget is very tight right now, where we're kind of like losing about $500 a month. Um, so I didn't know if they, people were saying, it's just like a backup in case anything were to happen, that we would have that money. You have an emergency fund of three to six months of expenses. Correct. So we have, um, 30,000 in emergency fund and we have a hundred thousand in like a high yield, uh, money market account. How much backup do you need? The great Walinda. I mean, what are you doing? Some kind of high wise, high wire trapeze act. You got $280,000 in backup. This is insanity. Yeah. Yeah. I agree. I would like to pay the principal down and okay. So how much do you owe on your home board? Uh, so we owe 329 and our interest rates 2.875. Okay. So here's what I would do if I woke up in your shoes. Okay. Now, um, I currently own about 650 million in real estate. That's my point of perspective. And I started from being broke. Okay. After having lost everything, if I woke up in your shoes, I would put $250,000 down on that house and have a $30,000 emergency fund by the end of the day, because I know that the data tells me not only in my own life, but the 10,167 millionaires that we studied that the millionaires that became millionaires starting from nothing, which is 89% of them. That's nine out of 10 in America became millionaires starting from nothing. Here's what they did. They paid off their house early and use the increased cashflow to build wealth. And they systematically and steadily invested year after year, after year, after year in their 401ks and the Roth IRAs and good mutual funds. So when we run into a millionaire, that's 47 and they've got 1.7 million in net worth, it's typically seven, $800,000 paid for house seven, 800,000 bucks in their 401k. And that's not your broke relatives with an opinion. Those are millionaires. Yeah. So we're only doing 5% of our 401k cause my wife's a stay-at-home mom and I only make about like 85 a year. Okay. I'm sorry. I made a mistake. I thought you said you were doing baby steps for five and six and you're not. So you're going to have to do that before we have a discussion. And if you want to beef up your emergency fund to 40,000 or 50,000, even just to be crazy, that's okay. But 280,000 is moronic. That's just ridiculous. Okay. And you guys need to get your budget tightened up. If you, if you are, if you have zero debt, which I'm now questioning, if you do or not accept your home and you're putting 15% of your income away for retirement, you ought to have room in your budget regardless of the daycare issue. So something else is wrong. So dude, you're going to have to dial in and do the stuff we're talking about in order for us to say, you're doing the stuff you're talking about and you're not. So we got to figure that part out. But reason is you guys have been piling up cash over on the left. So that tells me you're making money and you're good savers. You're just crummy at selecting where, because you're taking advice from broke relatives. So, ah, okay. Guys, if broke people are making fun of your financial plan, it's like fat people making fun of your diet. Okay. Come on. You got to think through this. It's just silliness. If you walk in and you hire a personal trainer and you made a mistake. Okay. It's a problem. And so you've got to go, you know, it's like these people that say, I'm a life coach and they've never had a life. So that's a problem. Okay. So you should actually have some background, some experience, some track record, some what we call social proof to move forward. Yeah. Something's off. I'd love to see their budget because for them to be able to stack away that much cash and still say he's $500 in the red every month, just a couple of things are off. And I think it's gotta be some fundamentals. I don't think it's crazy living. No, obviously not crazy living because they couldn't save that kind of money. Yeah. But something's gone. They're probably chunking money in there instead of doing their baby step four properly, which is 15% of your household income, not counting the match going into retirement. That's baby step four, which by the way, if you start that at 33 years old and you have an average household income, when you get to 67, you're going to have on average somewhere around $9 million just in that one account. If you just say 15% of your income for 25 or 30 years, if that's all you do. Okay. And that's if you never get a raise, which if you don't get a raise for 30 years, you're like a loser. Okay. So, I mean, seriously, this is, you can, you can, this is a wealth building process that bar none, but you've got to actually do it. It's not a theory. Create your free every dollar budget today. 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