Gaining knowledge helps to overcome the disingenuous analysis
Note: You do not need a formal background in Economics to empower yourself. Most of those dispensing advice are disingenuous or worse, since they have hidden objectives. Often, they will make their analysis unnecessarily complicated, so they can pose as our experts.
I’m new to your stuff, but as someone who got caught up in the gold bug/Zerohedge/Armstrong media for many years, I’m grateful to hear your views!
Question, with all this hidden inflation and all-time-low interest rates, am I best to spend $4000 a month paying off my mortgage (personal home) as fast as possible, or $1000 a month on a mortgage and investing $3000 in stocks and other investment property?
I am very conservative, so am naturally leaning towards the ‘pay off the house’ approach, but I don’t want to look back and think it was a silly move.
FYI – I’m 32, wife is 29, one child (10 months), we live on 50 acres in rural New Zealand. Property was $500k NZD, mortgage remaining is $200k. I run a website earning USD but as I’m in the alt-health space.
PS – do you have any books, blogs, podcasts etc that you would recommend for a young family trying to position ourselves as best as can be?
Here was my response (edited for grammar):
Thanks for the email.
If I were in your position, age, and circumstances, I would start by paying down your owner-occupied mortgage by about 1k extra a month. With 200k outstanding, you can pay that off in about 7-9 years. It is not wasted money and paying down your house will help the balance sheet. Amortization has a way of really building equity. Of course, if the rate is low then I would concentrate on higher rate debt first. It is not a silly move to pay down owner occupied debt.
My real estate investment debt runs at about a 6% rate (down from 7.5% from a year ago), but my owner-occupied mortgage is 3.75% for 30 years. I work the investment side and pay what I owe on my owner-occupied mortgage, which is about 50% LTV right now. Our situations are different, but if you and your wife are risk-preferred like I have been, you may prefer to do what I do and defer paying down owner-occ. loans in lieu of using investment debt.
If you choose to buy an investment property, I would dedicate the rest to the pay down on that loan or purchase. That will give you equity you can tap into sooner as you pay down the loan. I would try to separate your house equity from your investment end. I use LLCs to help this separation and borrow via my LLCs.
At these prices I am not a big fan of stocks, though they may continue to run up for awhile more. I prefer taking control of my investments, and if you are hoping to empower yourself by taking control of your financial life, I would try to be a little more active than building a stock portfolio. Though stocks can be very profitable, I made much more money speculating in real estate. But do the numbers first before investing.
I don’t really have any particular podcasts and such that I would recommend. Some say similar things to what I say, but they also go off into other directions with which I may not agree.
My advice; read as much as you can in the business publications (mainstream over alt-financial). I read hours a day and though most of it may not be useful at first, it helps me to learn and come up with ideas as time goes on. I would learn Economics and Finance basics as much as possible. This makes reading all this stuff easier, plus it makes it simpler for you to separate the garbage from facts. The alt-media is a terrible place to get advice. The more you know the better your future choices will be.
Take an interest in the financial world. Learn to think correctly about money to avoid the obvious, but common mistakes. At your age, investing is great, because you have the time. But don’t squander your most valuable asset; time. Looking back over the past 20 years, it was only five or six big money (investment) decisions that made all the others pale in comparison. So, wait for the obvious opportunities and have the ability to jump at the chance. But this takes lots of learning and reading in the mean time, and either cash on hand or investment equity.