Pay off your mortgage first

Many financial advisers feel strongly about investing more heavily than paying off your mortgage faster, especially if your APR is low (<5.0%).  Fortunately, I have a super low interest mortgage at 2.99%, but I still feel strongly about paying off my mortgage as quickly as I can before investing the bulk of my money into other areas.  As of right now, I am getting a 5.5% return on my 401K investments.  This is a 2.51% difference between my mortgage APR and return on my 401K.  For each $100K dumped into my mortgage, I am losing an additional $2,510 gain per year if I would have invested it.  In my opinion, the $2,510 loss per year is worth the peace of mind of paying.

On occasion financial advisers will say at your young age, you should be in a riskier portfolio that can yield higher returns.  If you lose your money today, you still have plenty of time to recoup because you are young.  Yes, at 32 years old I do feel young.  No, I do not want to take risk in losing my hard earned money.  The plan is to get my mortgage paid off by 37 years old, which is statistically early in comparison to the rest of America.  Today, we have individuals in their 50s and 60s still with mortgages.  I do not want to follow the majority and want to be an outlier when it comes to paying off my mortgage.  I do think others should also focus on paying off their debts as quickly as they can.

If more Americans paid off their debts instead of putting themselves further into debt, we would have a much better economy.  I do think everyone would be in a much better position financially because there would be less financial liability in this country.  I understand financial advisers feel strongly about investing more and think about paying your debts after, but I do not agree.  I also do not gain commission from others financial moves.  I also am not an expert on this topic, but I do think logically.  No debt = good.  Debt = bad.  It doesn’t get much simpler than this.

Other forms of debts include credit card debt, student loans, auto loans, and so on.  There are more ways to end up in debt than get out of debt.  There are so many things to spend your money on and less ways to earn money.  We constantly flow money out into different buckets and typically only have one path of money coming in, which is from your employer.  Think about cutting your costs, buying only what you need, and remain satisfied without the meaningless frills of life.  Just a few more thoughts on financial stability.

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