Madison MoneySports - Personal Finance Thread

[D_Eclipse9916]

Keep in mind the tax code screwed you if you are married and have a mortgage.  Most of America now has no use for a Mortgage deduction; so that advantage of mortgages got taken away.

I am personally in the "get your shit paid off" camp.  The proponents screaming "I make more money in the market are"
75% - Take that money and spend it and not invest it
20% - Take that money, invest it, get hit with an issue constricting cash flow; and now take huge hits to maintain cash flow
5% - Manage cash flow properly and invest properly.  

I view my house as diversification.  If the market tanks, I lose my job and dont have cash flow; I dont have a huge monthly bill to pay.  I also can leave my money in the market to take advantage of the inevitable run up. It also means you have a backup to your backups if you need to access cash from your house equity.  A nearly paid off or paid off house gives you leverage (and also reduces your debt to equity ratio when in worst case 2009 scenarios you will still be able to get a loan).

Most people who run into money issues are because of cash flow; not because of supposed net worth or what they "made" off investments.  It's "do you have money right now to pay your bills".  When a correction or recession occurs; you dont want to be having to pull money out of the market at its absolutely worst time to pay bills.  Just something to think about vs "MAXIMIZE YOUR GAINZZZZZZZZ".  That's my viewpoint as being extremely conservative; with the caveat that I do understand I am not squeezing every penny out of my hard earned dollars.

I think we're gonna need to see a citation on those statistics. 

We've never agreed about the point of a home, but your diversification point assumes people have a huge monthly payment or need to pay down their mortgage to have a rainy day fund. Neither is true for everyone. Our mortgage is ~45% of home value and paying it off will provide very few of the benefits you mentioned. I agree you should pay it down to have 20%+ equity, but paying it way down or paying it off is most definitely not a requirement to see those benefits. Pay it down to the point you can get a HELOC for what you need and stay above 20% equity, if that's your emergency plan.

Also note that if something like 2009 happens, you probably aren't cashing money out of your house that quickly. I agree with your premise about pulling money out of the market during a downturn, but there's also something to be said for not trying to get a home loan while dealing with whatever your emergency is (illness, injury, job loss, etc.). That, and you're borrowing money with an interest rate in an emergency, versus spending capital you already made in the market. No thanks on taking a rainy day loan against my house and feeling the pressure of having to pay it back. I'll spend some of my MAXIMIZED GAINZZZZZZZZ to keep the electricity on.

It’s like there is more than one way to build wealth!

You know those stats are made up; just basing it off what I see on the cancer of social media. Yes I am judgey.

And gains aren’t gains till you actually take them. So yes I’d rather pay 5% for a heloc vs taking out investment money that took a 40% plunge.

Again, I will state that I run conservative and that if you are willing to hedge your bets tighter than me you can make more money. I would like to think you are in the 5% Range so know that I am not pointing my finger at you. It’s not an attack on anyone [emoji3060]