monthly post about money

[bertine]

A poll, since I am trying to decide. I don't know which to do. One will get rid of debt (which I get stressed out about), one will make my life more comfortable in the future and the other will make my life more comfortable now (plus make my condo more valuable).

[Poll #825767]

Comments

[murun.livejournal.com]

I've always lived under the belief that it's best to pay off debts above all else. Mainly because you get charged a higher interest rate for debts than you earn on savings. Obviously, otherwise banks would go out of business!

[bertine.livejournal.com]

i believe that too but if i take my tax savings for having the mortgage and subtract it from the amount i pay in interest i actually am only paying about 3% on my mortgage. I can make more money with a ROTH. however, i hate having debt.

this will be another story in 5 years when i am not paying enough in interest to actually get any tax savings.

[ctakahara.livejournal.com]

Option D: ctakahara's checking or savings account.

I just need a measly thousand dollars or so!

[woodoo24.livejournal.com]

You're probably a little to young to start reading the AARP website but here is what they have to say.

http://www.aarp.org/money/financial_planning/sessionseven/payoffmortgage.html

The part that probably applies to you is in the Con Section.

Missing Investing Opportunities. You can lose the opportunity to invest and build up a secure retirement nest egg. If you use your resources to pay off your mortgage, you'll have less money to devote to growing your investments. If the interest rate on your loan is reasonably low, you may be able to earn more by investing. You can build wealth by investing in higher-rate earnings vehicles.

This drawback particularly applies if you have more than 10 years remaining before retirement. With this extra time, you could grow your money if it is invested well. So, paying off a mortgage may not make sense if you're focused on accumulating wealth at this point in your life.


I'm not sure a Roth IRA qualifies as a particularly high-rate earnings vehicle. But the money you save today will compound exponentally. So $30,000 you save today will be worth a heck of alot more at retirement than the $30,000 you save in interest paying a mortgage off early. This all assumes you have a low FIXED rate. If you have a low variable rate then you might benefit from paying off the mortgage before it starts going up.

Couple of other things you might want to ask...

If you continue to pay normally on the mortgage would it be paid off before you retire? If not, could you save enough today in high-yield investments to pay it off when you are ready to retire? Is that your retirement home?

I vote invest.

[bertine.livejournal.com]

i have 14 years left on a 15 year mortgage so it will be paid off well before i retire in 30-some years. my rate is 4.65% fixed, so there isn't a real reason to worry about that either.

i already save about 15% of my income between a 401(k) and a traditional IRA. i think i agree with you, the Roth IRA only allows me to save 3,000 (i think) but it would be nice to have some tax-free money when i retire. Plus I am far enough away from retirement that even if i did it for a couple years it would grow pretty well.


personally i think it is funny how divided people are between the mortgage and the roth plus who picked which.


i should get the AARP stuff, that might be helpful info.

[leahderose.livejournal.com]

the roth and traditional IRA have the same contribution limit, you can't contribute more then a total of $4000 this year, in a couple years it goes up to 5000. The advantage of the roth IRA is that all interest you earn is tax free, which will be quite a bit over 30 years. The disadvantage is you have to pay taxes on it now, but unless you're in a high tax bracket this may be a better option then the traditional IRA. With your mortgage as low as it is, you'll be able to earn a higher rate then that on a roth IRA- mine is over 5% this year.

[perviepom.livejournal.com]

All this IRA talk makes me nervous! The general rule is to pay off your biggest debt first, your 4.65% mortgage will be costing you a lot more than 4.65% if it's anything like our mortgages. I currently have a 4.75% mortgage and I'm paying back £1.81 for everyone £1.00 I've borrowed.

Lonely September 18, 2006

[bride000.livejournal.com]

I just wanted to post about what you wrote. Those words could have come from me. I really know how you feel. I don't know a magic solution. It's kind of strange to think that someone has felt exactly what I've felt. I made a decision to find someone who wanted to be with me. We went through a multi year ordeal with certain legal residency issues but now things are getting better. We're learning how to be together. I think the first step if you really want someone in your life is to find someone who actually wants to commit.

When you said you didn't know how to fight & not end it I know that feeling exactly!!!! I've never had friendships or relationships where we had knock down drag out fights and continued the relationship. Usually that was a sign that things were going to end soon. I hope you're feeling better and I hope that you can work out things so they are pretty much how you want them.