Right, Wrong, & Shades of Gray

There seems to be opposing camps on just about every financial topic.

Take paying off a mortgage early, for example.

One camp argues true financial freedom relies on being completely debt free, mortgage included. As long as you owe the bank money every month, your time and money are not your own.

The other camp argues that committing extra money to pay off a mortgage (at an accelerated rate) is strategically unsound, because - for every dollar - you’ll earn more invested in the stock market compared to what you’ll save in mortgage interest. This camp accepts the carrying of debt as a normal part of modern financial life.

Indeed, an average annual gain of 10% in the U.S. stock market is twice what most mortgage interest rates have been in the U.S. the last 10+ years, even considering recent rate hikes. Why not borrow so cheaply and invest lucratively?

So what’s the truth?

Should we be accelerating mortgage payoff or avoiding it? This conundrum is a classic example of where black and white thinking just confuses us and leads us astray.

Because both camps are right; they’re just highlighting different pieces of the story to justify different choices.

Try thinking more about money choices as they pertain to your own values and goals, instead of trying to find the “right” answer.

Even though we think of money as a math subject - black and white, more than or less than, right and wrong - personal finance is much more about value and values, worth and principles.

Believing there is a right and wrong way often slows us down in making decisions and derails us from keeping on a consistent track.

Instead, staying focused on why you do what you do with your money will likely yield you bigger returns in life compared with trying desperately to do the best thing and, consequently, flip-flopping strategies every time you read a new article or a friend shares their opinion.

Because, ultimately, whatever your strategy, it’s consistency over time that counts.