Dave Says: Investments Using Home Equity?

by | Oct. 04, 2011


Dear Dave,

Right now our debt is keeping us from investing. Do you recommend making investments with a home equity line of credit?


Dear Paul,

Let me answer this very, very carefully. No!

You don’t borrow on your home, Paul. You never want to put something as precious and important as your home in jeopardy just for the sake of investing.

Follow the Baby Steps. First, get $1,000 in the bank to start your emergency fund. Second, pay off all debts from smallest to largest – except for your house – using the debt snowball. This will lead you to Baby Step Three, which is fully funding your emergency fund with three to six months of expenses. Once you’ve done all this you’re ready for Baby Step Four, which is investing in Roth IRAs and other pre-tax retirement.

When you’re debt-free except for your house, you’ll find investing is easy because you’ve freed up your most important wealth building tool – your income!


For more financial help, visit daveramsey.com.

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