This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.
My goal is early retirement but I’m not saving for it. Last week sarahhiggs asked a question – whether I was saving for retirement or utilizing a Tax Free Savings Account or Registered Retirement Savings Plan. The short answer is no – my spouse and I have decided our primary goal right now is paying off my mortgage. Paying off the mortgage is our primary financial goal for the following reasons:
1) I don’t like debt
Regardless of your view on whether a mortgage is good debt or bad debt, I think the bottom line is that there is an agreement between the buyer and the financial institution to pay something back. My preference with this debt, as well as all of my debts, is to zero it out as quickly as possible. I don’t like owing anyone, including a faceless bank, money and never really have. Our mortgage will probably be the last major debt that we will ever have (or plan to have) – paying it off is freeing.
Ideally we would have saved the approximately $200,000 to buy our house, but we were kind of anxious to “own” a house. We felt that the $20,000 in interest we would have to spend over 6 years (most of it in the first few) was worth it.
2) Financial Freedom is more important to us than savings right now
After our house is paid off our fixed monthly bills will be approximately half what they currently are. After this point we will have some decisions to make. Right now we plan to work full-time until we have enough passive income to cover our living expenses. With our bills significantly lower we will be able to put significant dollars towards our savings goals and hopefully achieve our financial goal of retirement at 45.
3) The “return” on our mortgage is risk free
Looking at Tim and Robert’s returns over the past year or so I may have been better investing my money than paying off my mortgage. Paying off my mortgage is (to me) a sure thing investment wise. My fixed 3.59% is not great compared to what I could have achieved in the market last year, but coupled with my other two reasons it is a rate I am willing to accept in order to achieve my end goal.
My wife and I keep our finances separate. Right now over 75% of each of my paycheques is going towards paying down the mortgage. My wife’s money is used for our other savings, which will soon be used in purchasing a car, but is also our trip money, house renovation money and other larger “stuff” that we generally buy together.
We are currently 1/3 of the way done paying off our mortgage, with 4 years remaining. I’m looking forward to paying this off in the near future, but along the way we’re trying to have some fun. If we put every penny we made towards our mortgage we could probably shave off a year or so in payments, but we have decided on a more moderate plan of attack right now.
\How about you? Do you have a singular financial goal, or are you spreading your money around to many goals?