Brought to you by the EveryDollar app. Start budgeting for free today. My fiance and I just got engaged and we're looking to buy our first home. And I was trying to understand the, so basically we have the ability to put 20% down on the home. But based off of, you know, all the math behind the numbers, I've seen it seems more optimal to possibly put down less and have more liquid cash available to invest. call it maybe 10% down, was having the extra cash to invest long-term in, say, VU or QQQ or like a large-cap ETF or index fund. But I wanted to get your thoughts on it. It's not optimal. Your formula left out something called risk, and it left out something called good night's sleep when your home is steady. We studied 10,167 millionaires. 89% of them were first-generation rich, meaning they started where you are and became wealthy. The number of them that said we optimized our home mortgage by putting as little down as possible to invest and became a millionaire that way, the number of them out of 10,000 that said that was precisely zero. No one does that in the real world. That's a mathematical theory that doesn't hold water. And the reason it doesn't hold water is you have not risk-adjusted mathematically. Because you're adding risk to your life. So the typical millionaire, when they hit their first million dollars in net worth, have an $800,000 paid for house and a $700,000 or $800,000 401k. And they were sitting on a million and a half. And their house is paid for. And that's the typical millionaire. Like it was stereotypical. There were so many of them. It was crazy in that study, in that piece of research. So what you left out was the fact that when you have no mortgage or you've got a rapidly reducing mortgage, There's more peace in your life. Your career choices are better. Your relationships are enhanced. Your physical body doesn't carry the stress with it, and so you don't have stress-related diseases. All of these things play into your finances, and none of that was in your formula. Hey, you've got to take care of your vehicle if you want to keep it on the road, and the smartest move is regular maintenance. I recommend Christian Brothers Automotive, the official auto repair partner of The Ramsey Show. Your local Christian Brothers shop provides high-quality maintenance and repair services you can trust. Visit cbac slash Ramsey to find a location near you and get an exclusive Ramsey discount of 10 off your visit 10 off up to a value See store for details All of these things play into your finances and none of that was in your formula So looking at it, you're saying including the risk-adjusted returns long-term, you're saying if you have the 30-year fixed mortgage, you're going to be a lot safer with that known variable and it continuing to decrease over time versus the outside of the investment. I mean, you're a fixed rate mortgage. But, yeah, getting rid of the mortgage. As fast as possible. Going to my second question, which I am a long-time listener, so I assume you have an opinion on this, but I wanted to kind of specify our exact situation. So we're touring some new construction. They're townhomes. They're smaller homes that we plan to be at for, call it, four to five years max. We're 26 now. We want to start having children in four or five years. Hopefully we'd get something a little bigger by then if our income continues to increase, which is our plan. What we have been seeing a lot of in our area is people doing a five-year arm due to the fact that interest rates are currently relatively high with the assumption from the Fed that they'll slightly decrease over the next few years. If we're planning on only being a house for, call it five years or less, would a five-year arm ever make sense in that situation? No, because you don't know what's going to happen. You don't know what you don't know. So again, just playing the safe route. You have a plan, but your plan is not going to unfold the way you think. One of two things is going to happen. You're going to get wealthy faster than you thought, or you're going to have some kind of blocker come up, some kind of problem come up that's going to slow down something, and you may end up in that house for a little while longer than you thought. so nothing works out exactly the way you think it's going to and so um you put together things that are sustainable and they're not based that don't add extreme risk to your situation so in other words what i've talked to over the years brandon 35 years of doing this is i've talked to a number of couples who did something like you're talking about and then they think the arm is coming up and adjusted and then they had a child that had some needs and they weren't able to continue with their income increases for a period of time because they had to take care of the kids' needs. And they get stuck, and then they get hammered. The thing adjusts and they can afford to stay and they end up selling the house to keep from losing it and become a renter again because they took a step back in the mother may I game because they move forward without permission if you remember that yeah and Brandon let me encourage you I mean every you obviously a well thought out guy you're trying to look at the path of least resistance in your head I hear what you're doing you know you're looking out this angle yeah but I just want to encourage you Brandon what's going to make you guys win with money it's you guys it's not these like small we're going to finagle the system and get this and that. I'm not kidding. If you just do really boring, common sense stuff with money, live on less than you make, don't carry debt, invest in your retirement, pay off your house early, and you guys make an insane income and you just do those things. That's all you got to do. That's all you have to do. You don't have to try to shave a half a point here. Optimize a quarter of a point there. Yeah, so Ramsey is, I mean, like our principles and what we talk about on the show, because you've listened, it's pretty boring to guys like you. There's other podcasters out there and they're finagling this and this and okay, we can get the spread here and they're doing this. I mean, but the amount of mental calories and how it actually ends up really truly working long-term doesn't end up like that. And so people that follow this plan, while boring, right? It's not exciting. It's not the new thing. The amount of peace, you're solving for peace. This is what it is. And when you do that and you do common sense things and you don't try to make it all complicated, it's an enjoyable life. It really is. I hear what you're saying and what you're doing and I get it. And I think there's like the math nerds out there and they love this stuff. But I'm telling you, people that win with money long-term, it's them. They're the reason they win. It's not this system that you kind of rig here or there. Yeah, to verify that, Rachel, Brandon, And you're obviously brilliant. I mean, the questions, the way you formed your sentences, you actually know what you're talking about, which is rare. Sometimes I get people asking these questions that you're asking and they don't know what they're actually saying. They just heard it on TikTok. But you actually know what you're talking about. And that's going to work against you if you're not real careful. You're going to analyze your way into paralysis of the analysis if you're not careful. So do that. So I'll give you another example of what Rachel's talking about, Brandon, and the data. Because what we keep following is the data of what actually works, not the theory of a think tank math. Right. It's not math think tank. Right. Okay, so here's the data. The people that end up with a million dollars in their 401k did not pick on average did not pick the best possible mutual funds They picked a subpar mutual fund There were plenty of funds that outperformed what they picked. Now, they didn't pick the bottom 20%, but they didn't pick necessarily the top 20% of funds out there. They were somewhere around that 80 percentile. And so I'm looking at that going, you missed it, you missed it, because I'm a math nerd like him, right? And what the data says, and this is that what they find is that what they did do is exactly what you're talking about. They weren't that great at picking the right fund. But what they did do was they never missed a month. Consistency. Forever. No matter what. They put money in their 401k. Every stinking month. prom dress transmission goes out kids sick dogs got cancer every month they put money in every month it's up markets down what they didn't underperform in was consistency yeah they over indexed on consistency and they under indexed on fund choice and that's an example of what you're talking about they really weren't that mathematically savvy or mutual fund savvy they just were consistent versus the amount of people that don't do anything and they have theories of what they may want to do but they know or they try this little thing and then they try this other little thing and then they try this and they're always scheming and scamming trying to cut a half yeah and it's the same thing about paying off the house we get that call all the time if people have you know eighty thousand dollars left on their mortgage and they got ninety thousand sitting in some fund over here and they're like yeah but i could be making x amount and the amount of people we've had at live events, people here, I mean, that were around that we asked the question, those of you that paid off your house, raise your hand. And we'll have an auditorium of 2,000 people. And at some of these events, it's like- Five, 600. Yeah. I mean, there's a lot of them. And we say, okay, keep your hand up if you regretted it. Who regretted paying off their house? None. None. Zero. Never. So again, that's not in a formula, but I'm telling you, like when you solve for peace, as Dr. John Deloney says, with your money, that is worth it. That's worth the small percentage point here or there because you have peace and you sleep good at night and you have a happy family and a wonderful new marriage and little babies and it's great and it's great it's okay to wait a year after marriage to buy a house too by the way create your free every dollar budget today the simplest way to budget for your life
