Dear Dave,

My husband and I are on Baby Step 2 and have paid off approximately $ 30,000 in consumer debt since March. We were wondering if we should refinance our mortgage. Our current rate is 4.875%, with 28 years remaining on the loan. We found a 15 year refinance at 2.5% which would increase our monthly payments by about $ 200, but we can handle that. We have $ 150,000 in equity in our house and approximately $ 207,000 is left on the loan. What do you think we should do?


Dear Raye,

You did a great job this year! I am so proud of what you have accomplished and that you are looking to the future.

Baby Step 2 would not be affected except that your monthly mortgage payment would go up a bit. I wouldn’t pay the refinance fees out of pocket, however. I would include them in the loan. You would save over 2% by locking in that insanely low interest rate, and you reduce it all down to a 15-year loan. I like it all. It’s definitely worth the extra $ 200 per month to make it happen.

Think of it this way. You will save more than $ 4,000 per year thanks to the reduction in interest rates. You’re not going to see it in the cash flow because of the $ 200 increase in monthly payments, but over the span of the loan, you will have to pay between $ 4,000 and $ 4,500 less per year for interest. All of this money will be used to pay off closing costs and reduce the capital built into the move from 28 to 15 years.

Yes, you should do that!


Which one comes first?

Dear Dave,

I just saved my $ 1,000 Beginner’s Emergency Fund and plan to pay off my car and credit card debt – a total of $ 3,400 – by the end of January. Before starting your plan, I took out a student loan of $ 7,500 to pay for my fall and spring semesters. I still have one year of school left, which will cost about $ 10,000. Do I need to save money for my final year before tackling my student loan debt, so that I don’t have to take on another or start paying it off?


Dear Emma,

Well, it doesn’t make much sense to pay off the current student loan and then turn around and take out another one. Your first goal – after you’ve paid off credit cards and the car – should be to save money to finish school. Once you’ve done that, start paying off the student loan.

In short, you need to stop borrowing money. The idea of ​​saving to pay for things should be your brain’s default setting, Emma. Otherwise, you’ll be spending the rest of your life with car payments and other debts that hang around your neck. It’s not about being responsible for your money, and it will prevent you from saving for things that matter and getting rich.

Stop. Loan. Money. I hope I was not clear.


Dave Ramsey is a seven-time national bestselling author, personal finance expert and host of The Dave Ramsey Show, heard by over 16 million listeners every week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992 Dave has been helping people take back control of their money, build wealth and improve their lives. He is also CEO of Ramsey Solutions.