Over the years, and several thousand client appointments, I have seen and heard a ton of ideas on creating and growing wealth. I have chunked all of them down to my core rules of clarity. They are easy to write and easy to read, but not always easy to do. If you take them to heart and focus on what they will do for you the clarity and purpose each of us deserves will bubble up. It is a law of the universe! :-)
The Rules Of Clarity:
1) Eliminate outstanding debt and have plenty of cash on hand to eliminate worries during volatile economic times. This can include paying off your mortgage for those inclined to think in terms of philosophy versus quantification.
2) Have a list of your monthly costs. Yes, a budget!
3) Know your sources of income, i.e. your earned income, retirement income, social security, etc.
4) Properly allocate and diversify your investments to reflect your constraints for time, risk and volatility. Once that is done, ALWAYS set a predetermined dollar amount aside to invest each month. This is called "dollar cost averaging" and it is how you grow assets in periods of economic volatility. If you don't know or understand what this is, call me and we will have a class!!
So, back to rule #1 above. I recently had a detailed conversation with a client where it made sense for them to pay off their mortgage and that is what I recommended. At present the numbers suggest keeping a mortgage as interest rates are so low. You could get a 30 year fixed rate at about 3.5% which would cost about 2.45% after taxes.
Paying off your mortgage is not a wrong or bad decision, it is just the fact that there is a sense of freedom in not having a mortgage. Besides, it frees up money to dollar cost average in to a volatile investment environment. There is an old saying that says "scared money never wins". If the house is paid off, you know how much it costs to have the sun come up and you know where the money is coming from to cover it...you are golden!!
For me, I paid off the home I live in and have a small mortgage on the home where I play. Peace of mind always wins over money, as money can get scared and change, but peace of mind is total clarity!!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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