Dear Janine: 

“Is it better to put any extra money towards long term investing or paying down the house?  Our house is on a 15-year loan at 5.25 interest.  The balance is 90,000 and will be paid off in 11 years if we just pay the regular payment.  This is our only debt.”  - Susan, West Virginia 

The answer I have to this is going to appear like I’m weaseling out of it-and I am! This is a question only you and your husband can decide. However, I will be happy to guide you in your decision making process. 

It all boils down to what are you comfortable with? Do you want to own your house? Do you prefer to own what you use or are you happier investing the money and hope that the return is better then the interest you pay on your home? These are the types of questions to ask. It also is very wise to consult an accountant or financial planner on this matter (since I am a neither.) Your accountant will inform you of various tax advantages and strategies to use as you accrue more and more savings and a financial planner can guide you on what makes sense for your risk tolerance: invest or pay off the home.  

I have heard two different schools of thought on this: 

1. Pay off the house so you no longer have a mortgage over your head and all you have to worry with is paying property taxes on the place. Some accountants cringe at this because you do loose some tax benefits. It is up to you to decide if those tax benefits out way the relief you get from retiring that debt.

1. Invest the money wisely and work at getting a return on your investment larger than the interest rate of your house. Some of my clients prefer this philosophy because they are savvy investors and have no problem keeping a mortgage.

It is a personal choice. However, 5.25 percent interest is an incredibly low rate. You may want to consider making 13 payments a year on the house and take the rest of the money and investing it. Educate yourself, chat with your accountant and read the advice scattered throughout the web on investment strategies. That is the key to investing and decision making when it comes to finances: education and risk management! 

I need thousands of dollars, what do I do?

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Dear Janine:

I’m 36 years old, married with three children and want to start saving for a home. We don’t spend money on cable tv, going out to eat, or cell phones. I use your “Grocery Store Game” and have no idea where else to cut corners. I REALLY want this house. Any suggestions?  -Kelly, Washington, D.C. 

After speaking with Kelly, I was able to find out that she and her husband had two cars. He used his to commute to work every day which left her at home with the other one. When she gave me a few more details of their lifestyle and their goals, I suggested that they sell her car. Oh my! She argued for quite some time with me about how unrealistic that suggestion was, but here is my thinking. This car cost her family $7,500 a year to run, maintain, pay taxes on and keep in gas. She was able to walk most places she wanted to go and if she couldn’t walk, there was always the Metro station one mile from her current apartment.  

Eventually, Kelly told me she would think about it. I don’t know if she took my advice or not, but the goal is money here. How badly do you want your goal? Do you really, REALLY want your goal or are you just lukewarm about it? The amount of determination you bring to achieving your goal will allow you to be more creative in obtaining it.  

In this case, giving up the second car would be a boon to saving for a new home. Kelly is not the first person I have recommended this course of action. I have 4 clients that I have coached who have given up cars in the pursuit of what they really wanted in life. All of them have used different means of getting around. Renting cars, taxis, bikes, car pooling with friends and paying for gas, all of these options are available to most people. These clients have told me of improved health and vigor since they had to walk places, they mentioned how they have made more friends and know their neighbors better since adopting this lifestyle.