You’ve heard about the so-called Debt Free Revolution?
Suze Orman and Dave Ramsey are the most famous proponents of the pay-down-all-debt approach to personal finance.
But, just because something is called a ‘revolution’ doesn’t necessarily make it right!
… I’m sure that plenty of good French aristocrats also lost their heads during the French Revolution!
But, Money Monk was just voicing the view that’s it’s OK for debt-averse people, or those who know nothing about investing, to pay off their mortgages early when he said:
To each their own. In my parents case it was wise for them to pay off their mortgage because they have no knowledge of stocks and investments.
In my case it maybe be wise not to pay off my mortgage. Some people just like the simple no risk life. Younger people tend to take more risk because time is on their side.
Unless more people are educated about the market, many will go the debt free route because it take no risk
Firstly, if your parents were born in the US, MoneyMonk, they didn’t want a mortgage because they (or their parents) saw how the banks pulled mortgages to try and fund the run against their cash deposits during the Great Depression.
Their view was simple: “if I don’t have a mortgage, then the Bank can’t take my house away”.
But, this can’t happen any more. The bank can’t take your house away if you continue to make payments on time …
Secondly, having no knowledge of “stocks and investments” is no excuse: you can get that knowledge … even if it was a valid ‘excuse’ for your parents, it certainly isn’t the case today. Blogs such as your and mine are just one example about the sources of information out there today …
But, I agree: if time is running out, and you have less than 10 years left to retirement, then it’s probably too late – and too risky – to change course. The volatility of just about any investment over a time frame of a decade or less makes them simply too risky to bet your financial future on.
But, if you do have time on your side, then the risk is totally on the side of NOT investing. Because not investing guarantees a poor financial outcome!
And, if any of my readers think that getting a 6.5% – 8.5% after-tax return is ‘investing’ then they should be reading Pensioners’ Weakly instead of this blog 🙂