I’m not against paying off mortgages. I’m not particularly in favor of it either, any more than I have a general opposition to, or support of, latex paint or front wheel drive.
Dave Ramsey is most certainly in favor of paying off your mortgage. Granted, he does consider it a special category of debt, setting it aside to be dealt with in Step 6 rather than in Step 2 with the ordinary stuff. But it’s still debt, and Ramsey takes no prisoners in his fight against that evil scourge.
Arguing against this is a little difficult because there are certainly cases and situations where paying off a mortgage is indeed the best course of action, and it is hard not to fall into the trap of framing the discussion as always vs. never rather than always vs. sometimes.
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Just to recap, in this (more occasional than I intended) series I am discussing Dave Ramsey’s Seven Baby Steps. I’m skipping steps 1, 3, and 5 because there’s not much to say about them. (They are, in order, $1,000 to start an Emergency Fund, 3 to 6 months of expenses in savings, and College funding 
for children.) I’m sure that if I looked carefully into these three I could find something to disagree with, but with so many other things to get myself upset about, I just don’t have the time.
I already did step 2. The official title of Step 4 is “Invest 15% of household income into Roth IRAs and pre-tax retirement.” Plenty there to get my dander up. Why 15%? Why Roth? And then there’s how Ramsey wants you to invest the money. Oh my. This may be a long post.
There’s nothing scientific about 15%. As far as I can tell, it’s just a number Ramsey thinks sounds about right. Ramsey does concede that a few percent higher or lower probably won’t kill you, but, at least in The Total Money Makeover, he doesn’t explain why 15% and not 10% or 20%. (Total Money Makeover has a chapter on each step and so is, along with his website, my primary source for his advice for this series.)
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Of Dave Ramsey’s Baby Steps, the one most widely discussed in the blogosphere and elsewhere is #2, The Debt Snowball. This is the step in the program where the participant pays off his non-mortgage debt. Even I can’t find a reason to say this is a bad idea, at least not in principle. If you want to improve your net worth, and you owe lots of money, then paying those debts down is almost certainly the place to start.
It is the way that Ramsey advises that you pay your debts down that is controversial. He instructs that you sort your debts and pay them down in order 
of size, smallest to largest. To his great credit, he concedes that this does not exactly make sense. It is, according to Ramsey, “more concerned with modifying behavior than correct mathematics.” (Total Money Makeover, p.111.)
Many money gurus give advice that makes sense (if it makes sense at all) only in the context of psychology, but few actually admit it. So Ramsey gets points there. But saying the math doesn’t quite work is a euphemism. This isn’t math, it’s money. If you want to pay off your debt as quickly as possible, or if you want to maximize your net worth, which amounts to the same thing, you should pay off the debts with the highest interest rates first. Period.
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My very unscientific survey of the personal finance blogosphere finds Dave Ramsey to be the most often cited guru. This is a bit of a difficulty for me, because of the major gurus he is the one with whom I am least familiar. For example, until last night I had never heard his voice. If you are wondering how that could possibly be, that’s because you didn’t realize how regional his appeal is, and you live in Ramsey Country.
I had to go on his website to hear his show. According to the site, it is carried, on tape delay, on an AM 
station in Boston. I’d never heard of the station before and it doesn’t come in on my radio. (Also according to Ramsey’s website, the show is not available in New York City, the nation’s largest media market, at all.) It is available on XM and Sirius, but even I am too frugal to pay a monthly fee to listen to the radio.
Turns out he sounds like a likable guy, somebody I wouldn’t mind having in the next seat on an airplane. This is in contrast to, for example, Suze Orman. On reflection, I think that the principal difference between Ramsey and Orman may be cultural. They have very similar core messages. But the Nashville-based Ramsey is Christian in the wholesome American family values way. The San-Francisco-based and gay Orman, who refers to herself as a “57-year-old virgin” is really not. Ramsey’s on-air persona is that of the amiable but firm wise uncle. Orman is the busybody mother-in-law.
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Two weeks ago Trent at The Simple Dollar had a post in which he quoted at length from a pretty hostile email attacking him for not having any particular qualification to give personal finance advice. Of course, to a blogger like Trent that’s a slow hanging curve, and he proceeded to yank it into the bleachers in post that got 225 mostly supportive comments.
His defense of his right to give advice was not “Hey, maybe I don’t have a lot 
of credentials, but I know what I’m talking about” nor “Look, I’ve been doing this for three years and more than 100,000 people read this blog every day, so my advice must be pretty good.” Instead, Trent essentially said what most bloggers say, that he is not a guru but an ordinary guy doing his best. “All I can do is share my experiences and what I’ve learned along the way.”
Similarly, in the Get Rich Slowly post that discussed this blog (and led many of you to discover it) my current hero j.d. wrote that he had been thinking of updating his disclaimer and had settled on borrowing the text from The Digerati Life:
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Dave Ramsey is most certainly in favor of paying off your mortgage. Granted, he does consider it a special category of debt, setting it aside to be dealt with in Step 6 rather than in Step 2 with the ordinary stuff. But it’s still debt, and Ramsey takes no prisoners in his fight against that evil scourge.
Dave Ramsey, Gurus, Housing | Frank Curmudgeon | 
April 22, 2009 2:12 pm | 
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