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Dave Says: Saving Before the Mortgage?

by | Jun. 07, 2011

Finances

Dear Dave,

Why do you recommend saving before paying off your mortgage? I’ve always thought of a house as a liability that should be paid off as quickly as possible.

Mark

Dear Mark,

You’re off base on this one. The truth is that a house is an asset, and the mortgage is a liability. That’s straight from the pages of Accounting 101. There are folks out there who will try to tell you a house is a liability, because it costs you money. In fact, that house will make you more money than it cost when you sell it, so it’s an asset!

I’ve met 70-year-olds with houses that are paid for and no money in the bank. It’s a really sad situation. That’s why I want people to work on having an emergency fund and 15 percent of their income going into retirement first. Then, take everything above that and put it toward paying off the house as fast as possible.

But don’t believe all this stuff about a home being a liability. It’s just not true!

—Dave

* For more financial help please visit daveramsey.com.
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