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Just saying. That over a great many decades of investing, returns on a moderately conservative portfolio have averaged about 7.5%. My mortgage is under 4% fixed for 30 years. Some people are not investors, do not understand investing and always seem to have "reasons" that investing is a poor idea. As I stated before for those individuals it might be best just to pay off even low rate mortgages.
I am always amazed at attitudes towards investing. Even my illiterate grandfather, from the hills of northern Italy, talked about having your money work for you. He invested his meager excess income in land and later in buildings. He made a living with his hoe and died wealthy due to investing.
Just saying. That over a great many decades of investing, returns on a moderately conservative portfolio have averaged about 7.5%. My mortgage is under 4% fixed for 30 years. Some people are not investors, do not understand investing and always seem to have "reasons" that investing is a poor idea. As I stated before for those individuals it might be best just to pay off even low rate mortgages.
I am always amazed at attitudes towards investing. Even my illiterate grandfather, from the hills of northern Italy, talked about having your money work for you. He invested his meager excess income in land and later in buildings. He made a living with his hoe and died wealthy due to investing.
I think you missed my point, friend.
I'm talking about how things change over time. In yesterday's market, you'd be completely correct. My mortgage rate is 3.5% and my hands-off investments do much better than that 3.5%.
Roll back to the time I was talking about before. Mortgage rates were higher (6.5 to 7%) and the market was dropping.
And you might say "Yeah, but that was the past. I'm talking about now!" But you'd actually be talking about the last 7 years of prosperity with low interest rates and high market returns. We don't know what will happen in the next 7 years. Mortgage rates are tipping up and recently the markets are floundering about. For someone in their 20s 30s or 40s, it is a pretty safe bet that the market will go up in the long term. If someone has locked in a low interest rate (4% or lower), they might be better off investing that money.
However, nobody knew that in, say.. 2009 that the market would go up 3 fold in five years. Like I said before, any idiot could make money in the market in the last 9 years. Paying off non-mortgage debt is still a good bet if you ask me. After that, test the market if your other interest rates are low enough.
There might be a post 7 years from now talking about how we all should have paid our debts instead of dabbled in the market because it dropped 50% over that timespan. We don't know the future.
Those are pretty low interest loans that I would just put small additional payments on to reduce the length of them. But both of them if you include the tax deduction of the mortgage are likely below inflation.
Theoretically the future dollars you will be paying with will have less purchasing power in the market at that time, but it maintains it's purchasing power within your loan since payments are fixed.
If you include the tax deduction of the mortgage are likely below inflation.
That was true up until Jan 1 2018. Unless your mortgage interest is enough to push your itemizing above 12k or 24k, there is no tax benefit anymore. But that depends on your filing status, your interest rate, what else you are itemizing, etc.
But, it makes the deduction less valuable than it was. In other words, that interest you are paying towards your mortgage has little tax value to you now. It is merely money you spend for the privilege of the bank lending you the principal.
Sadly, for some people, they will always be in debt. For them, I think it is better to invest SOMETHING that will grow for them rather than them never getting to the place where they invest.
I don't really think it causes them to get into MORE debt - they just have a tolerance for debt and even when they pay it down if it gets below a certain level they are comfortable with spending a little more. So, pay on your credit cards but invest as well or you never will. It's not ideal but it is the end result that matters not that you do something "by the book".
That was true up until Jan 1 2018. Unless your mortgage interest is enough to push your itemizing above 12k or 24k, there is no tax benefit anymore. But that depends on your filing status, your interest rate, what else you are itemizing, etc.
But, it makes the deduction less valuable than it was. In other words, that interest you are paying towards your mortgage has little tax value to you now. It is merely money you spend for the privilege of the bank lending you the principal.
That is true moving forward and I see most people taking the easier standard deduction. The auto loan is still below inflation though, and there is really no reason to pay it off early. Would you pay off a 0% loan earlier? Even at 1.75% you will pay more in value by paying it off early.
The mortgage is close, so would take a closer look at opportunity cost of not investing. Additionally there is the risk of locking money in an asset that cannot easily be accessed for use elsewhere. This one could come down to preference of wanting to invest vs not wanting to hold debt.
That is true moving forward and I see most people taking the easier standard deduction. The auto loan is still below inflation though, and there is really no reason to pay it off early. Would you pay off a 0% loan earlier? Even at 1.75% you will pay more in value by paying it off early.
The mortgage is close, so would take a closer look at opportunity cost of not investing. Additionally there is the risk of locking money in an asset that cannot easily be accessed for use elsewhere. This one could come down to preference of wanting to invest vs not wanting to hold debt.
0% No, I wouldn't pay that off early. 1.75%? I probably still wouldn't pay that off early.
There are many factors. I'm not against investing vs paying off debt. The right answer is somewhere in between. What interest rate is on the debt and what the debt is. If I had student loan debt @ 1%? I'd take as long as they'd allow me to pay it off.
But if I had student loan debt, unforgivable debt at say... 6.5%? I'd get that paid down earlier. That doesn't mean I'd invest nothing in the meantime. The chances of beating the market @ 6.5% isn't guaranteed. And there is nothing I can do to get that debt forgiven any other way. It isn't like I can sell my house and recoup that equity. There is no equity in a student loan and no way to get rid of it. And even worse, student loan interest caps at $2500 (well, this was before the tax reform). I don't know if they changed it, but I know it is an itemized deduction. So, If you are paying student loan interest still and you can't itemized, you are getting zero tax benefit from it.
I don't know what exactly the cut-off would be, in terms of the interest rate. My student loan payment from the early 2000s is a joke today. I chose not to pay that down quickly and instead used that to invest. In that respect, that was a smart decision, in my opinion.
I had a car loan at 8% or so. It was hard to get a loan in 2008 when no one was liquid. I paid that down in 4-5 months.
Investing instead of paying debt works great as long as you are able to bring in an income. I know someone who disc issue in his back he is on disability lucky for him his home was paid off his monthly bills are low. I don't have any kids so tax is always higher for my wife and I we are both higher end of middle class my low mortgage interest rates have lot of tax returns where I end up with the standard deduction all. I'm guessing people who reply here probably have 2-3 kids have a nice tax credit just assume I also have children most tax years I actually owe a $3000.
Twice I've had my debit card compromised and drained my checking account.
Do you have any idea how that happened?
What was the weakness or mistake that allowed anyone to drain your account?
Quote:
Originally Posted by Larry Caldwell
... The people who got hurt in the last recession were the ones who decided they were upside down on their mortgage and just walked away, or who saw the market in free fall and bailed instead of riding it through.
That is not true.
During the Recession my tenants lot their jobs, they stopped paying rent and moved away. I was suddenly stuck with mortgage payments.
I did not 'decide' anything.
I was screwed with mortgage payments far beyond my pension income.
Get out of debt.
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