My wife and i paid off our mortgage jan 2019 after only 7 years in our house. GOD is good and he used Dave's channel to help bless us. Now its time for a long over due vacation with our two kids.
3rd year of the college still debt free. god, after watching some of the crazy videos I realize how smart my mom was forcing me to save all my income for 3 years lol
I always consider paying off debt a better form of investment. Think about it. Pay off 20k in debt and never worry about it again, or try to invest in other ways, pay off the 20k slowly turning that into paying 25k? Wouldn't you rather have that 5k for something sooner? Meanwhile, if you invest, maybe you get 5k over 10 years, maybe you don't. Investing is always a risk, never a guarantee. But paying off debt and never having to make another payment can be a guarantee. That 10 million dollars is attractive though, and mortgages do typically take so long to pay off. And, if you're only investing 15% of your disposable take-home pay and using any extra to pay off mortgage, doing a good balance of both is a very attractive option.
Reiden Lightman why rush to pay off a mortgage when interest rates of 2-3% reduces the value of the debt considerably over your lifetime. Why not invest the money and pay off the mortgage as slowly as possible
Doing exactly this. Paying off my mortgage faster, I have a guaranteed 4.65% ROI as money I will not be paying as interest. Currently on track to paying it in less than 10 years although I signed a 30 year mortgage. Just getting rid of PMI this month which was comparable to a 16% interest rate. On the other side I’m putting 15 % in retirement and splitting the leftovers into two sinking funds and college savings.
When I talk to people in my everyday life who believe in investing before paying down the mortgage, they don't have very much invested. They usually say they could pay off the mortgage with the investments. But that isn't true because it will be taxed. You don't have to pay a tax for paying off debt. I try to look at the big picture. Ill have my mortgage paid off in a few more months. It was a refi to buy an investment. Helocs are a great way to invest during a recession.
Yeah, easy peasy, simple as that. Pay off your house completely. Then buy a second house. Hey, while you're at it, purchase a skyscraper and maybe a small island or two with the change left over.
Thank you Dave! I have been struggling between maxing out all my investments or put just 15 percent all together and work on paying off the house sooner. My question has been answered.
That's a major problem with the new tax law, especially now that they have gotten rid of individual exemptions and capped the state & property taxes to 10K.
I have a question....my husband makes $60 K a year. I am a stay at home mom. We owe $38K on our home and can pay that off in full in about 6 months. The problem I have with our home is it is 900 square foot and only two bedrooms and a very, VERY tiny restroom. We are expecting number 2 kiddo and I want to add on to our home (because we need more living area and a third room- or will be a big chunk!). I know it’s better to pay off our home- but it just isn’t functional for a family. Any thoughts??? I don’t want my kids to be ten years old when we finally get a livable family home.
This man is doing well, and Dave's advice to invest early is good, however his math is off. 15% of this guy's income will NOT produce $1 million by age 32 - even if his income doubles TODAY and he begins investing $1250 per month (15%) and the market consistently returns at 12% without a hiccup for ten straight years, he will have $288,000 at age 32, which is fantastic, but not 1m. Please don't be discouraged if you get a hold of your finances, start investing 15%, and you're not a millionaire in ten years. You're still rocking it.
I noticed that too. I hate when Dave throws ignorant numbers around so easily. I mean, I don't discourage people from investing but also don't lie to them like that because then the poor guy might be 30 and thinking why isn't he a millionaire as promised if he followed every step and then he might feel discourage
He's got $1200 in surplus (after retirement) and that would increase to about $4200 assuming she gets a $50k job. Assuming they'd set aside $500/money for fun money and $500/month as 3rd emergency fund, that still leaves $3200/month towards the house, which allows them to pay off the house within 3 years. So they have around $400k in cash and assets at age 25. What do they do to make the jump to $1m in 5 years?
theMattVB dave is way off on his calculation. It will take at least 30 years at that rate and thats not counting him getting marry or have kids in future.
Nah dave is right. His wife is about to work full time. Also he says that after his bills he has about 1 grand in surplus a month. Assuming once his wife gets a job (they dont have to cash flow school anymore), they have a paid for house (which is one less bill) and if they keep there level of living the same which this dude sounds like he will they very well could be millionaires in 10 years.
And that's IF the market keeps returning 12% for the next 10 years which it will most likely not. Maybe half that return if your lucky and adjusted for inflation.
I think we all feel that way. There are times when I think about how much I would have had if I could have invested in my teens. I could have paid college off potentially by the time I graduated.
I just off my mortgage 2 weeks again, have being saving my Tax return and add other saving.. Did not waiting for bank to getting more interest from me..to me when Adding the interest on Mortgage there is not equity. if one look it in that way to get equity one pay buy off quickly .. Thanks Dave Ramsey.
oh, Dave... [shakes head] The caller is 22 years old, makes 50k/year, and does *NOT* presently have any money invested for retirement. 2019 maximum Roth IRA contribution = $6,000. Dave suggests that this young man and his wife will be millionares (ploral) by the time he is 30-32 years old, (Dave say's this at - 2:30). Lets do some math... The caller is 22 years old, according to Dave the caller has 10 years to become a millionare. If this young man (and his wife) both maxed out their Roth IRA's every year, they'd have to have an annualized return of approximatly 37.2% every year for 10 years on their $12k per year ($6k/year from the husband & $6k/year from the wife) Roth IRA contributions to see ($1,001,746.38) in their account. I don't know anyone who gets a annual return of 37.2% return on their [stock] investment without knowing a LOT about the market, and even 37.2% as an annual return in general is pretty darn high (and sadly unrealistic).
I like that idea about three things that you can do with money: Give it, Live it, and/or Invest it. I personally need to find a good balance of this three.
Also, everyone realizes the s&p just provided a negative return for 2018 right? Assuming you will get 10%+ return on investments yoy is foolish. Repricing in equities is coming.
But if funds are between 8 and 12 percent and his mortgage is likely 4 percent, doesn’t it make sense to invest instead of paying off the mortgage on a generally appreciating asset? I get the notion of being debt free including your house, but the difference in cost over 30 years of his total interest paid vs 30 years of mutual fund or index fund investing is huge.
I think that's why it makes sense to do both. What the ratio is depends on how you feel about debt, but at the end of the day the most important thing is to actually save the money and not spend on frivolous things.
My mum is stuck in an underwater mortgaged condo that she owns - $250 000 CAD in debt. I've been helping her pay off her credit card and various other debts, and she should be debt-free minus the condo in about a year and a half. At that point I'll be able to dedicate my extra earnings to retirement investing, however I'm not sure what to do property-wise. It would take (estimated) over 35 years to pay off the condo unit while I continue investing 15% of my annual earning into retirement investments. My mum needs to save much more than that due to her age. She would be 84 years old by then and I would be 67 years old. Plus I don't necessarily want to spend the rest of my life living with my mum either. What are my options?
I'm good paying off my mortgage early if you have the income to do it in a timely manner. I'm self-employed and although I haven't had a problem getting software contracts, others in my family have at certain points in time, and having the mortgage paid off was very important because 3-6 months in an emergency fund doesn't mean a thing when you are out of work for 2+ years and still have to pay a mortgage. Dave has good advice but depending on your path in life, it may be wiser to pay down the mortgage. I personally still invest every month into mutual funds, and do lump sum retirement deposits around this time of year in order to offset taxes from last year, but it's nowhere near 15% of my income because I'm taking 2 years to pay off the house before the next economic down cycle hits. You need to be pragmatic with whatever your situation is.
Ramsey a few questions. If interest rates are 0% would you still pay off that debt??? If you wouldn’t, then would you pay off a mortgage rate of 0.0001%. If you wouldn’t, then how high of a percentage would make sense before you would pay it off? Because 3.7% is prettttty darn low. I feel you are so close minded and stubborn that you don’t look at the angles. You are just so against the ‘D’ word and won’t push the pencil to figure out that paying it off can be a Bad thing to do in rare occasions (today’s low interest rates making Now one of those rare occasions).
Some parallels for me (UK). I have no debt bar mortgage. I have 6-9months expenses saved and I have a work pension. Given poor interest rates on savings, do I overpay mortgage instead? It's the retirement saving 15% I dont quite get. If I am paying into occupational pension, is that this point covered or should this be in addition?
We’re at 80k, 22, 3 kids(soon to be 4), debt free and will be millionaires before we’re 40 and have a paid for home worth probably around $350k 😆 in Canada ☺️
So @@feliciahayes9532 would you help us do the math? You are saying that in Canada at 22 each of you have been earning for the past 6 years more than a well payed 50 years-old skilled (and lucky) manager or technician in Europe, about 8k or more per month? Or did you inherit the money/business?
Marin yes I guess so. We have never received any inheritance money. My husband is a construction worker in the union, and does side jobs. I make some money online.
Wonder which mutual funds give such payback. Around here in Eastern Europe, all I can find are 2-4% (on average) yearly increase mutual funds. No way you'll get to a million $ in 10 years, with 5-15k$ per year investment with funds like that. Are things really that different in USA?
I will pay of one of my homes this year! maybe the 2nd one in 5 yrs. we will be debt free, and be able to help our kids get their education, in comfort.
I am not sure I am doing something wrong but... I am debt free except the mortgage. I completed baby steps 1,2 and 3 and it seems I switched baby step 4 and 6. Actually I put 5% saving for the kid and the rest towards the mortgage (about 40% of the income). Should I really put 15% on retirement or I can still continue pay off the mortgage. If I keep the current pace I will payoff the mortgage in 3 years.
No. Get a mortgage with the lowest rate possible (3.25%), pay it off slowly, plough everything else you can into low-cost index funds which typically return ~10% over the long term. You come out 6.75% ahead compared to paying off your mortgage early.
Why is paying off a house a big deal? First u still have taxes and insurance and than if you bought a home in a decent location u should get some appreciation. Invest that extra money especially if you have a low rate
I’m from Connecticut, married. I paid off my house few years ago ( about 350K ) , I contribute to my retirement portfolios to the maximum , I have few investments already. I have my children funds in placed already we are very generous to our community. Also I’m debt free. I’m 35 years old. I learned how to be a good money stewardship since I was a little boy. What’s next Dave ?
What changes the dynamic is the lack of Pensions. That puts a greater burden on people to save. I know baby boomers retiring now with Pensions of 100 K plus 401 k s. The Pension elimination which has occurred over time is a retirement planning game changer.
Jason Roos sheesh brother I know that part...I’m just adding my general advice to my fellow hardworking MEN...have a strong financial foundation and don’t fall for these shenanigans that sink us before we hit 30 otherwise we become a hamster in a wheel.
Once you pay off the house you lock up all that cash. Keep some in case you want to start a business or get laid off. If it's less than 4% fixed 15 or 30 mortgage with no pmi. Consider putting some in online savings to use if the market crashes or something.
I like smart young people. I’m 21 years old and I currently own 4 businesses. I should be a millionaire by 25😏 I’m planning on buying a house this year for my dad with cash and I’m gonna build a shipping container house for myself since Its just for me. I hope things work out for him and his wife!
if you are putting 15% of your income into an interest bearing retirement account then paying off your house is a move that makes your future much more predictable and manageable. With no mortgage payment you can handle an unexpected loss of income where you might not be in a spot where you want to sell your stocks to pay your mortgage and you have to because your income just got totally slashed.
It fascinates me that for all these years Dave almost sells being a millionaire. My wife and I will be millionaires by the time we are 35. My thing is, what does it matter? Financial Peace is what I'm after not some dollar amount.
I feel like he sees it as a added bonus after achieving financial peace. Basically the selling point of being able to work hard and follow steps to pay off debt, save and invest will make you a millionaire. Sometimes he knows that this will not be the case for other people, so instead helps them with plans for debt and the lower baby steps.
People like to hear that "millionaire" word. It's more attractive to average joes, so Dave uses it. Either way, if someone is going uphill, it's all good.
I think it's a buzzword he likes to use that correlates to public opinion of wealthy. This connects with a lot of people who come to Dave because they previously have money issues because spending = cool.
Millionaires by age 30-32? No way. He's maxing out $6000/year in a Roth IRA, but what rate of return is Dave assuming? Let's assume a maximum Roth IRA contribution of $6000 at the start of every year and an average annual return of the S&P 500 at about 10%, which is a bit optimistic (mine is returning 9%, and I'm glad to have even that!). 22. $6000 -> $6600 23. $12600 -> $13,860 24. $19,860 -> $21,846 25. $27,846 -> $30,630 26. $36,630 -> $40,293 27. $46,293 -> $50,923 28. $56,923 -> $62,615 29. $68,615 -> $75,476 30. $81,476 -> $89,624 31. $95,624 -> $105,187 32. $111,187 -> $122,305 What rate of return is Dave assuming? Dave claims to have a mutual fund that has an annual return of 12%, yet he does not identify it. I seriously question his math.
Dave is calculating that based upon sensible investments contributing to a ROTH IRA ( the growth is not taxed..that's why a ROTH ira is always better than a traditional IRA).
He is not just counting the retirement contribution. I think he is taking into account this guy's character. Being able to be debt free with only a mortgage, and already maximizing investments with mortgage payoff is huge at 22. Especially if you factor in that he has a non-working spouse.
He should try to pay off his house by 30. That would be about $12,500 extra per year. With his wife working that is very doable. Then invest in Gold, Silver, Individual stocks that pay good dividends in an individual account, and Index funds in a Roth IRA.
That's kinda the point of the book Everyday Millionaires. You can become a millionaire with time, patience, and hard work. The dream is to not be living paycheck to paycheck, and retire with dignity. The dream isn't to be able to buy anything any time, have a private yacht, 3 cars, 2 houses, etc. You can dream for that if you want, and if you really try maybe you could find a way to make it happen, but most of us just want to be at peace and have stability. A paid for home, no debts to speak of, money in the bank in case of emergencies, and money we know will be there when we stop working. But people think being a millionaire means you're super rich and fancy. It really doesn't, it's a reasonable goal that you should eventually hit if you are fiscally responsible.
Dave's math might be off for the 10yr plan but if they max out their roths save a little more put extra into a another fund pay off the house and no matter what.....DONT LIFESTYLE CREEP!!! They will definitely be millionaire's by 40!!! More power to them!!!😁👍
All you folks commenting on Dave's millionaire by 32 statement and doing the math on returns. Dave didn't say he'd have a million dollars in his retirement account by then. That is total assets, my parents are millionaires but have never had a million dollars in the bank.
I'm on baby step 6 but before I start paying more on my mortgage I want to save up 15k for a future car in 5ish years. Has anyone else done that? He never talks about this. I have an emergency fund but thats not for replacing a car in the future.
@@Dan007UT I would say so. You proabbly don't need to start saving right away depending how much you can save per month. If you can save 1k/month, it'll only take 15 months to save for a 15k car, so I personally would start saving 17-20 months before the purchase. Just see how long it'll take you to save for it, and add a few months just in case there's any hiccups along the way. Until then I'd say keep paying down the house to reduce your mortgage debt, which will reduce the total interest paid on your mortgage.
I find the comment that someone making 50k a year will be a millionaire by 32, extremely unrealistic. That math just doesn't add up. Sure he can be a millionaire 30-40 years down the road, but not in 10 years.
He won't, but it sounds good and helps people make themselves invest. He'll have more money than today, but getting rich slowly sounds boring, so he lies and hypes it up.
What does this guy mean by "left over"? He makes it sound like he's been paying down his mortgage for a long time. At 22, how long ago could he have purchased his house? A month?
He probably bought a cheap house. More people should take his lead and start with something cheap and pay it off fast. Then you can buy something bigger. Pay that off as quick as possible.
I believe Dave's plan is to save 15% of your household income regardless of how many jobs are involved in the creation of the wealth. The source of the money and who earns it is irrelevant.
Um...the types of mutual funds Dave has invested in across the past 30+ years has ( worst case after taxes) netted him more than 10% easily average rate of return. That's why you always hear him talk about a 12%. Your figure guestimates not even 4%. I'm not saying the market across the next 10+ years is going to guarantee a 9 or higher % return, but I'd rather listen to someone who's been there and done it for 30+ years who has a CONSISTENT result, than someone, you....me....and most idiots out there, who have NOT.
@@motoryzen According to the Investment Calculator on Dave Ramsey website: Enter your current age. 22 Enter the age you plan to retire. 32 How much have you saved for retirement? $0 How much will you contribute monthly? $800 What do you think your annual return will be? 12% ESTIMATED RETIREMENT SAVINGS In 10 years, your investment could be worth: $188,684
@@dennis007 thanks for running the numbers. You won't be a millionaire investing $7500 per year at a 10% return yearly. That's only $119k over 10 years. In 30 years your looking at a million. Thing is most folks cant do math. ;)
@@kmorris9098 It's OK for Dave to encourage the caller by pep talk. But, once the math is involved, Mr. Ramsey needs paying more attention on the numbers he uses.
It's based on the amazing 10 year returns possible today when we just hit the 10 year mark since the last stock market crash. Numbers are inflated. Realistically, assume 7% after inflation. I would be more conservative than that since the average investor gets closer to 5% after life hits.
@@Excalibur2 I think you might have misunderstood me or I could be wrong ...I mean when you're still working do you put 15% in towards retirement with the match included in that 15%.. Example.. my company matches 4% .. so would I just put in 11% to get the 15% . ( obviously I'm trying to put in more but I'm trying to figure out what the minimum is that I should put in)
@@igot5onit423 I think what is more valuable is to figure out, when you want to retire and how much, in 2019 $$, you think you'll need to live on in retirement. This plus your expectation on growth (on your investments and salary) and an estimate for inflation can tell you how much you need to save so that you can retire when and how you want. Lets say that you are 28 with $0 in retirement and you want to retire at age 55 an expect to need $40k per year in 2019 $$- lets start at $50k per year and figure +3.5% per year for a combined CoL/promotion increase. Lets assume that you'll average +9% per year on your investments and you put in 15% per year-- you'll be at $1.17M at age 55. By then the $40000 lifestyle will cost around $78000. Great news, at this level of lifestyle and the 9% growth, you've saved enough that you can just live on the interest. But, what if along the way, you decided that you more like a $60000 lifestyle (in 2019 $$)? All else the same, now you are taking out faster than it grows and are broke by age 68 -- so you'd have to either save more or work longer. Now you can choose to retire at 59 instead or save more. 22% would keep you in the black into your mid 80s and 25% should cover to age 100+ and let you keep your retirement at age 55. Nothing is quite so simple as a recession or depression at the wrong time could be a killer to any plan, so I target saving at a much higher percent than I think I need, so that I can stay on target even if some things go south.
Lol but what does that matter, they aren't guaranteed to do that for another 30 years. Companies making horse carriages were doing great, until cars came along. You thing that would still be a great investment today?
@@AmandaHugenkiss2915 Some good examples might be funds that averaged, lets say, 14% from 1959-1989 and see how they did from 1989-2019. I'm sure there are some continued to be as great, but more than likely, a whole bunch did much worse.
@@Excalibur2 thats why you invest in a mutual fund its spread over dozens sometimes hundreds of company stocks across several investment sectors. Thats why its never good to invest in a single sector like horse carriages or blockbuster... its much riskier. Mutual funds are safer and if im investing a 30 to 40 yr average return that beats the market show me that it is well managed.
THE CALLER CAN KISS THAT TEN GRAND SAVINGS AWAY when the economy collapses and the dollar becomes valueless fiat currency. BAD ADVICE DAVE. It was bad advice in 1929 and it is bad advice now.
I wish I was in this guys situation when I was 22. 👏🏻 👏🏻 👏🏻
I suppose millionaires by age 32 or 33! Wow!!!! Way to go!!
if i had known to contributed to my ira when i opened it, at age 24, id be him in the future. i focused on real estate.
My wife and i paid off our mortgage jan 2019 after only 7 years in our house. GOD is good and he used Dave's channel to help bless us. Now its time for a long over due vacation with our two kids.
Nice.. my wife and I made our last payment for our mortgage in December 2018. We bought our home back in March 2011. The feeling is great 👍
@@beevang8224 That is awesome. The feeling is great. Enjoy the freedom.
Did you invest while doing this or did you hold off investing and throw all that money towards your mortgage ?
I have both my house and investment property, both have large mortgages.. should I sell the investment property and pay off the house early?
3rd year of the college still debt free. god, after watching some of the crazy videos I realize how smart my mom was forcing me to save all my income for 3 years lol
I always consider paying off debt a better form of investment. Think about it. Pay off 20k in debt and never worry about it again, or try to invest in other ways, pay off the 20k slowly turning that into paying 25k? Wouldn't you rather have that 5k for something sooner? Meanwhile, if you invest, maybe you get 5k over 10 years, maybe you don't. Investing is always a risk, never a guarantee. But paying off debt and never having to make another payment can be a guarantee.
That 10 million dollars is attractive though, and mortgages do typically take so long to pay off. And, if you're only investing 15% of your disposable take-home pay and using any extra to pay off mortgage, doing a good balance of both is a very attractive option.
Reiden Lightman why rush to pay off a mortgage when interest rates of 2-3% reduces the value of the debt considerably over your lifetime. Why not invest the money and pay off the mortgage as slowly as possible
I guess that depends on how stable your job is, and how easy it would be to find another good job
Doing exactly this. Paying off my mortgage faster, I have a guaranteed 4.65% ROI as money I will not be paying as interest. Currently on track to paying it in less than 10 years although I signed a 30 year mortgage. Just getting rid of PMI this month which was comparable to a 16% interest rate. On the other side I’m putting 15 % in retirement and splitting the leftovers into two sinking funds and college savings.
When I talk to people in my everyday life who believe in investing before paying down the mortgage, they don't have very much invested. They usually say they could pay off the mortgage with the investments. But that isn't true because it will be taxed. You don't have to pay a tax for paying off debt. I try to look at the big picture.
Ill have my mortgage paid off in a few more months. It was a refi to buy an investment. Helocs are a great way to invest during a recession.
Pay off debt. You don't know what the future holds. Being debt free is a blessing in this world!
Very good advise and an amazing 22 yr old! Keep going you’ll get there.
Wow nice set up for a 22 year old! I just turned 26 and maxing out a Roth. Glad to learn this stuff early in life 😄
S/O to my focused millennials!
Yaaaaas! 22, 3 kids, soon to be 4, debt free, on my way to being a millionaire before I’m 40 😃❤️
You can easily make paying your mortgage off early an investment!
Pay it off rent your house out buy another one 🤔
That is a great Idea.
rinse and repeat until you own the whole town.
jcrowley1985 you got that right !
Where u been fam lol
Yeah, easy peasy, simple as that. Pay off your house completely. Then buy a second house. Hey, while you're at it, purchase a skyscraper and maybe a small island or two with the change left over.
Thank you Dave! I have been struggling between maxing out all my investments or put just 15 percent all together and work on paying off the house sooner. My question has been answered.
The new standard deduction of $ 24K makes the deductibility of interest on mortgage debt less valuable.
That's a major problem with the new tax law, especially now that they have gotten rid of individual exemptions and capped the state & property taxes to 10K.
this is why paying off the mortgage is great advice.
I have a question....my husband makes $60 K a year. I am a stay at home mom. We owe $38K on our home and can pay that off in full in about 6 months. The problem I have with our home is it is 900 square foot and only two bedrooms and a very, VERY tiny restroom. We are expecting number 2 kiddo and I want to add on to our home (because we need more living area and a third room- or will be a big chunk!). I know it’s better to pay off our home- but it just isn’t functional for a family. Any thoughts??? I don’t want my kids to be ten years old when we finally get a livable family home.
This man is doing well, and Dave's advice to invest early is good, however his math is off. 15% of this guy's income will NOT produce $1 million by age 32 - even if his income doubles TODAY and he begins investing $1250 per month (15%) and the market consistently returns at 12% without a hiccup for ten straight years, he will have $288,000 at age 32, which is fantastic, but not 1m.
Please don't be discouraged if you get a hold of your finances, start investing 15%, and you're not a millionaire in ten years. You're still rocking it.
I noticed that too. I hate when Dave throws ignorant numbers around so easily. I mean, I don't discourage people from investing but also don't lie to them like that because then the poor guy might be 30 and thinking why isn't he a millionaire as promised if he followed every step and then he might feel discourage
He's got $1200 in surplus (after retirement) and that would increase to about $4200 assuming she gets a $50k job.
Assuming they'd set aside $500/money for fun money and $500/month as 3rd emergency fund, that still leaves $3200/month towards the house, which allows them to pay off the house within 3 years.
So they have around $400k in cash and assets at age 25. What do they do to make the jump to $1m in 5 years?
theMattVB dave is way off on his calculation. It will take at least 30 years at that rate and thats not counting him getting marry or have kids in future.
Nah dave is right. His wife is about to work full time. Also he says that after his bills he has about 1 grand in surplus a month. Assuming once his wife gets a job (they dont have to cash flow school anymore), they have a paid for house (which is one less bill) and if they keep there level of living the same which this dude sounds like he will they very well could be millionaires in 10 years.
And that's IF the market keeps returning 12% for the next 10 years which it will most likely not. Maybe half that return if your lucky and adjusted for inflation.
I wish I was this kid when I was 22. But I’m 28 so I better get cracking
I think we all feel that way. There are times when I think about how much I would have had if I could have invested in my teens. I could have paid college off potentially by the time I graduated.
@@Excalibur2 i'm 37 and i'm nowhere near it!
This guy is a BEAST. So cool.
Wow I hope this guy continues to do well
I just off my mortgage 2 weeks again, have being saving my Tax return and add other saving.. Did not waiting for bank to getting more interest from me..to me when Adding the interest on Mortgage there is not equity. if one look it in that way to get equity one pay buy off quickly .. Thanks Dave Ramsey.
oh, Dave... [shakes head]
The caller is 22 years old, makes 50k/year, and does *NOT* presently have any money invested for retirement.
2019 maximum Roth IRA contribution = $6,000.
Dave suggests that this young man and his wife will be millionares (ploral) by the time he is 30-32 years old, (Dave say's this at - 2:30).
Lets do some math...
The caller is 22 years old, according to Dave the caller has 10 years to become a millionare.
If this young man (and his wife) both maxed out their Roth IRA's every year, they'd have to have an annualized return of approximatly 37.2% every year for 10 years on their $12k per year ($6k/year from the husband & $6k/year from the wife) Roth IRA contributions to see ($1,001,746.38) in their account.
I don't know anyone who gets a annual return of 37.2% return on their [stock] investment without knowing a LOT about the market, and even 37.2% as an annual return in general is pretty darn high (and sadly unrealistic).
This is of course assuming they don't invest anywhere else.
Either way at 22 he's in a very good place I was slaving away at minimum wage at this age
I like that idea about three things that you can do with money: Give it, Live it, and/or Invest it. I personally need to find a good balance of this three.
Contribute 15 % to 401k first. Throw as much money on the house each month (extra principle )to pay off quickly. With regards from Wisconsin.
I am in a similar situation, except the age, excellent advice, thanks!
Also, everyone realizes the s&p just provided a negative return for 2018 right? Assuming you will get 10%+ return on investments yoy is foolish. Repricing in equities is coming.
Invest for sure. Much higher return then these low interest rates
But if funds are between 8 and 12 percent and his mortgage is likely 4 percent, doesn’t it make sense to invest instead of paying off the mortgage on a generally appreciating asset? I get the notion of being debt free including your house, but the difference in cost over 30 years of his total interest paid vs 30 years of mutual fund or index fund investing is huge.
I think that's why it makes sense to do both. What the ratio is depends on how you feel about debt, but at the end of the day the most important thing is to actually save the money and not spend on frivolous things.
This is perfect, I’m 21 in the almost exact situation to the penny just got 6k in car loans that I’m going to pay off in 3 days.
My mum is stuck in an underwater mortgaged condo that she owns - $250 000 CAD in debt. I've been helping her pay off her credit card and various other debts, and she should be debt-free minus the condo in about a year and a half. At that point I'll be able to dedicate my extra earnings to retirement investing, however I'm not sure what to do property-wise. It would take (estimated) over 35 years to pay off the condo unit while I continue investing 15% of my annual earning into retirement investments. My mum needs to save much more than that due to her age. She would be 84 years old by then and I would be 67 years old.
Plus I don't necessarily want to spend the rest of my life living with my mum either. What are my options?
Follow his other videos he spells it all out but pay off enough to get out of the condo by selling and down grading.
I'm good paying off my mortgage early if you have the income to do it in a timely manner. I'm self-employed and although I haven't had a problem getting software contracts, others in my family have at certain points in time, and having the mortgage paid off was very important because 3-6 months in an emergency fund doesn't mean a thing when you are out of work for 2+ years and still have to pay a mortgage. Dave has good advice but depending on your path in life, it may be wiser to pay down the mortgage. I personally still invest every month into mutual funds, and do lump sum retirement deposits around this time of year in order to offset taxes from last year, but it's nowhere near 15% of my income because I'm taking 2 years to pay off the house before the next economic down cycle hits. You need to be pragmatic with whatever your situation is.
good advice! amazing for a 22 yrs old!
Ramsey a few questions. If interest rates are 0% would you still pay off that debt??? If you wouldn’t, then would you pay off a mortgage rate of 0.0001%. If you wouldn’t, then how high of a percentage would make sense before you would pay it off? Because 3.7% is prettttty darn low. I feel you are so close minded and stubborn that you don’t look at the angles. You are just so against the ‘D’ word and won’t push the pencil to figure out that paying it off can be a Bad thing to do in rare occasions (today’s low interest rates making Now one of those rare occasions).
Some parallels for me (UK). I have no debt bar mortgage. I have 6-9months expenses saved and I have a work pension. Given poor interest rates on savings, do I overpay mortgage instead? It's the retirement saving 15% I dont quite get. If I am paying into occupational pension, is that this point covered or should this be in addition?
I'm in the same situation at 30, but I ran the numbers and I'm investing the difference.
50k, a wife and a house @ 22..? Not in Europe.
ha ha ha ha ha ha.
We’re at 80k, 22, 3 kids(soon to be 4), debt free and will be millionaires before we’re 40 and have a paid for home worth probably around $350k 😆
in Canada ☺️
So @@feliciahayes9532 would you help us do the math? You are saying that in Canada at 22 each of you have been earning for the past 6 years more than a well payed 50 years-old skilled (and lucky) manager or technician in Europe, about 8k or more per month? Or did you inherit the money/business?
Marin yes I guess so. We have never received any inheritance money. My husband is a construction worker in the union, and does side jobs. I make some money online.
Wonder which mutual funds give such payback. Around here in Eastern Europe, all I can find are 2-4% (on average) yearly increase mutual funds. No way you'll get to a million $ in 10 years, with 5-15k$ per year investment with funds like that. Are things really that different in USA?
Pay off the mortgage early so you can invest more money later.
Invest more? Yes. ....Pay off mortgage? Double YES! 😁 Ok seriously though.... just do what Dave says. 🙌
I will pay of one of my homes this year! maybe the 2nd one in 5 yrs. we will be debt free, and be able to help our kids get their education, in comfort.
Useful - thank you
Paid off home early figure no debt to worry about...can save more. If one lost a job it's not a big issue.
This isn’t really debt free. This is interest free. A debt free life is a multi-millionaire living off of capital gains. Ppl still gotta work.
Also saying if he has kids. Should really be whether he is planning on having any. Because then the calculation changes.
I am not sure I am doing something wrong but... I am debt free except the mortgage. I completed baby steps 1,2 and 3 and it seems I switched baby step 4 and 6. Actually I put 5% saving for the kid and the rest towards the mortgage (about 40% of the income). Should I really put 15% on retirement or I can still continue pay off the mortgage. If I keep the current pace I will payoff the mortgage in 3 years.
Pay off the mortgage first.
Pay off the mortgage as fast as you can. The order of the baby steps are meant to be modified.
No. Get a mortgage with the lowest rate possible (3.25%), pay it off slowly, plough everything else you can into low-cost index funds which typically return ~10% over the long term. You come out 6.75% ahead compared to paying off your mortgage early.
What happens if he loses his income, cant make the mortgage payment and gets foreclosed on?
Why is paying off a house a big deal? First u still have taxes and insurance and than if you bought a home in a decent location u should get some appreciation. Invest that extra money especially if you have a low rate
Why not do a cash out refinance and invest the proceeds?
Which funds do you invest this 15% to? All equities?
Not good advice. Invest in property to rent and get rich way quicker. Retire when you are 40 not 65.
I’m from Connecticut, married. I paid off my house few years ago ( about 350K ) , I contribute to my retirement portfolios to the maximum , I have few investments already. I have my children funds in placed already we are very generous to our community. Also I’m debt free. I’m 35 years old. I learned how to be a good money stewardship since I was a little boy. What’s next Dave ?
I think he covered that at the end of the video
For his age this dude is killing it.
What changes the dynamic is the lack of Pensions. That puts a greater burden on people to save. I know baby boomers retiring now with Pensions of 100 K plus 401 k s. The Pension elimination which has occurred over time is a retirement planning game changer.
Do not get married, get a girl pregnant, or fall in love with a princess for at least 10yrs
Vinny T. speaking the truth!
Why not fall in love with a princess, get married, get the girl pregnant and live happily ever after.
AstronautSpaceCake I meant princess like the high maintenance, stay at home, non-contributing spoiled brat like Dave talks about
He said he's married already
Jason Roos sheesh brother I know that part...I’m just adding my general advice to my fellow hardworking MEN...have a strong financial foundation and don’t fall for these shenanigans that sink us before we hit 30 otherwise we become a hamster in a wheel.
Great advise Dave
Once you pay off the house you lock up all that cash. Keep some in case you want to start a business or get laid off. If it's less than 4% fixed 15 or 30 mortgage with no pmi. Consider putting some in online savings to use if the market crashes or something.
I like smart young people. I’m 21 years old and I currently own 4 businesses. I should be a millionaire by 25😏 I’m planning on buying a house this year for my dad with cash and I’m gonna build a shipping container house for myself since Its just for me.
I hope things work out for him and his wife!
I don't believe a word of what you just wrote. Please list these 4 businesses you own, along with links to their websites. I'll wait.
Lies!
My Mortgage Rate is 1.65% , still pay off early? Tough choice...
if you are putting 15% of your income into an interest bearing retirement account then paying off your house is a move that makes your future much more predictable and manageable. With no mortgage payment you can handle an unexpected loss of income where you might not be in a spot where you want to sell your stocks to pay your mortgage and you have to because your income just got totally slashed.
Who's the hater hitting thumbs down? 😂😂😂
When Dave says 15% of your income, is that before or after tax?
craig thain 15% of take home
It is 15 pct of Gross not net. Makes it more challenging
Before taxes
Is it 15% before or after taxes to save for retirement.
Yep, 15% of gross income.
It fascinates me that for all these years Dave almost sells being a millionaire. My wife and I will be millionaires by the time we are 35. My thing is, what does it matter? Financial Peace is what I'm after not some dollar amount.
I feel like he sees it as a added bonus after achieving financial peace. Basically the selling point of being able to work hard and follow steps to pay off debt, save and invest will make you a millionaire. Sometimes he knows that this will not be the case for other people, so instead helps them with plans for debt and the lower baby steps.
Millionaire is a nice term and a good intermediate goal.
ImaITman “Financial Peace is what I’m after not some dollar amount.” Brother, with that mindset, your already a millionaire where it matters :)
People like to hear that "millionaire" word. It's more attractive to average joes, so Dave uses it. Either way, if someone is going uphill, it's all good.
I think it's a buzzword he likes to use that correlates to public opinion of wealthy. This connects with a lot of people who come to Dave because they previously have money issues because spending = cool.
Millionaires by age 30-32? No way. He's maxing out $6000/year in a Roth IRA, but what rate of return is Dave assuming? Let's assume a maximum Roth IRA contribution of $6000 at the start of every year and an average annual return of the S&P 500 at about 10%, which is a bit optimistic (mine is returning 9%, and I'm glad to have even that!).
22. $6000 -> $6600
23. $12600 -> $13,860
24. $19,860 -> $21,846
25. $27,846 -> $30,630
26. $36,630 -> $40,293
27. $46,293 -> $50,923
28. $56,923 -> $62,615
29. $68,615 -> $75,476
30. $81,476 -> $89,624
31. $95,624 -> $105,187
32. $111,187 -> $122,305
What rate of return is Dave assuming? Dave claims to have a mutual fund that has an annual return of 12%, yet he does not identify it. I seriously question his math.
Dave is assuming they will invest in other vehicles besides only a Roth IRA.
I’m thinking of paying it off. I’m in my 30s and I want to pay off house and quit work.
🤔
How does he calculate him being a millionaire by 30 if he only puts away 7500 a year?
Dave is calculating that based upon sensible investments contributing to a ROTH IRA ( the growth is not taxed..that's why a ROTH ira is always better than a traditional IRA).
@@motoryzen I understand, but 7500 to 1 million dollars in less than 10 years is highly unlikely
Its Dave math. Adds up in his head but nobody else
He is not just counting the retirement contribution. I think he is taking into account this guy's character. Being able to be debt free with only a mortgage, and already maximizing investments with mortgage payoff is huge at 22. Especially if you factor in that he has a non-working spouse.
Great job! Most 22 year olds are living in their parents' basements playing video games all day
And most boomers are worrying about retirement after working and saving nothing for 40 years
@@Excalibur2 both are true lol
He should try to pay off his house by 30. That would be about $12,500 extra per year. With his wife working that is very doable. Then invest in Gold, Silver, Individual stocks that pay good dividends in an individual account, and Index funds in a Roth IRA.
Wish I made 50k at 22.
It’s very simple and easy. I can think of at least 5 jobs off of the top of my head that require no college and make at least that. Even double.
Why did not ask about the mortgage terms and equity in the house. Those are huge factors to consider that he completely missed.
9% of the people in my town are millionaires. Having a million dollars ain’t that special.
💯
That's kinda the point of the book Everyday Millionaires. You can become a millionaire with time, patience, and hard work. The dream is to not be living paycheck to paycheck, and retire with dignity. The dream isn't to be able to buy anything any time, have a private yacht, 3 cars, 2 houses, etc. You can dream for that if you want, and if you really try maybe you could find a way to make it happen, but most of us just want to be at peace and have stability. A paid for home, no debts to speak of, money in the bank in case of emergencies, and money we know will be there when we stop working. But people think being a millionaire means you're super rich and fancy. It really doesn't, it's a reasonable goal that you should eventually hit if you are fiscally responsible.
Remember: you don't own your possessions--they own you!
Roth all the way!!
Dave's math might be off for the 10yr plan but if they max out their roths save a little more put extra into a another fund pay off the house and no matter what.....DONT LIFESTYLE CREEP!!! They will definitely be millionaire's by 40!!!
More power to them!!!😁👍
have guy like this be a teacher in the public schools.....
All you folks commenting on Dave's millionaire by 32 statement and doing the math on returns. Dave didn't say he'd have a million dollars in his retirement account by then. That is total assets, my parents are millionaires but have never had a million dollars in the bank.
What a lovely dilemma to have!!!
I'm on baby step 6 but before I start paying more on my mortgage I want to save up 15k for a future car in 5ish years. Has anyone else done that? He never talks about this. I have an emergency fund but thats not for replacing a car in the future.
I Beleive Dave's stance on upcoming planned expenses is to save up on top or separately from the emergency fund for them.
@@Bipppi im guessing before I throw a bunch of money at the mortgage? Thats my plan at least... lol
@@Dan007UT I would say so. You proabbly don't need to start saving right away depending how much you can save per month. If you can save 1k/month, it'll only take 15 months to save for a 15k car, so I personally would start saving 17-20 months before the purchase. Just see how long it'll take you to save for it, and add a few months just in case there's any hiccups along the way. Until then I'd say keep paying down the house to reduce your mortgage debt, which will reduce the total interest paid on your mortgage.
@@Bipppi good point. Maybe I'll half and half it. Thanks!
15% of gross income or after taxes?
Gross .
I find the comment that someone making 50k a year will be a millionaire by 32, extremely unrealistic. That math just doesn't add up. Sure he can be a millionaire 30-40 years down the road, but not in 10 years.
I don't understand how he will be a millionaire in ten years. Can someone explain this to me?
He won't, but it sounds good and helps people make themselves invest. He'll have more money than today, but getting rich slowly sounds boring, so he lies and hypes it up.
@@Excalibur2 I feel you're answer to be more true then Ramsey's. Thanks for the insight.
@@Cumeni-Ha It includes assets you bozo
wish I had this advice at 22!!
Incredible
ALL about to change.......Save and wait 6 mo.
What does this guy mean by "left over"? He makes it sound like he's been paying down his mortgage for a long time. At 22, how long ago could he have purchased his house? A month?
He probably bought a cheap house. More people should take his lead and start with something cheap and pay it off fast. Then you can buy something bigger. Pay that off as quick as possible.
Fixcreditsolutions👍🏼
Wouldn’t paying off your mortgage be an investment?
22 and you are married, but I am 24 and have no GF
Do you save 15% for couples or 15% one of the spouses?
That's what I am wondering
I believe Dave's plan is to save 15% of your household income regardless of how many jobs are involved in the creation of the wealth. The source of the money and who earns it is irrelevant.
@@3E8mps thanks :)
Saving 15% individually or together ends up being the same total amount, assuming you'll both do it.
That makes sense. So it’s 15% total household income. 👍
Welcome to the new age middle class
Why don't you start by acquiring a higher income. What is your wife studying?
Dam he doing good for a 22 year old
Invest the money in real estate. Worry about the mortgage later.
A millionaire in 10 years only putting $7.5k to $10k a year in a mutual fund? Maybe $250-300k
Um...the types of mutual funds Dave has invested in across the past 30+ years has ( worst case after taxes) netted him more than 10% easily average rate of return.
That's why you always hear him talk about a 12%.
Your figure guestimates not even 4%. I'm not saying the market across the next 10+ years is going to guarantee a 9 or higher % return, but I'd rather listen to someone who's been there and done it for 30+ years who has a CONSISTENT result, than someone, you....me....and most idiots out there, who have NOT.
@@motoryzen
According to the Investment Calculator on Dave Ramsey website:
Enter your current age.
22
Enter the age you plan to retire.
32
How much have you saved for retirement?
$0
How much will you contribute monthly?
$800
What do you think your annual return will be?
12%
ESTIMATED RETIREMENT SAVINGS
In 10 years, your investment could be worth:
$188,684
@@dennis007 thanks for running the numbers. You won't be a millionaire investing $7500 per year at a 10% return yearly. That's only $119k over 10 years. In 30 years your looking at a million. Thing is most folks cant do math. ;)
@@kmorris9098
It's OK for Dave to encourage the caller by pep talk. But, once the math is involved, Mr. Ramsey needs paying more attention on the numbers he uses.
When he says 15% in retirement does anybody know if that includes matches.. or is that on top of the match.
It's based on the amazing 10 year returns possible today when we just hit the 10 year mark since the last stock market crash. Numbers are inflated. Realistically, assume 7% after inflation. I would be more conservative than that since the average investor gets closer to 5% after life hits.
@@Excalibur2 I think you might have misunderstood me or I could be wrong ...I mean when you're still working do you put 15% in towards retirement with the match included in that 15%..
Example.. my company matches 4% .. so would I just put in 11% to get the 15% . ( obviously I'm trying to put in more but I'm trying to figure out what the minimum is that I should put in)
@Andrew thanx
@@igot5onit423 I think what is more valuable is to figure out, when you want to retire and how much, in 2019 $$, you think you'll need to live on in retirement.
This plus your expectation on growth (on your investments and salary) and an estimate for inflation can tell you how much you need to save so that you can retire when and how you want.
Lets say that you are 28 with $0 in retirement and you want to retire at age 55 an expect to need $40k per year in 2019 $$- lets start at $50k per year and figure +3.5% per year for a combined CoL/promotion increase.
Lets assume that you'll average +9% per year on your investments and you put in 15% per year-- you'll be at $1.17M at age 55. By then the $40000 lifestyle will cost around $78000. Great news, at this level of lifestyle and the 9% growth, you've saved enough that you can just live on the interest.
But, what if along the way, you decided that you more like a $60000 lifestyle (in 2019 $$)? All else the same, now you are taking out faster than it grows and are broke by age 68 -- so you'd have to either save more or work longer.
Now you can choose to retire at 59 instead or save more. 22% would keep you in the black into your mid 80s and 25% should cover to age 100+ and let you keep your retirement at age 55.
Nothing is quite so simple as a recession or depression at the wrong time could be a killer to any plan, so I target saving at a much higher percent than I think I need, so that I can stay on target even if some things go south.
Do your research 8 to 10 % return is low there are dozens of funds with 30yr avg returns in the 14 to 15% return
Greg Rohr May you provide an example?
Lol but what does that matter, they aren't guaranteed to do that for another 30 years. Companies making horse carriages were doing great, until cars came along. You thing that would still be a great investment today?
Yeah I'd like to see examples also. It's rare to beat the market, and the market really doesn't return that well.
@@AmandaHugenkiss2915 Some good examples might be funds that averaged, lets say, 14% from 1959-1989 and see how they did from 1989-2019. I'm sure there are some continued to be as great, but more than likely, a whole bunch did much worse.
@@Excalibur2 thats why you invest in a mutual fund its spread over dozens sometimes hundreds of company stocks across several investment sectors. Thats why its never good to invest in a single sector like horse carriages or blockbuster... its much riskier. Mutual funds are safer and if im investing a 30 to 40 yr average return that beats the market show me that it is well managed.
Is Bank of America a good place to open a Roth IRA?
No.
No. Try Fidelity or even Etrade.
$10M Dave? Not too good on the math are ya?
Saving $7500 a year. You’ll starve when you retire. You need to be saving at least half your income.
If you want to retire rich. That's my goal.
THE CALLER CAN KISS THAT TEN GRAND SAVINGS AWAY when the economy collapses and the dollar becomes valueless fiat currency. BAD ADVICE DAVE. It was bad advice in 1929 and it is bad advice now.
You could buy 1 bitcoin and thank me later
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