Around 10 years ago, I had an unexpected windfall of $50,000. It allowed me to pay off my home (loan of about $150,000). In 2012, I relocated and was able to buy another home outright for about $230,000. Fast forward five years and another relocation in 2017: Sold 230,000 house for $350,000 (this house was bought towards the end of the housing crisis when prices were super low). I bought another house outright for $350,000.

Throughout these years, all of my paycheck has been available to save and spend in whatever way I want. There is no mortgage payment. So that cash adds up very fast. I have since started dumping money into my retirement accounts and have been able to buy a car without a loan. I live somewhat modestly and don't spend on luxury needlessly but I purchase the things that I want. I have a managed brokerage account that sometimes earns money. I am not super active with it because I don't know enough about how it works and I am extremely risk averse.

My income is modest. I make just under $100,000 a year in a blue collar job. Household income including spouse is around $225,000 until last year when spouse retired.

In 2019, I made one final move and sold the $350,000 house for $425,000. With that I moved into a $465,000 house. It is paid for. The insurance is ridiculous. The taxes are not terrible. But still, I never come close to spending my entire paycheck.

It is so liberating to not have to ever worry about getting by. Most people always say to not pay off your house because you can earn more in investments, but the reality is that Making good interest on investments requires knowledge that the average person doesn't have.

Much of my situation was lucky breaks from the housing market. I don't think that home values are going to be increasing in the same way that they were for the last ten years. I'm guessing that process will actually drop because home values are way too unrealistic right now.

Comments

You must log in or register to comment.

lucky_ducker t1_j9yx3yt wrote on February 25, 2023 at 4:19 PM

You're in an enviable position, and have obviously identified what works for you.

> Making good interest on investments requires knowledge that the average person doesn't have.

This sort of is, and isn't, true. Investors today have access to incredibly inexpensive stock, bond, and asset allocation mutual funds and ETFs that require, at most, a couple of hours of research at the outset.

However, the average investor's returns tend to be much less than the returns of the investment funds they choose. How is this possible? Because the average investor tries to move in and out of specific investments (market timing) to maximize investing results, which 90% of the time reduces net results.

Logical-Cell-7313 t1_j9ykvqu wrote on February 25, 2023 at 2:52 PM

Excellent story. I am able to pay off my mortgage too. But I choose not to. I refinanced around a year ago to a 20 yr loan at 2.5%. I have a large amount in a savings account earning 4.35%. If my mortgage was a higher interest I would consider paying off. But with rate on it so low. Hard to take the plunge. Interest rates on savings and cds are at decade highs. Only downside is interest is taxed as ordinary income.

BendersCasino t1_j9ykgsv wrote on February 25, 2023 at 2:49 PM

Timing helps too. I bought my first house in 2011 too, then moved in 2015, again in 2018 to my final house. I'm not paid off, but I refi'd at the right time during the pandemic and got locked into a 15yr at 2.1%. I have a boat load of equity because of just my luck in the market. I look forward to no mortgage payments!

Good job!

MikeWPhilly t1_j9yu684 wrote on February 25, 2023 at 3:59 PM

Happy for you and paying off anything will obviously create more wealth. Nobody would ever say it’s bad. That said as an alternative story:

2016 - Built a new home for $440k. Getting married within 2 weeks of settlement so not fun timing but early new construction so good buy. I could have sold our $160k condo to avoid PMI (Only 10% down) and reduce payment stress but kept to rent. 2017 - new jobs household income up $40k. Early 2018 - paid off condo now our mortgage is as cheap on home as condo was thanks to rent cash flow. Late 2018 - Appraise home to remove PMI ($525k)

Now since then we could have paid off main home. Instead we bought several more traditional rentals (15 year mortgages) and one STR just last year. Net worth is up seven figures on properties alone and we bring in about $65k a year in cash flow. That cash flow is driving more investments.

Anyway both paths free up money/wealth. But investing tends to lead to compounding. And since my main mortgage is 3.25% never paying it off - I’ll let it run until all 30 years are done. Well we will probably only hit 25 years since I want to sell around 55 and build a custom 1st floor only home.

eatingkiwirightnow t1_j9yu7fd wrote on February 25, 2023 at 3:59 PM

Good stuff. It sounds like a great situation.

I was kind of lucky too that I bought an affordable house (with mortgage) in 2018, with rates of 5%, that I was able to refinanced down to 3% in 2021. While it's not paid off, the mortgage payment is half of what the rent in the surrounding areas are going at.

-MYNAMEISNOBODY t1_ja05lbg wrote on February 25, 2023 at 9:16 PM

Good job and congrats!! I would recommend that you start to slowly educate yourself so that you can eventually dip your toes into investing. US Government Bonds are paying well ( vs cash) and are as safe as it gets.

At the very least, if you haven’t yet, you will want to ensure that any excess cash, like emergency funds, is not just sitting in a bank savings account paying .1%.

A high yield savings account is easy to set up, easy to transfer funds and pays at least 3-4.5% interest right now. That’s $30-45 per year per $1000 and it compounds. Free money… well, it least it almost keeps pace with inflation.