I posted a hypothetical question over on the Bend Economy Bulletin Board. It was the direct result of a conversation with a buddy. I am always of the opinion that the more voices I listen to, the better my decision will be. And would encourage anyone who is interested in their financial future to think about using the forum to ask questions. Plus, there are several smart people who frequent it, so that helps.
Keep in mind, no one is saying you have to actually use the advice. So ask yourself “what can it hurt?”
Yeah, yeah, yeah.
What about future inflation? What about tax benefits, no matter how small?
What about discipline? You HAVE to pay your mortgage. All well and good to think you’ll apply the difference, but that may not be what happens.
If you stuck 100k into the house and the stock market went up to 14,000 again, you’d feel pretty stupid.
If you stuck 100k in the stock market and it crashed to 6,000, you’d feel even stupider.
So what will it be, boy? huh, huh?
What if you know you’re going to working hard for the next 5 years or so, no matter what you do, and you know you can pay down the house pretty quickly through working toward it. To me, letting the money work while you work, and working toward paying off the house because you’re working makes the most sense.
So…my answer.
Half and half. 50k to the house; 50k to the investments.
Wimp.
“What about future inflation? ”
Real Estate can be a great inflation hedge in my opinion.
“What about tax benefits?”
Here is a real simple way to put it, assuming you are in the 25% tax bracket.
For every dollar you give me, I will give you a quarter back. Sound like a deal? No?!? I didn’t think so either. So how come when the numbers are bigger, and the tax break feels bigger, people still can’t figure this out?
“You HAVE to pay your mortgage?”
Dude, look around, no one is paying their mortgage. Paying your mortgage was soooooooooooo 2007.
“If you stuck 100k into the house and the stock market went up to 14,000 again, you’d feel pretty stupid.
If you stuck 100k in the stock market and it crashed to 6,000, you’d feel even stupider.”
I would have to go in the risk and debt averse direction, which would be paying off the mortgage. Especially if I was over the age of 50. I would want the SURE bet. Effectively making 5.85% off of myself.
“To me, letting the money work while you work, and working toward paying off the house because you’re working makes the most sense.”
This should read “…letting your money have the CHANCE to work…”
Again, one is a sure bet, the other is not. And I think it is all about managing risk. The less the better, and so paying off the mortgage makes the most sense to me.
And I’ll end with this.
“All well and good to think you’ll apply the difference, but that may not be what happens.”
Getting into the habit of putting something, no ANYTHING into savings needs to be a developed character trait from the moment you start handling money. So when the time comes, redirecting the monies that once were used for a mortgage payment will be a no brainer. If you don’t have the financial diligence to manage your money and your payments, then to me, you’ve already lost it. It is just a matter of time.
“If you don’t have the financial diligence to manage your money and your payments, then to me, you’ve already lost it. It is just a matter of time.”
Yeah, well.
I could hope I’d do better now. But….
I am sure you already do better. Think of all the battle scars from the bubble years (Cards, Pogs, etc). No way in hell I can see you losing those lessons learned. And I really don’t see you wanting to live in that reality again either. At least that is what I feel after reading your thoughts on your blog.