The Ramsey Show - App - Why You Spend Less When Paying with Cash (Hour 2)

Episode Date: May 1, 2019

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I am Dave Ramsey, your host. The phone number here is 888-825-5225. You can follow me on Twitter, at Dave Ramsey, on Instagram, at Dave Ramsey, and on Facebook.com, slash Dave Ramsey. Lots of people going social all around us. Chase is on Twitter. Can you explain to me how using only cash is beneficial?

Well, I don't use only cash. I use, I pay things over the Internet all the time. is beneficial well i don't use only cash uh... i use i pay things over the internet all the time and i use a debit card obviously for that and uh... i use a debit card at the gas pump and a few other places here there here's the thing money is weird

that there's it it it it activates Now, money is weird. It activates portions of the brain. Let me give you an example, okay? In the Internet world, including at Ramsey Solutions, when we put something on a website, the harder it is for you to buy something, the less likely you are to buy it. You won't follow through on the transaction. It's called friction in the internet world. If you've got to stand in line at a store, some people just put the thing down and walk out of the store. That's friction. The harder it is to buy something, the less you buy. That's the thing

one you need to remember. Now, there is such a thing as emotional friction. Now, what I mean by that is this in your mind right now or physically, if you want to, I'm going to do it. Take your wallet out. If you have one, this is my wallet. I have a money clip I carry in my front pocket with hundred dollar bills. So there's a hundred dollar bill, right? Lay that one hundred dollar bill in front of you with Uncle Benjamin Franklin's eyes piercing into your soul. OK, put beside that your debit card. Right. Put your debit card beside it or your credit card beside it.

Now, there's a couple of things that happen when you spend cash. It hurts. It creates emotional friction. It activates the pain centers of the brain, actually. MIT did a study with MRIs, and they were studying consumer behavior. And when the consumer spends cash, it activates the pain centers of the brain. When you make the exact same transaction with plastic, it does not activate the pain centers of the brain. You don't feel it.

And so you spend more when you spend with plastic than you do with cash. Tons of studies showing this. The average purchase is 12% to 18 percent more that you will spend in a fast food setting using plastic you will spend 70 percent more in a vending machine in the hotel lobby you will spend 170 percent Double, triple the transactions when you use plastic. Yeah, I'll take chips and a Coke and a candy bar, right? But when you're actually putting, you had to feed that dollar in that thing, right? You actually feel that and you spend way less.

So all of that is emotional friction. You need to be aware of that. The all of that is is emotional friction. You need to be aware of that. The other thing that happens is this. Think about this. Here's what's interesting. You ever, when you were a kid, if you're an old guy like me, you might have traded marbles with your friend. You had a marble and you trade something.

You ever trade something with someone? You give them something, they give you something. There's an exchange. You hand trade something with someone? You give them something, they give you something. There's an exchange. You hand them something, they hand you something. See, that's what happens when you pay with cash. You hand them, green president's faces, they give you the item. Think about what happens with plastic. You give them a piece of plastic.

They give you your plastic back. And they give you the item. Isn't it subtle that there was no exchange that occurred? You didn't make a trade. You got your plastic back and the item. Because you would never leave the transaction without your own credit card or your own debit card with you right but think about how subtle that is visually and how that activates the brain so all of that to say that when you spend cash you're more aware of your

spending here's an example you go out to eat when you're paying cash and you lay a hundred dollar bill in that little black tray uncle ben's coffin you know it's his coffin because he ain't coming back you just killed the old boy off he's gone right yep that little black tray goes away you don't ever see uncle ben again he's gone benjamin franklin is out of here but when you send that plastic out guess what comes back the plastic and you have a tendency to spend more on alcohol more on desserts and pick up the other person's tab at the restaurant when you are paying with plastic than when you're paying with cash this is why mcdonald's was the first one all these years ago in the fast food business to start taking plastic.

When I first started this show 25 years ago, nobody took plastic at all in fast food. And they didn't take it in the grocery store either. You wrote a check or you paid cash in fast foods 25 years ago. Or you paid cash. You wrote a check or you paid cash. And because it was scary to people to think that people might actually run up debt buying groceries or run up debt buying food at a fast food place. But McDonald's changed all of that. And it wasn't long after McDonald's did a big study on behavior.

And they found that you spend 78% more. You know, I'll supersize that. I'll put fries with that. And I'll pay for his, too, and give me the apple pie when it's on plastic. When it's cash, it's like dollar menu, baby. Changes everything. When you spend with cash, it changes the transaction. Now, all of that is important.

Think about it. Think about stuff like Apple Pay with your phone. See, that's even worse because you're not even handing them a form of payment. You're just waving a wand, your phone. You're like freaking Harry Potter buying stuff here. You just waved a wand and got free stuff. That's Apple Pay. Even less emotional friction.

These different methodologies with pay, the less emotional friction there is, the more you're going to spend. Now, none of this is evil. It's not like that's the mark of the beast. I'm not saying anything like that. But what I am saying is if you're going to get control of your money, you have to understand what is being done to you by these companies. They are managing your behavior. So when you spend cash, it changes your behavior function.

So especially when someone first starts doing a budget and trying to get out of debt and work the baby steps, I'll put you on a bunch of cash at that point. A bunch of cash. I still tip with cash. Like a valet or always leave some cash on the bed as I leave the room at a hotel for the maid because those maids work hard, man. You know, if you're going to tip, you tip with cash because you know what you get. You get this response like, wow.

But if you just include it on your bill, nobody even sees it. Nobody feels it. I want the server to be honored by the tip. Think about how that works, and it will change the way you look at cash. Cash is an important part of your financial turnaround. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs? Based new testament principles christian health care ministries or chm helps christian families

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Thank you. I appreciate that. That research is interesting, and the knowledge of some basic things about money like that will cause you to handle money better. That's the kind of stuff that is in the massively popular program, Financial Peace University. Over 5 million people have been through this program.

They have learned how to make and follow a budget, save money for a rainy day, get out of debt. Why? So you can build wealth. Why? So you can retire with dignity and change your family tree. You live like no one else, so later you live and give like no one else. If you want to get into Financial Peace University, it is a one-year membership.

It includes EveryDollar Plus, where you connect to your bank with the EveryDollarBudgeting app. It includes one year of access to all the videos and all the teaching online, and you join a group and go and take the course, usually at your local church. There's about 10,000 groups operating at any given time. You want to know more about this, just go to Financial Peace University. Check it out at DaveRamsey.com, and we will show you how we can walk with you over the next year or longer, but at least a year, and get you on this plan, get you going. But you've got to have the knowledge of these things.

When you have the knowledge, it causes you to behave differently. Knowledge is power, especially when it comes to money. John is with us in Boise, Idaho. Hey, John, how are you? Better than I used to be. How can I help? I appreciate you taking my question. Sure. I'm debt-free except for my house. I'm 66, so I'm looking at retiring in the next couple years, or at least semi-retiring. Good. I currently move 20 miles away from my house, and I'm living in a company house, which I can stay probably as long as I want to. Uh-huh. which I can stay probably as long as I want to. I'd like to sell my house, and I've got probably about $100,000 equity.

I'm considering buying something over here. The prices are a little lower, a few miles away. I'm wondering if I should save it or put it into another house and rent that house out temporarily, or what your advice would be on that. Either one would be okay. The downside of renting out a house that you're later going to live in is that you're going to probably end up giving it some once-overs once the tenants are gone. And you're going to end up doing some renovation of some kind, usually.

That's the downside of that. Because typically a rental property is at one level, and the home you want to live in is at another level as far as interior condition and so forth. So that's what you've just got to consider there, that do you really want to put renters in something you're going to move into later? I don't know. That's okay. It's not a bad thing to do, especially if you sell that and pay cash for a nice house that's rentable

and you can make some money while you're waiting. How long do you think you'll live in the company housing? I could live here as long as I want. They fixed it up specially for me, so I've got some special features here that I don't even think i'd put in my own house uh granite countertops things like that now if you're not working there you can't live there right i think they'd let me stay as long as i wanted okay it's the rental for them and they've just allowed me to move into it because it's closer to what i work okay but i mean

like if you're 86 20 years from, you're still living in that house? I think they'd allow it. Okay. I do. Just a matter of what you want to do then. Yeah. So if that's the case, I probably would buy a property and start renting it, even if you turned around and sold it later and bought a house to live in.

That was different. Or you turn around later when the renters move out, like I said, do a little renovation and get it tidied up and move into it. That'd be fine, too. Josh is with us in Lynchburg, Virginia. Hey, Josh, how are you? Doing good. How are you doing, Dave? Better than I deserve.

What's up? All right. So I'm a single male, 23 years old, with a relatively low income. What is your income? I bring home $19,000 a year. Okay. My only debt is a car, which I'm $6,000 upside down on. I owe $12,000 on it. And I'm curious as to with my considerable low expenses per month, if a $1,000 emergency fund is still required, or if it could have a little bit less than that, like $750,

and how much I should have in my bank account outside of my emergency fund at all times. Well, you want to keep just a floor in your bank account just to keep from bouncing a check, and you just pretend like that money's not there, a $50 floor, $100 floor, whatever it is. The emergency fund is a real emergency fund, Josh, is three to six months of expenses. Do you live at home? No, I live in an actual awesome living situation. I rent out a room from my friend's condo. Okay, cool.

All right, so you've got rent, you've got a car payment. A full emergency fund is three to six months of expenses of what it takes you to live now while you're working the baby steps we say baby step one before you get your debts paid off is one thousand dollars i think in your case i'd want to have a thousand dollars laying there and then let's get in the business of getting that car paid off you work in 40 hours? Yes. I work 40 hours sometimes when summer hits. I work construction, so there's a lot of time for overtime.

Good. Let's take a bunch of overtime or pick up a side job, one of the two, and let's get this car paid off, get your income up, okay? Okay. What are you going to be doing when you're 29 for a career? For a career, well, I plan on right now'm in school, that my work is paying for, and I plan on getting my journeyman's card and hopefully my master's card and doing my own electrical business, self-employed. Good for you.

That's a good plan. Okay, man, get after it. You're right on track. Yeah, just keep scratching and clawing, dude, but let's pick up all the overtime we can, get rid of the debt, and then build you an emergency fund of three to six months of expenses, get that car paid off at $12,000. I need $12,000 for you, extra income between now and September.

I want the car paid off now. Brantley is with us. Brantley's in Jacksonville, Florida. Hi, Brantley. How are you? Hi, I'm good. How are you? Better than I deserve.

What's up? Well, Dave, I'm actually engaged to a Christian. I'm going through Baby Step 2, and I'm getting married in three months. Congratulations. Thank you. Now, being non-Christian and now engaged to one, I'm in the process of kind of understanding and adapting more and more to Christianity. And it looks like I'm kind of heading towards that way,

but I don't completely understand the tithing, and I'm a very giving person. However, my logical brain is thinking, where's my money going? Is it being distributed well? Who is it helping? Now, when I get married, of course, our income is going to be together, so I'm okay with tithing. It's what she wants. Now, my question is, it's kind of a two-part question. One, should I tithe, even though I don't completely understand it yet and I'm unsure? And two, should I feel guilty giving a smaller amount than 10% while I'm saving for the wedding and getting out of debt? Okay. We don't do anything.

The only kind of Christianity that has guilt trips in it is toxic. So I'm not going to make you feel guilty about anything all right and i don't think your heavenly father who's crazy about you is going to make you feel guilty so that's not that's not what we're doing the thing i look at is this the bible says if we being evil meaning like you and me if we being the kind of people we are, not perfect people, know how to give our children good gifts, how much more so our Father in Heaven. In other words, as bad as we are, we're still good to our own kids, right? And your Heavenly Father is holy, so he's going to be, like, loving to give you good gifts.

So that's the thing. He didn't teach you to tithe in the Bible because he wants your money or because that church needs your money. He taught you to tithe because, as you've already discovered, even as somebody who isn't a Christian, you've already discovered that giving, living generously, is a wonderful character trait. It changes who you are as a person when you give. Agreed? Agreed, yes. And so that's why the Bible teaches tithing and giving.

A tenth of your income and other giving as well called offerings is because your father, your heavenly father, who's crazy about you, has a plan for you, says, hey, the best way to live your life is be a giver because you're going to be the best kind of person that way and you're going to have a wonderful life that way and so there's no guilt in any of that there's no guilt and there's no rules and there's none of that it's just a lot of grace and a lot of love and a lot of generosity and that's how i would go at this We'll be right back. In the lobby of Ramsey Solutions, Matt and Katie are with us. Hey, guys, how are you?

Good, Dave. We're great. Thank you. So awesome to have you guys. Where do you live? Kansas City, Missouri. All right. And all the way to Nashville to do your debt-free scream.

Yes. Love it. How much have you guys paid off? $60,000. Oh, cool. And how long did that take? 18 months. Good.

And your range of income during that time? Started at $35,000 and worked our way up to $45,000, but I'm about to finish my apprenticeship, so I'll be full-scale here in about two months. Good for you. What are you apprenticing to do? Electrician. Good. Okay. Very cool. Union then, right? Yes, sir. Good for you. What are you apprenticing to do? Electrician. Good. Okay.

Very cool. Union then, right? Yes, sir. Good for you. Well done. Good. And Katie, what do you do for a living? I'm a stay-at-home mom.

Very cool. We have a six-year-old daughter and twins that are three and a half. Oh, that's a handful. Very good. Love it. So what kind of debt was the $60,000? Well, we had a truck loan, had a couple bank loans, and a few credit cards that were pretty high. Okay.

So what happened 18 months ago that got you on this journey? So 18 months ago, we were waiting for our tax return to come in. We were really excited. We were way over our heads in debt, so we wanted that tax return to come, and we hadn't paid student loans. So the tax return never came. So we met with a bankruptcy attorney because we were so in debt that we were buying our groceries with our credit cards. So we met with the bankruptcy attorney.

And when we left there, I told him, I said, it's not right. That's not, that's not what we're supposed to do. So we started doing research. We found your name on, on the internet and I told him to scrape some quarters together and we went and bought your book. Wow. And we knew instantly that, that this was what we were supposed to do. Wow. Very cool. So you start reading through the book and what happened? And we knew instantly that this was what we were supposed to do.

Wow. Very cool. So you start reading through the book. And what happened? So I read the book within the first day. Front to back. I was on board. Matt was a little hesitant because I was just ready. I'm like, sell the truck, sell the car, sell everything.

He's like, like no i just bought this truck calm down i'm not i'm not doing all that you're crazy um so he got on board a couple weeks later i got a part-time job at night working at the grocery store just to get our snowball rolling. We sold the truck. We sold the car. We bought a 99 Cavalier and a 2007 minivan. Wow. So I became a minivan mom overnight. It happened. It did.

And yeah, we went nuts. We paid everything off. So what did the car and the truck bring? What did you sell them for? The car was actually paid off, so that's what we used to purchase our new vehicles. And we just broke even with the truck. What did they sell for? About $18,000.

Okay, so it was $18,000 of the $60,000. It's almost a third of your debt. Right. Okay, wow, yeah. And with your income being $35,000 to being 35 to 45, yeah, that was tough. It was hard. And the other car sold for what? About $8,000.

And then you used that and got two 4,000s? No. Wow. We used 4,000 to buy two cars. Oh, two 4,000s. And then the other 4,000 we paid off one of the smaller credit cards that we had. Wow, very cool, And chopped them up. Yeah.

And so bankruptcy starts being in your rearview mirror. You're turning the corner on this thing. You're starting to think we're going to make it. Yeah. That's a long 18 months. Very. When that truck drives away, there's a tear in your eye. Yes, there was.

Quite a few tears, actually. And we actually took financial peace um but we didn't take it until the very end of our journey here um to give us that last little gazelle mode we wanted to finish strong and so we did we paid like 10 or 12 000 in the last two months just being crazy we were not matt what convinced you because she she's going like crazy she's running around the house with her hair on fire trying to sell everything and you're like this woman's lost her mind and what convinced you to really think this might work well i came home one day from work and she had her thing on paper and uh show me if i was just to simply sell my

truck uh that 425 truck payment a month plus whatever she had found in the budget to scrape up to sell that thing. And that's how much more we used towards debt snowball. And she actually laid it out as far as how many months it would take to be debt-free. And that was kind of my moment. I got to get rid of the truck. And the irony is that now you've finished the apprenticeship, your income is going to shoot way up. Yes, way up. I mean, you're what gonna double uh yes yeah yes wow i love it that's so fun

yes and now you got no payments no payments and i'll be double my income so yeah and save up and buy you a truck right that's right i love it done. This is very cool. It's a manly thing to do when you've got three little kids and a wife scared out of her mind to give up something that means as much to you as a truck like that. That's hard to do, but that's a man thing when you put your family first. It was totally worth it. Well done, sir. Thank you.

Well done. I'm proud of you. Very cool. Did you have people cheering you on? Everybody thought we were crazy in the beginning, but as the progress was being made, we found ourselves thought we were crazy in the beginning. As the progress was being made, we found ourselves some cheerleaders in our corner. So that definitely helped through the long 18 months. Well, we got about 20,000 people in this Ramsey, the Ramsey Baby Steps community, which is the only official Facebook group. And you're part of that group, I hear.

Yes. Yeah, absolutely. I got on there and I kept reading that it was official. And there's so many pages that aren't official. And I'm like, yeah, if you're official, then why haven't I gotten my call yet? And your team called me the next morning. Well, I mean, we have one official Facebook group. There's a lot of people started them and running them.

Right. And that's awesome. That's fine. Whatever. But I think there's, what, 20,000 or 30,000 folks in this one, if I remember right. And it's great. And we just kind of kicked it off, I don't know, less than a year ago or something. Right. So, well, good.

And so they were supportive. Yes. Giving you every little detail of advice. Probably drive you a little crazy. Yeah. Yeah, I love it. I love it. People get intense in these groups, and that's a good thing.

It's a very good thing. Well, very cool, you guys. What do you tell people the key to getting out of debt is? Stick with it. Yeah. Stay to the steps. Don't stray. Don't make it your own plan because it doesn't work.

No ish. No ish. Exactly. No ish. I'm going to put up T-shirts that say no ish. Just do the plan. Right. I love it.

Well done. Good. Thank you. So how's it feel now when you look at those three little kids and go, I don't have any payments. It's really nice. It's a huge blessing. Yeah. Huge blessing.

You're positioned to completely change your family tree now. Yes. You know, Matt, with your family tree now. Yes. You know, Matt, with your income shooting up and you guys have now made the turn and you've learned to control money and to make money behave. You've got the whip out making it making those dollars dance, man. Once you learn to do that, you can do anything. Yes. How long have you all been married?

Almost five years. Very cool. Very cool. We're very proud of you. Thank you. Very, very proud of you. Thank you. Very, very well done. I love it. So we've, of course, got a copy of Chris Hogan's Retire Inspired book for you, signed by him. That's a number one bestseller.

And that is the next chapter in your story where you become millionaires. Awesome. Outrageously generous along the way. You brought the three kiddos with you. What are their names and ages? This is Gracelyn. She's six and a half. This is Matthew and he is three and a half. And this is Haley Jo and she is three and a half as well. The three and a half year old twins. There we go. Awesome stuff. So very well done, you guys. I'm very proud of you. Thank you. All right. It's

Matt and Katie, Gracelyn, Matthew and Haley Jo. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! Well done. Love it, love it, love it. Hey, that's amazing. Hey, guys, if you want to get in the official, the Ramsey Baby Steps community,

the official Facebook group, there you go. That's how you do it. You can just search it on Facebook, the, capital T-H-E, Ramsey Baby Steps community. Or you can just jump on the Dave Ramsey page, and you can click groups on that on the left. It'll pop up and show you there. But it's the Ramsey Baby steps community jump in there we'd love to have you and give you some support that way as well get all these people that aren't doing ish they're doing it they're doing the real thing no ish i like it i may i may print up t-shirts yeah this This is the Dave Ramsey Show. recent surveys show that 35 of home buyers last year

made an offer on a home without ever seeing it in person. That's a little crazy. With the increased competition in the housing market, people are starting to feel more pressure to make quick decisions when selling or especially buying a home. Do not do this. Do not do this. Don't go into a deal blindly. It's one of the largest purchases you'll ever make for most of you.

Get some help. Be wise, not rash. When you get panicked and out of control, usually that leads right straight into stupid. Our endorsed local providers can help you buy or sell without compromising home value or taking any shortcuts. And they still get an average of $5,000 more at closing for their selling clients. So if you're listing, you need to think about that. Not only that, but when using an ELP, a home is on the market for an average of 10 days versus the nation's typical total right now of 21 days.

So they're selling it twice as fast and for more money. If you're going to list with an ELP, one of our endorsed local providers, click on ELP at DaveRamsey.com, and that will happen for you. You'll find one of the people we recommend. All right, Craig is with us in Sacramento. Hi, Craig. How are you? I'm great, Dave. Thanks for taking my call. Sure, man. What's up? Hey, so I purchased a retirement home early in the state of Florida. I currently live in California, and everything was going perfectly well, and the loan funded

everything went through until they sold my loan to a loan servicing company who has been accused or actually has had lawsuits against them for faulty business practices, including they were doing a loan-forced insurance protection scam and also they were doing a like a false advertising on a loan acceleration program and they have multiple multiple multiple complaints against them for the business Better Business Bureau and the State Attorney General so I contacted a local provider there and it's going to cost me about seven thousand dollars to get out from under it. Do you recommend getting out from under these guys?

Nope. No? Nope. You have a solid contract, call a mortgage, and any violation of that contract you could defend easily. What I would do is I'd just watch them like a hawk and make sure your escrow and stuff is done. And make sure you're, you know, don't just assume that they're crediting your payments properly.

Watch the principal tick away as it should. Watch the escrow as it should. Don't sign up for any mortgage acceleration with them. I mean, don't fall, you know, make sure they're not overcharging. If you watch the escrow, they're not going to overcharge you on insurance. And forced place insurance is a contractually legal thing if you don't have insurance. But if you have proof of insurance, they can't forced place insurance on you. Right.

What they were doing was withholding the money payments to the insurance companies on purpose and then forced placing insurance on top of it, charging three times. Let's see. You would know that as soon as it happened. Right. absolutely. But I would have a legal recourse. Yeah, the people that that happens to are people that are not watching their stuff. Exactly.

And so you'd have all kinds of recourse because you'd have proof that you paid the escrow, and then you'd have proof they didn't do that, and then you could file suit on them. But obviously, if they screw up something, it's probably not going to be where they've already had their hands smacked right that's true and the problem is as soon as you go refinance they're gonna almost um i would say 90 something percent of the mortgages that you go get are going to be sold to someone correct it could be bank of america it could be countrywide it could be anybody and every one of them have some level of servicing issues. No, I would not go to the expense to refinance to get out of this. Just manage it.

Watch it closely. There's a likelihood they'll resell it anyway. They may not hold it forever. But just keep your fingers on the pulse of it. And, of course, get it paid off as soon as possible, which solves the whole problem. Tony is in San Angelo, Texas. Hi, Tony. How are you?

Better than I deserve. How are you better than i deserve how are you the same how can i help well i am wanting to up my husband's life insurance his salary has gone up over the years and our youngest is eight years old if we did 15 year term she would be 23 out of college on our own hopefully we would be 53 i figure all of our wealth will be in retirement account excuse me retirement account good so between being able to get to our retirement accounts at 59 and a half what do i do between the 50 53 and 59 and a half if something were to happen. I wouldn't sweat it. You're going to be okay. Okay. You're going to be okay. I mean, if you've got $2 million or $1 million or whatever in retirement accounts

and you have everything paid for and the kid's grown and gone and you've got six years to make it without penalty, your worst-case scenario would draw some of it down and be penalized. Okay. And that's your absolute worst-case scenario. worst case scenario would draw some of it down and be penalized. And that's your absolute worst case scenario. My guess is though that you'd be earning an income or you'll have other assets that you could live off of as well during that time by then.

Now I would not over insure for that gap. Okay, great. That leaves us with cheaper insurance. That's exactly what I would do. The cheaper chicken. Yes. Thanks for the call open phones at 888-825-5225 sean is on twitter what's it like to play the monopoly with you brutal i don't know i'm not even better than anybody else in monopoly except i don't go into debt in monopolyopoly or whatever.

But, I mean, I do play it with the principles just to see if it'll work, and it generally does. But most people don't go into debt in Monopoly. Sometimes they'll mortgage everything, but that's usually right about the time they're going. Right before they go around and go broke, the last thing they do is go in debt, right? Isn't that how most people lose Monopoly, right at the end there? You know, they try to hang on with some debt, and it kind of crashes them that much faster. But, yeah, yeah, it's, you know, the biggest problem I have is nobody will sell me properties because they think I'm going to win.

I can't get anybody to do deals with me. They're intimidated. I haven't played in years, though. We used to play with the kids some, and pretty fun stuff. We ought to do it again, I guess. Jack is with us in California, Fremont. Hi how are you good how are you doing dave better than i deserve how can i help well so i had a question on whether i should be thinking about paying down my mortgage which is about 400 000 left in it but i have a 15 year fixed at about 2.875 which is a

pretty good rate, I think. So one side of my brain thinks that, you know, just invest the money instead of paying it down so that you can get a return better than 2.875. What do you think? Well, you're leaving out risk. And when you put risk mathematically into this equation, it negates the spread between your mortgage rate and your investment returns, risk and taxes both.

And so now what I've found is this, that as we've studied millionaires, the typical millionaire, one of the things they do is they get their home paid off in about 10 years. It's a fairly typical track in the first 10 years. They're not borrowing on their home to invest ever. I almost never talk to someone with millionaire status who borrowed on their home to invest ever i almost never talked to someone with millionaire status who borrowed on their home to invest they get they work to get their house paid off and they work steadily to invest and so um you know i'm going to put 15 of my household income into retirement at what we call baby step four if you've heard me say that and be taking care of

kids college and i'm gonna throw everything else at mortgage. Have you got a big pile of money already sitting there non-retirement? Yes. How much? About $3 million. Okay. And so you've already killed it. Congratulations. What's your income?

Combined, it's about $450. Okay. You're making tons of money i mean it's you know if i listen here's what i would do in your shoes okay pay off your mortgage today okay if you don't like it by september if you just hate being debt-free, go get you a mortgage. There's no chance you're going to go back in debt, dude. I mean, you've already killed it, but you've killed it due largely to your income and due to the fact that you're an aggressive investor and saver. I mean, you have $3 million. Way to go.

Excellent job and a fabulous income. You know, it's more of a formality with you than anything else. I wouldn't have that little pile of garbage in the corner of my house called a mortgage. I'd sweep the corners out, dude. It's only $450,000 in your world. That's not much. I get off the day. This is the Dave Ramsey Show.

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