One Decision Can Change Everything
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Should I pay extra on a low‑rate mortgage or prioritize retirement and college savings?
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Normal is broke and common sense is weird. So we're here to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union Studio, this is The Ramsey Show. And I am Rachel Cruz hosting this hour with my good friend and co-host of Smart Money Happy Hour, George Camel. And so we're here to answer your questions about life and money. So give us a call at 888-825-5225. Up first, we have May in Oklahoma City. Hi, May. Welcome to the show. Hello. Thanks. Yes, absolutely. How can we help today?
So I'm getting a little bit of conflicting advice. A couple years ago, me and my husband set up like a set kind of budget plan, and our goal was to pay down our mortgage as quick as we can as part of that. We don't have any other debt, and we've been paying basically double payments on our mortgage instead of $1,500 a month, $3,000 a month for the last two years. Awesome. And I have $195,000 left on my mortgage with no other debt. Um, but last year when I went back to work full time, we met with a financial advisor because with both of our combined incomes, we didn't like qualify for a Roth. And I finally had a 401k to contribute to. And he was looking at my savings and the amount of retirement we had already saved up at age 45 for where we are now.
And he was like, Your interest rate is 2.9%. You shouldn't be making payments on your mortgage extra. You should be putting that towards your retirement because in the long term, you're going to make like 8% or more off of that by the time you retire. And that's more important at this time in life. So I was just wondering which is correct. Like, should I be putting money towards my mortgage extra or should I be focusing on retirement and like more savings for my kids, like their 529s and stuff like that? Says every financial, most financial advisors out there.
That's the hard part is there's... In math? Yeah, they're not terrible people. This person sounds like a level-headed person who's just doing math. And as you know, money is way more than math. It's about your peace, your options, your margin, and paying off your house leads you towards freedom. Now, investing can lead you toward a different kind of freedom. That's also true, but they have a vested interest in you giving them more money because that's how they make money. Do you understand?
Sure.
Right. Yeah. They are the investment.
Their judgment is clouded.
Might be a little. Yeah. I mean, and I'll say this, too, from a mathematical perspective. Yes, you're going to make more in the market if the returns are 11, 12 percent. Right. Then paying off a two percent debt like the math of it makes sense. Just like when you have debts, a lot of people want to pay off the highest interest rate first because mathematically that's all correct. Right. But what George was saying is so true. I'm like, what we have found is that money is so much more than math. I mean, we say personal finance is 80% behavior. It's only 20% head knowledge. So your behavior is not factored into his financial calculator, if you will. Your peace of mind, your... sleep at night, your autonomy, when you own everything, including your home, which is unheard of these days, like when these things start to play in and you have no debt, you have complete say over everything in your life, there's just something we have found from a psychological, emotional, spiritual perspective.
It just changes. And what I tell people all the time, Mae, is listen, Because I get the math argument. I understand it. So I would tell you, pay off your house. And if you hate it, Go get a second mortgage and you can invest.
It'll be at a higher rate, unfortunately. And that's what, like hanging on to this mortgage.
I don't think I'll get that 2.9%.
Sure.
Yes.
But to me, it's golden handcuffs. I'll tell you what my mortgage rate is. It's 0% for the rest of my life with no payments. And so I'm optimizing for something different. I'm going to be okay in retirement. And the truth is, Mae, you guys are going to be just fine in retirement.
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Chapters
6 chapters
1
Should I pay extra on a low‑rate mortgage or prioritize retirement and college savings?
0:05–34:39
2
When should a side hustle be counted toward retirement contributions?
34:39–1:02:50
3
How can Sarah pay off $327,000 in consumer debt and should she sell her vending-machine business?
1:02:50–1:05:36
4
What aggressive 18-month debt-payoff plan do the hosts recommend for high earners?
1:05:36–1:09:02
5
How should Jamie handle divorce-related debt, custody and using house sale proceeds?
1:09:02–1:14:07
6
What immediate steps can Veronica take to stop condo foreclosure after co-signing?
1:14:07–2:05:30