Why It Doesn't Make Sense To Delay Paying Off Your Mortgage

Summary

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Podcast Summary: Why It Doesn't Make Sense To Delay Paying Off Your Mortgage

Podcast: The Ramsey Show Highlights
Host: Dave Ramsey (with brief input from Financial Expert/Co-host)
Date: August 24, 2025
Duration: ~10 minutes

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Episode Overview

In this episode, Dave Ramsey offers targeted advice to a caller debating whether or not to put a sizable stock windfall toward paying down his mortgage. The discussion dives into the logic of handling large cash holdings, the risks of keeping too much liquid, the importance of following Dave’s “baby steps,” and cautions against taking investment advice from unqualified relatives. The theme: Paying down your mortgage is a foundational local move for long-term wealth—and not doing so often just doesn't make sense.

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Key Discussion Points & Insights

1. The Caller’s Situation and Main Question

• [00:06] Caller (male, age 33):
  • Along with his wife, is navigating "baby steps 4, 5, and 6."
  • They have $150,000 in stocks from his wife’s prior job and are considering using it to pay down their home principal.
  • Feeling family pressure about whether paying down the mortgage is wise.

2. Dave’s Core Principle: Reverse Engineering Financial Decisions

• [00:39 – 01:24] Dave’s rationale:
  • If you wouldn’t borrow money against your home today to buy company stock, then holding onto the stock instead of paying down your mortgage is essentially the same thing, just in reverse.
  • Quote:
    • “If by not cashing it and paying it on the house, it’s as if you borrowed on the house to buy [the stock]. Mathematically does that make sense?” — Dave Ramsey [02:14]

3. The “Emergency Fund Excuse” and Risk Aversion

• [02:32 – 03:18] The caller expresses concern about cash flow and the need for a backup due to family and budget constraints:
  • They hold $30,000 in an emergency fund and $100,000 in a money market account.
  • Dave challenges the notion of needing more than the recommended emergency reserve:
    • Quote:
      • “How much backup do you need? The Great Wallenda. What are you doing? Some kind of high-wire trapeze? You got $280,000 in backup. This is insanity.” — Dave Ramsey [03:03]
  • Dave firmly suggests that this level of backup is excessive and reflects misdirected saving efforts.

4. Paying Down the House: Millionaire Data and Wealth Building

• [03:30 – 05:01] Dave emphasizes practical experience and research:
  • With $329,000 outstanding on their mortgage and a low interest rate, Dave still advocates dumping extra cash onto the principal.
  • Shares personal experience: owns $650M in real estate; sees consistent trends among millionaires.
  • Quote:
    • “89% of [millionaires], that’s nine out of 10 in America, became millionaires starting from nothing. Here’s what they did. They paid off their house early and used the increased cash flow to build wealth...” — Dave Ramsey [04:08]

5. The Baby Steps and Budget Discipline

• [05:08 – 06:48] Dave discovers the caller’s not truly following baby step 4 (15% into retirement).
  • Advises resetting priorities—max out retirement savings, keep a rational emergency fund, pay down the house with the rest.
  • Warns against hoarding excessive cash due to misguided advice.
  • Quote:
    • “If broke people are making fun of your financial plan, it’s like fat people making fun of your diet. … You should actually have some background, some experience, some track record, some what we call social proof to move forward.” — Dave Ramsey [06:05]

6. Co-Host Perspective: Budget Fundamentals Out of Sync

• [06:48] Financial Expert/Co-host jumps in:
  • Expresses skepticism—the caller claims to be saving large sums but is $500 "in the red" monthly; suspects a budgeting error.
  • Points toward the need for reviewing household budgeting basics.
  • Quote:
    • “I’d love to see their budget … just a couple of things are off. And I think it’s got to be some fundamentals.” — Financial Expert/Co-host [06:48]

7. Long-Term Wealth—The Math is Simple

• [07:02 – 08:07] Dave closes with math on simple retirement saving:
  • If you start investing 15% of average household income at age 33, by 67 you’d have ~$9 million, even assuming no raises.
  • Reiterates: none of this is theoretical—consistent, disciplined investing and mortgage payoff is how real people build wealth in America.

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Notable Quotes & Memorable Moments

• [01:24] Caller admits: “Yeah” (Would not borrow against his home for stocks).
• [03:03] Dave Ramsey: “You got $280,000 in backup. This is insanity.”
• [04:08] Dave Ramsey: “89% of [the millionaires we studied]… paid off their house early and used the increased cash flow to build wealth…”
• [06:05] Dave Ramsey: “If broke people are making fun of your financial plan, it’s like fat people making fun of your diet.”
• [07:02] Dave Ramsey: “If you just save 15% of your income for 25 or 30 years… you’re gonna have on average somewhere around $9 million.”

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Key Takeaways

• Holding excessive cash “just in case” is counterproductive when an emergency fund is already in place.
• Avoid letting relatives’ uninformed opinions influence your financial decisions.
• Follow the baby steps rigorously—max out retirement savings, establish (but don’t overfund) an emergency fund, and throw extra cash at the mortgage.
• Financial success comes from simple, boring, repeatable habits—not from overcomplicating or second-guessing proven paths.
• True wealth building is not theoretical; it’s supported by extensive real-world data of American millionaires.

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Transcript

[Dave Ramsey]

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[Caller]

So my wife and I, just a little context. We're 33 years old and we're on baby step like 4, 5 and 6. Somewhere in between there, we had a question. Thank you. We have $150,000 in stocks from her old job that she's not in anymore. And we were wondering if it was worthwhile to put that on the principal of our home.

[Dave Ramsey]

Yes.

[Caller]

Okay. Yeah, I figured. I'm in a little debate with my family right now.

[Dave Ramsey]

I don't know why your family gets a vote.

[Caller]

Yeah, sure.

[Dave Ramsey]

Money.

[Caller]

Yeah, Yeah, I agree.

[Dave Ramsey]

So here's the thing. Here's the way. Here's the way. Here's a couple of things on this to help you know that my suggestion is right. Here's why I'm telling you this. There's two reasons. One is if you reverse engineer some of these decisions. And the Harvard investment newsletter calls this sunk cost analysis. Okay, so reverse engineer it and say if I had the opportunity to borrow, given my state of mind today, I'm working baby steps 4, 5 and 6. Which means you're putting 15% of your income into retirement. You're doing something on kids college, and you're paying anything you can find reasonably on the house as baby step six to pay off the house early. That's the stated goals of 4, 5 and 6. You know that, don't you?

[Caller]

Yeah.

[Dave Ramsey]

Okay, so if that's where your head is and you had the opportunity to borrow 150,000 on your home to buy stock in your wife's old company, you would never do that.

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[Dave Ramsey]

You would never do that.

[Caller]

No. No, we wouldn't.

[Dave Ramsey]

So keeping it is the exact same thing, only in reverse. It says if you. If by not cashing it and paying it on the house, it says if you borrowed on the house to buy it. Mathematically does that make sense?

[Caller]

Right? Yeah.

[Dave Ramsey]

So that's one thing. Go ahead, Go ahead. I'm sorry.

[Caller]

Oh, sorry. I was just gonna say the only thing is we right now we have, we have an 18 month old and another child on the way. So our budget is very tight right now where we're kind of like losing about $500 a month. So I didn't know if they people were saying it's just like a backup in case anything were to happen, that we would have that money.

[Dave Ramsey]

You have an emergency fund of three to six months of expenses.

[Caller]

Correct. So we have 30,000, an emergency fund and we have 100,000 and like a high yield money market account.

[Dave Ramsey]

How much backup do you need? The Great Wallenda. What are you doing? Some kind of high wise, high wire trapeze. You got $280,000 in backup. This is insanity.

[Caller]

Yeah, yeah, I agree. I would like to pay the principal down and.

[Dave Ramsey]

Okay, so how much do you owe on your home?

[Caller]

So we owe 329. And our interest rates, 2.875.

[Dave Ramsey]

Okay. So here's what I would do if I woke up in your shoes. Okay? Now I currently own about 650 million in real estate. That's my point of perspective. And I started from being broke, okay. After having lost everything. If I woke up in your shoes, I would put $250,000 down on that house and have a $30,000 emergency fund by the end of the day. Because I know that the data tells me not only in my own Life, but the 10,167 millionaires that we studied, that the millionaires that became millionaires starting from Nothing, which is 89% of them, that's nine out of 10 in America became millionaires starting from nothing. Here's what they did. They paid off their house early and used the increased cash flow to build wealth. And they systematically and steadily invested year after year after year after year in their 401s and the Roth IRAs and Good Mutual funds. So when we run into a millionaire that's 47 and they've got 1.7 million in net worth, it's typically 7, $800,000 paid for house. 7,800,000 bucks in their 401k. And that's not your broke relatives with an opinion. Those are millionaires.

[Caller]

Yeah. So we're only doing 5% in our 401k because my wife's a stay at home mom and I only make about like 85 a year.

[Dave Ramsey]

Okay, I'm sorry, I made a mistake. I thought you said you were doing baby steps. Four, five and six. And you're not. So you're gonna have to do that before we have a discussion. And if you want to beef up your emergency fund of 40,000 or 50,000 even just to be crazy, that's okay. But 280,000 is moronic. That's just ridiculous. Okay? And you guys need to get your budget tightened up. If you have zero debt, which I'm now questioning if you do or not, except your home, and you're putting 15% of your income away for retirement, you ought to have room in your budget, regardless of the daycare issue. So something else is wrong. So, dude, you're going to have to dial in, do the stuff we're talking about in order for us to say you're doing the stuff you're talking about and you're not. So we got to figure that part out. But reason is you guys have been piling up cash over on the left. So that tells me you're making money and you're good savers. You're just crummy at selecting where because you're taking advice from broke relatives. So, okay, guys, if broke people are making fun of your financial plan, it's like fat people making fun of your diet. Okay? Come on, you got to think through this. It's just silliness. If you walk in and you hire a personal trainer and they're £450, you made a mistake, okay? It's a problem. And so you've got to go. You know, it's like these people that say I'm a life coach and they've never had life, so that's a problem. Okay? So, you know, it's, you should, you should actually have some background, some experience, some track record, some what we call social proof to move forward.

[Financial Expert/Co-host]

Yeah, something's off. I'd love to see their budget because for them to be able to stack away that much cash and still say he's 500 in the red every month, just a couple of things are off. And I think it's got to be some fundamentals. I don't think it's crazy living.

[Dave Ramsey]

No, obviously not crazy living because they couldn't save that kind of money. But something's going. They're probably chunking money in there instead of doing their baby step four properly, which is 15% of your household income, not counting the match going into retirement. That's baby step four. Which by the way, if you start that at 33 years old and you have an average household income, when you get to 67, you're gonna have on average somewhere around $9 million. Just in that one account. If you just save 15% of your income for 25 or 30 years, if that's all you do, okay? And that's if you never get a raise, which if you don't get a raise for 30 years, you're like a loser. Okay? So, I mean, seriously, this is a wealth building process, that bar none. But you've got to actually do it. It's not a theory. Create your free every dollar budget today. The simplest way to budget for your life.