Investing vs Paying Off Your Mortgage Early

Published Aug 20, 2021, 7:00 AM

Is it better to pay off our mortgage or invest the money? It's a hotly debated topic (well at least in financial circles) with some surprisingly conflicting conclusions. We're exploring how to determine the best approach for each of us individually and the factors we each should consider.

Get the full show notes here!

Episode one, Investing versus paying off your mortgage early. Welcome to the Frugal Friends podcast, where you'll learn to save money, embrace simplicity, and liberate your life. Here your host Jen and Jill. Welcome to the Frugal Friends podcast. My name is Jen, my name is Jill, and today we are giving you insight from both sides of the debate on whether you should prioritize investing or prioritize paying off your mortgage early. And when I say both sides of the argument, I do mean both unbiased sides of the argument. We are talking a lot of numbers today, but this isn't going to just be strictly numbers. So I found a lot of really good insight in these articles, so I'm really excited to share them with you. But first, our sponsors also brought to you by being the common person. It's the service I am going to provide to all of you today, and let's be real, it's what I essentially represent on every episode, especially the ones where there's a lot of numbers involved. When those numbers and percentages all feel overwhelming, you can find comfort in my voice the common person, normalizing and validating that I don't understand everything being the common person. When you have one in the room, it makes you feel smarter. Is Is that why you did not want me to see the imp She didn't want me to see it. I was like, do you want to finish writing this just like I don't want you to see it? And I was like, okay, um, we are not going to get super into the weeds. We never get super mathematical on this show because personal finance is not predominantly mathematical. You can argue it with economics, not even business finance stuff like that. Stuff that's not emotional can be purely mathematical, but anything with an emotional component is not purely mathematical. And so that's one of the big reasons we're talking about this today. And I found a few articles that I thought just really gave some good insight that I hadn't heard before to the argument, especially specifically this first one. It's for money geek dot com and it's based it's just titled should I pay off my mortgage or invest the money? And it is an analysis of historical returns over forty three years and they found something really interesting for the time period. Jill. First, let's get your take on it. Yes, well, thanks Jen Uh. Speaking as the common person, I do I think these articles are excellent and to your point of this being both personal and mathematical, I think wherever we are on that spectrum, we can dive as deep as we want to. And I think the point of this article is that it's not cut and dry. I think sometimes on either end of the spectrum, when we're talking about paying off our mortgage or investing that money, you can land on either side and be so polarized in it. But I think at the end of the day, this article says there are things to consider, which I appreciate, and also for us who know that this is something to even be asking, it is helpful to know, all right, if I really want to dig in, sink my teeth into this and understand the reasoning behind what I choose versus what somebody else might choose. There it is, But we don't have to either. I don't think we have to be expert financial investors in order to make an informed decision for ourselves. So I think I'm finding like I'm finding permission in this article and in talking with you, Thanks Jen, And I think that this is a helpful one because you can skim the surface with it, or it also provides you with some pretty detailed numbers supporting why someone may or may not make the decision to invest or pay off a mortgage. So that's that's my like five thousand foot perspective on this article. But I also like all of the breakdown of what they're telling us to consider when we're asking this question. Yeah. Absolutely so this article, I will say, right off the bat, and they also give caveats and um, you know, different things about how their data might be skewed. But so right off the bat, they're looking at the forty three years between nineteen seventy one and two thousand thirteen, so they are including many of the recessions and crashes that happened throughout there, and not a predominant part of the bullmarket that we had from two thousand thirteen two. So that's a that's a caveat right up there. But again two thirteen, I mean, we can see the numbers that happened through there again, so it's not like it's a weird time. It's forty three years and so this is not unlikely to see things like this again. So when you put them side by side. Money Geek found that over the forty three years that, um, let's see, paying down a mortgage at that year's average mortgage rate was a better financial move than investing in the SMP five hundred in twenty six out of forty three years, or six of the time. So not many people would have I would not have guessed that that would be the truth. Um So what they did was they took average mortgage rates each year and at some point, I mean you could find mortgage rates for like, you know, at nine some bad years and mortgage rates we know right now are historically low. So it's a different it's just a little different. But this is definitely a perspective that this did happen in history, and history can repeat itself, and so it's good to look at these figures and just have some like reality hit knowing that if you're in the camp that's like, I'm definitely not going to pay off my mortgage early. I'm definitely going to invest, invest invest. I know that very likely they're going to be many years, probably close to half, where you might have been better off prioritizing a mortgage payoff than investing. Thankfully, the years where it is better to invest than pay off a mortgage is far higher and there's more opportunity to grow higher than there would be with a mortgage payoff. But it's just a really important reality check to see and I know we so they looked at the SMP five because that is the stock market Index, which an index is just something you um, it's a group of companies we used to measure the health of the stock market, essentially about five hundred of the biggest companies. And so they typically say that that's return ten p SIT since inception, but you know, a few decades into its inception, it actually changed where it had a lot more than five hundred and now it only has five instance that it's only returned eight percent, and so I typically and some people will use eight percent. They're just using year by year. They're not using an average in this study, so that's also important to know. They're using real returns versus an average return, which can be a little subjective based on which kind of SMP five hundred you're looking at. So not many people know that, and you're probably not going to be completely invested in an SMP. You should probably have some bonds, um which is going to lower that return. So all things to consider when you're pitting these things head to head. But I think the important thing to realize is that history can repeat itself, but past performance is no indication of future results. So we look at both of these things with a grain of salt, and we still see that paying down a thirty year fixed mortgage out of forty three years would have worked out in your favor. But again and then again, it also depends on when you get your mortgage. If you got your mortgage in a really high year, then you'd have that fixed rate forever versus lower you'd have that fixed rate. Um. It also doesn't take into account refinancing. So yeah, a lot of is interesting. UM I found a lot of good data nerd out data in here. Did you get a sense, gene from this article how quickly they were saying to be paying off a mortgage, Because in my mind, what they're arguing is paying it down and focusing on that is going to be more financially advantageous six of the time than investing in you know, your your typical stock market type investing. Are they saying only if you pay it down in a certain amount of time. Did you get a sense for that. I didn't necessarily see that in here, but I really think they're just looking year to year. So maybe not um looking at an average over time, but there maybe they're just looking at a year to year. So that's why it's it can't be like you got to take it with a grain of salt, but it saysn't say how fast there might be at the end. An example, I can't remember if if it was this one or another one, but I think it's just kind of to present an alternative idea to the assumption that every year it's better to invest than put extra towards your mortgage. And so there was also some insights on like taxes and stuff. When you read through the tax portion, what did you think of that? Now, as a new homeowner, you should think about that stuff. Yes, I am a new homeowner. Yeah. That they were saying in this article that typically taxes or something that you would want to consider when investing versus paying down a mortgage. And they're ultimately saying that including taxes, it usually favors paying down a mortgage. And so the reasoning behind that is there is a different tax treatment of stock returns and mortgage interest, and typically you would benefit more from DOCS due to a lower tax rate for those stock gains. However, they've cited the change of tax code in two thousand and seventeen which reduced the use of itemized deductions, including mortgage interest, and so most homeowners are not going to see a large deduction or the standard deduction. Yeah, eight two eight two percent of homeowners now take the standard deduction, So your mortgage interest doesn't matter for eight two unless you're in the twelve percent where it does matter. And then this is a moot point, right, So even by that standard, I think that would fall into the favor of focusing on paying down your mortgage. Yeah, which is a big Like, I see the tax even the when I was looking at the nerd wall the bank rates that all those articles on this itemizing your mortgage interest was like always one of the things, and it's like for two of homeowners, they're not going to have to worry about that, that's not a factor. So I think that's really interesting to take into consideration as well. And then they also go into what about tax exempt retirement accounts? And I like how he like pauses literally in the middle of the article. He's like, we're going to interrupt our analysis for a moment for a public service announcement to tell you that if your employer matches your four oh one k contribution, that you need to get that before you focus on any other debt. And they even he even gives like, the math is like you'll be getting a hundred percent return, which you don't get that guaranteed a hundred percent return. You don't get that anywhere else. So it doesn't matter what you're trying to do, you have to at least get your four oh one k match if you haven't done so already. And then they returned back to our regular analysis. Um So, he says, given that most homeowners take the standard deduction, the scenario where the SMP fire is in a tax except account, reverse back to their original scenario where neither is tax affected, so they're they calculated it without any tax effect for either. So that's going to be the calculation or the treatment that most people are dealing with, because most people aren't going to take the standard deduction on their mortgage interests, and most people are going to be investing just in tax exempt retirement accounts, and so it doesn't say like four one K versus raw ira the difference between that, and my brain can't do that math or that rationale right now. So if you know it, definitely hit us up in the frugal Friends community on Facebook and and let me know. But yeah, so taxes don't pay a huge role in here if you're taking the standard deduction on your mortgage interest and your prioritizing tax advantage retirement accounts. I guess if they say tax exempt they are talking about for ow n K or traditional ira A, but they do include roth ira A up in here, So I don't know. Yeah, I like all of the considerations that they're describing throughout this article, and of course we are talking generalities, and the article itself is telling you all of these different considerations and ways where their model might break down. And so yes, we each have to decide for ourselves what's going to make the most sense for our situations. Because while we say eighty two percent of Americans are going to take the standard deduction, okay, well then there's what eighteen percent of you who wouldn't, and so then that would be a consideration. This of course is written for Americans. So if you don't live in the United States, then that's a whole other the situation to be considering. So anyhow, other considerations that they're also outlining here is if you have other high interest debt, so credit cards the like, where your a p R s above sevent absolutely, paying down that debt is a better return for you than both the SNP and your mortgage. So before you even want to ask this conversation of mortgage or investing, pay down those other debts. The second piece is consider how risk averse you are. You you definitely shouldn't be investing in the stock market if you cannot stomach a sharp decline, or if you don't have a whole lot of time on your side investing in the stock market. You are going to do best if you've got some decades to be doing that with. So that's a consideration there. And then of course related to that, how quickly might you need cash? What is your timeline? Either a home equity loan or the stock market, those are not pieces that you want to be quickly pulling cash from you. You have the potential of taking a loss, shooting yourself in the foot if you're borrowing against your own house. So if you're gonna need cash in a hurry, you don't have other savings readily available to you, and that might be something you want to consider first. And then, of course, if you're eligible to refinance, this can be an incredible opportunity for folks to lower monthly payments reduce overall total interest paid on your home. So it's not just either or pay off mortgage or invest in the stock market. There's other things to consider that can save an incredible amount of money in the long run. And we'll get more into like diversifying and what that could look like. But these are just some other considerations in this conversation. Yeah, I know they say seventeen percent for the a p R, but I would say, I mean, I go more conservative at like seven to ten percent. If you have anything over seven percent, I would say, um, definitely get that paid off before you start investing. Which is even a lot of student loan debt is between seven to nine private student loan debt for sure. Yeah, if you can't refine it, I mean, try to refinance your private student loaning. Get it under that. That's definitely smart to do if you can do that. But yeah, like if you can't. Really that's a number right at that level where it kind of negates some of your gains. Unless you have a really long time in the stock market, it's going to negate a lot of the gains that you would make. So yeah, and again like if you need cash like quickly, then you probably shouldn't be looking on how about how to get rid of it if you're going to need it, So that's just that's just smart. Next on down here is some diversifying options. So, uh, the reality is you should be pursuing both strategies with your extra cash, is kind of what they're saying. And we'll we'll talk, you know, a little bit later about our plan and how we've decided. But picking the winner in a given year is hard or even impossible. With a win rate between sixty and sixty three for mortgages, there's room for a longer period when stocks win for years in a row. And that's really important that stocks. When we were in a bowl market like we were, like that was a horrible time to be prioritizing your mortgage payoff because there was just like high gains, unlimited gains, not unlimited, but high much higher that and your mortgage because that is definitely limited, so you're never but you're not going to be able to predict that. So this is kind of how you can predictably diversify and be safe while trying to kind of like pay attention to the economy and see what works for you and and just go with your gut, go it feels right for you before you do that definitely, like Jill was saying, pay down high interest debt for me, that's anything above seven or ten percent. Max out your employer match. Like they said before, you shouldn't be doing anything until you get that employer match. If it is available to you. It doesn't matter what your financial goal is. That's money that is promised to you from your employer, and not taking it is like telling your employer you don't want to raise. So the third is look for opportunities to refinance, so be aware of what the refinance rates and the markets like. So we refinance last year because the rates drop to record lows and so we took advantage of that. A lot of people's quote unquote luck with finances just comes from paying attention, like being prepared enough to capitalize on good things when they arise. So if you just lay in wait and are prepared, you can take advantage of stuff like this. And then fourth is to assess your goals and situation to choose the right mix for you. So short time horizons and lower risk tolerance should favor down paying down the mortgage, especially if you're not deducting your interest on your tax returns, so if you're taking that standard deduction. Longer time horizons in a tax exempt account, so for younger people would definitely favor investing in the market. So this does come down to your preferences the economy, and then just good old fashioned how old you are, so you know it is not just a number at that point. Yeah, yeah, So, so definitely take those things into consideration. Yeah, how what's your ultimate takeaway from this? Jen? How would you kind of summarize what you're saying here? I mean, it confirms what we are already how we already feel about our mortgage, that it is a low interest loan that we chose to do a fifteen year mortgage on, but we are not choosing to pay off quicker. And we chose the fifteen year just because it was a lower interest rate than the thirty But yeah, it kind of just confirmed like we're doing a good balance of both is what we're doing. We're not we're not prioritizing the mortgage. We're definitely you know, if I could say we're prioritizing one over the other, it would be investing. But we're not like fire people. So this kind of just it was good. I liked it was refreshing because we see a lot and we're going to see in our next article. You know, more of the debate on the other side, but you don't often see numbers put behind the argument, for like, it's okay to pay off your mortgage faster if you want to, like and here, it's not just an emotional decision. Here are some numbers behind it. You know, they're not it's not the most accurate picture of a long timeline. But I think, I mean, I think the last thing they say here really just sums it up. Good short time horizons and lower risk tolerance does favor paying down the mortgage. If you have a long time horizon and our prioritizing those tax exempt retirement accounts, then you'll have a little bit of favor towards investing in the market. I feel like that very much. Sums it up well. Yeah, well said, and I think even before we hit the record button on this episode, I liked what you had to say that you're not silly to choose either direction. Ultimately, I think, and anything that's going to point towards that freedom to make our own individual personal finance choices. One is not necessarily better than another. One might fit each one of us better than another. But yes, it's it's okay to say I'm going to focus on paying down my mortgage or I'm going to invest that money. Just know why you're choosing it. Ultimately, I think, have some of the knowledge behind it and make an informed decision for yourself. Yeah. The last thing I liked about this article is that it has some expert insights from economics professors, one from Ersinist College and the other one from m Villanova University. So actual economics professors like weighing in on this, and neither of them were surprised by the outcome. So once said, mortgage rates over the last forty five years that have have at times been very high, sometimes in the double digits, and the interest savings from paying off high interest as definitely offset the roughly eight to nine long term annual return of the SMP five and so yeah, and they're just kind of saying homeowners should like definitely now devote a smaller amount to mortgage payoff than historically because mortgage rates are historically low. That kind of just like re emphasizes it's important not to just definitely follow your gut, but also look at what's going on around you, like in the news in the economy, like what's going on. Are you hearing the words historically low, then that's a trigger you should probably pay attention to whatever that is and not just ignore it. It doesn't mean you act quickly or irrationally, but it means you pay attention and see and look further into it. So yeah, and still over the long run he expects the market to outperform. And then the other one, Yeah, I mean when we were talking about was it wasn't Mark Cuban. One of the sharks was Mark Cuban. How he said paying off debt is the safest investment. That's kind of what this one is getting at, Like paying down a mortgage can be viewed as an investment, a risk free investment. And then he talks about like schedules and interest and as salt. But and he says an appropriate mix for how to value like how much you should put towards your mortgage, how much you should put towards your investments really varies from individual to individual. Um So, Yeah, I liked the additional insight and the and the guy that wrote it is a c f A, so he's an a data scientist. So it's it's a good one. Definitely nerdy check it out if you want to nerd out dig in more. Just have a lot of numbers, a lot of percentage symbols, graphs and charts all over the place. Yea, make my little nerd heart happy. Um So, our next one probably not as many charts. Ah yeah, I'm not seen any charts in this one. But it is from financially Simple dot com and uh titled mortgage debt, pay it off? Or invest? Which should I do? Um so? And this one was written in so in we were still in the longest bowlmarket in history. Um so this definitely airs on the side of invest more. Don't worry about your thirty year fixed mortgage. So, Jill, what did you think about this one? I enjoyed it, I think said they still have numbers and percentages in it, which I do like, just not when it gets too complicated and into the weeds. But they gave just a they kind of followed a very simple example through the whole article. So I feel as though this was definitely for me a lot more approachable in kind of understanding what they're talking about. But for me, the thing that stood out in this piece was the beginning portion where they were describing a conversation with someone who was saying that they want to pay down their mortgage, and they were kind of asking why and what are you gonna do with that? And they're saying, well, once it's paid off, then I'm going to put all that money that I previously would pay towards my mortgage. I'm going to invest that, save that, do whatever. And they were arguing, no, you won't. Just human nature says that you won't your your standard of living rise to meet that because it's going to feel like an increase of income. And so I just I found that peace interesting kind of and I feel like there's arguments on both sides of it that can say a similar thing. Right, you're gonna pay off your mortgage and you're gonna put all that money savings into something useful, beneficial long term. But you could also say the same thing about those who say I'm not going to focus on paying off my mortgage, I'm just going to invest, but then they don't ever actually invest. Like I think there are two sides of that coin where we could make it or say we're going to make a decision and head in a direction, but then never actually move on the benefits we say it's going to bring. So that stood out to me. There's a part of me that wants to push back on that. Like, no, if someone's that dead set on a goal and they're saying this is what they're going to do with it, they probably will um And at the end of the day, paying down a mortgage is just great, even if they don't end up doing something remarkable with that extra savings every month. But I thought it was interesting that focus in on some of the emotional decision making even once you've reached a goal, and I think they're kind of using it as an argument and maybe not focus super hard on paying down a mortgage. But that's the part I zeroed in on. Yeah, well, it's funny because it made me think of our friend Andy Hill for Marriage, Kids and Money. They paid off their mortgage, and so it was really a goal. And I can't say this was their goal, but to have it allowed them to have more liquidity essentially versus investing more really predominantly would have tied up most of their money until they were fifty nine and a half. And so by choosing to pay off their mortgage versus invest Andy was able to quit his job and now runs the podcast, Marriage, Kids and Money full time. And he can do that now because everything he makes can go to their lifestyle and his wife also works. But it would have been much harder to do with a mortgage and money tied up in tax advantage retirement accounts. Would they end up with more money at the end, Yes, that is a fact. Do they end up with more freedom now because of their decision? Yes? And so you have to consider those things too, like what's your aim? Like what is your aim? What's your five year goal, what's your ten year goal? So like retiring at thirty isn't the only option. Maybe you pay off the mortgage and then that gives you the freedom two start a business, Like maybe that's your aim, that's your goal. There are so many life paths, and you pick the financial route that fits with the life path you want. So I yeah that it just made me think of another situation where it actually is an argument for paying off the mortgage. But so I liked also that they had a very cut and dry formula using averages. All averages, So they use the average of two house with a mortgage and a mortgage rate of four percent, and you can definitely still get that now most of them are lower, but definitely still not unheard of to see a four percent right now. So then they assumed that the market returned eight percent, which I typically like to use seven because I know that, I mean, the sp YES has returned a solid eight percent UM. Not all of your money should be in equities. Experts would say you shouldn't have all of your roth IRA in a single SMP index one. So that is my take interpretation of expert advice. And then they're putting the imaginary individuals tax rate at which is important because that means their income is at a place where they get the standard deduction, so that's kind of a qualifier for that. And then inflation they're assuming is at three UM and so they I wan't bore you with going through all of the math. But so they said, at the end of a thirty year mortgage at a four percent home appreciation rate, then your house will be worth about eight hundred thousand, eight or ten thousand. So at the end of it, you have no mortgage and dollars in worth of home. But if you're paying it off early, you are not going to be paying the mortgage for thirty years. You're going to have some years to invest extra. And so they're they're assuming they're not taking into account any investing done while paying off the mortgage early, so that would be another caveat there, But so they are saying, yeah, at the end of it, all right, And so then they go into the math of doing just the investing and not paying off the mortgage early, and then what it would look like to pay off the mortgage early and then start investing. And so if you do it with investing in the market, then I think they use a thousand dollars a month as a thing. It's still works or whatever it is. It's they're using the same baseline for each So if you invest in the stock market or eight percent a year compound interest for thirty years, you would end with two point five million, and that's because of compound inter rest um. Even at seven percent, your money doubles around every ten years. And so at paying off your mortgage early, they're saying, you spend fourteen thousand dollars a year of income on mortgage payments, and okay, yeah, here it is taking home an extra thousand dollars a month. Here we are, and so there's no other debt, so all things are even. They're going to add a thousand dollars a month to the mortgage and so that gets it paid off in twelve years, and then the remaining eighteen years they're going to invest in the SMP five hundred earning eight percent, and at the end of that you have a million in investment accounts. Add the eight thousand dollar home to it, so the total asset value is one point eight million after thirty years. And so now they're going to run. Now they're running the numbers, okay with this thousand dollars a month, So all same thousand dollars, but instead of just putting the extra to the mortgage for twelve years, doing it to the SMP five hundred for thirty years and nothing extra with the mortgage just paying it as is, so at the end of thirty years, just the stock portfolio is worth one point four million. And then now you add the eight thousand dollar home and that gets you to two point to million. So you're you're dealing with a difference of about four hundred thousand dollars. That's not nickels, you know. That's four hundred thousand dollars that you end up and of the liquid cash, yeah, it's one million if you pay off the mortgage early, it's one point four million if you invest. So all things considered, I mean, one point eight million ain't bad. M I would take it, definitely. I'd rather have four thousand dollars if you gave it to me. You know, I'm not going to turn it down. But it's not like a huge, you know, one million versus three million type argument. And if that decrease is that four hundred thousand dollar loss gives you the freedom that you want sooner like before fifty nine and a half and even yeah, you can argue you can take out contributions from a rath early, but then that messes with the number. So yeah, you can make that argument, But why would you. I mean, it's just like a You have to decide what your goals are and then decide the right what liquidity do you need to accomplish those goals now and later. You need to take both into consideration. Yeah, it's helpful to know. It's not so cut and dry. One one way isn't the exact right thing to do. There are arguments for both sides. So choose what's right for you, choose your own ending. Yeah, and again this one didn't take into consideration any refinancing. But yeah. So that is our goal, is that you can decide what's right for you. And when you decide it and somebody comes at you, you can be like, mm hmmm, this is why I'm doing this, and that is why I know it's right, not just because somebody told me to do it. That's not why I'm doing it. I know why it's right for me. M hm m hm. You know what else is right for me? It's right for me too. M h that's right. It's time for the best minute of your entire week. Maybe a baby was born and his name is William. Maybe you've paid off your mortgage, Maybe your car died and you're happy to not have to pay that bill anymore. That's bills, Buffalo bills, Bill Clinton. This is the bills of the week. Hey ladies, my name is Nikki and I'm calling about my bill is a week. It was a couple of weeks ago, but I'm really excited for it. I went and I got an oil change and have my tires clubs and everything, and normally I have my fience do all this, but just to save time and things like that, it's just a lot easier to go and pay for it and budget it out that way. So I spent about eighty dollars and had my oil change, tires slugs, and it took about an hour, and I could shop during that time. So it saves me time, save my fience time. And now I'm not spending on my two dollars every time about every other today going and filling my tires up with air, because no one should have to pay for air. All right, thanks, I love you guys. Bye. Yes, nobody should have to fill their tires up with there every day. I feel like this is a personal attack because actually yesterday I turned on my car and my tire Pressional backrid tire is low, so I feel like this is I'm the universe kind of getting at me. No one should have to pay for air. I agree that that's a solid statement right there, Nikki, Thanks for sharing your bill with us, saving your time to thank you. If you want to submit your bill of the week, whether it's about air or tires or somebody that you met, do you name it, visit for girl Friends podcast dot com slash bill. Leave us your bill, and now it's time for the Ling Round. M hm. You know, nobody asked for a live rendition of the Lightning Round, but we were asked for a live rendition of the Bill of the Week song. It's true, It's true. Okay, if people don't like it, we can take it away. I didn't say they didn't like it, but they just don't ask for it, and they just don't ask. Sometimes you get what you don't ask for for what you don't get. So true, today's Lightning Round is we are going to talk a little bit about our mortgage payoff and investing plans, how we are balancing those and we're both doing it differently as you may have guessed. Yeah, go ahead, John tell us you mentioned a bit about it, but give us, give us the full show. Yeah, so I actually talked about this in a YouTube video a little while back, but I did definitely take into account where our stock market or this is how I make my decision, taking into account where the stock market is, where the economy is, and kind of how it's being talked about in the news. Because again, things like the personal finance, the economy, the stock market, they're not purely based on how businesses are doing. There is an element of how general like social perception of how they're doing is that also plays into the stock market because we are emotional beings, um, and so if people are scared, the stock market starts to drop, regardless of how or in more percentage than maybe the economy, and businesses are actually losing revenue, so it it usually it doesn't take it to a place it's not going. But however, people are looking at the economy will amplify what's actually going on. So I try to look at that to make my decisions. And so definitely when we bought our house, up until I prioritized paying more on the mortgage for a smidgeon and then I learned about investing very quickly and transitioned to maxing out as many retirement accounts as possible, and we did that all the way up until and then when mortgage rates or refinance rates dropped two historic lows, we we were faced with a decision. We decided to refinance, obviously because our interest we was pretty high because we did not put a lot down. So we were like, okay, do we go with the thirty, the fifteen, or maybe even the twenty or the ten um There are all kinds of options when you refinance they don't give you when you get an initial mortgage. So we looked at the interest rates and also kind of our cash flow because we were happy with what we were investing. But we did see that, you know, when there's a global pandemic, economies get a little unstable, and this was kind of the biggest thing to happen to us in our lifetime. And so I was just, you know what, let's go with a fifteen year. I'm not going ten because I'm not going to like tie up all of my money and my mortgage. But I also don't want to go twenty or thirty because I you know, pointing an extra couple hundred towards the mortgage every month just kind of feels right right now, and it'll probably feel right for the next couple of years, but it won't feel right for like, you know, forever. But so fifteen felt like a good medium, and so are and and this is not like financial advice at all. This is my brain how I am thinking. I'm just recounting the story, and I'm still very happy with choosing the fifteen year. We got a lower, more lower rate than twenty or thirty. Wasn't It's a little higher than a ten, but so negligible it didn't matter. And we are maxing out our RATHI raise like we have been since we got them, and I feel good about our strategy. And we're also saving for rental real estate, and so that's another thing we didn't want to tie up. We don't want to tie up all of our money in retirement accounts or our initial mortgage because we want to have liquidity for our short term goals. So that was another thing we took into consideration. So that's a long way to say that, Um, well, yeah, that's how we're balancing our mortgage payoff and investing. Yeah, it's great. It works for you guys, and you've thought about it it's an informed decision for what makes sense for you. Nobody told me to do this. I decided to do this, and I think that's the most important thing, like with your finances, Like, don't just do something because somebody tells you to do it. Figure out why you're doing it. Yes, well said and well done. So what Yes, I am a homeowner. We purchased our home less than a year ago. We still have not even hit that one year mark, so I gosh, probably when this this episode comes out, it will be like exactly a year. Okay, alright, then we are just about at one year. So no, I'm not at the point where I'm considering refinancing, and it may never reach that point for us. I do know that I want to pay off our mortgage sooner than the thirty year mortgage that we got. But we have a really great low interest rate, so it could just be more advantageous to us to put more towards the principle and pay it off quicker that way. I mean, refinancing does cost money. You you purchase those points, you purchase that good interest rate. So with unless the interest rate drops more than what we've got right now, maybe it will. So I'll keep a pulse on it, but for now, the way that we're approaching it is and throwing a little bit of extra money every month towards the principle, but not at the loss of other financial goals like investing in retirement accounts. We are right now cash flowing renovations. We see that as a bit of an investment strategy to increase the value of our home. And so once we have a good majority of the renovations done, I think we're going to reevaluate what our interest rates looking like. Is it advantageous to refinance or do we just main hayne with where we're at now, but but put more towards the principle in addition to investing. So I'm similar in the diversifying approach. While I really can't stand debt, and having the mortgage gone at some point will be a great feeling. UM, I also recognize that I do still have some time in decades on my side if life goes as planned, to really be able to focus on investing as well. So that's that's my approach. Yeah, I really think the interest rate you have now is like one many people try to refinance too, So you just got it at the right time. Yes we did, UM, but yeah, so that's us and I hope that it's if you're on the fence. Maybe you're not on the fence, maybe we helped you get on the fence. But if you are on the fence, maybe we helped you figure it out a little bit or at least inspired you to reconsider. Okay, am I doing this because it's what I'm being told or because as it really fits in with my life goals? That's something we're talking about when we start our first challenge with Club BFF here in a week and a half. That's what we're looking at is core values. So like, am I doing what I like fuels me, what fires me up, or what society tells me should fire me up? So that's always good to be aware of so that you can spend your money in accordance to those values. So thanks for listening, and thank you so much for your kind reviews. UM when you learn something and or when you laugh, or for anything. UM like this one from Hudson Valley mom of four and it's titled love Them It's five stars. She says, thank you for your easy to listen to an encouraging podcast. I'm a wife and mom of four kids, ages twenty one to thirteen. We have a lot of unplanned expenses with college and sports. You help me find ways to think ahead and plan better for these unexpected bills. Your fun and easy ideas help me to keep moving forward. Thanks for all you do. Keep up the good work. Can't wait for the Frugal Summit. Mentioned of the Frugal Summit now, I hope you and I hope you enjoyed it. How Yes, we also want to thank our friends who share these episodes on social media. So when you share the latest episode and tag us on Facebook or Instagram, we add you to our monthly drawing. For every five tags and reviews we get each month, we give away a copy of the Frugal Friends workbook. Yeah, so keep leaving us reviews on iTunes or Stitcher and sending the screenshots to Frugal Friends podcast at gmail dot com. And don't forguess to tag us when you repost the latest episode on social Even if we missed the story, will still send you a heart. See you next week. Frugal Friends is produced by Eric Syrian. It is lightning and thundering. I've got real lightning and thunder happening outside. Sunny I can see maybe it might be getting a little dark, but it is blue skies and sunny over here, fifteen minutes away. Crazy, I mean, I love that those sunny showers that happen. It's really coming down. But you know it'll be out of here in like one point two minutes. Then it'll come over here and rain for two minutes. Yes, maybe make some more mangoes fall. I know. Yeah, we have a lot of mangoes in the freezer, in the fridge, just waiting for me to eat them. I mean, talk about liquidity and UM investment on your property. I know, the mango tree was a great investment UM in social capital because we can share. We can share these mangoes with people and then UM ask for favors in the future. H Is that? What's coming next? What do you need? Remember all those mangos we gave you, Well, now I need five thousand dollars. I'm ready to cash in, all right, I'll be preparing

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