Good morning Dinks. As a financial planner one of the most frequent questions that I am asked by clients is “Should I save for retirement or pay off my mortgage?” The easy answer is you should do whichever options saves you more money or makes you more money. But the truth is that it is a much more complicated question than that.
Both options have their advantages and disadvantages and as with everything in financial planning there is not one answer that applies to everyone. One option can save you a lot of money on interest charges and the other option helps you save money that you can use on other goals such as going on vacation. You answer to this always outstanding financial question depends on your personal financial situation because just like with everything in financial planning there is no one right answer for everyone. If debt drives you crazy then maybe you should pay off your mortgage, but if have other financial goals then maybe you should save money on a regular basis.
If you and your spouse are deciding whether to pay off your mortgage or save money ask yourself these three questions:
Which option is in line with your goals? Maybe your couple’s goal is to save money and take an exotic vacation every year. If you don’t have enough free income to save money and make extra payments on your mortgage you will have to prioritize your goals. I love travelling and I honestly believe that people will most likely have some type of debt throughout their life. So I prefer to save money and go on a couple really great vacations every year and keep my debt at a low interest rate on my mortgage. If I can keep my credit card payments to a minimum, keep my debt limited to a mortgage and travel to new places I will be a happy camper.
Which option is better for your mental health? Some people just can’t sleep at night if they have debt; if that sounds like you then your goal is probably to pay off your mortgage as soon as possible. I always love reading about people who increase their monthly mortgage payments, double up on payments and take advantage of the prepayment option. I always think to myself “WOW those people are really disciplined.” I personally don’t want to sacrifice my lifestyle just for my home but I have to admit that it would be nice to be 40 and not have to worry about making a monthly mortgage payment.
You can always do both. With the right financial planning you can save money for other financial goals and still make payments to pay off your mortgage as quickly as possible. Maybe you can increase your regular monthly mortgage payments to help pay off your mortgage sooner and at the same time save money for your other goals. I am a huge believer that we can achieve multiple goals at the same time if they are realistic. Maybe you can’t afford to pay an extra $20,000 on your mortgage every year, but that doesn’t mean you can’t afford to pay $10,000.
Do you prefer to save money or pay off your mortgage?
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