Dear Dave,

I just read The Total Money Makeover, but I’m still unclear as to why you recommend saving for an emergency fund and retirement before paying off your home. Shouldn’t a house be paid off as quickly as possible, since it’s a liability?

Mark

Dear Mark,

I appreciate the fact that you’re asking questions and thinking things through. But please don’t fall into the trap of thinking of your home as a liability. That mindset is way off base, in my opinion.

Your house is definitely an asset; it’s the mortgage that’s a liability. Some folks may try to position a house as a liability simply because it costs you money. But the truth is your home will make you more money than it will cost you over time. Therefore, it is an asset.

Some of the saddest situations I’ve seen in all my years of teaching are seniors who have paid-for homes and nothing saved or invested. Money isn’t the most important thing on earth, but it is a fact of life. That’s why I encourage people to build an emergency fund of three to six months of expenses and begin saving for retirement before they tackle paying off their homes.

Then, after all that is addressed, take every dollar you can scrape together and put it toward paying off your mortgage as fast as possible. Good question, Mark!

— Dave