Source
r/DaveRamsey•
Cycle_time

Any regrets following the baby steps?

My wife and I have listened to Dave for 10+ years. For the most part we followed the baby steps. One exception was that 3 years ago I received an inheritance that was large enough to pay off the rest of our mortgage. We didn't do that and continued paying extra on it every month like we never got the inheritance. 100% of it stayed invested and we treated it like it wasn't there.

Since then we've paid about $80k off the mortgage and have $45k remaining. I figure it'd take us about 20 months to pay it off at our current rate.

On the show Friday he again said something that I'd heard him say hundreds of times but it resonated this time. It was the "would you take out a loan on your paid off house to invest it in the market, then not paying off the mortgage is the same thing."

I spoke with my wife and we cashed out $45k from the investment and it will hit our bank account this week and we'll write that check. I'm still torn on it though because I wanted to do this on our own and not use an inheritance to help.

Anyone else bounce back and forth on how much to stick to the exact steps or fudge them a bit to be customized?

Posted May 7, 2017, 1:48 PM UTC

1241
[deleted]•

[removed]

15
[deleted]•

[removed]

4
[deleted]•

[removed]

10
[deleted]•

[removed]

8
[deleted]•

[removed]

1
[deleted]•

[removed]

1
[deleted]•

[removed]

1
[deleted]•

[removed]

2
[deleted]•

[removed]

2
[deleted]•

[removed]

2
[deleted]•

[removed]

-1†
[deleted]•

[removed]

3
[deleted]•

[removed]

3
[deleted]•

[removed]

2
[deleted]•

[removed]

2
[deleted]•

[removed]

3
[deleted]•

[removed]

3
hoggin88•

I can tell you how many times I've regretted following the steps: zero.

I have, on the other hand, tried to cheat the steps a couple times and did regret that. (Waited too long to start step 4, took out a student loan for a program I ended up quitting anyway.) I'm done trying to tweak the steps.

I would pay off the mortgage. It will feel great! And another thing Dave says, "If you pay off your mortgage and realize you hate being debt free, you can always go get another mortgage." :p

9
Temp_004BS6•

If you pay off your mortgage and realize you hate being debt free, you can always go get another mortgage.

Ah, one of my favorite Dave quotes.

4
Cycle_timeOP•

I distinctly remember when we got our mortgage thinking "this is the most in debt I will ever be in my life."

I can't see wanting to return to that. I hate mowing my lawn now but maybe it'll be different when it's all my lawn and not mine and the bank's

6
sarajuata•

I LOVE Dave Ramsey and thanks to him I'm debt free (besides mortgage) but one thing I regret is that we followed his guidance to the letter while married, paid off ALL my ex's debts, then we got divorced (all while the ex was working part time and I was making, like, 85% of our combined income)! I paid off the rest (which was mine to begin with) after the divorce, but I was a little resentful about that (i know, I need to let it go) :-/

But anyway, I'm about to embark on Baby Step 4 (I JUST bought a condo with 20% down on a 15 year mortgage where the payment is no more than 25% of my take home) & even so, I still have one credit card. I literally pay it off every couple days and I get Amazon reward points that I use to buy things I would normally buy anyway. I did try to switch to using that card exclusively, but I realized that what Dave says about spending more when you use plastic is TOTALLY true (even though the debit card I use is plastic, too!!)

5
gRod805BS4•

This is really sad. Marriage doesn't seem fair sometimes. Can you imagine a "free spirit" using their "Nerd" spouse just to get them to pay off their debt then leaving them.

1
sarajuata•

To be fair, I left him (lack of ambition was only one of MANY problems!) AND the Dave Ramsey plan was MY idea...but sometimes I just can't help but shake my head and laugh at how he really came out on top at the end of the day!! It's all good...lesson learned!

3
nagerjaeger•

Question. Was the interest being paid out on the mortgage higher than the return on the inheritance? If it was then it makes sense to pay off the mortgage.

I realize that is not really your question. Dave's baby steps are intended to help us manage our emotions that got us into debt. For those who can do math, and have the discipline to not make emotional financial decisions, the baby steps are a non-issue since they are already doing them "naturally." BTW, it is a rare person who has this capacity.

4
FrashizzleBS6•

For those who can do math

This is personal finance, not institutional finance. Trying to out-earn the interest on your mortgage with investments only works in institutional finance, where you have a repeating series of investment and debt transactions that levelize to a certain gain. So, you don't need to account for the risk of any single transaction.

In this case, OP is only making this transaction once, making risk much more of a consideration. Hence, why one should payoff the mortgage in most circumstances, even if investments are currently earning a higher interest rate.

It's the same reason you'd buy homeowners insurance - risk management. A lot of mega-companies don't insure their buildings, because they can cover individual losses. But you would be insane not to insure your house... because you feel the risk. It has a measurable effect on your utility. It's the same basic concept at work here.

4
MedicalLabScientist•

I love how Dave Ramsey only uses historical stock market returns when its convenient to prove his point.

For example when he encourages people to invest he promises them a 12% return and tells them they will have 4,000,000 or whatever ridiculous number at age 70. He never says a word about Risk or the chance the market will drastically underperform what it has done in the past 100 years.

However, anyone who chooses to invest in the stock market instead of paying of their house isn't taking risk into account and is a fool.

Sorry Dave.... You can't have it both ways.

3
IGetCarriedAway35BS3•

If you had a fund set up that your mortgage was paid out of... say it's a $100,000 fund earning 5% and your mortgage balance was $100,000 at 4%, then yes it would be perfectly okay to have that arrangement. But we're humans and it can be very hard to manage money "institutionally" as you point out.

1
GeneralRevil•

To be honest, in that case, I would say sell. I'm maxing out my retirement accounts while having a mortgage, so there is that, but a 4% guaranteed return is better than a 5% average return with risks of under-performance. However, if we're talking a 3-4% mortgage and the market average of 7%, then yes, that's a keeper.

1
Cycle_timeOP•

The mortgage is 3%. For the last 8 years my investments have done better than that obviously. During 2007 & 2008? I wasn't even close to 3%. Huge negative losses. Paying off the mortgage is a guaranteed 3% return over the next 20 months. Do I think the market will beat 3% over the next 20 months?

Even the experts are wrong all the time on that. They've been calling for a market correction for a couple years now and many almost guaranteed it would happen if Trump won the election. In hindsight they were all massively wrong.

The market is unpredictable but it is over due for a correction. Will it happen this month, next month, next year, or 20 months from now?

That's where I'm a little worried. I'm basically using $45k to time the market, which I've always been a put in and leave it type.

2
chailatte_gal•

Don't think of it like that. Think of it as building an asset.

Before we found Dave we were backwards. We saved a ton but had debt. We started to snowball and paid off debt more aggressively but still saved. Eventually we had $50,000 left of $82,000. We had $55,000 in savings. That's when we found Dave. It was tough and we sat on it for a week or two but we emptied our savings down to $5,000 and paid off all our debt.

Best. Decision. Ever. Take the leap.

We are 8 months removed from the day we becomes debt free. We've gone from $5000 to $35,000 in savings. You built up wealth SO much faster without the debt. We're saving about $4000 a month on average now.

2
Newbieplusone•

What those who call on you not to pay off your mortgage but instead to invest that money forget about is risk. If I were to lose my job tomorrow I would much rather have the house paid off then to have that money invested. Or if I was to be in an accident where I was in a coma I would like to know that someone coming in and taking the house is not one of the worries my family is left with.Plus any money invested could drop down to nothing.

3
Newbieplusone•

I just know that I used to use the Moses way of handling debt. I wandered around in it for 40 years. Since I switched to the Dave Ramsey plan my life has been a lot better. I got rid of my girlfriend because she wanted chicken to go with the rice and beans so I had to kick her to the curb. :-D I am out of debt and I have my fully funded emergency fund in place. The only thing I am doing different is I am working on step 6 before I go to step 4 because if I have my house paid off I will not need a lot of extra cash to make it on.

1