No payments. That was what I meant by life goal. As I said, I do have a mortgage — paying cash for a house is a step I am not ready to take yet, but I am working on it.
As for everything else, well, it’s been a “no payments” economy for me for some nine years. And no I have not stolen anything LOL! :-)
And even if I do one day have to finance something, well, I may be deluding myself but I bet 50% down will eat up a whole lot of “no credit history.”
Now let's say your house is paid off and it's worth $300,000. How much money do you have? None, unless you can take it out. Maybe when you need it, the bank won't let you have it because your injured or unemployed.
What if there was a natural disaster or a fire and the insurance company gave you $100,000, but it cost $200,000 to rebuild. The bank won't give you the other $100,000.
Let's say the market goes down and now your house is worth $200,000. You lost $100,000 when you could have protected about $80,000 and made money compounding.
Equity is not safe or liquid and it has no rate of return.
Let's say you put $100,000 into an investment paying over 7% tax free compounding. In 12 years you'd have $200,000. The 12th year you'd make $14,000 and the cost of the loan would be a net of 4%, so you pay $4,000. Pay 4 and make 14. How much do you want?
Let's say you can't sleep because you have a mortgage and can't stand making more than you owe. Take the money out and pay off the loan.
Oh, and there's a death benefit.
Bingo...Dave Ramsey talks about this a lot. If you plunk down a large down payment, a lot of banks are going to sit up and take notice (he puts it a lot more intelligently than I, but that's why he's a millionaire and I'm not)
Besides, if you pay off that mortgage, and then a life event like losing your job happens, then you still have a roof over your head :) Not to mention doing something productive with that mortgage payment you no longer have like investing it or putting it away for retirement.
As Dave says 'If you live like no one else now, then later you can live like no one else.'
(We've paid off over $12,500 of non-mortgage debt since April with $4500 to go on a student loan, which we hope to dispatch with after tax time. We have emergency savings, plus other savings--a first in our marriage. We live on $3600 a month take home for a family of six--two kids in Catholic school with another heading there next fall. Anyone who says that we can't live on cash can ask us for advice :P Our whole Christmas is paid for--in cash, saved up since May)
Fifty years ago it was not a way of life to live on credit, yet today you're looked at strangely if you don't live on credit.
FYI #71