[OT] Personal Finances: Was The perfect MP3 player

Dave Smith DavidSmith at byu.net
Sun Sep 18 17:28:34 MDT 2005


Michael Halcrow wrote:

>On that note, financial planners will frequently tell you that your
>mortgage is the last thing you should pay off, because the interest
>rate is relatively low, and the interest on the mortgage loan is
>tax-deductible. Hit your car loans first with everything you've got,
>then make an extra payment or two on your mortgage principle every
>year, and make your student loan payments as small as you possibly can
>(even inflation outpaces Stafford loan rates). This is assuming that
>you have not made the mistake of running up a credit card balance, of
>course (convenience or being too lazy to go to the bank is not an
>excuse for doing that -- there really is no good excuse for it at
>all). And if you are just accepting a credit card APR over 10% --
>well, you know what they say about a fool and his money. ;-)
>  
>

Many financial planners will also advise you to get a second mortgage on 
your home equity to invest. Many financial planners are also mortgage 
brokers. Many people who have taken this advice have foreclosed on their 
homes. You can't foreclose on a house that's paid off. Follow the money 
and don't trust every financial planner.

Your comment also assumes that I have a car payment, which I do not. 
This is the second incorrect assumption made in this thread. The first 
was that I don't already have a cash savings account to cover expenses 
for an unfortunate extended period of unemployment, which I do.

By the way, I'm not into mutual funds for the short term, and the S&P 
has averaged 13% over any 50 year period, so your numbers are irrelevant 
to my situation. Personally, I'd rather move retirement closer by a 
couple years than indulge in electronic gadgets right now anyway, but 
that's just me.

Anyway, I know I have uncommon financial opinions, and that I'm a green 
amateur, so I'm interested in the rest of the group's opinions. I 
generally find that IT-type people are pretty darn good with money, 
especially the engineering types. Not sure why, maybe they see it as 
some kind of optimization problem wanting to be solved.

So, anyhoo my plan is basically this, in chronological order: Pay off 
all debt except the house. Amass an "emergency fund" of a year of cash. 
Save 15-20% of gross income for retirement and children's education in a 
mix of Roth IRAs and 401(k) plans. Pay off house as fast as possible. 
Two months after house is paid off, throw a huge party with the house 
payment money you've saved over the last couple months. Then, spend like 
crazy using all that extra income that's no longer going to Wells Fargo 
Home Mortgage. Retire at 50-55 and enjoy your millions. Yes, there are 
risks: Get life insurance for 10x your salary to help your family in 
case you kick the bucket. Get long-term disability insurance in case you 
loose all your fingers and can't type C code anymore (many employers 
provide this). So that's it in a nutshell. What does everyone think? 
Sound or stupid?

--Dave



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