Saving for college vs paying off house

[Anonymous]

Anonymous wrote:Honestly, I'd sit down with some kind of financial planner. He/she will just echo your opinion about putting money into investments / 529s, but then it will come from a 3rd party "expert" so maybe your husband will be more receptive to the advice.

+1 Time for some outside mediation.

FWIW, we are taking an approach somewhere in the middle -- saving aggressively for college because our kids are in middle school, but also putting extra each month to the mortgage with a goal of having it paid off a year or two after our youngest finishes college so DH can then retire. We'll shift that aggressive college savings to mortgage payment once we are done paying for school (our goal is to pay 100% for in-state college, if kids want to go elsewhere they'll need to find someplace that would be comparable in cost -- no loans).

Sounds like your DH is in the camp that sees peace of mind in not having a mortgage, even if the interest rate was low. But, IMO, saving for college is the higher priority when your kids are young. One option could be to set the college savings level you think is appropriate but throw any 'extra' money at the mortgage -- tax refund, raises in salary, etc.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Can you split 1/2? I can see logic in both approaches. We paid off mortgage first and it worked out fine for us. Knowing your home is completely paid for gives you tremendous peace of mind.

OP here. But is this financially the best strategy? I'd rather have a rental property before paying off the mortgage.

Your husband is clearly not comfortable with carrying a lot of debt. I would not harp on buying a rental property because that would mean another mortgage (more debt) plus the expense of another property - which you may or may not make money on. Wait until the mortgage on your primary residence is paid off before bringing that up again.

In my opinion, you should 1) Invest at least enough in your company 401Ks to get the employer match. Do not throw free money away. You are young and your money has lots of time to grow with compound interest - take advantage of that. 2) Pay extra on the mortgage each month because having it paid off will give your husband peace of mind. 3) Invest in your child's/children's college accounts.

You do not want to put your eggs all in one basket - putting everything in real estate is risky. Putting all of your money in the stock market is risky. Not investing in your children is a different kind of risk but a risk all the same. I would seriously consider meeting with a financial adviser now.

You have a great income for two 30 year olds. Be grateful and don't take it for granted.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can you split 1/2? I can see logic in both approaches. We paid off mortgage first and it worked out fine for us. Knowing your home is completely paid for gives you tremendous peace of mind.

OP here. But is this financially the best strategy? I'd rather have a rental property before paying off the mortgage.

Your husband is clearly not comfortable with carrying a lot of debt. I would not harp on buying a rental property because that would mean another mortgage (more debt) plus the expense of another property - which you may or may not make money on. Wait until the mortgage on your primary residence is paid off before bringing that up again.

In my opinion, you should 1) Invest at least enough in your company 401Ks to get the employer match. Do not throw free money away. You are young and your money has lots of time to grow with compound interest - take advantage of that. 2) Pay extra on the mortgage each month because having it paid off will give your husband peace of mind. 3) Invest in your child's/children's college accounts.

You do not want to put your eggs all in one basket - putting everything in real estate is risky. Putting all of your money in the stock market is risky. Not investing in your children is a different kind of risk but a risk all the same. I would seriously consider meeting with a financial adviser now.

You have a great income for two 30 year olds. Be grateful and don't take it for granted.

OP here. I do max my 401k, but DH will only put 10% into his. I handle all of our finances, but can't physically put more money into his 401k because that's through his work.

We have been splitting putting money into the mortgage and the Vanguard account.

DH is extremely risk adverse. He's an engineer We're very grateful for our income, but have also worked very hard to get here and are frugal. This area is just expensive. I do think sitting down with a financial adviser would be a good strategy.

[Anonymous]

I hope your husband can consider the possibility that his strategy might not be the best one for wealth accumulation.

Perhaps print this article below and see if he'll read it? I find Ric Edelman to be very sensible.

http://www.edelmanfinancial.com/education-center/articles/1/11-great-reasons-to-carry-a-big-long-mortgage

[Anonymous]

Anonymous wrote:I hope your husband can consider the possibility that his strategy might not be the best one for wealth accumulation.

Perhaps print this article below and see if he'll read it? I find Ric Edelman to be very sensible.

http://www.edelmanfinancial.com/education-center/articles/1/11-great-reasons-to-carry-a-big-long-mortgage

OP here. I just read through that and it was very interesting.

A point my dh keeps coming back to is that over the course of a 30 year mortgage he will pay 300k in interest. That number is what bothers him the most. He doesn't think that he can get 300k in investment over 30 years (I think we can).

[Anonymous]

Pay off the house! You never know what it coming. Your child may get scholarship, decide to go a different route than college. Once the house is paid off you will be amazed at how much easier it is to enjoy life. Plus, stock market investing is a bad idea right now. Market is overinflated and bound to correct.

[Anonymous]

Anonymous wrote:Your husband sounds crazy.

Show him the actual dollars and cents on paper. I assume the $4k is for the state tax benefits? Show him that. Show him traditional growth of a home vs. growth of investment accounts over time.

The mortgage rates are SO LOW and housing can never be thought of as a sound investment. I can't imagine the logic behind that kind of strategy.

This isn't an issue about logic or conventional wisdom about where to invest money. Worry over a mortgage and paying off your mortgage early is an issue of security. If you are the kind of person who worries about the what ifs, realizing that you aren't making smart decisions isn't going to change what you do.

FWIW, I'm like OP's husband. I grew up poor, with depression era parents and then had my dad die when we were young. Nothing anyone ever says to me will ever change my need to have a lot of money saved and my need to have my mortgage paid off. Having debt of any kind is anxiety producing for me. And, my college savings plan is to use our mortgage money once it's paid off.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can you split 1/2? I can see logic in both approaches. We paid off mortgage first and it worked out fine for us. Knowing your home is completely paid for gives you tremendous peace of mind.

OP here. But is this financially the best strategy? I'd rather have a rental property before paying off the mortgage.

Historically and mathematically speaking, no. Paying off mortgage gives you two upsides - 1) you are always moving forward (market - stock or real estate investments) can go down; and 2) peace of mind (important to some, not so for others).

Female here, and I'm Team Husband.

There's 1 more upside with paying off mortgage. Mortgage equity is counted differently than money in 529. Every single cent in 529 is counted as $ available for college, whereas mortgage equity is not.

[Anonymous]

OP, I think it's ridiculous that you want to buy a rental property. That shouldn't even be an option right now, given your inexperience as a landlord (I presume) and the fact that you guys are neither maxing out retirement or 529.

[Anonymous]

Anonymous wrote:OP, I think it's ridiculous that you want to buy a rental property. That shouldn't even be an option right now, given your inexperience as a landlord (I presume) and the fact that you guys are neither maxing out retirement or 529.

OP here. I have been a landlord previously. While DH isn't maxing his 401k, combined we put 28k in last year. What is maxing out a 529? I put 4k in yearly. We're very good at major home repairs and construction, so renovating a townhouse and renting it out would actually be a good fit for us.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can you split 1/2? I can see logic in both approaches. We paid off mortgage first and it worked out fine for us. Knowing your home is completely paid for gives you tremendous peace of mind.

OP here. But is this financially the best strategy? I'd rather have a rental property before paying off the mortgage.

Historically and mathematically speaking, no. Paying off mortgage gives you two upsides - 1) you are always moving forward (market - stock or real estate investments) can go down; and 2) peace of mind (important to some, not so for others).

Female here, and I'm Team Husband.

There's 1 more upside with paying off mortgage. Mortgage equity is counted differently than money in 529. Every single cent in 529 is counted as $ available for college, whereas mortgage equity is not.

OP here. I doubt DD and future kids will get any sort of scholarships... 180k isn't much money in the DC area, but it's still a high salary (regardless of what DCUM thinks).

[Anonymous]

What would it do to your payoff schedule if you put half of that $75k into your mortgage? I agree with you that the money could do better invested elsewhere, but this is a marriage not a corporation. If putting $75k in now would mean it's paid off before the oldest kid gets to college, do that and invest the rest. It's not going to give your husband complete peace of mind but it should help him relax and the sooner you put money into a mortgage the more it cuts away at the total interest paid number that you said is giving him so much stress.

Take the other $75k and put it into the market or a rental condo instead of house.

[Anonymous]

Anonymous wrote:What would it do to your payoff schedule if you put half of that $75k into your mortgage? I agree with you that the money could do better invested elsewhere, but this is a marriage not a corporation. If putting $75k in now would mean it's paid off before the oldest kid gets to college, do that and invest the rest. It's not going to give your husband complete peace of mind but it should help him relax and the sooner you put money into a mortgage the more it cuts away at the total interest paid number that you said is giving him so much stress.

Take the other $75k and put it into the market or a rental condo instead of house.

^^ *half of that $150k ($75k total)

[Anonymous]

Anonymous wrote:

Anonymous wrote:What would it do to your payoff schedule if you put half of that $75k into your mortgage? I agree with you that the money could do better invested elsewhere, but this is a marriage not a corporation. If putting $75k in now would mean it's paid off before the oldest kid gets to college, do that and invest the rest. It's not going to give your husband complete peace of mind but it should help him relax and the sooner you put money into a mortgage the more it cuts away at the total interest paid number that you said is giving him so much stress.

Take the other $75k and put it into the market or a rental condo instead of house.

^^ *half of that $150k ($75k total)

Or a lump sum contribution to the 529 ($25-50k). Based on your HHI, your kids will not qualify for financial aid and $4k is a drop in the bucket.

[Anonymous]

Anonymous wrote:Pay off the house! You never know what it coming. Your child may get scholarship, decide to go a different route than college. Once the house is paid off you will be amazed at how much easier it is to enjoy life. Plus, stock market investing is a bad idea right now. Market is overinflated and bound to correct.

+1. We're in our 30s and paid it off in our 20s. No regrets. We're still saving for college, but our retirement is essentially covered by a paid off house.