Do you follow Dave Ramsay?

[Anonymous]

Anonymous wrote:I don't know that I "follow" DR, but I have listened to him quite a bit. He doesn't always go straight by the numbers. For example when paying off debt he says to pay the smallest one first (so that you can have small wins to keep your momentum going), even though starting with the highest interest rate might be better mathematically.

His stance on debt is that it is inherently risky. So owning your house free and clear is less risky than even a low rate mortgage. So his argument is not about the math but the risk.

I agree with this one, no matter the interest rate. In terms of paying off a mortage, my concern is that you are putting too much money into one asset. Who stays in a house for 30 years anyway?

[Anonymous]

Anonymous wrote:Paying off mortgage is step 6. After funding retirement.
http://www.daveramsey.com/new/baby-steps/

But the thing is, what family except for very upper middle class and above fully funds a mortage? Have a pension? Company can go bust and you lose it. Plus, with life expectancy growing, who can save enough for 25 years or more of retirement while living with ever-higher daily expenses?

[Anonymous]

How does he suggest to pay for things? Cash? Debit card?

If I get rid of my credit cards, or just budget pay in full?

[Anonymous]

Don't get rid of your credit cards or that will mess with your credit score.

[Anonymous]

Yes...I follw his advice. It working for me.

[Anonymous]

Anonymous wrote:How does he suggest to pay for things? Cash? Debit card?

If I get rid of my credit cards, or just budget pay in full?

Cash when possible, then debit cards.

IMO, the cash bit is a fine idea, but if you have a track record of 2-3 years of paying credit cards on time with no carryover of balance (I have been lucky enough not to have a balance carryover since October 2000), use credit cards as those have MANY more protections/rewards for using them as opposed to debit cards.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don't know that I "follow" DR, but I have listened to him quite a bit. He doesn't always go straight by the numbers. For example when paying off debt he says to pay the smallest one first (so that you can have small wins to keep your momentum going), even though starting with the highest interest rate might be better mathematically.

His stance on debt is that it is inherently risky. So owning your house free and clear is less risky than even a low rate mortgage. So his argument is not about the math but the risk.

I agree with this one, no matter the interest rate. In terms of paying off a mortage, my concern is that you are putting too much money into one asset. Who stays in a house for 30 years anyway?

You don't have to plan to live in a house forever to want to be rid of pointless debt. We paid off the mortgage on our rental this month, and we've been renting in another state for three years (our rent is half the income we get from our rental).

Bogelheads agree about waiting until you have sufficient liquidity to pay off the mortgage. They say your home should not be more than 33% of your net worth. So until you have saved two times the value of your house, keep saving and wait to pay off the mortgage.