Driving to the city yesterday, IFO had the opportunity to listen to a financial advisor she rarely hears – Ric Edelman. He was advancing the notion that it is just silly to try to pay off your mortgage early.
Well, we were shocked.
Not only had we always thought that the most wonderful thing in the world was to live in a mortgage-free home of our own, but we treasure memories of movies showing happy families looking on adoringly at Dad has he BURNED THE MORTGAGE after having made the last payment to that greedy (boo! hiss!) banker.
But no, Mr. E seemed to think his caller (nearing retirement and fearing rising expenses against a fixed income) asking that question was a naive fool seriously in need of financial advice… of the kind dished out by Mr. E himself. We rushed to his website thinking we might get an explanation that made more sense than the one he gave on the radio. We were, after all, threading our way through a very complex freeway junction at the time – maybe we needed to read about it.
We finally found the explanation and invite you to read it if you have the time and patience to wade through a lot of history, psychoanalysis, and ridicule of the idea of owning your own home free and clear. It’s too many words for us.
Now, in contrast look at another financial advisor, Dave Ramsey – apparently viewed by Mr. E as a rival, but in reality quite a different kind of advisor.Mr. R sells books and puts on seminars, rather than charging to review people’s financial situatios. He regularly invites listeners who have followed his advice and become “debt-free” to call in and scream into the phone, “WE’RE DEBT FREE!!!”
He advises getting a 15-year mortgage so you’ll pay it off quickly. He has tons of practical advice on buying real estate that is easy to understand and to agree or disagree with.
Now, IFO definitely doesn’t agree with all of Mr. Ramsey’s advice. He doesn’t advise buying individual stocks, for example, preferring that people buy mutual funds. We never have understood this fixation so many financial advisors have with mutual funds, but it’s not a BAD move for people who have lots to think about besides growing their next egg on their own.
The thing is, when decent stocks are going down in price, so are mutual funds! So, where’s the win? We have no problem with mutual funds, but just personally prefer to pay ourselves the fund management fee and save ourselves from trying to find out who the fund manager is and how long he/she has been managing the fund and what it’s track record is and stuff like that. It’s much easier to find that out about individual companies.
So, what do you think? Pay off or don’t pay off the mortgage?