Pay off mortgage vs. investing

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image of a house

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Conventional wisdom tells us that we should be maxing out our Roth IRA, Roth 401k (if we have one) to take advantage of employer matching (if your employer does that), and investing everything remaining beyond our living expenses. My take on that advice is that conventional wisdom is being given by the people making interest off of your loan.

All of us want to live the “American Dream” by living with financial freedom and security. We want to own a home and retire comfortably some day. The most difficult task most of us face is how to get there. The most frustrating part is that it’s always a gamble. By that I mean, if you’re socking away your money in the stock market, there’s no guarantee that when you’re ready to retire the stock market isn’t planning to take a big dump on your plans by declining 50%. Huge gains from all those years of diligent investing could be wiped away without any warning, reasonable explanation, or promise of recovering in the foreseeable future. The truth of the matter is, there’s no rhyme or reason to the stock market and it doesn’t make any logical sense.

I’m not suggesting that you don’t invest. To the contrary, I think that each and every one of you should be striving to become debt free and take most, but not all, of that conventional wisdom. We must remember why we want financial freedom. Is it because we want to swim in piles of money like Scrooge McDuck, or is it for something more meaningful? Do you want to spend more time with family, focus on hobbies, or make more time to do the things that make a difference? For me, I want to make music, see the world, and focus on ways that I can serve humanity.

When it comes to paying off your mortgage vs. investing, you have to ask yourself what’s more important for your personal meaning of financial security. For example, if the scenario I described before occurs and you lose much of your investment portfolio value to a stock market plunge, would you rather have your house paid off or more money invested with the potential to recover at a later date? That’s an impossible question for me to answer for you, but for me it’s easy. I want a paid off house.

The reason is simple. Money doesn’t have intrinsic value. It can only be used to trade other types of value, or earn more of itself. Those are not trivial purposes in this day and age, however, I personally feel like having a place to live if everything else goes down the toilet supersedes my “desire to acquire.” I know there are countless posts, articles, YouTube videos, and advice about this subject that will pull the veil over your eyes by doing the simple math showing how much better off you’ll be if you just invest. It’s easy to see that over time the interest earned will be greater from investing than the interest spent on your mortgage. The trouble with that logic, besides what I’ve already mentioned, is that it’s missing the most important piece of the puzzle. YOU. It assumes that you don’t care about living your life with peace of mind, and that you’re as big a risk taker as the next person.

You have to choose what’s right for yourself regardless of what some financial guru tells you is the best choice. I’m paying off my mortgage aggressively with full knowledge that I “might” be able to have a few more dollars later in life. I’ll be 43 years old when it’s paid off, and completely debt free. To me that means I can quit my day job (if I want to) and go back to what’s important to me. Making music.

Remember folks, Life’s a Play (that’s my album).

The MAN Himself

Author of Modern Guitar Method. Also, please listen to my new album. I think it's the best jazz album of 2021 and It's available everywhere!