I was driving to work yesterday when I heard an ad for the book series Rich Dad, Poor Dad and it mentioned that ” Your house is actually NOT a good investment”. Now I am by no means a stock broker, banker and sure as hell not a politician, but I am going to give you some down to earth advice on the topic. I believe your home is actually the biggest asset you have and the best investment you will likely ever make in your life. I have put together a few tips of why you may want to re-think about dumping all of your money into stocks when you still have a mortgage.

1. Your Mortgage has a guaranteed rate of return

Huh? yeah it’s true. You pay interest on your mortgage, and that does cost you a lot of money. By paying it down you are getting a guaranteed return on your investment, something a stock cannot guarantee. Lets say you are paying 3.5% on a $400,000 mortgage over 25 years and you had $10,000 in mutual funds that you decided to put down on your mortgage, you would save $13,439.38 in interest over the course of your mortgage. The annualized rate of return on that is 5.6% which is quite remarkable.

2. Your house is a tax free investment

Yes, stocks are more liquid…. but every time you open the tap, the government gets a taste! Whether it be dividends, capital gains or management fees, your investments also cost you money! When you sell your principal residence you do not get taxed on the gains. By paying it down faster you are securing your investment and avoiding any tax component. That is not even taking into account appreciation in property value…… which is also tax free!

3. You cannot put a price on being debt free

Call me a spiritual junkie, but to me complete clarity cannot be attained while you have debts. I am all for stocks, but I only gamble what I am willing to lose. Take a drive down the million dollar areas next time stocks drop and tell me how many for sale signs you see? Those super savvy investors can barely last a month when shit hits the fan and that is because they leverage way too much. When you are debt free, you are free….period. You can withstand recessions, you can be a little more selective with what job you have, you do not have to do overtime, you can have extended vacations and you have much more control over your life which is priceless.

4. Your emotions stay in check

Ever see somebody with a “big portfolio” not scurry to a tv screen to check out how his stocks are doing? Most people I know who invest are checking their stocks several times a day…… that has to be exhausting. The levels of anxiety you experience with the up and downs of the market are just too stressful. I love knowing I put my money into my mortgage and it is making me money and I can focus on more important things in my life.

One of my favourite quotes is “if you worry about how much money you have, you aren’t rich”. You have to be able to listen to your instincts and follow them whole-heartedly if you want to live a happy life. If you are naturally someone who is risk adverse and does not want to lose money, then you might want to consider the many benefits of paying down your home faster. If you would like more information about this topic or would like to discuss your personal situation I would love to be able to help out. You can reach me at andrewtamburello@gmail.com. Have a great week.

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