The year was 1998 and I had just paid all the closing costs to establish a 15-year fixed rate mortgage a few months earlier. The market was going gang-busters and my business partners thought I was crazy when I told them I was going to pay off the loan.
"But it's tax-deductible," they cried, shaking their heads in unison.
"You'll make so much more money in stocks," they tried to tell me again and again and again
But I didn't care. Even though I'd managed stock portfolios for over 20 years and everything looked great, something inside kept poking at me. It didn't matter what they thought. The whole world could say how stupid I was, but I went ahead and wrote the bank a big, fat check. A year later I married an Italian who also owned his home free and clear. Even though we've bought three houses since, we've never financed a penny of any of them, including our vacation home in Italy.
There's something that happens when you own your house outright that has nothing to do with balance sheets or opportunity costs. You think about yourself in a different way. While it seems so cowardly, like hiding under the bed, the very opposite is true. Major life decisions are no longer tied to a monthly payment. You are suddenly free. Really free. For the first time in your life. You have a roof over your head that nobody can take away no matter what happens.. That's when you start to question a lot of other expenditures you've always taken for granted, like shiny, new cars and dry cleaning and window washers. Soon you can't help but notice how little money it really costs to be happy - which is when you finally get it. That paycheck you've been bringing home every two weeks is a choice, not a necessity. Less than two years after I paid off the loan, I quit my job. I was 44 years old.
Every once in a while, friends ask me for advise about their finances. First thing I always say is, "Pay off your house." But - as far as I know - nobody ever does it. The concept of the mortgage is ingrained in American culture and everybody knows that smart, financially sophisticated people borrow money to buy real estate.
I guess it all depends what you are trying to accomplish. The dot.com bubble that burst on March 10, 2000 at a NASDAQ high of 5,408 fell to below 1400. More than 13 years later it has yet to break its old high. My goal isn't to get as rich as possible. It's to enjoy my life and sleep well with what money I've got.
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