I told my kids that when they finished high school they would have to earn spending money, AND that they would have to pay for their final year of college so they'd have skin in the game. My daughter eventually thanked me for that policy--she said she was one of the few in college who didn't run out of money before the end of a semester, because she earned her spending money and learned some economy. It helped that we instituted a clothing budget when they were young teenagers. They got a clothing budget but could keep any unspent money. They loved it--and started learning how to look they way they wanted on a budget.
Yes, if you have bonds in your portfolio yielding less than the after-tax cost of your mortgage, it makes sense to pay off your mortgage first. But if you want leverage to increase your exposure to equities, a mortgage is the cheapest way to borrow for retail folks, i.e., those of us who aren't corporations and able to issue bonds.
"Greater happiness" doesn't strike me as a reason that can be generalized. Whether you want more or less leverage is a function of your tolerance for risk.
I've been thinking about that too, and agree that paying mortgage rates is like paying a bond. Then realized that if I take money out of my IRA I'd pay taxes on the distribution, and possibly push myself into a higher tax bracket. So the reasoning above works--but only if you have a taxable account without too much in capital gains.
Comments:
Congratulations! Hope you're still solvent after putting five kids through college.
Post: When should parents stop supporting their adult children financially?
Link to comment from May 15, 2021
I told my kids that when they finished high school they would have to earn spending money, AND that they would have to pay for their final year of college so they'd have skin in the game. My daughter eventually thanked me for that policy--she said she was one of the few in college who didn't run out of money before the end of a semester, because she earned her spending money and learned some economy. It helped that we instituted a clothing budget when they were young teenagers. They got a clothing budget but could keep any unspent money. They loved it--and started learning how to look they way they wanted on a budget.
Post: When should parents stop supporting their adult children financially?
Link to comment from May 15, 2021
Yes, if you have bonds in your portfolio yielding less than the after-tax cost of your mortgage, it makes sense to pay off your mortgage first. But if you want leverage to increase your exposure to equities, a mortgage is the cheapest way to borrow for retail folks, i.e., those of us who aren't corporations and able to issue bonds.
Post: Should you prepay a mortgage?
Link to comment from May 15, 2021
"Greater happiness" doesn't strike me as a reason that can be generalized. Whether you want more or less leverage is a function of your tolerance for risk.
Post: Should you prepay a mortgage?
Link to comment from May 15, 2021
I've been thinking about that too, and agree that paying mortgage rates is like paying a bond. Then realized that if I take money out of my IRA I'd pay taxes on the distribution, and possibly push myself into a higher tax bracket. So the reasoning above works--but only if you have a taxable account without too much in capital gains.
Post: Should you prepay a mortgage?
Link to comment from May 15, 2021