Invest in yourself by getting your own mortgage. This will help you save money on interest.
Let's start with the idea that you own your home, have a mortgage, and have at least a little money left over each month to invest. Where do you put your money? You'll want a safe investment that pays more than bond funds. It would be nice if the money you invested grew every month. How about getting around? Yes, that's a big deal. No problem.
The baby boomers were taught that it's good to save money and that it's best to keep it in the bank. Even if the bank went broke, the FDIC would protect our money up to $100,000. So, if we had more money than that, all we had to do was open an account at another bank. The only problem is that the most interest that banks can pay on savings or CDs is 5.5%, and that interest is taxed.
As an alternative to stocks, bonds, and mutual funds, you could pay down your mortgage with the money you would have spent on these things. In other words, pay more than your monthly mortgage payment each month. You can choose whether to invest a part of the money you put away each month or the whole amount.
A Little More: The Math of Savings
Here's what might happen if you invested the money you owe on your home's mortgage. Let's use a new mortgage with a fixed rate and a starting balance of $100,000 that is paid off over 30 years at 7%. If we paid $25 more each month, we could pay off this mortgage 39 months early. Check my math, but I think that would save us 39 times the monthly payment amount, which is $665.31, or $25,947. If we made $25 extra payments for 321 months, that would add up to $8,025 and leave us with $17,992 in savings growth. If you divide $17,992 by 321 months, you get an average of $55.83 in tax-free growth each month. If you averaged that amount over a year, it would come to $669.96. When we divide that by our annual investment of $300 ($25 per month), we get a huge average return of 223%.
