3083: Why We Paid Off Our Mortgage by Julien Saunders of Rich And Regular

[00:00:00] ServiceNow unterstützt Ihre Business Transformation mit der KI-Plattform. Alle reden über KI, aber die KI ist nur so leistungsfähig wie die Plattform, auf der sie aufbaut. Lassen Sie die KI arbeiten – für alle! Beseitigen Sie Reibung und Frustration Ihrer Mitarbeiter und nutzen Sie das volle Potenzial Ihrer Entwickler. Mit intelligenten Tools für Ihren Service, um Kunden zu begeistern – all das auf einer einzigen Plattform. Deshalb funktioniert die Welt mit ServiceNow. Mehr auf servicenow.de.

[00:00:30] Have you ever noticed how a calm mind can really set the stage for a good night's sleep? That's the idea behind our new podcast, Good Sleep. Greg, our host from Optimal Relationships Daily, is here to help ease you into a peaceful night's rest with some positive affirmations. And these affirmations aren't just comforting. They can help ease anxiety and nurture positive thoughts, setting you up for true good sleep.

[00:00:55] So press play on good sleep tonight, because a good tomorrow starts with a good night's sleep. Just search for Good Sleep in your podcast app, and be sure to pick the one from Optimal Living Daily. This is Optimal Finance Daily, Why We Paid Off Our Mortgage, by Julian Saunders of richandregular.com.

[00:01:19] Imagine right outside your window is a huge tree obstructing a beautiful horizon, and the only way for you to see that view is to cut the tree down. You spend years saving up for an axe until one day you're ready to pick it up and start chopping. Day and night, rain or shine, hot or cold, through good times and bad. With every ounce of energy you have, you chop.

[00:01:46] On some days, the size of the tree makes you want to give up and accept that you will never see the view you've dreamed of. Settling becomes comforting. After all, most people would be elated to see what you already have. But one day, after chopping and chopping and chopping, you see the tree tilt. Months later, it leans some more, until finally, one last swing of the axe sends the tree tumbling down.

[00:02:16] The sound it makes is like the largest cash register you've ever heard. And boom, a million dollar view is born. Seven years ago, if someone asked me if I ever thought I would be mortgage free at 37, I would have said, it's possible. I would have then asked, what amazing six-figure job opportunity did I land?

[00:02:38] I would not have believed it was possible working a regular job and steady, persistent, unrelenting grinding. A few days after we got engaged, sitting in a Lima, Peru hotel, we devised a financial plan for our life over meats, cheese, and pisco sours. Paying off the mortgage was a milestone that we knew was in the realm of possibility, just not in the immediate future.

[00:03:05] At home, we would listen to Dave Ramsey podcasts and hear how much his guests were enjoying life now that the burden of debt was lifted. Given our income, we would also think that we could experience that joy in a much shorter time frame. When we weren't binge listening to Dave's rants, we would explore blogs like Afford Anything, Go Curry Cracker, Millennial Revolution, and several others featured on Rockstar Finance.

[00:03:33] From time to time, we would flip each other articles from people who had done it and think, one day that'll be us. The primary reason we decided to pay off the mortgage was to create a level of freedom and flexibility that no job could ever provide. It was a critical part of the plan because it drastically minimized our cost of living, allowed us to invest at an even higher rate, and gave us the ultimate layer of security.

[00:04:01] I also believe tackling an obstacle was good for us as a married couple because it taught us lifelong lessons in teamwork and sacrifice. Given our plan to gain financial independence, the point where our cost of living is covered by passive income, it simply made sense to eliminate our largest bill. As an added bonus, our now primary residence could easily be rented for $1,000 plus a month once we move out.

[00:04:29] That income, combined with our other rental property, covers a substantial amount of what we need on a monthly basis and gets us much closer to financial independence. However, there are downsides to paying off a mortgage, such as The mortgage payoff increases our tax exposure because we don't have mortgage interest to deduct every year. And the opportunity cost of the money going towards the payoff could have gone into the market,

[00:04:58] earning us a higher rate of return than our mortgage costs us. Ultimately, we chose to pay it off because the good far outweighed the bad in the long run. Secondly, given the cyclical nature of our economy, it made little sense to assume that the gravy train we're riding would continue in perpetuity. On a regular basis, we witness layoffs, people battling burnout,

[00:05:24] or suffering from a slew of physical and emotional ailments that are directly linked to unhealthy work habits. More common than all of those cases are people who simply aren't happy. We don't want to be like them, so we swung the axe. We swung it about 30 plus times over a two and a half year period, putting every single dollar to work. Some payments were as small as a couple hundred dollars, some upwards of $8,000,

[00:05:54] until the final swing for $10,800.57, plus $30 for the wire transfer fee on Kirsten's birthday. Over that period of time, we agreed to send every extra dollar to go against the principle as soon as our direct deposits hit, because we knew that the longer it stayed in the checking account, the easier it was to spend it. According to the U.S. Census Bureau,

[00:06:21] As of 2015, approximately 30 million Americans own their homes free and clear. Of those, 2.5 million are Black, compared to 25.8 million whites, the leading group. Among Blacks, only 14% are between 30 and 40 years of age, approximately 327,000. So compared to the U.S. population, that means we're in the top 9%.

[00:06:50] As Black Americans, we're in the top 0.008%. But as Black Americans in our age group, we're in the top 0.001%. So essentially, we're Black unicorns. Bottom line, we didn't just pay off a mortgage. We bought time. Specifically, we bought about 45 months of our lifestyle in today's dollar

[00:07:15] for future use and put ourselves one huge step closer to an early retirement. So in a way, I suppose you can put a price on freedom. You just listened to the post titled, Why We Paid Off Our Mortgage by Julian Saunders of richandregular.com. There are many reasons why someone would choose to pay off their mortgage. Or not.

[00:07:41] I like that we've heard a few different stories on the show recently of people deciding to be mortgage-free. Because it allows me to continually check in with myself on my decision to not pay off my mortgage. Spoiler alert, I still have no intention of paying off my mortgage early. Many people find a lot of peace of mind in owning their home outright. But I find a lot more peace of mind in owning more liquid assets.

[00:08:09] Paying off my house right now would mean that 30% of my net worth would be stored in this tangible asset. If I found myself in a position where I needed to access this money, I'd be forced to sell my house or take out a home equity line of credit. HELOCs usually have variable interest rates, which I learned the hard way when I took on a $15,000 HELOC to help with my down payment on my house. Now I paid it off in six months and only spent about $200 on interest.

[00:08:39] But the interest rate increased three times in that six months. That being said, I'm not interested in taking on any debt that has a variable interest rate. I like the idea of my primary residence holding only about 10% of my net worth, so I can invest most of my money in income-producing assets. And so there may come a day when I put more money into my house as my net worth grows. I'm just not there yet.

[00:09:06] That'll do it for today and another installment of Optimal Finance Daily. Have a great rest of your weekend, and I'll catch you tomorrow where your optimal life awaits. Optimal Finance Daily