Paying your house off ala Dave Ramsey

 
cabinover
Member
Posts: 2344
Joined: Wed. Feb. 04, 2009 7:13 am
Location: Fair Haven, VT
Stoker Coal Boiler: Hybrid Axeman Anderson 130
Baseburners & Antiques: Sparkle #12
Coal Size/Type: Pea, Buckwheat, Nut
Other Heating: LP Hot air. WA TX for coal use.

Post by cabinover » Sat. Feb. 15, 2020 12:49 pm

I'd heard of this guy now and then but happened into his radio show recently while working. That affords me time to really listen while servicing and repairing trucks.

He likes to approach debt like a snowball. Take the smallest debt, pay it off, add those monies to the next largest debt and repeat. His largest feel good is your house being paid off.

I disagree with this part but generally agree with all of the rest of his debt riddance advice and here's why. It makes more sense to me, disregarding emotions, to leave that 3-4% mortgage (if you are say > 1/2 way through your term) and have your money making anywhere from 6-25% in the market.

I asked a co-worker about this and he said the best thing he'd done was to take money from his 401K, take the tax hit, and pay off his house (only about $20K IIRC). His reason was all emotion and I get it. He's almost 70 and feels happy having that money adding to his bank account every month now.

Other than that why would one do this unless like many of Dave's callers, they have no idea about finance and want to take his seemingly easy(ier) way out?

*We, through hard work and lots of time, could actually afford to pay off our mortgage tomorrow and shave off 5 years or so. Having said that I don't think I'd feel any different. Maybe that's because we've saved enough and it already feels like we're debt free? I don't really know. My wife on the other hand is always fretting about money, the total opposite of my views. Weird conundrum I know :lol:


 
User avatar
McGiever
Member
Posts: 10130
Joined: Sun. May. 02, 2010 11:26 pm
Location: Junction of PA-OH-WV
Stoker Coal Boiler: AXEMAN-ANDERSON 130 "1959"
Hand Fed Coal Boiler: BUCKET A DAY water heater
Hand Fed Coal Stove: Warm Morning 414A
Coal Size/Type: PEA,NUT,STOVE /ANTHRACITE
Other Heating: Ground Source Heat Pump and some Solar

Post by McGiever » Sat. Feb. 15, 2020 1:08 pm

Paying off your house at being near to 70 is way different than at say at 40...at 70 one is 'forced' or ruled to begin to yearly drawing IRA monies out anyways...

The same 3-4% debt vs lost 6-25% compounded growth applies...forget instant gratification....
Penalties...NFgWay!!!

 
cabinover
Member
Posts: 2344
Joined: Wed. Feb. 04, 2009 7:13 am
Location: Fair Haven, VT
Stoker Coal Boiler: Hybrid Axeman Anderson 130
Baseburners & Antiques: Sparkle #12
Coal Size/Type: Pea, Buckwheat, Nut
Other Heating: LP Hot air. WA TX for coal use.

Post by cabinover » Sun. Feb. 16, 2020 1:33 am

And we are 48 and 52 so we still have a bit of time left to ride out any storm in the market for a while. That does change the way one looks at things I guess.

 
NoSmoke
Member
Posts: 1442
Joined: Sun. Oct. 14, 2012 7:52 pm
Location: Mid Coast Maine
Hand Fed Coal Boiler: New Yoker WC90
Baseburners & Antiques: Woods and Bishop Antique Pot Bellied Stove
Coal Size/Type: Stove/Nut/Pea Anthracite
Other Heating: Munchkin LP Boiler/Englander Pellet Stove/Perkins 4.108 Cogeneration diesel

Post by NoSmoke » Sun. Feb. 16, 2020 4:42 am

What about never having a house payment from the start?

I started building my house when I was 18 years old. Everyone laughed at me because it was a Tiny House long before it was cool to have one. I had no money because I was 18, but I had enough to build a 2 car garage, put in a well and septic, and I was off.

In 1994 my house was 576 sq ft, and worth $10,000. Today that same house is 2600 sq ft. and worth $199,000. I have no idea how much money I have put into the home, but not that much since 90% of the building materials came off my own land, and a homeowner can deduct off their income taxes both property taxes and home improvements.

I am not too bright, but I was able to retire at 42 years old.

 
NoSmoke
Member
Posts: 1442
Joined: Sun. Oct. 14, 2012 7:52 pm
Location: Mid Coast Maine
Hand Fed Coal Boiler: New Yoker WC90
Baseburners & Antiques: Woods and Bishop Antique Pot Bellied Stove
Coal Size/Type: Stove/Nut/Pea Anthracite
Other Heating: Munchkin LP Boiler/Englander Pellet Stove/Perkins 4.108 Cogeneration diesel

Post by NoSmoke » Sun. Feb. 16, 2020 4:54 am

I have heard the "have a mortgage, and play the market" money strategy, but what about the building house strategy?

Last year I had a house that belonged to my Late-Grandmother. It had been vacant for 11 years when Katie and I decided to put this big house up for sale and move into that house. It was worth $40,000, but by putting $1700 into it, and using my sawmill and forest products as much as possible, in 5 weeks time my father and I rebuilt that home and made it livable. It is still needs work, but is worth $80,000 now.

Value now of $80,000, minus value that it was at $40,000, equals $40,000 in added value. Now subtract out the material costs of $1700, and in 5 weeks time we increased my net worth by $38,300.

Where could I possibly work with my meager high school education and make $7,660 per week?

Equally, I do not know of many legal ventures where a person could invest $1700 and net $40,000 in 5 weeks time other than in houses.

Granted that is net worth, and not cash in hand, but it still increased my net worth.

 
NoSmoke
Member
Posts: 1442
Joined: Sun. Oct. 14, 2012 7:52 pm
Location: Mid Coast Maine
Hand Fed Coal Boiler: New Yoker WC90
Baseburners & Antiques: Woods and Bishop Antique Pot Bellied Stove
Coal Size/Type: Stove/Nut/Pea Anthracite
Other Heating: Munchkin LP Boiler/Englander Pellet Stove/Perkins 4.108 Cogeneration diesel

Post by NoSmoke » Sun. Feb. 16, 2020 5:02 am

cabinover wrote:
Sat. Feb. 15, 2020 12:49 pm
Other than that why would one do this unless like many of Dave's callers, they have no idea about finance and want to take his seemingly easy(ier) way out?
Because unless you have the deed to a property free and clear, with no one else having it even as collateral, it is not really yours.

 
fig
Member
Posts: 1137
Joined: Fri. Feb. 12, 2016 2:36 pm
Hand Fed Coal Boiler: Harman SF360
Hand Fed Coal Stove: T.O.M (Warm Morning converted to baseburner by Steve) Round Oak 1917 Door model O-3, Warm Morning 400, Warm Morning 524, Warm Morning 414,Florence No.77, Warm Morning 523-b
Hand Fed Coal Furnace: Clayton 7.1/DS Machine basement stove/ Harman SF1500
Baseburners & Antiques: Renown Parlor stove 87B
Coal Size/Type: Bituminous/anthracite
Other Heating: Harman Accentra, enviro omega, Vermont Ironworks Elm stove, Quadrafire Mt Vernon, Logwood stove, Sotz barrel stove,

Post by fig » Sun. Feb. 16, 2020 10:10 am

I bought my house 20 years ago and paid it off in 5 years. Who is this Dave Ramsey you speak of?


 
User avatar
freetown fred
Member
Posts: 30293
Joined: Thu. Dec. 31, 2009 12:33 pm
Location: Freetown,NY 13803
Hand Fed Coal Stove: HITZER 50-93
Coal Size/Type: BLASCHAK Nut

Post by freetown fred » Sun. Feb. 16, 2020 10:20 am

Just another public speaker that impresses some! Never heard that "have a mortgage--play the market" strategy?? I have paid cash for any house I've owned. Yes N--OWNED. I pay taxes for the upkeep of the community. Also pay monthly bills for things of convenience. Built 2 rental houses (one in Vt. & one in Fla.) they were good income till maintenance got old.

 
cabinover
Member
Posts: 2344
Joined: Wed. Feb. 04, 2009 7:13 am
Location: Fair Haven, VT
Stoker Coal Boiler: Hybrid Axeman Anderson 130
Baseburners & Antiques: Sparkle #12
Coal Size/Type: Pea, Buckwheat, Nut
Other Heating: LP Hot air. WA TX for coal use.

Post by cabinover » Sun. Feb. 16, 2020 12:41 pm

NoSmoke wrote:
Sun. Feb. 16, 2020 4:54 am
I have heard the "have a mortgage, and play the market" money strategy, but what about the building house strategy?

Last year I had a house that belonged to my Late-Grandmother. It had been vacant for 11 years when Katie and I decided to put this big house up for sale and move into that house. It was worth $40,000, but by putting $1700 into it, and using my sawmill and forest products as much as possible, in 5 weeks time my father and I rebuilt that home and made it livable. It is still needs work, but is worth $80,000 now.

Value now of $80,000, minus value that it was at $40,000, equals $40,000 in added value. Now subtract out the material costs of $1700, and in 5 weeks time we increased my net worth by $38,300.

Where could I possibly work with my meager high school education and make $7,660 per week?

Equally, I do not know of many legal ventures where a person could invest $1700 and net $40,000 in 5 weeks time other than in houses.

Granted that is net worth, and not cash in hand, but it still increased my net worth.
You did well but you also started with a $40K house if I read this correctly. Most of us do not start out that way. I agree, I'd like to average almost $8K for 5 weeks as well! Good on you guys!

 
cabinover
Member
Posts: 2344
Joined: Wed. Feb. 04, 2009 7:13 am
Location: Fair Haven, VT
Stoker Coal Boiler: Hybrid Axeman Anderson 130
Baseburners & Antiques: Sparkle #12
Coal Size/Type: Pea, Buckwheat, Nut
Other Heating: LP Hot air. WA TX for coal use.

Post by cabinover » Sun. Feb. 16, 2020 12:43 pm

NoSmoke wrote:
Sun. Feb. 16, 2020 5:02 am
Because unless you have the deed to a property free and clear, with no one else having it even as collateral, it is not really yours.
Semantics to me. Bird in hand is worth two in the bush right? There is no difference between not having a mortgage and having money enough to pay it off tomorrow from my point of view. And then there are still taxes...it's never really ours no matter how much we'd like to think so.

 
cabinover
Member
Posts: 2344
Joined: Wed. Feb. 04, 2009 7:13 am
Location: Fair Haven, VT
Stoker Coal Boiler: Hybrid Axeman Anderson 130
Baseburners & Antiques: Sparkle #12
Coal Size/Type: Pea, Buckwheat, Nut
Other Heating: LP Hot air. WA TX for coal use.

Post by cabinover » Sun. Feb. 16, 2020 12:45 pm

fig wrote:
Sun. Feb. 16, 2020 10:10 am
I bought my house 20 years ago and paid it off in 5 years. Who is this Dave Ramsey you speak of?
He's a radio money guy that has some good ideas, just not all of them. Helps a lot of folks that seem unhappy to have $20-50K in CC debt but are driving around in a late model vehicle worth most of that debt.

 
cabinover
Member
Posts: 2344
Joined: Wed. Feb. 04, 2009 7:13 am
Location: Fair Haven, VT
Stoker Coal Boiler: Hybrid Axeman Anderson 130
Baseburners & Antiques: Sparkle #12
Coal Size/Type: Pea, Buckwheat, Nut
Other Heating: LP Hot air. WA TX for coal use.

Post by cabinover » Sun. Feb. 16, 2020 12:50 pm

freetown fred wrote:
Sun. Feb. 16, 2020 10:20 am
Just another public speaker that impresses some! Never heard that "have a mortgage--play the market" strategy?? I have paid cash for any house I've owned. Yes N--OWNED. I pay taxes for the upkeep of the community. Also pay monthly bills for things of convenience. Built 2 rental houses (one in Vt. & one in Fla.) they were good income till maintenance got old.
We never could have paid cash for what we have when we bought it Fred. Had to use a bank for that and it's worked just fine. Bankers have to eat also I reckon. We live below our means so now 30 years later things look differently.

When we started out we looked at a duplex and my father in law extolled the inherent bad part of renting. Turned us away from buying it. Not sure how many times that house has changed hands but I'll bet no one lost money on it. Then father in law turns around, buys a foreclosure and redoes the entire house, and rents it out all the while bitching about renters. I learned a lot watching that episode of family :lol:

 
User avatar
freetown fred
Member
Posts: 30293
Joined: Thu. Dec. 31, 2009 12:33 pm
Location: Freetown,NY 13803
Hand Fed Coal Stove: HITZER 50-93
Coal Size/Type: BLASCHAK Nut

Post by freetown fred » Sun. Feb. 16, 2020 1:05 pm

Understood C--back when I was fortunate enough to be farming, logging & odd refurb jobs--seemed like a 7 day, 12 hrs per/365--oh wait!!! it was!!!!!!!!!!!!!!! :lol:
cabinover wrote:
Sun. Feb. 16, 2020 12:50 pm
We never could have paid cash for what we have when we bought it Fred. Had to use a bank for that and it's worked just fine. Bankers have to eat also I reckon. We live below our means so now 30 years later things look differently.

When we started out we looked at a duplex and my father in law extolled the inherent bad part of renting. Turned us away from buying it. Not sure how many times that house has changed hands but I'll bet no one lost money on it. Then father in law turns around, buys a foreclosure and redoes the entire house, and rents it out all the while bitching about renters. I learned a lot watching that episode of family :lol:

 
User avatar
Rob R.
Site Moderator
Posts: 17980
Joined: Fri. Dec. 28, 2007 4:26 pm
Location: Chazy, NY
Stoker Coal Boiler: EFM 520
Hand Fed Coal Stove: Chubby Jr

Post by Rob R. » Sun. Feb. 16, 2020 1:38 pm

cabinover wrote:
Sun. Feb. 16, 2020 12:43 pm
Semantics to me. Bird in hand is worth two in the bush right? There is no difference between not having a mortgage and having money enough to pay it off tomorrow from my point of view. And then there are still taxes...it's never really ours no matter how much we'd like to think so.
Good point. It can always be quickly taken away if you are unable to pay the taxes, which for most people will exceed the original mortgage payment by the time they pay it off.

As for building your own house, if you have the skills and can pull it off, my hat is off to you.

 
User avatar
Rob R.
Site Moderator
Posts: 17980
Joined: Fri. Dec. 28, 2007 4:26 pm
Location: Chazy, NY
Stoker Coal Boiler: EFM 520
Hand Fed Coal Stove: Chubby Jr

Post by Rob R. » Sun. Feb. 16, 2020 1:45 pm

NoSmoke wrote:
Sun. Feb. 16, 2020 4:42 am

I am not too bright, but I was able to retire at 42 years old.
What is your definition of retirement?

I am not picking on you, but from some of your other posts I got the impression that you stopped working due to health issues, and now your wife is covering much of the bills, and you are studying to be a steam boiler technician. Sounds more like between jobs than retirement.


Post Reply

Return to “Money & Finance”