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Well good news for me since I paid off my mortgage. At 43 I'm now completely debt free with a paid off SFH and cars. Credit cards are paid off every month.
I had recently sold a house I owned with my brother. With my proceeds I used that to pay off the mortgage with a wire transfer. I'm reserving some funds to extend my driveway and for projected capital gains taxes since it was not my primary residence. The rest is sitting in SPAXX till I decide on how to deploy it.
I have redirected some of the funds to increase my monthly contribution to Roth and brokerage accounts. My workplace retirement account has a healthy balance and I put enough to get the match. I don't want to increase there as I feel I have a lot of money tied up in retirement accounts and my goal is to retire at 56. I'll have access to a 25yr pension then.
Feel free to make any suggestions on the allocation. I currently manage my investments myself with 38% of my net worth in my workplace retirement account, 17% in brokerage and 4% in my Roth. I have about 10k in a HSA but I can no longer contribute to it since I don't have a HDHP. I have 12m emergency fund.
My brain doesn't do math well. Presuming you had a loan with a decent interest rate, is the return from paying it off greater than the return you'd get if you'd continued to pay the mortgage and invest the remainder?
My brain doesn't do math well. Presuming you had a loan with a decent interest rate, is the return from paying it off greater than the return you'd get if you'd continued to pay the mortgage and invest the remainder?
Math doesn't support me paying a 1.875% interest loan, but I'm just done seeing the balance. For a while I was paying extra on the loan, but when interest rates went up I just started banking the money in Ally. Personal finance is more about math, sometimes it's emotion driven.
Mortgage was under 40k so really not generating a lot of interest as well.
Math doesn't support me paying a 1.875% interest loan, but I'm just done seeing the balance. For a while I was paying extra on the loan, but when interest rates went up I just started banking the money in Ally. Personal finance is more about math, sometimes it's emotion driven.
Mortgage was under 40k so really not generating a lot of interest as well.
Makes sense, focusing on eliminating the fixed monthly payment thus increasing the cash flow, makes a lot of sense. As you mentioned, with balance less than 40k, there is not a lot of difference. Now that you are free from making such monthly payment, you can redirect the extra cash flow to something else that is productive.
Makes sense, focusing on eliminating the fixed monthly payment thus increasing the cash flow, makes a lot of sense. As you mentioned, with balance less than 40k, there is not a lot of difference. Now that you are free from making such monthly payment, you can redirect the extra cash flow to something else that is productive.
Increased cash flow was a component in my decision. Without a mortgage payment, my emergency fund went from 6m to 12m overnight.
Internet "experts" will often tell you that you're better off continuing to pay a low interest loan and investing the money at a higher rate. Unfortunately that advice has two issues, one technical and one psychological. First of all, it only works in a period of low inflation and low interest rates plus a regularly rising stock market. Well, those days are gone, probably for a long time. Secondly, while it sounds like a good plan, what actually happens for a large number of people is that they proceed to spend the money rather than investing it in those (hopefully) higher-return vehicles.
On the other hand, a paid-off loan will not require payments when you get laid off, or incur some kind of large unexpected expense.
Everyone has their own philosophy of personal finance. A very large part of mine, motivated by my years of experience in for-profit businesses, is "always strive to reduce fixed costs." If you have no debt and low running costs, you can weather a period of low or zero income a lot better than the person whose debt service and other fixed costs require a high income. There are an awful lot of high income people who are still living paycheck to paycheck.
Internet "experts" will often tell you that you're better off continuing to pay a low interest loan and investing the money at a higher rate. Unfortunately that advice has two issues, one technical and one psychological. First of all, it only works in a period of low inflation and low interest rates plus a regularly rising stock market. Well, those days are gone, probably for a long time. Secondly, while it sounds like a good plan, what actually happens for a large number of people is that they proceed to spend the money rather than investing it in those (hopefully) higher-return vehicles.
On the other hand, a paid-off loan will not require payments when you get laid off, or incur some kind of large unexpected expense.
Everyone has their own philosophy of personal finance. A very large part of mine, motivated by my years of experience in for-profit businesses, is "always strive to reduce fixed costs." If you have no debt and low running costs, you can weather a period of low or zero income a lot better than the person whose debt service and other fixed costs require a high income. There are an awful lot of high income people who are still living paycheck to paycheck.
Great points, I completely agree. I think that's why so many are attracted to Ramsey's debt snowball idea, because those small wins create momentum, and people who once viewed their situation as hopeless can then see that they can take control and make better decisions.
Great points, I completely agree. I think that's why so many are attracted to Ramsey's debt snowball idea, because those small wins create momentum, and people who once viewed their situation as hopeless can then see that they can take control and make better decisions.
I used the snow ball method a bit on my debt payoff. Car note was the lowest balance so targeted that first. Once that was gone, I redirected those funds to pay off the house faster. My goal was to pay off the house by 2025 anyways, so I was able to meet that goal early.
I use Mint to track my progress and it was nice seeing the graphs of my progress.
Now I have to figure out my next goal...
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