an early mortgage payoff discussion

On Sunday morning, Yahoo! featured this story about whether or not paying off your mortgage early was a sound financial decision. For you Janey's-come-lately that click after Yahoo! changes the link, the ultimate conclusion of the author was that an early mortgage payoff was a poor financial decision because your money would make a better return in even a mildly aggressive retirement account.

As soon as I read the headline, I knew I would disagree. But, I gave the author her fair chance to persuade me & I'm still unconvinced. Here's why.

Above all, I think the author assumes that everyone has the same goal as she does -- to accumulate a lot of money. (She also assumes that everyone who pays extra toward their mortgage principal has a payoff goal of 25 years as opposed to 30. I'm not sure why she makes all these assumptions.) Personally, my goal is not to accumulate a lot of money. My goal is to do what I am clearly called to do, which is to take some financial responsibility for my family's well-being while still filling my daughter's proverbial cup (as Dr. Sears describes) and taking control of our children's education by homeschooling. These goals are much easier to achieve when you don't have that niggling mortgage payment sucking up over a quarter of your net income.

I would venture to bet that although the majority of Americans probably don’t have homeschooling as their top priority, they very well might list freedom. In fact, I would venture to bet that if the majority of Americans were given the choice between loads of money handed over at age 65 or the ability to spend the last 10 years of their working career doing whatever job they choose and not being a slave to the man, they would choose the latter. It probably didn’t occur to the author because, well, authors are usually pretty happy with their professional life since they already have the gig that fulfills them. A writer is a writer from the day she’s born.

The other huge reason that I disagree with this article is that it violates one of our family’s basic principles: always be prepared. If you did get to the link before it disappeared, you probably read the author’s assertion that this silly early mortgage payoff business started during the Great Depression, when over 25% of the population was unemployed. This little factoid is presented as if it is completely contrary to modern economics.

Have you all been paying attention to the unprecedented deficit the current administration is racking up? What do you think it’s going to take to pay that back? Have you also been paying attention to the percentage of tangible American goods that are being produced out of this country? And how most American middle- and upper-class workers specialize in intellectual, intangible goods & services, mostly dependent on a giant web of marketing, rather than any tangible items? What would happen if the public didn’t buy into that marketing scheme anymore? Is it being a chicken little to assume that another Great Depression is completely possible...or even probable? I think it’s naive not to.

So how’s that retirement money (you know, the money that you can’t touch without penalties of 10% or more, if at all) working for you when the bank is seizing your property and leaving you without shelter for your family? And even worse, what happens when that high-return (read: risky) account crashes and you don't even own the land your home sits on?

It all boils down to what your goals are. If you love your job, would love to retire in that field & your biggest goal is either to accumulate wealth for its own sake or to make a major purchase of some sort, then your best bet might be to funnel your extra funds into a retirement account. But, if your career is low on your fulfillment list & you could see yourself doing a hundred more interesting things before you die than what you do for 40 hours every week, don’t base a lifestyle decision on the numbers and the math. And don’t be satisfied with cutting just 5 years off your mortgage.

If you value security & freedom over wealth, here’s my advice: first, build yourself an emergency fund of 6 month’s bare bones expenses. Next, pay off all your creditors. When allocating your money to different creditors, be sure you can allocate at least enough money to those persnickety credit cards so that they will be paid off in no more than 2 years. If there’s any money left over, put it toward your mortgage. Not just once a year, but every single month. And of course, make do with what you have, now and for always, and never, ever rack up any more debt for depreciating items. In the end, you’ll be sitting in the exact position that most people dream about, even if it’s not what pads your investment portfolio.

Get Moving: I can’t say it enough. You must figure out what your goals are or you could have all the money in the world and it would be useless.

Here’s some keywords to think on...do you value your time? Traveling? Your home? Your career? What would you change if you could? Your job? Your self-esteem? Your experiences? Your time (or lack of time) for family, church, hobbies? I truly believe we all know what we’re called to from the time we are very little. Sometimes we forget or push it away, but deep down we know. That thing you keep coming back to? That thing you’re probably thinking of right now? That’s it.

Keep reading this site and you will get there one day, because once you get the financial monkey off your back, just about anything worth acquiring is possible.

Annoying but necessary disclaimer: All information contained herein express my opinions only and are based on my health status & location. Each person's situation, health, and local laws & ordinances are different. By all means, use your own common sense & don't do anything you see here if someone more important than me (like your doctor, your local police, your own conscience) would disagree. If you're easily persuaded by everything you read, and you think I might cause you to hurt yourself or break the law, quit reading my site, please.