My plan to be debt free by 50.

[debtheaven]

I think it sounds like a great plan to pay off the SLs and vehicles, but I wouldn't prepay the mortgage. It will be paid off anyway by the time your kids go to college.

We took out a short loan (12 years) on our most expensive rental so that it will be paid off when DS3 (our youngest) finishes HS, for the same reason.

[tallguy]

Swamp,

Do whatever makes you feel better. Phil et al. like to regularly play up the investing aspect (with all the attendant millions one will make) as some sort of guarantee. They tout the historical returns of the market, ignoring the fact that just because something HAS happened in the past does not mean that it WILL happen again.

We just had a lost decade for stocks in this country, where the S&P 500 actually went down over a ten-year period. Adjusted for inflation, it was even worse. If you look to Japan it gets downright scary. After the global downturn in 2008 the Nikkei index was back down to the levels from 1982, and was down about 75% from the bubble high of 20 years ago. Nothing like a lost generation, huh?

We may now be heading toward a long-term bull market, but we may not either. Pre-paying your mortgage may turn out to be your best use of funds if stocks stay level or go down, or it may cost you some lost earnings if stocks go up. Who knows? Not me, not you, not Phil. If it will allow you to sleep better at night having your mortgage gone, do it. A lot of people have lost houses because they played around with the equity. I seriously doubt whether many with paid-off homes lost theirs.

Now, that all being said, I remain a believer in the long-term future of stocks. I remain fully invested and am increasing my investments now. But I also just paid off my house, not being willing to subject my home and future to that kind of risk. If I remember correctly from old MSN conversations, not even Phil takes the equity out of his home to invest. His wife won't let him. He only does it with rentals, which we know is a far different matter for several reasons.

So again, do whatever makes you feel better. Paying off your mortgage will never make you sorry you did it. The alternative...might.

[Peace77]

Do you have an emergency fund?
I would take care of that first.

I would pay of the truck first.

If you have a financial emergency, you don't want the truck repossessed. If something happens to DH, his student loans are canceled in case of disability or death. If not, they can be deferred.

While people can promote putting funds into the stock market, there is no way anyone can buy the peace of mind that comes from being Debt Free.

You don't want to be in the spot of the fellow who had his mortgage and savings in the same bank. He had a $100k mortgage and $100k in savings.
The bank had a emergency, froze all assets and called his loan. He couldn't get his money and his loan was due immediately. While he had plenty of money in the bank, he still lost his house.

[cronewitch]

I would pay off the smaller debts but save the money to pay off the mortgage separately instead of prepaying. Then when the balance matches the money saved to pay it off pay it all at once if you want to. Then you get the mortgage deduction in the interim, instead of maybe not itemizing while still paying.

Phil is right financially but you may enjoy knowing you don't have debt.

[Plain Old Petunia]

<< You don't want to be in the spot of the fellow who had his mortgage and savings in the same bank. He had a $100k mortgage and $100k in savings.
The bank had a emergency, froze all assets and called his loan. He couldn't get his money and his loan was due immediately. While he had plenty of money in the bank, he still lost his house. >>

Banking laws and regulations have changed a bit since The Great Depression, so this concern is moot.

[rovo]

Jul 4, 2011 11:47:15 GMT -5 Plain Old Petunia said:

<< You don't want to be in the spot of the fellow who had his mortgage and savings in the same bank. He had a $100k mortgage and $100k in savings.
The bank had a emergency, froze all assets and called his loan. He couldn't get his money and his loan was due immediately. While he had plenty of money in the bank, he still lost his house. >>

Banking laws and regulations have changed a bit since The Great Depression, so this concern is moot.

I call BS on this one. I'd have to see the specifics to even begin to believe this.

[Plain Old Petunia]

I'm with you, Rovo. During Depression era bank failures, this sort of thing did happen. (Not a bank deciding they would freeze YOUR assets to cover their emergency, but a bank failing, people lost what is in their account(s), but mortgage payments were still due.) That's why laws were enacted way back then to prevent it happening in the future.

It sounds to me as though Peace77 heard an undocumented story, believed it, and is now passing it on.

[swamp]

Jul 4, 2011 8:25:56 GMT -5 Peace77 said:

Do you have an emergency fund?
I would take care of that first.

The $50 to $60k in stocks/cash accounts doesn't count as an emergency fund?


I see Phil's point about building wealth, but when I started getting serious about finance/investing about 10 years ago. the markets have done nothing and my stocks aren't really worth too much more than what I put into them. I know all about the long term historic returns of the stock market, but I don't have that experience with it.

I'm going to keep investing, but I dont really hold out any hope for those 9 to 12% returns.

[swamp]

Jul 1, 2011 11:11:06 GMT -5 resolution said:

I think you need a Herbie or something to spice up the thread and get more posts. An 09 Silverado that you are keeping for 10 years just isn't going to cut it.

Um, I have a cleaning lady that comes every other week and DH and I both have smart phones? We also have cable. And we get take out/go out to dinner about twice a week. I also go to Zumba classes a few times a week at $5 a pop. And my kids play hockey. We plan on buying a boat in a few years. We have a jet ski (fully paid for, though).

Does that count?

[rovo]

Jul 4, 2011 12:10:03 GMT -5 swamp said:

Jul 4, 2011 8:25:56 GMT -5 Peace77 said:

Do you have an emergency fund?
I would take care of that first.

The $50 to $60k in stocks/cash accounts doesn't count as an emergency fund?


I see Phil's point about building wealth, but when I started getting serious about finance/investing about 10 years ago. the markets have done nothing and my stocks aren't really worth too much more than what I put into them. I know all about the long term historic returns of the stock market, but I don't have that experience with it.

I'm going to keep investing, but I dont really hold out any hope for those 9 to 12% returns.

Most on this board think "one size fits all" and this isn't the case. You have your own business so a layoff isn't likely. And Yes, for a serious emergency the stocks and money market are the emergency fund.

As to paying off the house loans, whatever makes you happy as the financial ramifications are minimal. I wouldn't pay off the mortgage unless all other not deductable debt is at zero and you are flush with cash. We paid ours off after 5 years of a mortgage because the amount was insignificant compared to our net worth.

[Deleted]

In June, we paid off #2 home of our 2 homes. It was a foreclosure we purchased back in Jan. of '08. Feels fantastic!

We are now accelerating our regular mtg. payment, and paying off #1 home in the next 23 months. We've owned this home 14 yrs come this Oct. We are in year 8 of a 15 yr. fixed.

It is our LAST debt. When we pay off this mtg., dh will be 49 yrs. and 5 mos.

We don't know our future, but we do know that being totally debt free, opens up AT LEAST a few additional options....and realistically, quite a few MORE.

[Havoc]

Jul 1, 2011 10:30:31 GMT -5 swamp said:

DH and I are both 41 and I want to be debt free by 50.

Here's the plan

Debts:

1. DH's student loan currently owe about $15,000. I pay $1,000 a month minimum, and plan to have it paid off by September 2012. Interest rate is 4.3.

2. DH's truck loan. I have no idea what he owes, but it's about $315 a month for 5 years, and we're about 1.5 years into it and there are about 3.5 years left. Once I pay the student loan off, the money to pay on the student loan will go on the truck loan. Interest rate is 4%.

3. Mortgage. We owe about $177k, 4.5%, about $1600 a month. 15 year loan, 3 years into it. Once the truck is paid, the money will pay down the mortgage.

4. My van: 0% financing on a 6 year loan, so whenever I pay it, I pay it.

We have about $400k in retirement accounts and $50 to $60k in various cash accounts.

The reason I want the house paid off is my kids will be going to college in 12 years, and I want to have a cash flow available and a paid house I can tap into for college expenses. Yes, the kids have college funds.

Thoughts?

Thoughts??? Well, the first thing that comes to mind is that if you ever want to change up the "Whip it good" maxim, you might want to consider "Where there's a whip, there's a way".

But since this is YM: OBVIOUSLY your DH is a big drain on the whole situation - a SL and a truck loan? And he likes those fancy gadgets like smart phones? Something definitely needs to be done about him.... [disclaimer: sarcasm alert]

Seriously, thought, I think your plan is fine. I think it would be ok if you let the mortgage payments roll w/o extra payments, because it will still be paid off by the time the Hordlings are ready for school, so your cash flow will pick up by then. The only diff b/w your plan and ours, really, is that instead of heavily pre-paying our mort we are investing a chunk of cash each month into a dividend-heavy portfolio (both DRPs and trading acct) with the idea that (1) the div return alone is about = to mort interest rate, any cap appreciation is a bonus, and the div rates will increase over time... plus the turbo of reinvested divs, and (2) in fifteen years, the dividend flow will be a substantial source of income for us for college costs. Or fun money...

[Peace77]

Glad to hear that the banking regulations have changed. I suspected they had.

Don't know how I managed to overlook your cash accounts. Very good.

[swamp]

::But since this is YM: OBVIOUSLY your DH is a big drain on the whole situation - a SL and a truck loan? And he likes those fancy gadgets like smart phones? Something definitely needs to be done about him....::

Yes, I think I need to outsource some of his services to a pool boy. Should I start a separate thread on whether I can afford said pool boy?

[cronewitch]

Jul 6, 2011 8:05:20 GMT -5 swamp said:

::But since this is YM: OBVIOUSLY your DH is a big drain on the whole situation - a SL and a truck loan? And he likes those fancy gadgets like smart phones? Something definitely needs to be done about him....::

Yes, I think I need to outsource some of his services to a pool boy. Should I start a separate thread on whether I can afford said pool boy?

You can afford a pool boy if you don't buy a boat. I boat would cost you for moorage, fuel, insurance and upkeep. Take that money to pay for a pool boy instead.

It is new math like if you didn't pay daycare or a housekeeper you could afford to quit working even if you can't afford the current cost of living.

[Taxman10]

Jul 6, 2011 8:05:20 GMT -5 swamp said:

::But since this is YM: OBVIOUSLY your DH is a big drain on the whole situation - a SL and a truck loan? And he likes those fancy gadgets like smart phones? Something definitely needs to be done about him....::

Yes, I think I need to outsource some of his services to a pool boy. Should I start a separate thread on whether I can afford said pool boy?

I can volunteer my "pool boy services" for you once a week, if you'd like :-)