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    #16
    Originally posted by tripods68 View Post
    You have 60K in cash and 54K in mortgage balance. And how much is your mortgage payment? 1400 - 1700 range. I'd say you can easily pay off your mortgage TODAY and rebuilt savings plus EF easily in the next a year. Assuming you can save $2K a month x 12 = 24K in 12 months, saving 3K mortgage interest payment by deferring later. Do you expect to lose your job in the next year or two. If so i'd still pay off the mortgage. That's what I would do.
    Mortgage payment is $900. then I throw in an extra 300 so $1200/mo (I think my interest portion is $130 or so; rest goes to principal)

    I escrow myself so that isn't included in the above but would be pulled from 60k (7k per year to cover taxes and insurance).

    I think I've been doing the baby steps all along (never knew them before), just not in that strict order and I've had to adjust based on life events like marriage, kid, replace car, etc. So I kind of cycle through them as I see fit.

    For 2015 it was max out Roth; increase 401k but didn't max; tackle mortgage.

    You have definitely given me something to think about for 2016 - thank you!
    Last edited by Jluke; 10-29-2015, 07:18 PM.

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      #17
      Originally posted by Jluke View Post
      Mortgage payment is $900. then I throw in an extra 300 so $1200/mo (I think my interest portion is $130 or so; rest goes to principal)

      I escrow myself so that isn't included in the above but would be pulled from 60k (7k per year to cover taxes and insurance).

      I think I've been doing the baby steps all along (never knew them before), just not in that strict order and I've had to adjust based on life events like marriage, kid, replace car, etc. So I kind of cycle through them as I see fit.

      For 2015 it was max out Roth; increase 401k but didn't max; tackle mortgage.

      You have definitely given me something to think about for 2016 - thank you!

      We are intensifying baby Step 6 first before baby Step 5. That's because our daughter will be 15 years old in 5 years. That gives us few more years to save towards college after we are completely debt free.
      Got debt?
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        #18
        I hope anyone seriously accelerating paying off their mortgage takes time to talk to contemporaries about their experience as they accelerated payments and their history in allocating remaining sums after paying upkeep and the various taxes.

        Comment


          #19
          Originally posted by tomhole View Post
          1. Would you take out a home equity loan at 3.75% and put it in your retirement savings? If no, then maybe paying off the mortgage is a good thing. Most of us would never consider doing this.

          2
          Tom

          Me! We absoutely have borrowed against our house to invest in the market. From the moment we've bought we've always tried to maximize all retirement accounts and never paid down the mortgage.

          As we've had more money we've thrown a few dollars that way. But for the most part we've invested heavily in retirement and in taxable accounts/cash.

          It's paid dividends. We've ended up with a good amount of home equity and an even larger stash of retirement cash. I am not sure but I think if we didn't invest another penny in our retirement pot we could still afford to retire at 55. According to the calculator with our stash we would have $1.8M to retire on not counting our home equity or taxable investments if we don't contribute a penny. At a spend down rate of $80k/year (which is more than we spend now including our "rent"/mortgage), NO social security, we will run out of money at age 82. Now we need it to last to 100, but I bet if I included SS for and my DH we'd easily make it. This is using 7% rate of return and 0% contributions from now until 55 and living at $80k. If we use our current expenses of $65k, we run out at 89. This is also assuming that we still have a mortgage payment and right now we have enough cash to pay for a house outright if we so choose. So our expenses would drop instead of $5500/month down to $3100/month living well. And if we did that we'd have $2.8M when we died. But who wants that?
          Last edited by LivingAlmostLarge; 10-30-2015, 09:04 AM.
          LivingAlmostLarge Blog

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            #20
            Originally posted by LivingAlmostLarge View Post
            I think DR is wrong about building wealth

            DR's Wealth building formula is avoiding debt completely. You have a greater chance to being wealthy by staying away from debt. You are the exception not the rule. Majority will not achieve wealth building having so much debt.

            There are those who are "cynics" of Dave Ramsey's teaching and say "DR is just milking the public, fooling everyone buying his product while making millions". Everyone has a right to make a living, including Dave Ramsey.

            Before credit cards how people lived their lives, by paying for things in cash. Today's is just the opposite, high debt, and number one caused of divorce is money.

            There are things we do daily we don't even blink - we use credit card. We buy Starbucks coffee. For those who aren't discipline small drinks can an add up to thousands. I know! I was this guy in my 20s buying stupid things I couldn't afford trying to impress people I don't even like. Sorry I digress.


            The cost of listening to Dave for free gave us the motivation. It might even help somewhat medically for future mental illness, anxiety of carrying so much debt, and all the family pressure that comes with debt.

            To us DR's is about listening to the message and incorporating the right message into your lives. We found the right message that works. That messenger--just happens to be Dave Ramsey. We listen to his free daily podcast. We signed up for FPU class as a couple (cost $93) once a week meeting for 9 weeks. The results are greater than we had hope. Those who have not attended FPU class, try it once. It was a fun class, more importantly it gave us the tools, and inspired us to be debt free. You'll meet many couples who are similar situation, but are now in the process of making the difference to be debt free.

            2015 has been a transformation year to our family financially and relationally. Our kids know the "big picture" of what we are trying to accomplish. The rest of my family, parents, brother, and sister see are seeing what we are doing and accomplished thus far.

            Today we look at life crystal clear with very clear goals in mind. We are envisioning our life in 5 years completely debt free so we can achieve greater things/heights we have yet to achieve. We found the messenger to help us get there fully inspired and motivated.
            Last edited by tripods68; 10-30-2015, 07:43 PM.
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            www.mo-moneyman.com

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              #21
              Originally posted by Jluke View Post
              Mortgage payment is $900. then I throw in an extra 300 so $1200/mo (I think my interest portion is $130 or so; rest goes to principal)

              I escrow myself so that isn't included in the above but would be pulled from 60k (7k per year to cover taxes and insurance).

              I think I've been doing the baby steps all along (never knew them before), just not in that strict order and I've had to adjust based on life events like marriage, kid, replace car, etc. So I kind of cycle through them as I see fit.

              For 2015 it was max out Roth; increase 401k but didn't max; tackle mortgage.

              You have definitely given me something to think about for 2016 - thank you!
              In your situation I would not lump sum pay off that mortgage because you would end up cash poor for about 6 months and I know that would cause me a lot of stress. If anything I would pay off the car in a lump and then snowball the car payment into the mortgage but that assumes your retirement is squared away. I dont know specifics like your age or retirement balance but since your 2015 goal was to max out the roth I would wager you are behind on retirement and that should be a big priority over paying down low interest debt.

              Comment


                #22
                Originally posted by Goldy View Post
                In your situation I would not lump sum pay off that mortgage because you would end up cash poor for about 6 months and I know that would cause me a lot of stress. If anything I would pay off the car in a lump and then snowball the car payment into the mortgage but that assumes your retirement is squared away. I dont know specifics like your age or retirement balance but since your 2015 goal was to max out the roth I would wager you are behind on retirement and that should be a big priority over paying down low interest debt.
                Thanks for the advice. I have debated paying off the car. However, I like seeing the mortgage balance go down and have also considered putting around 25k on the mortgage so I have under 2 years to go on the mortgage.

                My superstitious nature holds me back - as soon as I make a big move, I'll need the money for something else.

                Details:
                Age 38
                401k is 250k
                Roth is 29k

                Taxable investments 45k
                Cash 60k

                Comment


                  #23
                  Originally posted by Jluke View Post
                  Thanks for the advice. I have debated paying off the car. However, I like seeing the mortgage balance go down and have also considered putting around 25k on the mortgage so I have under 2 years to go on the mortgage.

                  My superstitious nature holds me back - as soon as I make a big move, I'll need the money for something else.

                  Details:
                  Age 38
                  401k is 250k
                  Roth is 29k

                  Taxable investments 45k
                  Cash 60k
                  Looks like you are in good shape! The general rule is to have 3x salary by age 40 saved in retirement, and assuming you can hit that you are sitting pretty.

                  Maybe a compromise is to set aside a 6 month EF from your 60k and put the rest towards a debt payment and ride it out till its gone.

                  Comment


                    #24
                    I am not a DR cynic. I think he works. I think his method is proven to get people out of debt. Do I think he's the best method for wealth? NO. I also say this.

                    His standard answer is 15% is going to get you to retirement is wrong. That is a one size fits all. There are so many variables that it can't be only black or white. Why?

                    Because if you are 45 and suddenly getting out of debt NOW, but you have paid for 20 years on your mortgage you got when you are 25, then you need to focus on retirement. Anyone cannot go back and "save" their mortgage payment into a retirement account, but they can focus on saving as much as possible for retirement and say in 10 more years the house will be paid off by 55 and they will have a nest egg to boot.

                    The truth is someone who is 45 and in debt likely has no retirement savings and 15% isn't enough to get them there. Someone who is 35 and spending 5 years digging out of debt would crazy to not save 15% or more for retirement before focusing on the mortgage.

                    So why focus on retirement over mortgage? Three reasons. One you can't go back on save for years you didn't maximize it out. Two you might be close to paying off the house depending on your age. If you are in your 40s you might be in the house your bought in 20s. You can't assume that you just bought a new house and are starting to pay. You might already be 10 or 15 years in. A lot of variables. Third the house will get paid off due to paying down equity every month. But will you retire and die in the house? What happens if you at age 55 you have $50k left on a $250k house but you want to downsize? Or need to downsize? Kids left, divorced/widowed/or just physically unable to manage? What if instead of a 4 bd home you want a 2 bd condo?

                    No one nowadays can guarantee you'll keep your paid for home forever. My personal plan we'll buy soon and keep it for 20-25 years and downsize as soon as the kids are in college. We will buy a bigger house than needed FOR sure for 2 empty nesters (I assume to still be married). And my DH and I already discussed this. We aren't counting on the equity for retirement but we certainly know we won't be in a two story house at 60. We'd like a condo or small ranch/rambler.

                    I just think that Dave Ramsey gives you tools to get out of debt, but after that take his advice with a grain of salt. You have to evaluate and look at your own personal situation.

                    Originally posted by tripods68 View Post
                    DR's Wealth building formula is avoiding debt completely. You have a greater chance to being wealthy by staying away from debt. You are the exception not the rule. Majority will not achieve wealth building having so much debt.

                    There are those who are "cynics" of Dave Ramsey's teaching and say "DR is just milking the public, fooling everyone buying his product while making millions". Everyone has a right to make a living, including Dave Ramsey.

                    Before credit cards how people lived their lives, by paying for things in cash. Today's is just the opposite, high debt, and number one caused of divorce is money.

                    There are things we do daily we don't even blink - we use credit card. We buy Starbucks coffee. For those who aren't discipline small drinks can an add up to thousands. I know! I was this guy in my 20s buying stupid things I couldn't afford trying to impress people I don't even like. Sorry I digress.


                    The cost of listening to Dave for free gave us the motivation. It might even help somewhat medically for future mental illness, anxiety of carrying so much debt, and all the family pressure that comes with debt.

                    To us DR's is about listening to the message and incorporating the right message into your lives. We found the right message that works. That messenger--just happens to be Dave Ramsey. We listen to his free daily podcast. We signed up for FPU class as a couple (cost $93) once a week meeting for 9 weeks. The results are greater than we had hope. Those who have not attended FPU class, try it once. It was a fun class, more importantly it gave us the tools, and inspired us to be debt free. You'll meet many couples who are similar situation, but are now in the process of making the difference to be debt free.

                    2015 has been a transformation year to our family financially and relationally. Our kids know the "big picture" of what we are trying to accomplish. The rest of my family, parents, brother, and sister see are seeing what we are doing and accomplished thus far.

                    Today we look at life crystal clear with very clear goals in mind. We are envisioning our life in 5 years completely debt free so we can achieve greater things/heights we have yet to achieve. We found the messenger to help us get there fully inspired and motivated.
                    LivingAlmostLarge Blog

                    Comment


                      #25
                      Originally posted by LivingAlmostLarge View Post
                      His standard answer is 15% is going to get you to retirement is wrong. That is a one size fits all.
                      Once you completed baby step 2 (e.g paid all existing debt except mortgage), there is no reason that you cannot save 15%. But how many American can save 15% percent? Not many because lack of disposable income or income, poor budgeting, and debt. Debt is a huge drain in our economy. Most only can save between 6-10% which problematic itself but that's just reality.

                      Originally posted by LivingAlmostLarge View Post
                      Because if you are 45 and suddenly getting out of debt NOW, but you have paid for 20 years on your mortgage you got when you are 25, then you need to focus on retirement.
                      You are describing someone in baby step 4, 5, and 6 - all done simultaneously.
                      Baby step 4: 15% retirement;
                      baby step 5: College fund
                      baby step 6: Pay mortgage faster

                      Unless you have kids, you skip step 5 and go to step 6. However, most don't have to pay their home faster. However, we see greater benefits paying off our mortgage faster than keeping the 15 year mortgage.

                      Originally posted by LivingAlmostLarge View Post
                      Anyone cannot go back and "save" their mortgage payment into a retirement account, but they can focus on saving as much as possible for retirement and say in 10 more years the house will be paid off by 55 and they will have a nest egg to boot.
                      I agree.

                      But being completely "debt free" allows someone to maximize retirement savings on consistent regular monthly basis. Large part of our income are dedicated towards debt. Without debt, large part can be dedicated to retirement.

                      Originally posted by LivingAlmostLarge View Post
                      The truth is someone who is 45 and in debt likely has no retirement savings and 15% isn't enough to get them there. Someone who is 35 and spending 5 years digging out of debt would crazy to not save 15% or more for retirement before focusing on the mortgage.
                      I know many you are describing in this age group. Those in this situation cannot afford to retire early yet most will continue to work beyond 70 years of age. It is not crazy at all for anyone to think that most preferred not have a mortgage payment than saving for retirement. Depending on lifestyle or culture, those focus on repaying debt faster--are likely inclined to save more towards retirement.

                      Originally posted by LivingAlmostLarge View Post
                      So why focus on retirement over mortgage? Three reasons. One you can't go back on save for years you didn't maximize it out. Two you might be close to paying off the house depending on your age. If you are in your 40s you might be in the house your bought in 20s. You can't assume that you just bought a new house and are starting to pay. You might already be 10 or 15 years in. A lot of variables. Third the house will get paid off due to paying down equity every month. But will you retire and die in the house? What happens if you at age 55 you have $50k left on a $250k house but you want to downsize? Or need to downsize? Kids left, divorced/widowed/or just physically unable to manage? What if instead of a 4 bd home you want a 2 bd condo?
                      There is no reason why you can't focus on repaying mortgage debt faster and savings 15% at the same time.
                      DR advocate 15% retirement and any extra apply towards mortgage reduction. If you do both, great. There is no right or wrong. If you choose not to apply the extra income toward the mortgage--That's an individual choice to make.

                      Our situation is different, our combined household this year is 180K. Next year, it will be higher close to 190K; both of us have state pension with 15% mandatory contributions + 16% additional pretax contributions 403(b) & 457s. We also contribute to ROTH. Assuming we retire at 65, we hope to live very comfortable with our pensions, and retirement savings while living completely debt free. I cannot say, how much our net worth will be in 15 for 20 years but I hope that it will in the range of multi-million.

                      We like our home, whether we keep our home in 5 years --the value should be higher. While it is not our dream home, it's a perfect rental home for young couple starting out (decent size 1741 sq. ft) single story home with small backyard.

                      I don't think we disagree a whole lot. We just like DR's preferred method of wealth building principle. Its simple and it works.
                      Last edited by tripods68; 11-01-2015, 03:58 PM.
                      Got debt?
                      www.mo-moneyman.com

                      Comment


                        #26
                        Tripod you missed the point completely. The point is that 15% is not the end all and be all of retirement. And just because you have paid off your home doesn't mean that you will build wealth. You may not have TIME to build wealth.

                        Dave Ramsey doesn't work after debt reduction which he does great because he's Motivating, instructional, and adamant. But after that he falls apart.

                        He doesn't explain that someone in their 40s or 50s getting out of debt needs to be SMART about getting out and debt and saving. Someone in their 20s has more time to correct their mistakes.

                        You said most people can't save 15% unless they pay off debt. I fully agree.

                        What I disagree is that saving 15% at 45 is NOT ENOUGH. It's better than where they would be if they hadn't paid off the cars, the CC, etc. But after you finish paying off all your unsecured debt and you are 45, it's time to redivert the debt payments and look at the big picture. You've spend 2-3 years CUTTING retirement savings and you CAN't go back and save $5k into a Roth but suddenly you have all these extra dollars to save from DEBT being gone.

                        What do you do? Perhaps you focus on Roth IRA and 401k because there are no loans for retirement. The house you are in you bought when you were 25 and you only have 10 more years left. So if you are 45 and have a mortgage ONLY, you let that go because most payments are principal only and every extra penny ABOVE AND BEYOND 15% goes to retirement and maybe college. WHY?

                        Because perhaps they aren't retiring at 55 but at 55 they'll have 10 years of saving and a paid for home. If they take another 5 years to pay off the home in FULL like you are advocating and only save 15% for retirement it doesn't make financial sense. They are losing YEARS of compounding especially people who haven't been saving since their 20s. Starting to save more than 15% at 50 is a lot harder than at 45. Those 5 years at a later time point make BIG difference.

                        So no Dave Ramsey does his speel great. I am a huge fan of his and a proponent that you have to change behavior. I believe in the snowball over highest % because it is about a person's behavior.

                        But he gives false assumptions (12% returns, where do I find that), he suggests that 15% is enough for everyone. The truth is that for a 30 something couple with kids spending 2-3 years or more getting out of debt it MIGHT be enough, it'll be cutting it close. For anyone older it's highly unlikely unless they have a pension or other retirement savings. But who wants to hear that you have to still live "gazelle intense" after you pay off all your debt forever?

                        People here have mastered living frugally. They understand that savings means living below the means. People who find DR have a dramatic shift in behavior and attitude about money.

                        FWIW I make no claims about retirement but as I calculated what we've saved from 26-36 without saving another PENNY is enough to fund our retirement at $80k for 35 years retiring at age 55. And that's living higher than we live now. So compounding is a huge deal and I was using 6% returns which is half what Dave Ramsey uses. Along the way we paid off a large amount of debt (private MBA) and had two kids, went to 1 income, and save about 3 years of cash living expenses. So I can honestly say compounding if we had started even earlier would have helped.
                        LivingAlmostLarge Blog

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                          #27
                          LivingAlmostLarge, I am living your point right now.

                          I have paid off all my consumer debt while saving only to my 401k match.

                          If I maintained my current retirement savings at the 401k match and attacked my mortgage all out, I could get it paid off in 8 years. That would be awesome because I would be mortgage free and the amount I would have to save for retirement would be greatly reduced (no house payment).

                          But I am 49 and way behind on my retirement savings. So I have decided to max out my tax advantaged retirement savings, add a little to that in the form of taxable retirement savings, and pay any extra to the mortgage each year. I am doing it this way because if I lost 8 years of tax advantaged retirement savings, that really puts me in a pickle when I try to retire, even without a mortgage payment. Home equity is not as liquid as fat IRA's and 401k.

                          If all goes well with my current plan, I get to retire at 60 but I will still have a house payment. I am hoping to downsize from our current house between now and then and greatly reduce or even eliminate the mortgage. It's all about balance at this point.

                          If I were 10 years younger, I might go all in on the mortgage, but not now.

                          Tom

                          Comment


                            #28
                            LivingAlmostLarge

                            Dave Ramsey doesn't teach people when they can retire, he cannot tell you WHEN you should retire or what age, or tell you how much money you need to retire. THat's up to the individual.

                            He does believe living a life of completely DEBT FREE no matter what age group you belong. It doesn't matter if you're 45 years old or 60 years old. Debt free lifestyle is the key to wealth building. DR defined wealth building as follow:

                            net worth = asset minus liability.

                            He tells his audience the biggest wealth building that you have is your Income.

                            Our net worth will be just over a million in 5 years--that's assuming we have paid off our home completely while continuing to invest. That's our goal short term.
                            In 10 years we hope to double that number. While I may not retire at age 60, I may retire at age 63 when our net worth range between 2.5 to 3 million outside from monthly pension. I'm eligible to collect pension at 50 which is 3 years from now. However, I get more if I retire at 63 + social security benefit. My wife is eligible to retire at age 61 with a monthly pension + social security.

                            DR's program will not work for anyone if people don't change their spending behavior. He teaches you how to create a plan/budget, paying down your debt from lowest balance to the highest balance, and at least 15% investment retirement savings. He talks about being gazelle intense so people get out of debt sooner than later.

                            I don't know if 15% retirement saving is enough for those who are late in retirement savings. You can take that advice for what it is. Could you save more than 15% (I don't see the reason why not) if you are 50 years old and just now starting? Sure. Will you have time to invest for the next 15 years before you are at 65 if you just started at age 50. Probably not. Because you are late in retirement savings, most people may have to work to their 70s. THat's up to the individual.

                            Could you earn 12% ROI? Maybe or but maybe not (i'm leaning). Not sure why people gets riled up about the 12% when DR brings this up. Its possible, its not out of line. DR may bragged that earns at least 12% ROI on some of his investment. That's because his been investing for over 30 years which is exactly his point. There are 4 investments he recommends (growth, growth & income, aggressive growth, and international) to be fully diversified. While his recommendation may not be suitable to the most savvy investor, his advice is not out of line if you think long term.
                            Last edited by tripods68; 11-02-2015, 12:34 PM.
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                              #29
                              Jluke, the wonderful thing about this site is that we can read but totally disagree with others. The greatest gift you can give your children is to be totally, financially self reliant as a retiree.

                              The more I read, research, observe the experience of seniors and track my various investment numbers, I'm convinced that retirement rests on the magic of compounding. The sums you contribute in the early years work much harder for you than the sums contributed later. Yes the market roller coasters and I gnash my teeth and fret about paper 'loss' but there is no denying the difference between the sum actually contributed over all those year and current value.

                              What your children use as adults for money management is impossible to guess. My dad impressed me by standing on the front step and burning a few $ 5. bills. I abhor paying interest and am one of those people who paid off their mortgage principal in 13 years.

                              We were able to fund DKs college education with a Mutual Fund whose monthly contributions came from sources like the sums allowed as a tax deduction, splitting sums for gifts between stuff and MF and having them use about 1/2 of 'earnings' however tiny, for college. My dad started that ball rolling by gifting a Government Savings Bond to each grandchild. He made it known to extended family and friends that gifts of cash rather than stuff was a good idea which carried forward for every gifting occasion through university graduation.

                              Feel free t disagree... I believe that it's critical that our DKs have 'skin in the game.' They need to earn money in high school, summer vacation and university to understand and experience how money affects their lives.

                              Comment


                                #30
                                Originally posted by snafu View Post
                                Jluke, the wonderful thing about this site is that we can read but totally disagree with others. The greatest gift you can give your children is to be totally, financially self reliant as a retiree.
                                Yes, I keep learning new things on here and appreciate the various perspectives of everyone. Especially since most seem to be in different stages of executing their financial plan and no two plans are exactly alike.

                                I was half hoping that I was missing something obvious and there would be one right path forward. It seems the people in a "good position" do not get the same volume of feedback/advice as the ones who are deep in debt.

                                The biggest change I'm making is being very aggressive towards retirement now. I have always contributed to a 401k and a Roth since age 24, but never came close to maxing out.

                                I know the house will be paid off by end of 2018 with a lump sum around 12 or 14k (barring any life changes) and I'm in a position where I will only be charged a maximum 3k in interest for the remainder of the term.

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