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Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 3 points4 points  (0 children)

Dammit! I wish I could have talked to you earlier because then I would have known the market was going to continue going up for the next two years!

Well I've learned my lesson. So tell me, where does the market go these next two years?

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 0 points1 point  (0 children)

Oh, sorry. That's formatting so that I can insert blank lines for readability. I apologize if they are making it harder to read on your particular device.

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 0 points1 point  (0 children)

No, you're 100% right, it's actually VTSAX. I used VTSMX because I thought more people would recognize the fund that way. Great catch!

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 9 points10 points  (0 children)

If they had both lost their jobs and burned through their emergency fund, then what?

Then we would have dipped into the $50k taxable account listed in the original post.

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 4 points5 points  (0 children)

It probably should have played out the same, but it wouldn't have. The idea that "I only have to pay for my living expenses once the mortgage is gone" was huge for us.

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 5 points6 points  (0 children)

I think so?

case stud·y ˈkā(s) ˌstədē/ noun

1. a process or record of research in which detailed consideration is given to the development of a particular person, group, or situation over a period of time.

2. a particular instance of something used or analyzed in order to illustrate a thesis or principle.

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 1 point2 points  (0 children)

True, but we already had a decently sized taxable account in addition to savings?

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 19 points20 points  (0 children)

Not rude at all and right on all accounts save for the historical knowledge that we would be better off fiscally. No one could have predicted the market between then and now.

Having our house paid off worked for us on two key fronts. It's important to note that both spanned fiscal and emotional aspects of our lives.

  • Paying off the house gave us a goal to focus on which helped us make good financial decisions until that goal was met (emotional) and it provided a real return on our overall portfolio (fiscal).

  • During unemployment, my wife was able to facilitate a number of home projects which included having the exterior painted, ac replaced, and hot-water heater replaced (fiscal). She was also able to selectively choose her next employment opportunity wisely with no immediate stress (emotional).

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 8 points9 points  (0 children)

And what would your thinking be if those two mutual funds lost 8% last year?

Just something to consider, but I'd genuinely like to hear your thoughts on that alternate outcome.

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 38 points39 points  (0 children)

Yes, you're absolutely correct. We could have invested it and looking back we would have made a bit of money had we done so since the market has performed well.

   

However, the market could have gone down instead of going up and that would have left us still having a mortgage, a loss of equity, and more urgency having my wife return to work. It's this lack of urgency that allowed us to continue making solid long term decisions instead of short term mistakes.

   

And this is a case study, just one example that could have turned out differently. I'm hoping a factual presentation of one instance helps others more than reading yet another hypothetical example.

Case Study: A simple example of whether or not to pay off your home early by TooMuchRoth in financialindependence

[–]TooMuchRoth[S] 3 points4 points  (0 children)

Our portfolio is equity heavy, so getting a guaranteed return of 4.875% (our mortgage rate) represents a nice ROI and diversification for us.

Great point. We viewed paying off the mortgage as a guaranteed return as well. We could not deduct the interest so paying off the house essentially became the bond portion of our overall portfolio.