Graham Stephan Changes His Mind About Debt? (Ramsey Show Reacts)

Brought to you by the EveryDollar app. Start budgeting for free today. Graham Stephan, who I love. Real estate investor, personal finance YouTuber. We've been friends for a while. Yeah, he's great. I love him. We've collabed a lot. A lot of Graham fans out there, and some people found Ramsey through him and found Graham through us. And he recently posted this video. One day ago, million views. I paid off my 2.875% mortgage, dot, dot, dot. Dave Ramsey was right. Graham! Which is a great title, because famously, while Graham agrees with a lot of our teachings, and he's one of the most frugal people I know, he makes me look like a real big spender. I always dreamed of having a segment on my show called The Spend Off between you versus Graham. It would have been awesome. It's still time. So Graham posted this video, and it was 16 minutes of him basically saying what I have been telling him every time I've been hanging out with him, what Dave Ramsey told him, which is, yeah, but you got to just pay it off because the peace of mind is worth it. It's a weight off your shoulders. Life isn't about arbitrage and the spread. You're not taking into account risk. And it was 16 minutes of just, it sounded like we had infiltrated him. It was inception. All right. Maybe. Well, you know, why don't we roll a 60-second version, a little montage, if you will, so you can get a taste for what happened in this video. All right. After years of telling people not to pay off low interest rate debt and arbitrage your money in the markets to make more money instead, I'm starting to think that maybe I was wrong. I never thought I would say this, but for the first time ever, kind of started to think that maybe Dave Ramsey has a point. Even though everything was on auto payment, I never accounted for the fact that every single mortgage became its own mini ecosystem of thinking. Honestly, I didn't even think this would be a thing until I started selling off my real estate. I'm talking to ones with 2.8, 7, 5% mortgages fixed for 30 years. And once those were sold, it just felt like an odd sigh of relief. It was as though something was taking up mental space in my head that I didn't even know existed until it was gone. That is why when it comes to the final piece of paying off your loan, it really just comes down to freedom. I'm just going to slow clap that one. No, hold on. I have to say this. That's the first time I've seen this and you're telling me about this. Dude, I bet you didn't see this coming. I'm getting choked up. Here's why. Graham is somebody who I just love hanging out with, but also I have high respect for. But also Graham has a whole bunch of people follow him because he's brilliant and he's smart and he's got very clear ideas on and he lives what he preaches, which is rare these days. The world will shift and the world that my kids are inheriting, that your kids are inheriting, will change when people have the courage to say, I was doing this, I had a lived experience, magic words, I was wrong, and here's what I'm doing now. And dude, I applaud Graham for that level of character. That gives me a little sliver of hope in this world on fire we live in for the world my kids are growing up in. Bravo, brother. That's awesome. Well, I got a real treat for you, John, because we have Graham on the line right now on video. Graham! What's going on, Graham? What's up, brother? Good. I wouldn't have said nice things if I knew you were on. I thought you knew I was on the entire time. You're like talking me on. I wasn't going to say nice things. Talking into my ear and I'm like, man. How are you, man? I'm doing good. Awesome. I got to know this was not an April Fool's prank. You actually paid off your primary mortgage. So this started with some rental properties that I had and I kept them for years because all of them were locked at like 2.8% to 3.3%. And I kept them because I didn't want to give up that mortgage. Because to me, the mortgage was everything. And if inflation is 3% to 5%, assuming they're not lying about those numbers, it could be way higher than that. It's free money. And I started selling off these properties. And oh, my gosh, it never hit me until I looked at debt categories. Let's go down. I was like, wait a second. This is just a weird weight off my chest. Even though they were all cash flowing, they all did fine. It was just bit of a sigh of relief that it just felt good to see that number go down. And then I asked on Twitter, and I sent you this link that I asked if anyone regretted paying off their mortgage early, even the people with low interest. And I want to say 98% of people, not a single one was like, yeah, I have regrets. Everybody was like, yeah, I know I could have more money in the markets. But just the feeling of having a paid off home, it just gave me a little more confidence, a little pep in the step. Made you a couple inches taller. I love it. Man, that's huge. We've argued about this for years, I feel like. Anytime I've been on Ice Coffee Hour, you've been on our show, we usually get into a debate about arbitrage and spreads. And I'm always like, man, it's more than about a spreadsheet. It's about living your life and risk and peace. And you guys were such like math logic people that I felt like I couldn't get through to you. So what finally did it? It wasn't me. Was it Dave Ramsey himself? No, it was really just paying off those rental properties. It was the feeling of doing that and then realizing, oh my gosh, it's just like, I've gone to this arbitrage my entire life to like, not nickel and dime, but like, oh, I can make an extra dollar over here and I can do this and move this. I would do it because I always just look at the numbers. I'm like, the numbers make sense. But when I started to get that peace of mind of just like, eh, maybe I'm not going to make as much money, but you know what? It's simpler. I don't have to think about it. It frees up some space for me to focus on something else. I'm not so stressed out all the time. That's a feeling that I never really appreciated until I want to say this last year. And it all started oddly enough because I had this rental property where it made sense for, it's so dumb, but I calculated that I could take a pledge to asset line at like 4 point something percent and build out this basically guest house. And I was able to make like a 15% cash on cash return on none of my own money. And I thought, well, man, this makes sense. I should do this. And it was the worst nine months of my life dealing with construction in Los Angeles. And then I realized, what? Oh my God. For what? For what? I get to borrow this money over here and do this over here to make an extra, it was like 14 grand a year that I thought was, oh, that's going to be free. It was awful. The amount of stress and headache that went into, I lost so much more money than I ever would have gained in years just from lost opportunity costs because my mind was not fully present. And that's when I realized, you know what? I've taken this too far. And I think there's a value to simplicity and peace of mind that I never calculated until that experience. Beautiful. So what would you tell someone? Because we get these calls often on the show of, I'm confused. Why should I pay this off when I can make more in the market? What would you tell those people out there who are hanging on to those low interest rate mortgages going, I could pay it off. I could pay extra, but I just feel like there's better opportunities. The thing is mathematically, I do think that there are better opportunities that I mean, again, when you look at the numbers, it doesn't make sense on a primary residence, low interest rate mortgage. If you're taking the deduction on top of that, like my gosh, that mathematically pencils out. I would say for me, there is a quality of life improvement, but that doesn't also mean that you should be building also up an emergency fund. You should be maxing out retirement accounts. You should be investing. I wouldn't take down the emergency fund and not invest for the sake of paying down a mortgage. But I do think there's a value of peace of mind that comes with just having it paid off as long as it's not done at the detriment to everything else. And when I cited these surveys, by the way, it said that one of the biggest quality of life improvements was also cash on hand. And so not having like zero emergency fund, but you have a paid off house. It's having cash on the side led to more peace of mind than even having a paid off property. So I think there's something to be said about that. Otherwise, I think, you know, peace of mind, you got to calculate that. Hey, bravo, brother. Thanks for hanging out with us. Not because you follow the Ramsey plan, but bravo for for choosing peace. That's awesome, man. And like respect, man. Big time respect. We'll see you, Graham. All right. I'm going to end with this comment I left on the video, John, which is my work on this earth is done. I've done it. I've evangelized the Ramsey plan successfully, even if it's subconsciously. I love that. And I'm glad Graham's a friend and way to go being debt free, man. Create your free every dollar budget today. The simplest way to budget for your life.