A recent article at MSN Money asks the age old question: Should you pay off your mortgage early? In regards to this issue, this article has a little more bite than others. Liz Pulliam Weston, the author, thinks the following items take precedence over paying off your mortgage.
- Fully funding your retirement
- Paying off high credit card debt.
- Creating an emergency fund equal to three months’ expenses.
- Ensuring you have adequate life insurance
- Ensuring you have adequate long-term disability insurance
- Enjoying life by striking a balance between ‘saving for tomorrow and living today’
I agree with many pieces of this article. You certainly want to make sure that you aren’t house rich and otherwise poor. I agree that funding your retirement is an important goal that should come before paying down your house. After all, you can’t buy groceries with your home equity. Also, as someone who was struck by an inexplicable and unexpected illness I can definitely say that everyone should have a solid emergency fund. An emergency fund is not only essential for the individual who becomes ill, it is also necessary for the family member who may need to miss work to care for their sick spouse, child, or parent. Similarly, one must have solid long-term disability insurance. I was fortunate to have recovered enough to return to work after six months, (although I am still in pain every day), but it’s important to know that a 30 year old has a 50% chance of being disabled for three months or longer before turning 65.
I think many people purchase life insurance before disability insurance, but you have a greater chance of becoming disabled than dying at a young age. Of course, once you have long-term disability insurance you should definitely purchase a life insurance policy as well. After all, if you pass away you don’t want to leave your family without the financial means to care for themselves. Don’t forget that even stay-at-home parents need life insurance. After all, if they die you’ll need to pay someone to watch your children while you work.
Lastly, I agree that it is important to balance today’s happiness with tomorrow’s financial needs. If you are forgoing dinners out and budget vacations to pay off your mortgage, you should certainly think twice about doing so. It’s true that life isn’t guaranteed, so you should appropriately budget for enjoyment and entertainment with the ones you love.
To read the MSN Money article click here.