Living A Contrarian Philosophy

Matt and his wife have been debt-free for a year. They're feeling pressure to move up in house but want to stay put and continue investing. What would Dave advise?

QUESTION: Matt in Fort Worth and his wife have been debt-free for a year, and they're making $50,000 a year. They owe $62,000 on their house and are in their 20s. They're feeling pressure to move up in house but want to stay in it and continue investing. What would Dave advise them to do?

ANSWER: I don't give a crap what your broke relatives think. Number one, what other people think is never a good motivator for money. Whatever broke people think, you need to run the other way. It's like taking diet advice from fat people. What they all think doesn't really matter.

Number two, this might be the best time to buy real estate in the last 50 years. It's the lowest interest rates with the best prices. If you were ever going to do it, this is the time to consider it. It is a good investment. If you wanted to move up—not because of these other people—then the Dave Ramsey rule of thumb goes all the way from "I don't borrow money; I pay cash for everything" to "I don't yell at you about a 15-year fixed-rate mortgage when you're debt-free with an emergency fund and the payment is less than 25% o your take-home pay." That would afford you more than double the house you're in. That would still be very conservative.

Having said all of that, if you wanted to move up a little in house and you guys really feel a peace about that, this is a good time to do it under those guidelines. If you don't and you want to stay there, pay that house off, live in that house, and become worth $10 million, you're going to have me as your best friend.