Cry me a river, right?
First world problems, as they say. But for this couple, it’s a problem with a twist. They sold their rental townhouse for $325,000, and after taxes and other fees, they have $309,000 in cash. Now comes the harder question: how do they use that money? The husband wants to invest the money. The wife wants to pay off the mortgage. Who’s right?
The husband’s argument: investing is better
The husband, a corporate attorney, makes a good argument for investing the money. He notes that historically, the stock market has provided a 9 to 11% return. He and his wife have maxed out their retirement accounts and have a good emergency fund in place. They also have other investments working for them, like a SEP-IRA for his business and tax-advantaged solar panels.
He argues that paying off their mortgage, which has a 3.25% interest rate, is not the best use of the money. Instead, he wants to take advantage of the market’s potential for growth. He also acknowledges that his wife is a saver and is emotional about money, but he thinks that they should still push forward with investing.
The wife’s argument: paying off the mortgage is safer
The wife, an elementary school teacher, has her own reasons for wanting to pay off the mortgage. She sees it as a safe move, one that will reduce their monthly expenses and ensure that they have a roof over their heads no matter what happens in the market. She is also wary of debt, and the idea of having a paid-off home gives her peace of mind.
She admits that she understands the potential benefits of investing, but she is still hesitant to take that risk. She prefers to stick to what she knows and trusts, and paying off the mortgage is something that she knows will benefit their family.
There are a few key factors that are influencing this decision for the couple:
– Their current mortgage has a relatively low interest rate of 3.25%
– They already have other investments in place, like their retirement accounts and the SEP-IRA and solar panels
– They have a good emergency fund and no credit card debt
– They have an income disparity, with the husband making significantly more than the wife
The decision of whether to invest in the market or pay off the mortgage ultimately comes down to personal priorities and risk tolerance. For some, the idea of being completely debt-free is incredibly important and gives them peace of mind. Others are willing to take on more risk in order to potentially reap greater rewards.
It’s worth noting that there are no easy answers here. Both options have their pros and cons, and it ultimately comes down to what feels right for the individual or couple.
So, who’s right? As with most things in life, it’s not a simple question. Both the husband and wife have valid arguments, and ultimately, they will need to come to a compromise that they are both comfortable with.
It’s worth noting, however, that the husband’s argument may hold more weight in terms of potential financial gains. If the couple is comfortable taking on some risk, investing the money could lead to significant returns over time. On the other hand, if debt reduction and security are more important to them, paying off the mortgage may be the better choice.
Ultimately, it’s a personal decision that should be made with careful consideration and in consultation with a financial advisor. Cry me a river, right? At the end of the day, a $300,000 decision is not one to be taken lightly.