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Why I Don’t Always Follow the Advice I Read

Why I Don’t Always Follow the Advice I Read

If you go looking for advice about money, you’ll soon discover that there’s a lot of it out there, and that much of it is conflicting. Even the experts disagree on many points. (Pay off your mortgage! Never pay off your mortgage! Credit cards are evil! Use credit cards for everything and get cash back!) Given all that, it can get confusing trying to figure out what to do. Chances are you’ll be able to find someone that agrees or disagrees with you, no matter what point of view you have, and they’ll probably be an expert who is either describing a very particular circumstance or giving very general advice. Following ALL of the advice that’s out there is just plain impossible. What does that leave?

For me it leaves reading as much as possible, learning from my own experiences and the experiences of others, and seeing how similar the experts’ scenarios are to my actual scenario. Let’s take the mortgage, for example. For awhile there I had two mortgages: one with my partner on our current home, and one on an investment property. I handled both of those mortgages very differently, because they were very different situations. The one on our house is a 20-year fixed at 5.625%, and the one on the investment property was a 30-year adjustable interest-only that started out at 7%. The constants were me, my goals, and our tax situation.

First, our house and the 20-year fixed. It has never made financial sense for us to take anything other than the standard deduction on our taxes when we file . Our mortgage interest is low enough that it doesn’t push us over the standard deduction. (This year is likely to be the only year we’ll be able to itemize, and even then I’m not yet sure that itemizing will come out to be more than the standard deduction.) Yes, I know that we could be investing the additional money we’re paying toward the mortgage elsewhere instead of letting it sit in our home. I know that I could borrow even more and invest that too, but frankly my (very limited) investing track record sucks. All I’ve ever really tried in the past are retirement funds, and I’ve lost significantly more money than I have ever earned. I’m working on changing that, and I realize that past performance is not a guarantee of future returns, but I’ve learned to listen to my gut when it tells me things. I’ll take guaranteed positive return + other advantages over other things in this instance. For instance, the idea of living in a paid-for, insured-for-replacement-cost home is appealing to me. Paying off the mortgage will enable me to live on about $1300 per month (and MUCH less if I cut back in other areas or don’t save as much). We could also rent our house out later if we decide to move without having to worry about how to pay the mortgage if it sits empty. To me all of this means freedom, which is very important to me.

Then there was my investment property and the 30-year adjustable, interest-only mortgage. I did not pay a penny toward principal on that mortgage, and had no intention of doing so, ever, until I sold the property. Why? Because it would have been silly for me to pay off a whole heck of a lot of money at 7% that was fully deductible. Especially since other people were paying me rent. My next investment property will probably have the exact same type of mortgage that I also won’t pay down.

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There is no single “right” decision. The point is to look at your individual situation, weigh the options, and do what you think is best for you. No one else lives your life.

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