In most cases, a financial adviser will recommend not to pay off your mortgage ahead of time...I get this all the time, especially from friends and family with big houses and who are broke*. Someone, somewhere told them that it's a good thing to have a mortgage because you can deduct the interest, and the more you pay in interest, the more you can deduct.
That for every dollar I give away to the bank, I might avoid paying somewhere between 10 and 35 cents to the government has got to be the stupidest thing I've ever heard***. It's like a woman who spends the day shopping for shoes and only calculates how much money she saved. If you saved so much money, where is it?
Now, perhaps if you have to choose between paying credit card debt and and mortgage, the mortgage is the lesser of two evils. And perhaps if you have some relatively risk-free investment that is paying you more than you're paying in interest (especially if it is in a tax-deferred account), then that might be a better use of the money. But paying interest just for the sake of paying it is idiotic.
But perhaps we should not be too hard on financial advisors, because there is a method to their madness, or at least to their training:
When you begin a career as a Financial Advisor, you might want to work for a financial or insurance company or a bank... Once you get experience, you can become self-employed. About a third of all Financial Advisors are self-employed...It would be uncharitable to say that your financial advisor thinks you ought to have debt because that's in the best interest of his immediate employer. But it's probably not inaccurate to say that those who trained him - whether bank or financial company - trained him to see the world the way they want to see it. That world is not full of financially independent people. It's full of people with big houses and bigger mortgages, telling each other that paying interest is the road to happiness.
* Thankfully it's not so much now that they are no longer getting "rich"** on real estate.
** even broker.
*** It was after hearing this for the dozenth time that I firmly concluded that most people simply do not listen to themselves.
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Financial advisor is a good racket.
Man with money: What should I so with my money?
Financial Advisor: Start by giving some to me. They it doesn't really matter what you do with the rest.
Buying a house can be a good deal but it is not Always a good deal. Buy low, sell high and buying to keep a roof over your head at about the same total cost of renting are good ideas. Buying because someone told you it was a good deal for them 20 years ago... not so good.
"It's like a woman who spends the day shopping for shoes and only calculates how much money she saved."
Seriously ELB? wow, why u gotta bring the hate? Men can behave the exact same way.
I had a couple guys telling me you need a mortgage for tax purposes. They also said don't do your own taxes.
Perhaps it requires some creativity that I'm not aware of.
I did hear that a yard sale is a bad idea when you can donate the stuff and write off even more.
Giraffe,
You hang with some seriously ignorant people.
The mortgage tax deduction is a very good deal, IFF you were going to spend that much on a roof over your head anyway. Paying it to the landlord or to the bank in interest really doesn't matter much and getting any of it back in tax savings is a bonus.
Donating your old trash to charity is only good when you can lie through your teeth about what you gave and its real market value. Modern IRS rules have really cracked down on this lately. Most charities will not tell you a value for donated goods. They don't want to encourage you to lie, but if you do, they do not want to be in the middle of it.
Men can behave the exact same way.
Can? Sure, but they generally don't. While I hate to take commercials as any measure of reality, when was the last time you saw a guy returning form Bass Pro with a new boat full of Bass Busters talking about how much money he saved?
But commercials are not really the point, which is that savings that are spent elsewhere are not savings, and taxes not paid are a fool's assets if their price is three or ten times their value in interest.
Either way, the bulldog goes hungry.
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