A DEBT-FREE man was advised not to pay off his mortgage early even if he could afford it.
Financial guru Dave Ramsey told him it would be best to remain patient and not exhaust his abilities. savings very fast.
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Carl from St Louis, Missouri called The Ramsey Show to get financial expert advice about your mortgage situation.
The caller and his wife had completely gotten rid of their consumer debt and now had just $45,000 left on their mortgage.
They had $35,000 in savings and were thinking about using a large portion of that to pay off their house faster.
However, Dave warned Carl about letting his savings get too low.
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“I don’t want your savings to be less than three months of household expenses,” he said.
Carl calculated that three months of household expenses for him would be about $10,000.
Dave warned, “If you have a $15,000 event, we’ve got a problem, man.”
Although Dave understood Carl’s enthusiasm for paying off the house quickly, he encouraged him not to rush
“This is more intentional than intensity at your stage,” he said.
“So I just want to be wise and careful, even though I’m just as excited as you are to get you out of debt.”
Dave also suggested that Carl could put $10,000 toward the house payment instead of a larger amount and therefore maintain a sizable savings account.
He also insisted that the caller was continuing to invest money in retirement.
Maintaining an emergency fund of at least three months of living expenses is part of Dave’s Baby Steps Method.
Dave Ramsey’s 7 Baby Steps
Dave Ramsey advises his followers to follow a seven-step plan to save for emergencies, pay off debt, and build wealth.
Step 1: Save $1,000 for your initial emergency fund.
Step 2: Pay off all debts (except the house) using the debt snowball.
Step 3: Save three to six months of expenses in a fully funded emergency fund.
Step 4: Invest 15% of family income in retirement.
Step 5: Save for your children’s college fund.
Step 6: Pay off your house sooner.
Step 7: Build wealth and give.
Dave’s co-host Ken Coleman had another suggestion for Carl.
“How could you make an extra $5,000 to $10,000? That’s what I’m seeing.”
Ken said he would feel “nervous” about saving less than $10,000 if he were Carl.
DAVE ANTI-DEBT
Dave is vehemently opposed to all forms of consumer debt and encourages his followers to only spend on debit cards and to purchase cars cash only.
“Americans live in such slavery that they do not know what it is to be free,” he said.
Dave himself went bankrupt at age 26, when he was a young real estate investor who relied heavily on loans.
See how one of Dave’s other callers paid off $234,000 in debt in just 31 months.
And see what he recommended for a 46-year-old man drowning in debt and with no retirement fund.
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