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I don't get the CC fear either, and I speak of someone who racked up quite a bit of debt in my younger days and saw first hand how interest can destroy you. Live and learn, and I did. Now I've taught my kids, and showed them how it works with real life examples. I was excited for them to get their first CC and have seen how they use them wisely. It's just one of those things you either learn how to do or you don't I suppose.
Whoa! When did the thread turn down the road of "fear of credit cards"???? I don't recall reading any post where someone said they had a fear about them. Talk about a thread going south!
Whoa! When did the thread turn down the road of "fear of credit cards"???? I don't recall reading any post where someone said they had a fear about them. Talk about a thread going south!
Seconded. I sincerely doubt that most people who choose not to use credit cards have a "fear" of them. I think most non-users just see them as one more piece of clutter in their lives regardless of the potential benefits. To each his own.
I also think it's ridiculous to assume that anybody with no credit history has "something to hide."
So, I happened to be listening to Dave Ramsey today and a caller asks Dave
Caller: Should I pay off my mortgage?
Dave: How much do you owe?
Caller: Approximately $180k.
Dave: How much money do you have?
Caller: Approximately $350 - $425k
Dave: Why wouldn't you pay it off?
Caller: We're debt free except for our mortgage. If we paid it off, we would lose our only deduction
Dave: [after doing some calculations] So, you're telling me that you'd rather give the bank $8k so you can get $2,700 back from the IRS?
Caller: What was I thinking? I guess I have my answer
Dave: [in his typical smug voice] yeah, its really a very simple argument. I used to think the same way, until I saw the light.
I agree. If you have 425K sitting in a bank account and 180K mortgage then no brainer to have the house paid!!!
I agree. If you have 425K sitting in a bank account and 180K mortgage then no brainer to have the house paid!!!
What if the deduction drops you out of a higher tax bracket?
What if your mortgage is less than both the rate of inflation and your earnings in your investment account?
I have been consistently earning more than 5% in my investments.
My mortgage is 2.8%. It's also my only deduction besides my property taxes.
So...why would I pay it off?
What if the deduction drops you out of a higher tax bracket?
What if your mortgage is less than both the rate of inflation and your earnings in your investment account?
I have been consistently earning more than 5% in my investments.
My mortgage is 2.8%. It's also my only deduction besides my property taxes.
So...why would I pay it off?
So you would be willing to hang on to a $180k at 2.8% for mortgage a deduction?
What if the deduction drops you out of a higher tax bracket?
You would only pay the higher rate on your income in the higher bracket, not your entire income.
Assume a single person, income of $183,250 (ceiling of the 28% bracket) and a $5000 deduction. If you lose the deduction the tax rate on the $183,250 won't change; you will just have to pay 33% of the additional $5000 in taxes, or $1650. Personally I'd rather pay the $1650 in taxes than the $5000 in interest, maybe I'm just strange.
Quote:
What if your mortgage is less than both the rate of inflation and your earnings in your investment account?
I have been consistently earning more than 5% in my investments.
My mortgage is 2.8%.
This is a perfectly sound reason not to pay off your mortgage early.
So you would be willing to hang on to a $180k at 2.8% for mortgage a deduction?
Why wouldn't you? You always have the option of pulling the cash out of the investments and paying off the mortgage. You do not always have the option of pulling cash out of the home at a low interest rate.
So you would be willing to hang on to a $180k at 2.8% for mortgage a deduction?
Please see the second reason.
It's the more compelling of the two and the biggest reason I'm not paying off my mortgage right now.
The other reason is that I can't go back in time and make up the earnings in my investments over time.
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