To many people, living debt-free is a lifelong dream. It’s the picture of the easy life. Retired with no debt. . .
You may be surprised to learn, however, that debt-free is not always the best decision – particularly if the choice is between paying off a mortgage or using the money more wisely to invest in a future using low-interest rate funds.
What? I Shouldn’t Pay Off My House?
Most of us don’t have that much extra cash lying around. We simply don’t have the luxury of being able to pay off our family home and maxing out our retirement contributions and investing in a side business. It’s pretty much an either-or proposition.
With that said, from a financial standpoint, it is usually most favorable to make additional contributions to a company 401(k) program, if your company is matching your contributions, or investing in growing a side business, rather than using extra money to pay off the mortgage.
Putting money into a 401(k) plan has many advantages:
Creating a side business has many advantages:
And, remember this: Mortgage interest deductions help when tax time rolls around.
After all is said and done though, the mortgage versus 401(k) versus side business decision is a personal one that you must ultimately make for yourself. Just keep in mind that if your priorities are financial, it is probably best to lean towards making additional contributions to your retirement account or starting a business, rather than paying down your mortgage.