WEBVTT
NOTE
This file was generated by Descript
00:00:00.050 --> 00:00:00.730
Timothy Iseler, CFP®: Hi everyone.
00:00:00.920 --> 00:00:02.929
Welcome to The Thing We Never Talk About.
00:00:10.470 --> 00:00:12.210
My name is Tim Iseler.
00:00:12.260 --> 00:00:17.140
I'm a certified financial planner, and I
run my own independent financial advisory
00:00:17.140 --> 00:00:22.410
business, helping musicians, artists,
And other people with weird jobs make
00:00:22.410 --> 00:00:24.580
smarter decisions with their money.
00:00:24.800 --> 00:00:28.440
You can learn more at iselerfinancial.com.
00:00:28.716 --> 00:00:33.026
If you have a question you would like
me to answer in a future episode, please
00:00:33.096 --> 00:00:37.086
visit iselerfinancial.com/podcast.
00:00:37.626 --> 00:00:42.186
And if you like what you hear you can also
subscribe to my Keep It Easy newsletter
00:00:42.216 --> 00:00:46.626
at iselerfinancial.com/newsletter.
00:00:47.377 --> 00:00:52.837
Today I want to share a case study from
work I did recently with some clients.
00:00:53.017 --> 00:00:57.567
I like sharing case studies because
it both gives you an example of
00:00:57.567 --> 00:01:01.397
what financial advice or financial
planning looks like, and it can
00:01:01.417 --> 00:01:05.927
also help you understand the kinds
of questions you should be thinking
00:01:05.927 --> 00:01:08.427
about in your own financial life.
00:01:08.797 --> 00:01:13.917
So here's the setup: my clients were a
married couple with two young children.
00:01:14.167 --> 00:01:18.317
They both work full-time and own
their home, and they've actually been
00:01:18.317 --> 00:01:22.817
paying more than the required minimum
payment for their mortgage each month.
00:01:23.167 --> 00:01:28.707
And they expect to receive a one-time
windfall from a property sale.
00:01:29.027 --> 00:01:33.537
I'm not sure that the number is super
critical to this story, but for context,
00:01:33.817 --> 00:01:36.977
it is several hundred thousand dollars.
00:01:37.127 --> 00:01:40.607
In other words, it's a meaningful
amount of money, and they want
00:01:40.617 --> 00:01:43.277
to make sure they use it wisely.
00:01:43.497 --> 00:01:49.277
In particular, they wanted to compare
two options: number one, take all the
00:01:49.277 --> 00:01:55.347
money and invest it now for long-term
goals like retirement; or option two,
00:01:55.737 --> 00:02:01.187
use the money to pay off their mortgage,
then invest whatever's left over and
00:02:01.187 --> 00:02:06.877
take the money that would have gone to
their monthly mortgage payment and invest
00:02:06.887 --> 00:02:10.087
that as a recurring automated transfer.
00:02:10.812 --> 00:02:15.592
I mentioned that this couple has been
aggressively paying off their mortgage,
00:02:15.672 --> 00:02:20.982
so even though they are less than ten
years into a thirty-year mortgage,
00:02:21.142 --> 00:02:26.302
they're actually on track to pay
it off in just under sixteen years.
00:02:26.662 --> 00:02:30.072
And since they have about sixteen
years left on their mortgage if
00:02:30.072 --> 00:02:33.202
they just continue doing what
they've been doing, I decided that
00:02:33.202 --> 00:02:39.352
it makes sense to use a twenty-year
time horizon for our projections.
00:02:39.762 --> 00:02:43.972
And for good measure, I threw in a
Goldilocks door number three: what
00:02:43.972 --> 00:02:48.602
if they paid off half the mortgage
now, invested the rest, and then
00:02:48.602 --> 00:02:52.342
directed the extra money towards
investments when the mortgage is paid
00:02:52.342 --> 00:02:55.342
off in about six point two years?
00:02:56.142 --> 00:03:00.192
Before we go any further, I want to
take a minute to acknowledge how much
00:03:00.192 --> 00:03:02.602
this couple is already doing right.
00:03:02.822 --> 00:03:05.922
They're adding a little extra money
to their mortgage payment each
00:03:05.952 --> 00:03:10.915
month, which doesn't seem like much
at first, but actually saves tons
00:03:10.915 --> 00:03:16.735
of money and shaves months or even
years off the life of the loan.
00:03:17.005 --> 00:03:20.725
And they're thinking about how they
can put extra money to work for
00:03:20.725 --> 00:03:25.295
them rather than thinking about what
could they buy or whether they could
00:03:25.295 --> 00:03:28.725
move into a bigger house or whatever
else you might do with that money.
00:03:29.405 --> 00:03:32.825
Longtime listeners of this
podcast will remember my four
00:03:32.865 --> 00:03:35.285
foundational money recommendations:
00:03:35.505 --> 00:03:38.745
number one, spend a little
less than you want to;
00:03:38.955 --> 00:03:42.135
number two, save a little
more than you have been;
00:03:42.455 --> 00:03:46.275
number three, pay off debt a
little faster than you need to;
00:03:46.525 --> 00:03:50.065
and number four, invest
for the rest of your life.
00:03:50.285 --> 00:03:54.255
If you can do those four things,
you can get pretty far in life.
00:03:54.375 --> 00:03:58.045
And these clients are already
ticking all four boxes.
00:03:58.195 --> 00:04:02.125
So they're in a good spot, and this
question of what to do with extra
00:04:02.125 --> 00:04:04.495
money is a good problem to have.
00:04:04.785 --> 00:04:06.485
But anyway, back to our case study.
00:04:06.825 --> 00:04:10.019
Their current mortgage has a 5.5
00:04:10.249 --> 00:04:16.509
annual percentage rate or APR, which
is the interest they pay on the loan.
00:04:16.749 --> 00:04:21.109
That's fairly high compared to where
interest rates were even just five
00:04:21.109 --> 00:04:26.159
years ago, so the interest expense
is definitely on their minds.
00:04:26.509 --> 00:04:31.469
And their current investment mix is
about 90% stocks and 10% bonds, which
00:04:31.469 --> 00:04:34.929
historically returns around 9.1%
00:04:34.929 --> 00:04:35.619
annually.
00:04:36.049 --> 00:04:40.219
Now, that doesn't mean that their
investments will return 9.1%
00:04:40.219 --> 00:04:45.689
every year, but, since we're looking
at projections over 20 years, that
00:04:45.699 --> 00:04:50.759
should be a long enough timeline to see
the investment markets behave more or
00:04:50.759 --> 00:04:53.539
less in line with historical averages.
00:04:54.019 --> 00:04:58.059
I took the information from their
existing mortgage and typical average
00:04:58.079 --> 00:05:02.819
annual returns based on their investment
mix, and then used that information to
00:05:02.819 --> 00:05:09.249
calculate what would happen over the next
20 years in each of those three scenarios.
00:05:09.742 --> 00:05:14.962
So again, we're looking at option one,
invest the full amount now and continue
00:05:14.992 --> 00:05:21.152
paying off the mortgage as normal; option
two, pay off the mortgage now, invest
00:05:21.172 --> 00:05:24.972
the rest, and then invest the money
that would have gone to the mortgage
00:05:24.972 --> 00:05:29.972
each month; and option three, pay
off half the mortgage now, invest the
00:05:29.972 --> 00:05:34.992
rest, then direct the monthly mortgage
payments towards investments once it is
00:05:34.992 --> 00:05:38.042
paid off in about six point two years.
00:05:38.382 --> 00:05:43.772
Here's what I found: if we assume that the
money currently going towards the mortgage
00:05:43.772 --> 00:05:48.952
each month would be redirected towards
investments once the mortgage is paid off
00:05:49.022 --> 00:05:55.322
in every scenario, then investing the full
amount right now was the clear winner.
00:05:55.602 --> 00:06:00.382
However, if we assume that investing all
of the money right now means that they
00:06:00.382 --> 00:06:06.232
will not make ongoing payments once the
mortgage is paid off, then option three,
00:06:06.482 --> 00:06:10.812
in which half of the mortgage is paid
off right away, is the better choice.
00:06:11.282 --> 00:06:16.202
And option two, which is paying
the full mortgage right now, never
00:06:16.222 --> 00:06:18.572
turned out to be the best choice.
00:06:19.440 --> 00:06:20.670
Here's what else I found.
00:06:20.850 --> 00:06:25.440
If the average annual
investment returns were 8.6%,
00:06:25.600 --> 00:06:30.970
which is about what you'd expect
from an 80% stock, 20% bond mix,
00:06:31.200 --> 00:06:33.700
then the results would still hold.
00:06:33.930 --> 00:06:36.780
However, at around 7.65%
00:06:36.930 --> 00:06:40.860
average annual return, which is
what you might expect from a mix
00:06:40.870 --> 00:06:48.040
of 70% stocks/ 30% bonds, all three
options essentially end up the same.
00:06:48.360 --> 00:06:53.650
What that tells me is there is some room
to be less aggressive with the investment
00:06:53.650 --> 00:06:59.610
mix or for the average annual returns to
come in slightly below the expected rate.
00:06:59.900 --> 00:07:03.920
But if either of those drift
too far in the wrong direction,
00:07:04.130 --> 00:07:06.400
then there is no clear winner.
00:07:07.250 --> 00:07:11.490
Now, as I said, over a twenty-year
time period, I would expect the
00:07:11.560 --> 00:07:15.840
average returns to be roughly in
line with historical averages.
00:07:15.970 --> 00:07:18.720
So I'm not super worried
about that part of it.
00:07:19.080 --> 00:07:24.610
But these projections assume that you
maintain an aggressive growth-focused
00:07:24.620 --> 00:07:27.810
investment mix over the next two decades.
00:07:28.200 --> 00:07:32.190
I believe that this couple can do
that, but it's worth considering
00:07:32.190 --> 00:07:36.510
your own risk tolerance when making
this kind of decision for yourself.
00:07:36.790 --> 00:07:40.800
Because if you are a more
cautious investor, the conclusions
00:07:40.810 --> 00:07:44.830
of this case study might not
translate to your situation.
00:07:45.620 --> 00:07:50.070
Another thing to note is that even when
there was a clear winner in terms of
00:07:50.070 --> 00:07:54.440
which option works out best based on
projecting the data we have twenty years
00:07:54.440 --> 00:08:00.220
into the future, the difference between
the best option and the second-best option
00:08:00.500 --> 00:08:03.120
was only about two point five percent.
00:08:03.560 --> 00:08:07.750
That extra two point five percent ends
up being a decent amount of money, and I
00:08:07.760 --> 00:08:13.526
don't want to dismiss it, But I also want
to acknowledge that choosing the second
00:08:13.546 --> 00:08:16.986
best option isn't a bad alternative.
00:08:17.186 --> 00:08:21.966
Both options are good and, depending
on how you feel about debt, it might
00:08:21.966 --> 00:08:25.346
be worth giving up that extra 2.5%
00:08:25.416 --> 00:08:31.046
upside in favor of paying off the
mortgage in a little over six years.
00:08:31.622 --> 00:08:37.062
So to recap, this couple will
receive a large one-time windfall.
00:08:37.182 --> 00:08:41.532
We compared what would happen if they
invested it all right away, if they
00:08:41.532 --> 00:08:45.412
paid off their mortgage and invested
the rest, and if they paid off half
00:08:45.412 --> 00:08:47.262
the mortgage and invested the rest.
00:08:47.522 --> 00:08:52.192
We also looked at what would happen if the
monthly mortgage payment was redirected
00:08:52.232 --> 00:08:57.902
towards investments once the mortgage was
paid off in all scenarios, or just the
00:08:57.902 --> 00:09:00.812
scenarios where it gets paid off early.
00:09:01.242 --> 00:09:05.492
And the numbers suggest that, based on
a 20-year timeline and their current
00:09:05.502 --> 00:09:11.912
investment mix, the top two options were
either investing it all right away or
00:09:11.912 --> 00:09:14.112
paying off half the mortgage right away.
00:09:14.392 --> 00:09:19.252
But paying off the whole mortgage
came in third in every scenario.
00:09:19.972 --> 00:09:24.462
I hope this example has been helpful for
you, because, even if it doesn't directly
00:09:24.472 --> 00:09:29.192
translate to your situation, I think it
at least tells you the kinds of things
00:09:29.192 --> 00:09:33.052
you should be taking into consideration
if you're thinking about whether to pay
00:09:33.052 --> 00:09:37.942
off your mortgage early or if you have
a large amount of money and want to make
00:09:37.942 --> 00:09:40.092
sure you're putting it to the best use.
00:09:40.572 --> 00:09:43.012
And of course, it's also
important to consider the
00:09:43.022 --> 00:09:45.262
emotional side of the decision.
00:09:45.472 --> 00:09:50.362
The numbers are important, but how
you feel also needs to be factored in.
00:09:50.886 --> 00:09:53.756
If you have a question about
what to do with your own money,
00:09:53.876 --> 00:09:55.896
please feel free to reach out.
00:09:55.906 --> 00:10:00.426
You can send me an email at
podcast@iselerfinancial.com,
00:10:00.686 --> 00:10:04.696
or use the form at
iselerfinancial.com/podcast
00:10:04.876 --> 00:10:06.586
to submit a question.
00:10:07.156 --> 00:10:08.066
That's it for today.
00:10:08.076 --> 00:10:11.726
Next week I'll be talking with
tattoo artist Serena Lander.
00:10:11.916 --> 00:10:15.656
I've known Serena for around
25 years and she has given me
00:10:15.736 --> 00:10:18.126
many tattoos during that time.
00:10:18.406 --> 00:10:22.586
Not only was it great to catch up with
her, but Serena was really forthcoming
00:10:22.586 --> 00:10:28.396
about both the challenges and the upsides
of a career as an independent artist.
00:10:28.556 --> 00:10:32.256
So I hope you'll tune in next
week for my conversation with
00:10:32.346 --> 00:10:34.906
tattoo artist Serena Lander.
00:10:36.162 --> 00:10:39.002
The Thing We Never Talk
About is for educational and
00:10:39.012 --> 00:10:40.872
entertainment purposes only.
00:10:41.072 --> 00:10:43.732
It's not legal, investment, or tax advice.
00:10:43.942 --> 00:10:48.492
People on the show, including myself,
may have interests for or against
00:10:48.542 --> 00:10:52.782
any investments discussed, so do
yourself a favor and don't ever make
00:10:52.812 --> 00:10:57.462
any investment decisions based on
what you hear on this or any podcast.
00:10:57.812 --> 00:11:01.502
If you like what you hear, please
like and subscribe to this show
00:11:01.512 --> 00:11:03.912
wherever you listen to podcasts.
00:11:04.262 --> 00:11:08.062
If you have a money or finance question
you'd like answered in a future episode,
00:11:08.332 --> 00:11:11.262
please visit iselerfinancial.com/podcast.
00:11:12.488 --> 00:11:16.928
and you can get my insights on money And
more delivered directly to your inbox by
00:11:16.928 --> 00:11:22.328
subscribing to my Keep It Easy newsletter
at iselerfinancial.com/newsletter.
00:11:22.628 --> 00:11:24.048
Thank you so much for listening.
00:11:24.078 --> 00:11:24.878
I appreciate you
NOTE
This file was generated by Descript
00:00:00.050 --> 00:00:00.730
Timothy Iseler, CFP®: Hi everyone.
00:00:00.920 --> 00:00:02.929
Welcome to The Thing We Never Talk About.
00:00:10.470 --> 00:00:12.210
My name is Tim Iseler.
00:00:12.260 --> 00:00:17.140
I'm a certified financial planner, and I
run my own independent financial advisory
00:00:17.140 --> 00:00:22.410
business, helping musicians, artists,
And other people with weird jobs make
00:00:22.410 --> 00:00:24.580
smarter decisions with their money.
00:00:24.800 --> 00:00:28.440
You can learn more at iselerfinancial.com.
00:00:28.716 --> 00:00:33.026
If you have a question you would like
me to answer in a future episode, please
00:00:33.096 --> 00:00:37.086
visit iselerfinancial.com/podcast.
00:00:37.626 --> 00:00:42.186
And if you like what you hear you can also
subscribe to my Keep It Easy newsletter
00:00:42.216 --> 00:00:46.626
at iselerfinancial.com/newsletter.
00:00:47.377 --> 00:00:52.837
Today I want to share a case study from
work I did recently with some clients.
00:00:53.017 --> 00:00:57.567
I like sharing case studies because
it both gives you an example of
00:00:57.567 --> 00:01:01.397
what financial advice or financial
planning looks like, and it can
00:01:01.417 --> 00:01:05.927
also help you understand the kinds
of questions you should be thinking
00:01:05.927 --> 00:01:08.427
about in your own financial life.
00:01:08.797 --> 00:01:13.917
So here's the setup: my clients were a
married couple with two young children.
00:01:14.167 --> 00:01:18.317
They both work full-time and own
their home, and they've actually been
00:01:18.317 --> 00:01:22.817
paying more than the required minimum
payment for their mortgage each month.
00:01:23.167 --> 00:01:28.707
And they expect to receive a one-time
windfall from a property sale.
00:01:29.027 --> 00:01:33.537
I'm not sure that the number is super
critical to this story, but for context,
00:01:33.817 --> 00:01:36.977
it is several hundred thousand dollars.
00:01:37.127 --> 00:01:40.607
In other words, it's a meaningful
amount of money, and they want
00:01:40.617 --> 00:01:43.277
to make sure they use it wisely.
00:01:43.497 --> 00:01:49.277
In particular, they wanted to compare
two options: number one, take all the
00:01:49.277 --> 00:01:55.347
money and invest it now for long-term
goals like retirement; or option two,
00:01:55.737 --> 00:02:01.187
use the money to pay off their mortgage,
then invest whatever's left over and
00:02:01.187 --> 00:02:06.877
take the money that would have gone to
their monthly mortgage payment and invest
00:02:06.887 --> 00:02:10.087
that as a recurring automated transfer.
00:02:10.812 --> 00:02:15.592
I mentioned that this couple has been
aggressively paying off their mortgage,
00:02:15.672 --> 00:02:20.982
so even though they are less than ten
years into a thirty-year mortgage,
00:02:21.142 --> 00:02:26.302
they're actually on track to pay
it off in just under sixteen years.
00:02:26.662 --> 00:02:30.072
And since they have about sixteen
years left on their mortgage if
00:02:30.072 --> 00:02:33.202
they just continue doing what
they've been doing, I decided that
00:02:33.202 --> 00:02:39.352
it makes sense to use a twenty-year
time horizon for our projections.
00:02:39.762 --> 00:02:43.972
And for good measure, I threw in a
Goldilocks door number three: what
00:02:43.972 --> 00:02:48.602
if they paid off half the mortgage
now, invested the rest, and then
00:02:48.602 --> 00:02:52.342
directed the extra money towards
investments when the mortgage is paid
00:02:52.342 --> 00:02:55.342
off in about six point two years?
00:02:56.142 --> 00:03:00.192
Before we go any further, I want to
take a minute to acknowledge how much
00:03:00.192 --> 00:03:02.602
this couple is already doing right.
00:03:02.822 --> 00:03:05.922
They're adding a little extra money
to their mortgage payment each
00:03:05.952 --> 00:03:10.915
month, which doesn't seem like much
at first, but actually saves tons
00:03:10.915 --> 00:03:16.735
of money and shaves months or even
years off the life of the loan.
00:03:17.005 --> 00:03:20.725
And they're thinking about how they
can put extra money to work for
00:03:20.725 --> 00:03:25.295
them rather than thinking about what
could they buy or whether they could
00:03:25.295 --> 00:03:28.725
move into a bigger house or whatever
else you might do with that money.
00:03:29.405 --> 00:03:32.825
Longtime listeners of this
podcast will remember my four
00:03:32.865 --> 00:03:35.285
foundational money recommendations:
00:03:35.505 --> 00:03:38.745
number one, spend a little
less than you want to;
00:03:38.955 --> 00:03:42.135
number two, save a little
more than you have been;
00:03:42.455 --> 00:03:46.275
number three, pay off debt a
little faster than you need to;
00:03:46.525 --> 00:03:50.065
and number four, invest
for the rest of your life.
00:03:50.285 --> 00:03:54.255
If you can do those four things,
you can get pretty far in life.
00:03:54.375 --> 00:03:58.045
And these clients are already
ticking all four boxes.
00:03:58.195 --> 00:04:02.125
So they're in a good spot, and this
question of what to do with extra
00:04:02.125 --> 00:04:04.495
money is a good problem to have.
00:04:04.785 --> 00:04:06.485
But anyway, back to our case study.
00:04:06.825 --> 00:04:10.019
Their current mortgage has a 5.5
00:04:10.249 --> 00:04:16.509
annual percentage rate or APR, which
is the interest they pay on the loan.
00:04:16.749 --> 00:04:21.109
That's fairly high compared to where
interest rates were even just five
00:04:21.109 --> 00:04:26.159
years ago, so the interest expense
is definitely on their minds.
00:04:26.509 --> 00:04:31.469
And their current investment mix is
about 90% stocks and 10% bonds, which
00:04:31.469 --> 00:04:34.929
historically returns around 9.1%
00:04:34.929 --> 00:04:35.619
annually.
00:04:36.049 --> 00:04:40.219
Now, that doesn't mean that their
investments will return 9.1%
00:04:40.219 --> 00:04:45.689
every year, but, since we're looking
at projections over 20 years, that
00:04:45.699 --> 00:04:50.759
should be a long enough timeline to see
the investment markets behave more or
00:04:50.759 --> 00:04:53.539
less in line with historical averages.
00:04:54.019 --> 00:04:58.059
I took the information from their
existing mortgage and typical average
00:04:58.079 --> 00:05:02.819
annual returns based on their investment
mix, and then used that information to
00:05:02.819 --> 00:05:09.249
calculate what would happen over the next
20 years in each of those three scenarios.
00:05:09.742 --> 00:05:14.962
So again, we're looking at option one,
invest the full amount now and continue
00:05:14.992 --> 00:05:21.152
paying off the mortgage as normal; option
two, pay off the mortgage now, invest
00:05:21.172 --> 00:05:24.972
the rest, and then invest the money
that would have gone to the mortgage
00:05:24.972 --> 00:05:29.972
each month; and option three, pay
off half the mortgage now, invest the
00:05:29.972 --> 00:05:34.992
rest, then direct the monthly mortgage
payments towards investments once it is
00:05:34.992 --> 00:05:38.042
paid off in about six point two years.
00:05:38.382 --> 00:05:43.772
Here's what I found: if we assume that the
money currently going towards the mortgage
00:05:43.772 --> 00:05:48.952
each month would be redirected towards
investments once the mortgage is paid off
00:05:49.022 --> 00:05:55.322
in every scenario, then investing the full
amount right now was the clear winner.
00:05:55.602 --> 00:06:00.382
However, if we assume that investing all
of the money right now means that they
00:06:00.382 --> 00:06:06.232
will not make ongoing payments once the
mortgage is paid off, then option three,
00:06:06.482 --> 00:06:10.812
in which half of the mortgage is paid
off right away, is the better choice.
00:06:11.282 --> 00:06:16.202
And option two, which is paying
the full mortgage right now, never
00:06:16.222 --> 00:06:18.572
turned out to be the best choice.
00:06:19.440 --> 00:06:20.670
Here's what else I found.
00:06:20.850 --> 00:06:25.440
If the average annual
investment returns were 8.6%,
00:06:25.600 --> 00:06:30.970
which is about what you'd expect
from an 80% stock, 20% bond mix,
00:06:31.200 --> 00:06:33.700
then the results would still hold.
00:06:33.930 --> 00:06:36.780
However, at around 7.65%
00:06:36.930 --> 00:06:40.860
average annual return, which is
what you might expect from a mix
00:06:40.870 --> 00:06:48.040
of 70% stocks/ 30% bonds, all three
options essentially end up the same.
00:06:48.360 --> 00:06:53.650
What that tells me is there is some room
to be less aggressive with the investment
00:06:53.650 --> 00:06:59.610
mix or for the average annual returns to
come in slightly below the expected rate.
00:06:59.900 --> 00:07:03.920
But if either of those drift
too far in the wrong direction,
00:07:04.130 --> 00:07:06.400
then there is no clear winner.
00:07:07.250 --> 00:07:11.490
Now, as I said, over a twenty-year
time period, I would expect the
00:07:11.560 --> 00:07:15.840
average returns to be roughly in
line with historical averages.
00:07:15.970 --> 00:07:18.720
So I'm not super worried
about that part of it.
00:07:19.080 --> 00:07:24.610
But these projections assume that you
maintain an aggressive growth-focused
00:07:24.620 --> 00:07:27.810
investment mix over the next two decades.
00:07:28.200 --> 00:07:32.190
I believe that this couple can do
that, but it's worth considering
00:07:32.190 --> 00:07:36.510
your own risk tolerance when making
this kind of decision for yourself.
00:07:36.790 --> 00:07:40.800
Because if you are a more
cautious investor, the conclusions
00:07:40.810 --> 00:07:44.830
of this case study might not
translate to your situation.
00:07:45.620 --> 00:07:50.070
Another thing to note is that even when
there was a clear winner in terms of
00:07:50.070 --> 00:07:54.440
which option works out best based on
projecting the data we have twenty years
00:07:54.440 --> 00:08:00.220
into the future, the difference between
the best option and the second-best option
00:08:00.500 --> 00:08:03.120
was only about two point five percent.
00:08:03.560 --> 00:08:07.750
That extra two point five percent ends
up being a decent amount of money, and I
00:08:07.760 --> 00:08:13.526
don't want to dismiss it, But I also want
to acknowledge that choosing the second
00:08:13.546 --> 00:08:16.986
best option isn't a bad alternative.
00:08:17.186 --> 00:08:21.966
Both options are good and, depending
on how you feel about debt, it might
00:08:21.966 --> 00:08:25.346
be worth giving up that extra 2.5%
00:08:25.416 --> 00:08:31.046
upside in favor of paying off the
mortgage in a little over six years.
00:08:31.622 --> 00:08:37.062
So to recap, this couple will
receive a large one-time windfall.
00:08:37.182 --> 00:08:41.532
We compared what would happen if they
invested it all right away, if they
00:08:41.532 --> 00:08:45.412
paid off their mortgage and invested
the rest, and if they paid off half
00:08:45.412 --> 00:08:47.262
the mortgage and invested the rest.
00:08:47.522 --> 00:08:52.192
We also looked at what would happen if the
monthly mortgage payment was redirected
00:08:52.232 --> 00:08:57.902
towards investments once the mortgage was
paid off in all scenarios, or just the
00:08:57.902 --> 00:09:00.812
scenarios where it gets paid off early.
00:09:01.242 --> 00:09:05.492
And the numbers suggest that, based on
a 20-year timeline and their current
00:09:05.502 --> 00:09:11.912
investment mix, the top two options were
either investing it all right away or
00:09:11.912 --> 00:09:14.112
paying off half the mortgage right away.
00:09:14.392 --> 00:09:19.252
But paying off the whole mortgage
came in third in every scenario.
00:09:19.972 --> 00:09:24.462
I hope this example has been helpful for
you, because, even if it doesn't directly
00:09:24.472 --> 00:09:29.192
translate to your situation, I think it
at least tells you the kinds of things
00:09:29.192 --> 00:09:33.052
you should be taking into consideration
if you're thinking about whether to pay
00:09:33.052 --> 00:09:37.942
off your mortgage early or if you have
a large amount of money and want to make
00:09:37.942 --> 00:09:40.092
sure you're putting it to the best use.
00:09:40.572 --> 00:09:43.012
And of course, it's also
important to consider the
00:09:43.022 --> 00:09:45.262
emotional side of the decision.
00:09:45.472 --> 00:09:50.362
The numbers are important, but how
you feel also needs to be factored in.
00:09:50.886 --> 00:09:53.756
If you have a question about
what to do with your own money,
00:09:53.876 --> 00:09:55.896
please feel free to reach out.
00:09:55.906 --> 00:10:00.426
You can send me an email at
podcast@iselerfinancial.com,
00:10:00.686 --> 00:10:04.696
or use the form at
iselerfinancial.com/podcast
00:10:04.876 --> 00:10:06.586
to submit a question.
00:10:07.156 --> 00:10:08.066
That's it for today.
00:10:08.076 --> 00:10:11.726
Next week I'll be talking with
tattoo artist Serena Lander.
00:10:11.916 --> 00:10:15.656
I've known Serena for around
25 years and she has given me
00:10:15.736 --> 00:10:18.126
many tattoos during that time.
00:10:18.406 --> 00:10:22.586
Not only was it great to catch up with
her, but Serena was really forthcoming
00:10:22.586 --> 00:10:28.396
about both the challenges and the upsides
of a career as an independent artist.
00:10:28.556 --> 00:10:32.256
So I hope you'll tune in next
week for my conversation with
00:10:32.346 --> 00:10:34.906
tattoo artist Serena Lander.
00:10:36.162 --> 00:10:39.002
The Thing We Never Talk
About is for educational and
00:10:39.012 --> 00:10:40.872
entertainment purposes only.
00:10:41.072 --> 00:10:43.732
It's not legal, investment, or tax advice.
00:10:43.942 --> 00:10:48.492
People on the show, including myself,
may have interests for or against
00:10:48.542 --> 00:10:52.782
any investments discussed, so do
yourself a favor and don't ever make
00:10:52.812 --> 00:10:57.462
any investment decisions based on
what you hear on this or any podcast.
00:10:57.812 --> 00:11:01.502
If you like what you hear, please
like and subscribe to this show
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wherever you listen to podcasts.
00:11:04.262 --> 00:11:08.062
If you have a money or finance question
you'd like answered in a future episode,
00:11:08.332 --> 00:11:11.262
please visit iselerfinancial.com/podcast.
00:11:12.488 --> 00:11:16.928
and you can get my insights on money And
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at iselerfinancial.com/newsletter.
00:11:22.628 --> 00:11:24.048
Thank you so much for listening.
00:11:24.078 --> 00:11:24.878
I appreciate you
