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Should I use my extra money each month to invest or pay towards the balance of my mortgage?

I have about $1,000 extra each month that I want to either invest or pay towards the principal of my mortgage ($81,000 with a 5.75 percent interest rate). What would be the best use of my money?

Debt, Investing, Real Estate
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December 2018

Less stress = longer happier life!

HI Friend! 

This is a good question and I am sure that answers you have received support more of the Math than that of behavior finance.  Indeed you could invest in the market and historically get a better return.  But there is no guarantee how well or poor you will fair.  

From a behavior finance view point, I have found that having a free and clear home brings peace of mind.  It gives you options to focus on the things that you value most which might not be work.  You could rent the home and live abroad.  You can take a sabbatical and not have to worry about having a roof over your head.  Regardless, in less than 7 years you would be free and clear.  Imagine how you will feel when you have $1000 plus your payment to use at your desire.  That is all cashflow! And most importantly, much less stress.  

Less stress = longer happier life!

What would you feel better about?  

At the end of the day, being debt free feels good.  Having less bills makes life easier.  Also, there is great value in having a healthy investment and seeing it grow.  Each of us have a different take on how we handle stress and how it affects our behavior.  Historically, good investors stick to a good financial plan.  Go with what you feel is best for your peace of mind.

For a good online calculator I suggest: Bankrate.com 

This is a mortgage payoff calculator and it will tell you how many years you will save.  I hope this helps you make an informed choice!

With love and regards,

Jose Sanchez, CFP®

June 2018
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