If you’ve been given the advice to pay off your mortgage as first priority do you know why.” While having no more mortgage payments to make every month would be nice, it may not be best for you until your other debts are taken care of. It’s not unusual for you to get the same advice on paying down the mortgage from your parents, who heard it from their parents. Does it sound like good advice to you?
First, you should understand where that advice came from and why.
Your parents or grandparents may have known or seen someone lose their home to the bank during the depression.
That was a historic time that left it’s impressions for generations to come. Now you can understand why they give you the advice they do. For them it is the only way to be secure. Fortunately you can no longer be forced to pay off your mortgage on demand like before.
Looking at how much we pay compared to how much they paid.
Decades ago when our parents or their parents were buying homes, the homes were selling for -,000 or even less. They usually had jobs they gave them a full pension, job security really existed then, and they often worked at the same company for up to 30 years. They generally had no credit cards or carried a small amount of debt compared to the average today. Credit cards had very little popularity back then and few had them for personal use. New cars were usually between 00-00. Their medical costs were a fraction of what we see today too.
Look at our costs now just 2 generations later. Today you will find house prices running from just under 0K to over several hundred thousand. Most likely you will change jobs, or even your career at least a few times by retirement. You can’t expect guaranteed job security today. No matter what size the company you’re working for is. Most companies are at risk in today’s market. Even owning your own business is no guarantee that you’ll be safe.
You can almost forget about a pension these days. A 401k with vesting is about all you can hope for. Like many, your 401k isn’t growing fast enough due to inadequate contributions. People typically decide on how much to pay into their 401k based on how much they want to spend today and not on how much they will need in retirement.
Previous generations may not have had any credit card debt, or very little of it if they did. And if they were carrying a credit card balance it was a fraction of today’s average. We often see families with credit card debt running rampant in addition to 1 or 2 car loans carrying a debt load of well over K.
Are you getting a different view on this yet?
Let’s pay another visit to the “pay off your mortgage” advice now. I do believe in paying off your mortgage but not until you can justify it after reviewing all of your finances. Getting started, a mortgage can give you a great tax deduction for years you can enjoy while focusing your debt strategy on other more expensive debts you don’t have a deduction on. Unlike compounded interest credit card debt, your mortgage is based on simple interest. The mortgage is often referred to as your “cheapest debt” because of these two factors.
Debt from credit cards can cost you tens of thousands or more in retirement income you aren’t building. It grows quickly and can make you give up dollars today that cost you tens of thousands in retirement later. Rates can hit up to 29% and fees can cancel your progress. You no longer have the write off for it you used to either.
Focus on a debt strategy that will help you get ahead and you may find it also provides you with something unexpected. Around a third of your credit score is made up of revolving credit, which includes compounded interest rate credit cards. So accelerating the pay down of this debt can also benefit your credit score faster than normal.
Let’s continue on and try to decide on whether it’s better to have no more mortgage or focus elsewhere.
You need to include this in your overall strategy.
Are you ready to take you’re retirement needs into consideration? You are in a small club if your retirement fund is keeping pace with your projected income requirements in retirement. It has been estimated that less than 10% of us will retire with an income that will enable us to enjoy the lifestyle we hope for in retirement. It’s not unusual for someone that is retired to have difficulty writing a 0 check. Is that the way you want to live when you retire?
If your retirement fund is falling behind you’ll need to look at whether you need to send extra money towards it instead of the mortgage after your other debts are paid off. Then you need to get a retirement planner or financial planner to help you identify your needs and figure out how to get there.
Don’t get your advice from friends and relatives. The reason I say that is your immediate circle is often in the same place you are financially. It is not unusual to spend time with others that have the same problems that we have.
That mortgage pay down advice isn’t sounding the same as it was before is it? Your life is much more complicated than it was for your parents, who also didn’t have the same high costs or debt loads you do. There is a lot to consider before deciding on what to do.
You don’t know this and it’s hurting you.
Now you want to figure out how much your debt is going to cost you so you know where you really stand. Every single debt you have. Almost no one does this the right way, why do you think that is? I wish you could just count up the statement balances, but it doesn’t work out. You aren’t capturing the total interest and number of payments it will take to pay it all off. Here is a way to get what you need without having to pay for it.
You can get a debt analysis at no cost or obligation on paying off your debt and having no more mortgage here that will show you exactly how much your debt is going to cost you based on how you pay everything today. It will also show you how much you can save by looking at options and doing things differently. Provide the basic information needed and ask for your personalized debt analysis.
You’re building your future today so you need to be as informed as possible on your finances and debt. Knowing how much debt you really have causes you to spend less and watch your money better. Get your analysis and take a good look at where you stand and start making better decisions in regards to your finances.
