Keith tax guy - debt is slavery - knocks it out of the park

[solon]

Here's the latest from the wealthy accountant, MMM's accountant:
https://wealthyaccountant.com/2018/04/12/the-greatest-secret-between-debt-and-wealth/

He hammers on the theme that debt is slavery. And the ultra-rich (Buffet, Munger) know this and use it to their advantage, and even laugh at those caught in debt.

Articles like this make me want to go all William Wallace on my debt. Single-minded, narrow focus, I'm-mad-at-this-terrible-injustice-and-I-won't-rest-until-it-is-remedied. (Sorry for the stream of consciousness rambling.)

[ducky19]

"FREEDOM!!!!!"

[thd7t]

I don't like this article, because it doesn't really look at the fact that all debt isn't equal, because access to debt isn't equal.  I can use debt as a tool because of my situation, but predatory rates make debt very different for many people.  I have incredibly inexpensive debt on my house that allows my other money to make lots of money.  Historically (and to this day) banking practices has not given that tool to everyone.  The same thing that lifts me up is pushing others down.

[KeithTax]

thd7t, there is a discussion in the comments on your points. I also explain why I chose the path I did in the post. It makes sense while allowing readers to lead the discussion on debt. I just planted the seed for thought.

[thd7t]

Keith, I appreciate you pointing that out!  I didn't read into the comments, but I will.  I'm glad that you're here for the conversation!

I will say that one of the points that I was trying to make was not only that debt can be okay if you don't have "net debt", but that there is serious structural inequality in the lending system that makes it easy for me to have low interest debt compared to what is available to others.  I think that it's an important discussion to have, but I didn't find it in the comments.

[solon]

Keith, I appreciate you pointing that out!  I didn't read into the comments, but I will.  I'm glad that you're here for the conversation!

I will say that one of the points that I was trying to make was not only that debt can be okay if you don't have "net debt", but that there is serious structural inequality in the lending system that makes it easy for me to have low interest debt compared to what is available to others.  I think that it's an important discussion to have, but I didn't find it in the comments.

I think some of what you're saying is exactly keith's point. Debt is slavery, your hair is on fire, go after it with gazelle intensity. Debt is harmful to many, many people, and the fact that you've found a way for it to be helpful (or at least not as harmful), doesn't detract from the main point.

[OurTown]

Part of my journey was paying off cc / consumer debt.  Did that.  Next was getting into a high income profession in a LCOL area.  Did that.  Next was doing a refi on the home mortgage from a 30 year fixed to a 15 year fixed at a low interest rate.  Did that.  Next is building the stache to my magic number.  Doing that now.  Then I'm going to finish off whatever is left of the mortgage.

Why not kill the mortgage first?  This is of course the subject of the don't pay your mortgage threads.  I'm good with the setup the way I have it because with the 15 year amortization, a pretty hefty percentage of each monthly payment is going towards principal.  So by the time I hit the number I won't have that much left to pay off.

[thd7t]

Keith, I appreciate you pointing that out!  I didn't read into the comments, but I will.  I'm glad that you're here for the conversation!

I will say that one of the points that I was trying to make was not only that debt can be okay if you don't have "net debt", but that there is serious structural inequality in the lending system that makes it easy for me to have low interest debt compared to what is available to others.  I think that it's an important discussion to have, but I didn't find it in the comments.

I think some of what you're saying is exactly keith's point. Debt is slavery, your hair is on fire, go after it with gazelle intensity. Debt is harmful to many, many people, and the fact that you've found a way for it to be helpful (or at least not as harmful), doesn't detract from the main point.

I respectfully disagree here.  I can make debt work for me, not because of my actions, but because of who I am.  Even if his point is that all debt is bad, it's systemically less bad for me than for many.

[wageslave23]

Keith, I appreciate you pointing that out!  I didn't read into the comments, but I will.  I'm glad that you're here for the conversation!

I will say that one of the points that I was trying to make was not only that debt can be okay if you don't have "net debt", but that there is serious structural inequality in the lending system that makes it easy for me to have low interest debt compared to what is available to others.  I think that it's an important discussion to have, but I didn't find it in the comments.

I think some of what you're saying is exactly keith's point. Debt is slavery, your hair is on fire, go after it with gazelle intensity. Debt is harmful to many, many people, and the fact that you've found a way for it to be helpful (or at least not as harmful), doesn't detract from the main point.

I respectfully disagree here.  I can make debt work for me, not because of my actions, but because of who I am.  Even if his point is that all debt is bad, it's systemically less bad for me than for many.

What is your point? Interest rates and the decision to extend you credit is solely based on your expected ability to repay the loan and what the money is to be used for.  Any other basis has been made illegal long ago.

[eudaimonia]

Short but fantastic article. Our forefathers knew that debt = slavery and we need to get away from the idea of "good debt".

[inline five]

Short but fantastic article. Our forefathers knew that debt = slavery and we need to get away from the idea of "good debt".

Most on here earn high incomes and live like a pauper to invest the difference.

Others outside of this realm use 3%-5% debt to make returns of 10%-15% or more. The use of OPM (other people's money) is a fantastic wealth building tool.

[Rosy]

True - debt is slavery, but I doubt even Warren Buffet never had any debt.
Fundamentally, I don't believe in good debt or bad debt.

While I had good reasons to finance my car, I am well aware that it costs me 99 cents every day in interest for the life of the loan.
It also limits the cash available to me each month and prevents me from saving/investing as much as I'd like.
My only consolation is that at present the interest I earn is more than the interest I pay.

inline five has a point about OPM, although that depends entirely on your circumstances and low income and/or significant debt will generally bar you from that club.

[mintleaf]

Debt is a tool, and like every good tool it is a force multiplier. If you're in the habit of making good decisions, it can amplify those good decisions. If you're in the habit of making bad decisions, it will usually make your situation even worse. Unfortunately the vast majority of debt is created for (and marketed to) people who will use it badly, to the benefit of the lenders. So the unconditional message of "debt is bad" is a perfectly fine starting point, for the vast majority of people.

[scottish]

Short but fantastic article. Our forefathers knew that debt = slavery and we need to get away from the idea of "good debt".

Most on here earn high incomes and live like a pauper to invest the difference.

Others outside of this realm use 3%-5% debt to make returns of 10%-15% or more. The use of OPM (other people's money) is a fantastic wealth building tool.

<grin>  It's also a fantastic wealth destroying tool when it goes wrong.

[jlcnuke]

No offense, but the article comes across too "Dave Ramsey'ish" for me. The basic message is well intentioned, and generally applies well to a good portion of people, but ignores the greater reality which provides sound financial reasons for debt. Despite the addendum of "Jason, I should have said net debt, as in more debt than investments" in the comments, the concept of "productive debt" vs "harmful debt" really isn't clarified.

More importantly, however, I'd say that while the article implies "debt" is causing the "slavery", the truth (somewhat hinted at if you read between the lines but not clearly stated) is that financial independence is required to be "free" of worry for those obligations. Of course, when you try to boil down complex topics like all of personal finance into a 1 page article, stuff is going to be missed.

[Rosy]

No offense, but the article comes across too "Dave Ramsey'ish" for me. The basic message is well intentioned, and generally applies well to a good portion of people, but ignores the greater reality which provides sound financial reasons for debt. Despite the addendum of "Jason, I should have said net debt, as in more debt than investments" in the comments, the concept of "productive debt" vs "harmful debt" really isn't clarified.

More importantly, however, I'd say that while the article implies "debt" is causing the "slavery", the truth (somewhat hinted at if you read between the lines but not clearly stated) is that financial independence is required to be "free" of worry for those obligations. Of course, when you try to boil down complex topics like all of personal finance into a 1 page article, stuff is going to be missed.

Yes, the article may have hammered home the point Ramsey style, but the style of delivery notwithstanding, the critical point is like you said:
"Financial independence is required to be "free" of worry of those obligations".

[NorCal]

I liked the article.  This is one of the better ones on the topic.

My personal philosophy is that there are two types of people in the world.  Those who earn compound interest and those who pay compound interest. 

Sure, you can get nuanced and reference those who borrow to invest in assets with a higher rate of return than the cost of debt.  But those discussions don't apply to 95% of the blog-reading public.

[Lan Mandragoran]

Seems like an article for views or the masses. Good thing I spose, but uhhh it’s a little black and white compared to reality.

[thd7t]

Keith, I appreciate you pointing that out!  I didn't read into the comments, but I will.  I'm glad that you're here for the conversation!

I will say that one of the points that I was trying to make was not only that debt can be okay if you don't have "net debt", but that there is serious structural inequality in the lending system that makes it easy for me to have low interest debt compared to what is available to others.  I think that it's an important discussion to have, but I didn't find it in the comments.

I think some of what you're saying is exactly keith's point. Debt is slavery, your hair is on fire, go after it with gazelle intensity. Debt is harmful to many, many people, and the fact that you've found a way for it to be helpful (or at least not as harmful), doesn't detract from the main point.

I respectfully disagree here.  I can make debt work for me, not because of my actions, but because of who I am.  Even if his point is that all debt is bad, it's systemically less bad for me than for many.

What is your point? Interest rates and the decision to extend you credit is solely based on your expected ability to repay the loan and what the money is to be used for.  Any other basis has been made illegal long ago.

The latest study that I can find on racial discrimination in mortgage lending was published last year.  It shows that applicants of color are denied at twice the rate of white applicants.  Here's a link to a brief article on it.
http://wunc.org/post/blacks-and-latinos-denied-mortgages-rates-double-whites#stream/0
Legislation proposed by Tim Scott (R-SC) gets to some of the issues that make credit access unequal. 

Studies from 2016 showed that identical applications for credit using typically black names vs. white names result in the equivalent of an average difference in availability of credit equivalent to a 71 point difference.  These were based on identical credit and repayment patterns.  The checks were conducted in 61 municipalities, so this "average" disparity is significantly worse in some areas.

[jlcnuke]

Keith, I appreciate you pointing that out!  I didn't read into the comments, but I will.  I'm glad that you're here for the conversation!

I will say that one of the points that I was trying to make was not only that debt can be okay if you don't have "net debt", but that there is serious structural inequality in the lending system that makes it easy for me to have low interest debt compared to what is available to others.  I think that it's an important discussion to have, but I didn't find it in the comments.

I think some of what you're saying is exactly keith's point. Debt is slavery, your hair is on fire, go after it with gazelle intensity. Debt is harmful to many, many people, and the fact that you've found a way for it to be helpful (or at least not as harmful), doesn't detract from the main point.

I respectfully disagree here.  I can make debt work for me, not because of my actions, but because of who I am.  Even if his point is that all debt is bad, it's systemically less bad for me than for many.

What is your point? Interest rates and the decision to extend you credit is solely based on your expected ability to repay the loan and what the money is to be used for.  Any other basis has been made illegal long ago.

The latest study that I can find on racial discrimination in mortgage lending was published last year.  It shows that applicants of color are denied at twice the rate of white applicants.  Here's a link to a brief article on it.
http://wunc.org/post/blacks-and-latinos-denied-mortgages-rates-double-whites#stream/0
Legislation proposed by Tim Scott (R-SC) gets to some of the issues that make credit access unequal. 

Studies from 2016 showed that identical applications for credit using typically black names vs. white names result in the equivalent of an average difference in availability of credit equivalent to a 71 point difference.  These were based on identical credit and repayment patterns.  The checks were conducted in 61 municipalities, so this "average" disparity is significantly worse in some areas.

Do you have a link to the 2016 studies you reference? The study you linked specifically mentions that differences in income/credit/etc are not accounted for when showing the difference in denial rates, and specifically says that credit score differences etc that aren't mentioned are responsible for the difference.  I'd be interested to see studies that actually address that since credit score is not generally part of the data reported for such issues (as mentioned in the article linked).

[Dicey]

thd7t, there is a discussion in the comments on your points. I also explain why I chose the path I did in the post. It makes sense while allowing readers to lead the discussion on debt. I just planted the seed for thought.

Why leave this important information for others to dissect in the comments? Why not discuss it directly and openly? Prudent use of mortgages can be a fantastic tool to create wealth, for very low risk.

We are very comfortably FI. We paid cash for our HCOLA house five years ago. We still kind of regret not getting a mortgage, especially now that the latest eleventh-hour tax changes have mostly pushed that option off the table for good.

We console ourselves by keeping mortgages on all of our rentals, but you well know that interest rates favor owner occupied properties.

Just my two leveraged cents.

[thd7t]

Keith, I appreciate you pointing that out!  I didn't read into the comments, but I will.  I'm glad that you're here for the conversation!

I will say that one of the points that I was trying to make was not only that debt can be okay if you don't have "net debt", but that there is serious structural inequality in the lending system that makes it easy for me to have low interest debt compared to what is available to others.  I think that it's an important discussion to have, but I didn't find it in the comments.

I think some of what you're saying is exactly keith's point. Debt is slavery, your hair is on fire, go after it with gazelle intensity. Debt is harmful to many, many people, and the fact that you've found a way for it to be helpful (or at least not as harmful), doesn't detract from the main point.

I respectfully disagree here.  I can make debt work for me, not because of my actions, but because of who I am.  Even if his point is that all debt is bad, it's systemically less bad for me than for many.

What is your point? Interest rates and the decision to extend you credit is solely based on your expected ability to repay the loan and what the money is to be used for.  Any other basis has been made illegal long ago.

The latest study that I can find on racial discrimination in mortgage lending was published last year.  It shows that applicants of color are denied at twice the rate of white applicants.  Here's a link to a brief article on it.
http://wunc.org/post/blacks-and-latinos-denied-mortgages-rates-double-whites#stream/0
Legislation proposed by Tim Scott (R-SC) gets to some of the issues that make credit access unequal. 

Studies from 2016 showed that identical applications for credit using typically black names vs. white names result in the equivalent of an average difference in availability of credit equivalent to a 71 point difference.  These were based on identical credit and repayment patterns.  The checks were conducted in 61 municipalities, so this "average" disparity is significantly worse in some areas.

Do you have a link to the 2016 studies you reference? The study you linked specifically mentions that differences in income/credit/etc are not accounted for when showing the difference in denial rates, and specifically says that credit score differences etc that aren't mentioned are responsible for the difference.  I'd be interested to see studies that actually address that since credit score is not generally part of the data reported for such issues (as mentioned in the article linked).

https://mediaassets.tmj4.com/document/2016/02/19/MLO%20Discrimination_HHML_32264844_ver1.0.PDF
Research was compiled by economists at Texas Christian University, Marquette, and Georgia State.

The research largely looks at the first decade of the 2000's, but while there have been major changes to how Mortgage Loan Originators work since that time, I haven't seen anything that suggests that this is the case with regard to people of color.

[birdman2003]

For the median American household making $59k in 2016, debt is a terrible burden. 

+1 for this article

[frugalecon]

This article paints with a very broad brush, but I can see that it has value for perhaps typical people who do not have good self control and are at risk of getting themselves into serious debt. My only debt is a zero rate car loan (which enables me to make money on the float) and a low interest 15 year mortgage that frankly requires me to pay trivial interest relative to my income. (And even that interest is falling fast.) Doesn't seem like it would make sense to pay off either, given the opportunity cost I would bear.

[Calvawt]

I think that article was not very good.  I also thought Dave Ramsey when I read it.  Too generalized and too much in bold print.  If everything is bolded, it loses its usefulness of making a statement stick out.

Berkshire Hathaway has $103,000,000,000 in debt.  Obviously debt can be used to create wealth.  You can see it with people building real estate wealth, growing their business, etc.  Being debt free and building from equity also works, but to say that it is the only way is just not true.  In most cases, its a combination of the two anyway.

[Rosy]

This article paints with a very broad brush, but I can see that it has value for perhaps typical people who do not have good self control and are at risk of getting themselves into serious debt. My only debt is a zero rate car loan (which enables me to make money on the float) and a low interest 15 year mortgage that frankly requires me to pay trivial interest relative to my income. (And even that interest is falling fast.) Doesn't seem like it would make sense to pay off either, given the opportunity cost I would bear.

Debt does not necessarily have anything to do with self-control - serious illness has driven many people into bankruptcy or caused them to lose everything. Young families just starting out are easily swallowed up by a debt wave if the least little thing goes wrong and there is no one to bail them out in a "normal' every day emergency.
Low income, rising prices and stagnating wages are wrecking havoc on a huge percentage of the population.

Of course, consumerism is the other half of the coin - voluntary debt slaves, no thank you.

I agree with your comment in general frugalecon, but it also reminded me of how quickly we condemn, especially if we are now either well situated or were always frugal paragons or just simply have always had the luxury of a good safety net - that alone is worth it's weight in gold.
Just sayin'.
... and you are right, the article was painted with a broad brushstroke, not allowing for OPM nor for situations out of our control.

[frugalecon]

This article paints with a very broad brush, but I can see that it has value for perhaps typical people who do not have good self control and are at risk of getting themselves into serious debt. My only debt is a zero rate car loan (which enables me to make money on the float) and a low interest 15 year mortgage that frankly requires me to pay trivial interest relative to my income. (And even that interest is falling fast.) Doesn't seem like it would make sense to pay off either, given the opportunity cost I would bear.

Debt does not necessarily have anything to do with self-control - serious illness has driven many people into bankruptcy or caused them to lose everything. Young families just starting out are easily swallowed up by a debt wave if the least little thing goes wrong and there is no one to bail them out in a "normal' every day emergency.
Low income, rising prices and stagnating wages are wrecking havoc on a huge percentage of the population.

Of course, consumerism is the other half of the coin - voluntary debt slaves, no thank you.

I agree with your comment in general frugalecon, but it also reminded me of how quickly we condemn, especially if we are now either well situated or were always frugal paragons or just simply have always had the luxury of a good safety net - that alone is worth it's weight in gold.
Just sayin'.
... and you are right, the article was painted with a broad brushstroke, not allowing for OPM nor for situations out of our control.

Rosy, you are absolutely right that many end up in debt through unfortunate circumstances that are out of their control. And I am sorry if I came across as judgmental. But I think that the article is probably most useful for people who just need to be hit between their eyes with a 2x4, b/c they are harming themselves voluntarily (and are the voluntary debt slaves you reference).

I worry about my sister, who with her husband makes about $300k/year while living in a relatively LCOL area, but who spends most of it and goes deeply into debt for luxury cars, expensive clothes, jewelry, elective plastic surgery, booze, cigarettes, etc. I am not sure they understand how much they will need in retirement savings to maintain their lifestyle. Several years ago they were audited by the IRS, and they needed $10k from my parents, who were on fixed income, to get out of it. Unfortunately, they didn't learn much from that, since they still spend with abandon and use credit freely.

[RedmondStash]

Anybody else notice that some individual letters were formatted bold in that article? They spell out:

r-e-m-e-m-b-e-r

No joke. Take a look for yourself, ignoring the all-bold headlines.

Debt can be a useful tool mathematically; getting a really low interest rate on a mortgage might make it worthwhile to keep the mortgage and instead invest the money you would have used to pay it off. But I'm struck by the fact that there are so many threads agonizing about whether or not to pay off a mortgage, and not a single one about someone expressing regret for paying off a mortgage even if they could have ended up with more money.

There's something to this freedom-from-debt thing. It's not all about the numbers. Freedom from all debt does seem to confer a higher level of happiness, at least for many people.

[Rosy]

This article paints with a very broad brush, but I can see that it has value for perhaps typical people who do not have good self control and are at risk of getting themselves into serious debt. My only debt is a zero rate car loan (which enables me to make money on the float) and a low interest 15 year mortgage that frankly requires me to pay trivial interest relative to my income. (And even that interest is falling fast.) Doesn't seem like it would make sense to pay off either, given the opportunity cost I would bear.

Debt does not necessarily have anything to do with self-control - serious illness has driven many people into bankruptcy or caused them to lose everything. Young families just starting out are easily swallowed up by a debt wave if the least little thing goes wrong and there is no one to bail them out in a "normal' every day emergency.
Low income, rising prices and stagnating wages are wrecking havoc on a huge percentage of the population.

Of course, consumerism is the other half of the coin - voluntary debt slaves, no thank you.

I agree with your comment in general frugalecon, but it also reminded me of how quickly we condemn, especially if we are now either well situated or were always frugal paragons or just simply have always had the luxury of a good safety net - that alone is worth it's weight in gold.
Just sayin'.
... and you are right, the article was painted with a broad brushstroke, not allowing for OPM nor for situations out of our control.

Rosy, you are absolutely right that many end up in debt through unfortunate circumstances that are out of their control. And I am sorry if I came across as judgmental. But I think that the article is probably most useful for people who just need to be hit between their eyes with a 2x4, b/c they are harming themselves voluntarily (and are the voluntary debt slaves you reference).

I worry about my sister, who with her husband makes about $300k/year while living in a relatively LCOL area, but who spends most of it and goes deeply into debt for luxury cars, expensive clothes, jewelry, elective plastic surgery, booze, cigarettes, etc. I am not sure they understand how much they will need in retirement savings to maintain their lifestyle. Several years ago they were audited by the IRS, and they needed $10k from my parents, who were on fixed income, to get out of it. Unfortunately, they didn't learn much from that, since they still spend with abandon and use credit freely.

Yes, that would worry me too. I have a couple of 2 by 4's out in the shed if it will help:)

[Fireball]

Keith, I appreciate you pointing that out!  I didn't read into the comments, but I will.  I'm glad that you're here for the conversation!

I will say that one of the points that I was trying to make was not only that debt can be okay if you don't have "net debt", but that there is serious structural inequality in the lending system that makes it easy for me to have low interest debt compared to what is available to others.  I think that it's an important discussion to have, but I didn't find it in the comments.

I think some of what you're saying is exactly keith's point. Debt is slavery, your hair is on fire, go after it with gazelle intensity. Debt is harmful to many, many people, and the fact that you've found a way for it to be helpful (or at least not as harmful), doesn't detract from the main point.

I respectfully disagree here.  I can make debt work for me, not because of my actions, but because of who I am.  Even if his point is that all debt is bad, it's systemically less bad for me than for many.

What is your point? Interest rates and the decision to extend you credit is solely based on your expected ability to repay the loan and what the money is to be used for.  Any other basis has been made illegal long ago.

The latest study that I can find on racial discrimination in mortgage lending was published last year.  It shows that applicants of color are denied at twice the rate of white applicants.  Here's a link to a brief article on it.
http://wunc.org/post/blacks-and-latinos-denied-mortgages-rates-double-whites#stream/0
Legislation proposed by Tim Scott (R-SC) gets to some of the issues that make credit access unequal. 

Studies from 2016 showed that identical applications for credit using typically black names vs. white names result in the equivalent of an average difference in availability of credit equivalent to a 71 point difference.  These were based on identical credit and repayment patterns.  The checks were conducted in 61 municipalities, so this "average" disparity is significantly worse in some areas.

Do you have a link to the 2016 studies you reference? The study you linked specifically mentions that differences in income/credit/etc are not accounted for when showing the difference in denial rates, and specifically says that credit score differences etc that aren't mentioned are responsible for the difference.  I'd be interested to see studies that actually address that since credit score is not generally part of the data reported for such issues (as mentioned in the article linked).

https://mediaassets.tmj4.com/document/2016/02/19/MLO%20Discrimination_HHML_32264844_ver1.0.PDF
Research was compiled by economists at Texas Christian University, Marquette, and Georgia State.

The research largely looks at the first decade of the 2000's, but while there have been major changes to how Mortgage Loan Originators work since that time, I haven't seen anything that suggests that this is the case with regard to people of color.

Thanks for posting the study! Interesting stuff. Seems not much has changed since the early 2000s.

www.housingwire.com/articles/37405-bancorpsouth-fined-106-million-for-discriminatory-lending-redlining

[Dicey]

But I'm struck by the fact that there are so many threads agonizing about whether or not to pay off a mortgage, and not a single one about someone expressing regret for paying off a mortgage even if they could have ended up with more money.

That's pretty funny, considering what I posted earlier in this very thread:

We are very comfortably FI. We paid cash for our HCOLA house five years ago. We still kind of regret not getting a mortgage, especially now that the latest eleventh-hour tax changes have mostly pushed that option off the table for good.

We console ourselves by keeping mortgages on all of our rentals, but you well know that interest rates favor owner occupied properties.

FWIW, we are striving to educate so that people can make optimal decisions. It's no more agonizing than anything else we analyze as Mustachians.

[seattlecyclone]

But I'm struck by the fact that there are so many threads agonizing about whether or not to pay off a mortgage, and not a single one about someone expressing regret for paying off a mortgage even if they could have ended up with more money.

That's pretty funny, considering what I posted earlier in this very thread:

We are very comfortably FI. We paid cash for our HCOLA house five years ago. We still kind of regret not getting a mortgage, especially now that the latest eleventh-hour tax changes have mostly pushed that option off the table for good.

We console ourselves by keeping mortgages on all of our rentals, but you well know that interest rates favor owner occupied properties.

FWIW, we are striving to educate so that people can make optimal decisions. It's no more agonizing than anything else we analyze as Mustachians.

If you need another counterexample, take mine. We aggressively paid off the mortgage on our first home. When it came time to get a bigger one to make room for kids, I did the math and found that we would be at least $100k richer if we had instead invested our extra principal payments in VTSAX. We took out the biggest possible non-jumbo loan when we bought our current house, and invested the remaining equity from our old house in the stock market. I sleep fine at night. I fully expect the next 30 years to bring plenty of periods where 4% interest will seem like a laughably low price to pay for other people's money.

[ender]

If you need another counterexample, take mine. We aggressively paid off the mortgage on our first home. When it came time to get a bigger one to make room for kids, I did the math and found that we would be at least $100k richer if we had instead invested our extra principal payments in VTSAX. We took out the biggest possible non-jumbo loan when we bought our current house, and invested the remaining equity from our old house in the stock market. I sleep fine at night. I fully expect the next 30 years to bring plenty of periods where 4% interest will seem like a laughably low price to pay for other people's money.

This gets even worse if you are not utilizing pretax options like 401ks in order to pay down a mortgage.

Our effective interest rate is ~2.6% or so after deducting interest.  It takes nearly 10 years just to match what a 401k returns for us even if we put the entire 401k into cash.

[Dicey]

If you need another counterexample, take mine. We aggressively paid off the mortgage on our first home. When it came time to get a bigger one to make room for kids, I did the math and found that we would be at least $100k richer if we had instead invested our extra principal payments in VTSAX. We took out the biggest possible non-jumbo loan when we bought our current house, and invested the remaining equity from our old house in the stock market. I sleep fine at night. I fully expect the next 30 years to bring plenty of periods where 4% interest will seem like a laughably low price to pay for other people's money.

This gets even worse if you are not utilizing pretax options like 401ks in order to pay down a mortgage.

Our effective interest rate is ~2.6% or so after deducting interest.  It takes nearly 10 years just to match what a 401k returns for us even if we put the entire 401k into cash.

Which, of course, we know you would never do, lol!

[ender]

Which, of course, we know you would never do, lol!

For many people, putting a 401k into cash is significantly better than paying down a mortgage early....

[Dicey]

Which, of course, we know you would never do, lol!

For many people, putting a 401k into cash is significantly better than paying down a mortgage early....

I totally agree with you @ender. I also know you are just making a point, not actually making a recommendation on how to allocate 401k witholdings, lol!