Should I Really Pay Cash For A House?
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14 year old: Dave, I really like this girl in school.....how do I ask her out?
Dave: What's your household income?
bhs lol true
bhs
Dave : whatâs her income? Does she have any debt?
@@No-handleneeded1 Don't ask her out until you agree on these four things: money, religion, kids, and in-laws.
LOL
đđđ
Took me 5 years to saved $220,000... I told my parents what my main goal is and they let me stay at their house for free including groceries. In my mind, I treated my job like I was still in school. When u go to school, they donât pay you. Bought my house in 2015 for $180k and paid it off in cash.
beast gj bro, now give back to ur parents by gifts or holidays xd
Lucky for you not everyone lives rent free.
Great job
Thats awesome. Im looking at the same situation. This infalition in houses right now are crazy
Must be nice
More than anything, imagine absolutely zero debt, house paid off, your mind is clear, no stress, no worries. You have all the freedom to invest wherever you want and live the way you want. The feeling is priceless.
Preach!!!!
Facts. I grind every day so I can have that freedom before 35. I made a promise to myself the day my mortgage is cleared I will never work for another person again in my life unless absolutely necessary.
Outright ownership of a home is one of the ultimate freedoms in life.
We are there!
@@NoNonsenseJohnson you are definitely right!!!!
Love Dave's advice.
I built my family a house with cash, we saved in every aspect building ourselves. Absolutely life changing. No mortgage, living the dream.
Thank you. On the same route.
How about buy that house for cash and take whatever your mortgage payment would be and invest that every month.
Wealth comes from you! You are the problem and the solution! Absolutely right!!
Because if you invest the money in the markets it starts compounding today. And if your rate of return is better than the interest on the house you'll make out with a lot more money.
No, its better if he not pay cash and buys an apartment building that cash flows 4k/month every month. Dave and you are giving out bad advices.
@@jeanlenor1858 Obviously đ because *being a landlord is sooo eeaasssyy* đ /sarcasm
@@mphomolapo1562 I'm being a landlord out of state, 8 hours away, in a place where most people don't wanna invest.
I buy cheap and still make 50% cash on cash return even with occasional eviction I deal with. I m now working on a 8 unit apartment building on the better side of the town that will be rent ready next year. It will only section 8 tenants.....
I was poor, very poor. I dropped out of college in year 3. I never made more than $11/hr in my working years. I had a dream and I wouldn't let your kind of nonchalant belief stop me.
I will now retire really early next year, instead of 65.
HOW DO YOU KNOW BEING A LANDLORD ISN'T EASY? HAVE YOU EVER TRIED OR ARE YOU JUST READING /LISTENING TO HORROR STORIES?
Buying a house in cash is like putting the cash in a savings account. When you want to withdraw your money, just sell your house.
You do not lose your money when you buy in cash. you still have that money but its just in a form of a house. So buy cash if you can.
Houses need maintenance though, but overall you're right
@@Gelo2000origami not a new build with a 10 year guarantee from the builder
Do you have to sell?
Is it possible to get a mortgage for another property using the house as a guarantee?
Idea is to get a buy to let property
Great advice if you donât need to live somewhere after you sell your house. Also, most people donât sell their house only to buy a cheaper house.
I paid off my house in six years. This is so true. Thank you Dave.
Andrew Yang Nice name!
You are my kind of guy, well done
Where do you live??
Thatâs smart. Wish I had different thinking years ago.
Paid mine off in 16 months, best thing I have ever done, owning a paid off house is the best thing in the world! In Tennessee, was only making $50k before taxes. Rice and beans baby
If I had a dime for every time Dave brings up the study of 10,167 millionaires heâd have 10,168 millionaires to study
I dont believe his study..i believe its made up
@@jayc4715 really?
Wait, so how many millionaires were surveyed in the study of 10,167 millionaires?
@@jakemorj5498 yes
đđđœ
It would be nice to eventually be in a position to have to make a decision like this.
It can happen
QuickFlipEZShip you will!
You can any time you want.
Just realize paying anything over 3x after tax salary for a house is really stupid.
The average American is paying for a house that's 6 times their PRE tax salary.
That means on a 15 year mortgage they are paying over a third of their income to a house which produces no money.
Imagine what a third of your money from 25 to 40 years old would look like as a pile of cash. Now imagine that pile of money 3 to 4 times bigger by retirement thanks to compounding interest. That's the price you are paying for buying twice the house you need.
It also depends where he lives. In some places houses go for 80k.
kkknotcool that is a good metric to use. The house I live in is about 2x gross annual or more like 3x after tax annual.
After my second divorce and my third start over in the USA, I moved to a poor Latin country where I could not borrow money to buy a house, so I paid cash for a 20 year abandoned six unit building. As I worked my way in I slowly remodeled other units and rented them to other expats. As my rents grew, I bought other units and now have 18 paid for units worth a little over 1 Million dollars. Not being able to borrow money put me on the path to success. Money can be made, even in third world countries. The sun is shining and the birds are singing in this paradise that I am happy in.
Good job man. How long did it take to acquire those units? Iâm gushing 5years or more
You in CR?
@@blackheartcardigan I am in Costa Rica. I was going to the States for a couple of months this summer, but international flights have been closed since April. I might be able to get out by November.
@@davidking4779 I swear I've probably met you at the airport or something. There seems to be a lot of guys with a similar MO traveling through Latin America scouting rental properties.
Im so happy for you. Keep it up.
The majority of people live beyond their means. Just by keeping up with Dave, itâs helped me tremendously!
Me too!
I'd much rather keep up with Dave than with the Joneses.
Shoutout to everyone who wants to pay for their first house 100% outright! Thank you Dave for getting me focused on the right things!
Definitely me...but how!?
@@samtalon9380 Read Dave's books! Especially; The Total Money Makeover
@@NatePhilips Love this book!
@@NatePhilips OOh okay thank you... I'll check it out
Good luck!
âWhy you take financial advice from broke peopleâ lol savage
@@Grosbolt Or maybe not even broke... Dave seems to have a strange definition of broke.
how does he know they are broke?
@@Beastygainz eh yea but hes gonna be leaving money on the table paying cash imo
Dave Ramsey is the biggest gangster on CZcams
Yeah but the caller never said they were broke. Dave just making assumptions.
Just bought my first house with cash I didnât want to deal with mortgages banks etc
I heard what Dave said about not going into debt to invest that was good advice not to do that I donât have a car payment now Iâll have no rent or mortgage payment so I can invest more
I pay cash for everything it gives you so much Leverage. If it's a car, home, or anything, if you don't like the price walk away. Also anyone that selling anything like to see cash less hassle.
Paying cash feels good but it's not the best move financially. Paying 500k cash for a house is excellent hassle free experience but loans are available at 3.5% these days. Over 30 years, your 500k will become $8.7M if it grows 10% (which is possible with mutual funds as DR himself suggests).
@@PritamDas_26 or you can look at it a different way, I'll take the 500K and buy two homes (CASH) which I get to rent for about $1600 each a month= $3200 a month. income. That's $38,400 a year recurring revenue and now my money is working for me. at this point I'll Finance another $250,000 home and take the nearly 40 Grand to pay off the house quicker...Just my 2cents.
@Dionicio Ysassi Cash is king!
@@PritamDas_26 When you mention cash, do you mean manager's cheque as well?
@chief tp never bought a car at a dealership. I always bought my cars at California state auction. Comes with safety inspection, smog, and clean tittle. Got my jeep commander 50% off what used one would sell for. Also a car is liability not and asset.
If you can't pay cash for a house just be smart and buy something that's well in your range. If two are working buy a home that just one person could pay.
Mark G ie Live within your means:)!
@@carltonhenry7671Crazy I know.
And pay double principle! Pay it off in half the time.
Carlton Henry No live below your means up to a point that if your income would be cut in half for some time, you can still afford it
Carlton Henry nope live below your means because of you Iâve within your means youâll never progress youâll just be the same even with more money
I bought my house outright 7 years ago. Best decision I've ever made !
Graduated high school during the recession of the Carter adm. started my dairy farm at the age of nineteen while working full time at the local sawmill where I was employed since the age of 14. The late 70âs -late 80âs were tough yrs for many. But not knowing any different, that seemed to be just the way it was. Worked without electricity for a while because the power had been cut off at the mill. Which taught me how to live without electricity in my own home while cutting back to imported my dairy facilities. Eventually sold out, built a house with cash and paid cash for an education while going to night school after landing a job with the gov. Now Iâm retired with no debt whatsoever ....for decades, and am very thankful for those years that taught me how to live like no one else! Thanks for your service. Love your show!!!,
It makes me laugh when people say that today's younger generation has it so tough that they will never be able to afford homes, etc. Um, did y'all ever see what housing interest rates were in the 70's and 80's??? :) Where there's a will, there's a way.
@@kzimmerman2211 interest rates have very little to do with it. It's all about income and cost of homes. Educate yourself, Boomer.
Caller:
Dave: USE CASH
lol
Whats up in Alaska?
I had zero down payment on my house, had just gone through financial peace, and I can tell you buying our house was one of the best financial decisions Iâve ever made. I didnât buy more than I could afford. Now, my income is up 30% and still have that same easy house payment. Mortgage is ok if youâre thinking long term and wonât move. If I had cash I would have put it on the house.
Paid cash for my house when I was 28. It does feel amazing! If i can do it anyone can.
How did you save for your house??
I was thinking the same thing, why would I get a mortgage, the amount of stress and heart ache that comes with it is unbelievable, I want to actually enjoy having a home.
Sometimes I really wish I knew a lot of this stuff before and that I could start again with a clean slate.
David Maxfield I hear you. Iâm thankful my dad me doing this since I was 16. Now that Iâm 30, my net worth is almost half a million
Doyle Bros Lawn Care cool. What is your job?
Mike Marroquin I have a lawn mowing business. We do mulch and landscaping now too
Doyle Bros Lawn Care cool man!
Teach what you know now to your kids. As well as start saving as much as you can doesn't matter how much. So you'll at least have something by the time you retire. Your biggest investment now would be your kids. Teach them!
Just paid for a small 1 bedroom in cash at 25. Took a few years of struggling. Rice and beans. Tuna. Having a bunch of roomates or paying motivated friends who need a temporary boost in extra income to sleep on their couch for a few weeks. Living out of a garbage bag and a backpack with all my "possessions" lol.
Now all my bills are under $500 a month. That's everything. Few thousand dollars a year for survival the rest straight into investing. Future looks good :)
And you can always start saving up some cash to upgrade in house if you wanted to.
That's amazing. Well done.
Way to go man. My wife and I just sold our house and used that equity to pay for a condo cash. All of our friends and family thought we were crazy but looking back I am so glad we did it. Debt free at 30 house n all. Now we have over 7k sitting around a month to help others and invest
Well done, sir. Keep going. When you buy your next house, that one bedroom rental property will boost your income nicely.
You did it smarter ,,I pulled out my whole 401 K at 34 and paid all my penaltys with what I had saved in my bank so that my 401 K wont get touched,,,i started all over again starting a 401 k plan ,I bought a house in cash, im now going to invest into stocks.
Dave Ramsey, I read that book Everyday Millionaire. It was good, it open my eyes and show me everything about Investing perspective as well. I advice everyone to buy it, it's good, very uplifting to get your goals and dream in order.đđœđđđŒ
"No student loan that's been around as long you think it's a pet"
LOVE IT :)
The sad thing is most student loans will long outlive the family pet
I laughed so hard đ
Hahahaha
investing requires good experience and knowledge to carry out a good and successful trade, I have lost a lot trying to trade all by myself May I ask which investments are good??>>>>>>.
I understand your concerns, my friend. I recommend exploring passive index fund investing and expanding your knowledge in this area. Personally, I experienced both successes and challenges when initially seeking a reliable passive income......,
how do I get in touch with this consultant that assist??>>>>
STEPHANIE KOPP MEEKS, that's whom i work with look her
Thanks for these recommendations.....,,,
If I had $300k lying around, and if it's a house I knew I wanted to live in for a while (not just investment property) you better believe I'd pay cash.
You would not invest in 300k in an investment home if you could get good enough cashflow on it?
If you pay cash for everything, you will never have the desire to file for bankruptcy....
I would end up renting for the rest of my life if I had to buy a house in cash. Good homes in DC area are at least 250k. Kudos to those who can do it.
Its definitely rough in alot of markets
It's not a bad thing to get a mortgage. It's cheaper to pay a mortgage for 30 years than rent for 30 years. And the next 30 years are gloriously cheaper than renting.
Just don't get a mortgage until you have a plan to get out of it. Most Americans keep refinancing or upgrading their houses into brand new 30 year loans. I can't imagine facing retirement with a house payment. And I'm still 25 years away from that.
Dave explains how to get a mortgage within your income range that won't hurt you financially. You can find lots of videos of him describing it.
Buy a house in cash in the projects for cheap and get a gun ,,,,,promblem solved
Move
Some people don't have enough cash in the bank to buy a house outright, so the next best thing is to get a low interest mortgage and pay it off over time. Time and Pressure. It's a geological concept. And it's in the Shawshank Redemption.
I just went to a funeral this past weekend for a 80 year old family member, the in laws were talking about selling the house so when I asked how much was owed on the house, I found out her husband had paid cash for it 5 years or so.
He had passed away shortly after buying it but he went to his grave knowing his wife wouldn't have a mortgage along with plenty of money to live life in the form of Roth IRAs and IRAs .... I asked what George did for a living and found out he was an old school accountant that didn't live above his means.
All 5 sons will be receiving quite a bit of money each year from the IRAs and the sale of the house.
First thing I was think Dave Ramsey plan.
Read the book and it is so true because after I paid off my house several years ago all the former payment $$ went into investing.
Yes - I did in 2013 and it's now worth 4x what I paid. Never had a mortgage payment and never will!
Want to be bet you will in the future đ
@DaBoogie Two payments a year, combined under $1200 dollars is hardly concerning.
@DaBoogie What? Is this an American thing?
@@joecurran2811 He's complaining about property taxes. If you own property, you pay tax based on your land and building's value toward schools, the local fire department, libraries, etc. It's a silly complaint using flawed logic. If you don't own land, guess what: you're still property taxes through your rent. But, when you rent, you don't own ANYTHING. Paying taxes stinks, but it is a necessary part of maintaining healthy communities.
@DaBoogie LOL, keep paying rent for the next 60 years. Tattoo the word fool on your forehead and look at it every morning and each month you hand over that rent payment to your landlord.
Why do I hear a lot of people say (including rich people), that if you have a paid off house and get in the hospita where insurance doesnt cover all, you lose the house.
I did it. Although the house was only 22 K.
Doesnât matter! You still donât have a mortgage, which MANY people cannot say. Congrats!
Where did you buy a home for 22k and how long ago? Please and thank you.
@@russellyajaira Bicknell Indiana. Or they will give you a lot, if you agree to build an inspec home.
I am making about $800 in interest savings per month having my house paid off.
That adds up
@@Grosbolt S&P 500 finished 2019 up 32%. Been averaging 12-15% annually for the past decade. Buying a house in cash given today's interest rates and market returns is an incredibly expensive mistake.
BTrain5489 until it crashes! Also having house paid off means more cash to invest into S&P 500!
@@Grosbolt *COVID-19 global pandemic has entered the chat*
Dave always references this study of 10,000 millionaires. Has anyone considered that being on the high end up the income band simply leads to paying off your debts faster and investing higher % of income, rather than the other way around?
Exactly, Iâm not saying heâs wrong with everything stated here but I do want to should âcorrelation does not equal causationâ.
Of course millionaires would pay off their house early. The question is how many paid off their house before having a million dollars?
We are refinancing our 30-year fixed FHA loan to a 10-year fixed, and hope to have it paid off in 4-5 years! Then save up for another 2-3 years and pay cash for a $375-$400k home. I'm so excited about becoming 100% debt free. The principles Dave Ramsey talks about really work!
Wish i had that type of money
Why refinance your 30 year fixed? I have a 30 year fixed but paying it off in 12. It cost like 5000.00 to refinance, just put that towards your 30 year fixed and still pay it off in a couple years.
So you are really saving enough in interest after closing costs to justify changing to a 10 year mortgage vs paying it off early?
Seriously, if you can pay it off in 4-5 years your 30 year mortgage is only amortized 4-5 years not 30 ???.
@@msmargiek48 Maybe his FHA loan had PMI and/or was not Fixed %.
Great sense of humor and sound advice. Got to love Dave.
Thank you!!! I really needed that sanity check. I've been having shower and driving thoughts about 'why should I just put a 15% down payment and pay an additional x% over the life of the loan just in interest?' Although it will take a very long time to afford a 2 million dollar home in cash, I should at least put more down and take a smaller loan. Side note: a house is never fully paid off, there will always be property taxes. Fun.
Paying for my house in cash this month! Thanks Dave.
living frugally and being debt free is obviously the best course for most people, but its just a fact that you can leverage debt and make way better returns than paying cash for a rental property for example.
using debt is higher risk, and more stress, but if done properly it has the biggest returns.
Dave knows this, but he got burned using debt in the past, so thats why he has the complete opposite philosophy now.
using debt you can start your real estate empire with much less money. you can put down $20k on a $100k home rather than waiting the extra time to save up $100k to pay cash. you can get a mortgage for under 3.5% and quite easily make more than enough to pay the loan and profit while of course building equity in the home also.
The problem with this is how you get to the amount of savings to buy a house. An affordable home in area with reasonable pricing is 150-250k. Assuming you are investing in ROTH IRA and 401K it would take forever to save up for a house.
Try living in New York đđđ
Try living in Kauai
Pause the investing to save up for the down payment. Get through baby step 3, then make it your primary goal to save up the $40K you need for the home.
@@auntyuber5127 Yup: California, Hawaii and New York have the most expensive real estate. The discrepancy in price with other states is insane.
@@Rockerlady Just don't buy there. Too risky. Not to mention the cost of living.
I really like Daveâs Fozzie Bear impression at 5:42
I was playing at 2x when I heard it XD
25 years old no more car payment, Harley will be paid off in 6-8 months. then saving for 4-5 years and building a house. very glad I saw this episode as paying cash for the house was my goal. glad to see it is suggested to pay cash for your house too!!! continue with the baby steps everyone we can do this!!!
This is bad advice. Watch videos by other people.
@@billy936 This is great advice. No debt means no interest payed. That means not taking out a 100,000 dollar loan and paying 200,000 back. I think you should go back to school and learn basic math.
@@kasken719 Yeah, I guess you're right. There's absolutely no faster way to earn money on a lump sum of $200,000 than to avoid record low interest on an asset that appreciates at a glacier's pace. Wow, let me tell every real estate investor what you just discovered so they can stop using any kind of leverage since there's no mathematical benefit! Wow, hold on, I'll be back in a little while. It's gonna take me likely all month to inform so many multi-millionaires about this basic math.
@@kasken719 In all seriousness, Google "opportunity cost"
Excellent advice, I love this setup and the camera quality, the frame rate đđ»
great advice Dave. not going to say to much but exactly the advice I give to any body who whats to know how its done.
About to put 50k toward our mortgage by the end of this month! Thanks Dave!
My motto is "If you can't pay for it in full you can't afford it." Even a house!
The problem is that if youâre not paying into a mortgage, then youâre probably paying into rent at a higher price than you would a mortgage. I agree with everything else, but I donât believe that a house applies to this. If you can start putting that money into liquid value as opposed to handing it over to a landlord, thatâs a better position than the latter.
I have to agree with both of you. Cyclecruza, definitely true with cars and motorcycles and other toys.
But i also agree with the house part, especially if it's your 1st home. But I'd say you definitely don't need to try to aspire to buying your dream house until you can afford it! Cyclecruza congrats on the new home by the way! You taught me a lot about riding when i was new to the sport, happy to see your success has brought you to your dream house on a nice piece of property!
Hey I didnât know you watch Dave Ramsey
@@msg1192 CHEAP APARTMENTS or living in a vehicle for a couple years and living cheap would make it so that you'd be able to buy your house in one go assuming if you're alright with that lifestyle.
True that CC
I heard the greatest advice in my works break rooms while I was working for decades for the same company! If I heard these peopleâs advice I knew to avoid it almost every time! It served me well! On that note I did seek out older people I respected which was 3 over the years and picked there brains! I still do it 30 some years later with my Pastor friend! Iâve been helped along financially by these 3 opinions thru my life!
Thanks dave for the advice I will retire when I am 106.
Thatâs very true Iâve been using this method of saving for just a short time and seeing big gains I really appreciate you and the service you provide for your audience good job.
Buy my house cash was by far the best choice I've ever made.
Leverage if done right is the most powerful tool to increase wealth ten fold. This idea of people buying their fist home with cash is preposterous - Iâm a millionaire x 5 - when I bought my first home I didnât have all cash, nobody does. Maybe if you buy a home in the boondocks of Mississippi for $12000 it is possible, but hundreds of thousands of dollars ? Heck no. Once I made money I doubled and tripled my principal payments. Dave Ramsey actually hurts people with these unrealistic ideas
Me:
Dave Ramsey: Pay cash for it !!!
Me:
Dave Ramsey: Sell your car !!!
When the banks went to criminal (low) interest rate levels, I paid the fixed mortgage off since it was a better ROI than leaving it in the bank
I guess I'm on the right track then, I ended up buying a home through foreclosure for a ludicrously low price, had to buy in cash and it only cost me $10,000 to fix up, grand total $47,000 1800sqft with 5 acres. I beat my parents to owning a home, but it's a big thank you for them for teaching me to live under my means and to buckle down and save.
What state?
@@mademoiselle3000 Missouri, it's not some luxury high-end home, appraised value is $95,000 until I clear the land and build the buildings I want, then value will stand around $130,000ish area., cost would only be around $10,000 since I can do the work myself.
@@Twisted86 Good ol' sweat equity. Goes a long way sometimes. Great Job on that buy.
Also , by the time you save up your cash , the house may cost you double or more.
Thank you for the content, it really makes a difference.
It's really simple... if your income comes crashing down, those minor investments will not support your monthly cost of living until you get straight... not having housing costs will minimize your risk of debt to survive.
Most underrated comment in here... Well said
Iâm looking at buying a house cash in about six months !!!!!! Canât wait
I think itâs hilarious when Dave make that voice! Hahaha heâs got me laughing lol 5:44
Great advice !
I love Dave but sometimes i wonder.... When are we actually going to start ENJOYING these millions? When we are 60? I am 36. Buying a house within 4 years (age 40). Paid off in 10 years like he said is ideal (if I work very hard). Then I will be 50 with no debt. Now time to "build my millions". By 60 maybe i will be rich. I mean, i think its great to leave wealth for my kid but how do you guys enjoy the process ??
To those of you starting in yours 20s, you are smart!! Good luck to everyone!
He didnât say you have to be a millionaire to enjoy your money. You set your monthly budget yourself. Set some money aside each month for fun. But be sure to follow your plan.
Youâve got to live a little. What if you die at 50?
@@jacobshaw2991 Most people don't make enough to have a large "fun" category in their budget. Dave is against vacations, eating out, encourages eating rice and beans, etc. And that is FINE for a couple years if you are getting out of debt. But in order to save to pay cash for a house or pay it off in 10 years most people would have to live on rice beans for a LONG time.
Im a nurse and see people getting seriously ill out of the blue. So i am more for finding a balace and enjoying life. You cant take money when you die. I wish he would make a video about thar.
It's hard to get a million dollar portfolio with only 10 years of growth in the markets. You literally need to invest $2000+ a month.
So that's why you are better off investing early while you pay off your mortgage and student loans. Rather than loosing compounded growth for a perpetually reduced amount of interest.
As you get older ageism and health limit your salary potential. And nothing is stopping a person from becoming FI before 50.
Do not take your real estate wealth building from Dave!!! That's called financial suicide.
Here's the problem with this logic: Dave is claiming that paying off your house early somehow *causes* you to become wealthy, but not discounting the reverse option: that becoming wealthy enables you to pay your house off early. That seems much more likely to me.
Also, I've noticed that he has modified his claim about inheritance from "90% of millionaires are first-generation wealthy" to "90% of millionaires didn't inherit their wealth," which has very different implications for the politics of wealth inequality. Technically I didn't inherit much (if you don't include having college paid for) but my grandparents gave me enough for a down-payment on a house which has skyrocketed in value, and all I had to do to become a millionaire is follow the well-trodden path that my parents and grandparents followed. Generational wealth is about a lot more than handing someone a giant pile of cash (though I'm likely to get that some day too).
Paying off your house does bring wealth as you're not paying interest and especially if the home apriciates in value. You also have to look at Dave's clientele. What's the lowest common denominator? It's not investors. So while wealth building works for us, not so much for the others. However, paying the house off early gives people options to invest if they want.
I paid cash for two houses, and in some ways I regret it. The first house was okay. I paid $229K for it, put about another $40K in improvements in it, sold it 9 years later for $320K, netting me about a $32K profit after commissions. Okay, but not great for 9 years. It did feel good to have the house paid off. I would have made significantly more money than if I'd invested the money, but fine. It gave me peace of mind to start a business and not worry about a mortgage. The second house was much more expensive, I had a huge amount of money tied up in it for 14 years and net net I probably lost about $300K on it (the house did not appreciate one iota in 14 years, and I had to sink $200K in repairs due to expansive soil damage), which is horrible to think how much money I could have made if I'd stayed in the first house and invested the difference in the stock market. Millions of dollars in difference. And then I can't even deduct that loss on my taxes, which is a real double whammy. I wish I'd never bought the house and I certainly wish I hadn't had that much dead money sitting in an illiquid asset for 14 years. It was a beautiful house, but the financial damage from it leaves a bitter taste in my mouth.
So part of this debate i think is to buy an ordinary, normal tract home for a normal price like $250-300K. Paying cash for a house like that is fine I guess if you have the money. Second is to work a normal job with steady income instead of trying to be an entrepreneur. There's a big difference in financial planning and strategies for a salaried employee with steadily increasing income, vs. an entrpreneur with erratic income. Third, is to have two working incomes with you and your spouse and then you can really build some wealth.
Here's an idea I have which you'll hate. Theoretically this is better than paying cash for a home, but only if both partners are very, very disciplined and in agreement on everything in life related to finances. Here goes. You buy the $300K normal average tract home. Instead of paying cash for it, you open up a separate brokerage account and you deposit $300K of after-tax net worth into the account. You don't use that account for anything other than paying the mortgage. Every month, you sell a little bit of stock and pay the mortgage with that money. If you get a market correction, you don't freak out and just keep doing it. The market will come back over time. So it's like you've paid cash for your house, but you've earmarked a special amount of funds specifically for the house, and you're back stopping this whole plan with your two incomes in case something goes really wrong. You can not tap into that money under any circumstances. And there you go. Over time you should make a signficant spread off a 3% mortgage and what you make in the stock market. I know you don't agree with that, and for the majority of your listeners, they probably don't have enough financial discipline to make it work, but if you do it right I think this can be a significant factor in building net worth. I'm currently renting. When I get ready to buy my next home, this is what I'm considering doing.
I think the reason why no millionaires you survey suggest this is because most millionaires are older and come from a generation where we didn't have 3% mortgage rates. Even a generation ago, typical mortgages were 7-8% or so, and it's going to be hard to arbitrage that agains the stock market.
Kevin, I hope all viewers read this. Your final comment about the difference in mortgage rates between generations is crucial. It would be nice to see Dave address the new reality or rates.
Totally agreed. People pay houses in cash never mention the fact of inflation and time value of money. The easiest way to understand it is: compare how many things you can buy with $20 in 1990(30 years ago) and now, you'll see $20 in 1990 has much more value than now. The $300k you have now is much valuable than 30 years later. Same thing with the mortgage, the $1000/month mortgage you are paying today will be nothing in 30 years(2050). Of course, you'll have to be disciplined and have a steady job, as well as invest the rest of your money.
Thanks for sharing
Yes, this is what I was kind of thinking. Payy it off in dividends and appreciating stocks
@@justinacase2623 Thank you for educating me and thoroughly proving me wrong with this insightful comment
I'm 28 and have just begun my journey to do exactly this. I wish I had financially matured at an earlier age to start much sooner, but it's never too late
This video is great! Thank you!
If would take most people a lifetime to save up enough to pay cash for a house đ
@Nicks Kicks Depends what you do and where you live
Iâd be dead and debt free đ
No, its better if he not pay cash and buys an apartment building that cash flows 4k/month every month. Dave and you are giving out bad advices.
@@jeanlenor1858 I never said pay cash?
@Nicks Kicks If they lived with their parents and had no bills maybe.
I paid mine off in 6 years.. Honestly if I had not done that (and put the extra money each month in my stock index funds) I would have more money today (our NW is just over $3M BTW and started with minus $140k 22 years ago). The problem is you don't know that at the time and pink slips at work were being handed out like confetti, so paying off the house was the least risky thing to do in my case.
In every case.
Frank Hinde youâre right, Iâm currently in the same spot as you were...and looking at this cheap interest mortgage but with uncertainty in my job...really wish I could stretch out the mortgage as long as possible
The starting line, that's Savage from Dave đđ
Thanks Ramsay⊠I needed that⊠buying mine soon
I think that a majority of people buy more house than they can actually afford, that is way they don't have money left over for an emergency fund and when something comes up, they have to take out a home equity loan, which gives them a negative net worth and puts them further in debt.
So when I save up $700k Iâll be ready to buy a house in California. There is one problem... people die.
You don't have to live in California if you can't afford it.
Why would one want to live in california?
Coulombic Distortion youâre right a 6 figure income shouldnât be enough to buy a house in Ca. Ca should be reserved for the ultra rich.
Aidan Hodge Science you donât always get to live where you want.
@@rs2543 whats stopping you? Ive moved 26 times already in my life. You can buy land for $2000 where im from or $6000 where I am now in north carolina. Sure beats saving up $700,000
It must be taken into account that home prices have dramatically increased in recent years, itâs one thing for a 60yr old millionaire to pay off their house in 2008 when it was $200k, when that same house is 1mil today it would seem different. That money could make you millions in the amount of time it would take to pay off that mortgage. It really just depends on your particular financial situation/age/interest rates. Itâs not a one size fits all issue.
"When you've had your student loan so long you start to think it's your pet" đ€Łđđ
I don't know ... I have worked as a Drilling Engineer offshore for several years - I made good money and did not spend much (also I studied in Europe almost for "free" (aka paid by taxpayers)) - when I switched to an office job I bought a nice house in cash. Looking back I don't think it was a good financial decision -> Yes I have saved rent, but there is still a lot of costs ... and yes the value probably has risen somewhat, but I cannot really cash it in when and how I want ... since then I have bought small rental properties with long term fixed interest rate and about 10 - 20% down payment ... each single investment was better than my home -> at least as far as all relevant numbers are concerned ... had I invested the money I spent on the house, I would be much further ahead on the way to financial independence.
Zara thustra
You are correct. Paying cash for a house is one of the dumbest financial decisions a person can make.
@@topcomment3816 Well I guess I can name some dumber ones ;) ... but you are right, I just had it and I did not know what I was doing - didn't learn it at school or university or from parents ... it was only later that I educated myself.
The numbers make since, but peace of mind is difficult to put a price on.
Your home is never an investment bro. It's just a home to live in.
"Hey Dave, what are you having for lunch?"
"We did the largest study of millionaires..""
I like the no debt mindset.
I have to point out that Dave conflates correlation and causation here. The millionaires surveyed may have been millionaires BECAUSE they paid off their homes and maxed their retirement plants, but the data cannot show that. They could also have been millionaires for any number of other reasons, and their paid off homes/maxed retirements were caused by the same good financial decision making that made them millionaires. Minimizing interest expenses is a great financial principle to live by, but debt is not a universal evil. Rather, leverage and debt are powerful tools which can do great things or cause lasting damage if misused. A chainsaw in the hands of child is a recipe for disaster, but it sure makes trimming trees easier.
I agree 100% with your assessment. This study he performed which he mentions over and over again, while immense and valuable, is really only a vast collection of data. It's not the type of study where you can draw conclusions and causation as to what exactly makes people wealthy. He could very well be right, but he could also be wrong. Dave also mentions that 85% of the millionaires paid off their home really fast, and he says this is "statistically all of them". Nope, dead wrong on this point. Not even close. It's not a poll or a vote which he compares it to. 15% is still a significant group when performing this type of analysis.
Also the sample size is too small to really give accurate data. 10k millionaires but there are actually over 11 million millionaires in the US as of 2018.
@@mr_boom105 you are really not a great statistician đ
@@zackarystewart9214 đ€Łđ€Ł you really not a great troll
@@mr_boom105 nope but I've made a career out of doing statistics
This got real at about 5:40 .đđđ
My son and daughter in law paid cash for their house, Iâm so happy for them.
Dave Ramsey, I would like to speak in behalf of everyone in California, We love you!
I love ramsey rant hes so inspiring
We always buy everything in cash. Only the house, but paid it off in 7 years. We only buy what we could afford.
If you can pay cash for a $200k house, you should put a $40k down payment down and buy 4 rental houses. Pour all rental income back into the houses and you build $800k of assets in 20-30 years for free. That doesnât count inflation. Housing inflation is roughly 2.3% annually, so in 20 years those assets you got someone else to pay for will be worth $1.2 million. If you can minimize risk and are comfortable with a low level of risk, leveraged investments are you friend. If all youâre going for is peace of mind, then pay cash for a house.
Do not take your real estate wealth building advice from Dave Ramsey!!! He s bad, very bad.
jean lenor at its core, itâs not bad advice given the majority of his followers are out control when it comes to money. Dave Ramsey advice isnât really for people trying to grow exponential wealth.
@@kevinrushing5667 I'm copying and paste my original comment to this video. Read it through and be the judge for yourself.
You are assuming your rentals will be occupied. Borrowing money to build a real estate empire is a facade, like a bodybuilder using steroids. It looks great, but in reality you are deep in the red to the banks for a long time before you start to see any positive net worth. Buy your first rental with cash. Even if it's a 50k small place. Slow and steady wins the race. With each rental you buy the next will be bought faster and faster. Borrowing money to buy rentals will only make you crash and burn during a recession, or you will have to sell half your rentals and play catch up with the guy that started small but bought with cash. Remember. Your income is your most powerful wealth building tool.
That's if you know what you're doing. Same with investing in other things. Ramsey is talking about the average Joe who will likely lose his shirt by investing.
my house has increased in value by almost $70,000 in the three years since I agreed to buy it. I took out a mortgage that I'll have paid back in about 10 years. Had I waited till I had the cash I'd be even further behind now while paying $1500-$2000 month in rent instead of toward a home I"ll own one day. It's not always best to pay cash.
Same here, if i had try to save for the house that i bought with a mortgage i would have only gotten further behind. I'm nearing 50% equity in it right now. Saving cash for a house is pretty silly with interest rates near zero and mass money printing. The rich hoard appreciating assets, the poor hoard worthless toilet paper dollars.
I'm pretty dead set on not getting a mortgage, I'm saving about 1100 a month right now towards buying land and building my own small house and I think I'm going to achieve it (just hit 37k) I'm looking for land for about 20k then I'll start on the house. I don't make a lot of money so having no debt will make my lower middle-class income feel like middle-class or better. Its kinda hard to do but I know it will pay off in 5 or 10 years, those car commercials with 299 payments for a 400hp sports car is mighty tempting! But I shall resist and in 7 or 8 years from now I'll just pay cash for that too!
âWhy you take financial advice from broke peopleâ Uncle Dave be roasting LOL
when my children get old enough i will not charge them to stay with me and tell them to save all their money and buy a house
Steve Climber Iâm in track to pay off my house in full within 10 years and I didnât live with my parents or inherit a dime. I was just smart in that I got a house that wouldnât make me house poor and I drive a 25 year old car. No excuses.
Well think of that whatever you are paying mortgage for the house find out how much interest you are paying per month .. so if you invest that money to somewhere else and get back with out risk then make sense but in many case itâs not so wise is pay the house as quick as you can and save up for investment good luck you all..
Mixing up correlation with causation. Paying cash for a house doesn't make you a millionaire, just makes it more likely that you were a millionaire to begin with.
if you notice dave didnt actually answer this guys question. he danced around it quoting his millionaire study. that guy would have been better off investing the house money and renting, more than likely.
30 year mortgages especially at rates less than 2.5% may b good debt, provided of course u r living in a house within ur means.
No debt is good debt.
@@CJBMAGGOT94 if u borrow at 2% and can invest at 10%, that is a good debt.
@@CJBMAGGOT94 It really depends on the individual, you lose money paying cash for a house that you could have financed at 3% while investing the cash for 6-10% returns. Paying cash is buying peace of mind/risk avoidance with such low interest rates available.
@Billy Ray Valentine The average market return is 10% so if you just invest in an S&P 500 index fund then you will get an average 10% return.
I agree and if you've been paying rent, you'll just replace your rent with the mortgage payment which is usually much lower
99% of Americans canât buy the house they want cash
100% of Americans canât buy the house they want cash. Everyone wants a better house than they can afford.
I have the same vintage camera as Dave!
5:40 now I know who the voice of Cleveland from family guy is.
I recently discovered Nassim Nicholas Taleb, a former Wall Street options trader turned author. He's one of the people who predicted the 2008 market crash by examining data about what a bad position Freddie Mac was in, and was able to profit from it. The question this guy asked is straight out of Harvard Business School and the other places whose sophisticated math contributed to the 2008 crisis by ignoring risks and only looking at the math. Common sense says keep some cash, sophisticated academics say that's not proper maximization of assets ... but that thinking ignores risk.
Taleb says a lot of the same things as Dave, but in more technical and philosophical language. He'd be an interesting guest on the show. Debt increases "fragility", according to Taleb, especially when a "Black Swan" event strikes (an unexpected, difficult to predict crisis). If you're got debt you're at much higher risk under these conditions, Taleb says. But if you've got no debt and lots of cash, in addition to any other investments, Taleb proposes market fluctuations don't matter as much because it limits your exposure to the Black Swans.
"A good investor will be successful in any market." Being Debt free, I think, contributes to this. All debt does is make the Bank money. Why not be the bank? Excellent content. I'll check out Taleb.
Is there any information on how many millionaires rented a place until they had enough to buy a house with $cash$?
In the early 1980s, high-rate loans emerged as a part of the Federal Reserve's plan to fight inflation. By October 1981, the average rate for 30-year mortgages reached its all-time high of 18.63%. Today's rates, while currently on the rise, are still at all-time lows compared to previous decades. Dave, I think your millionaire surveys are a little DATED.
King Ramsey !!!! Love this guy.