“It was Thanksgiving and my wife was preparing a turkey for dinner get together. I saw her slice off both sides of the turkey before putting it in the oven. I asked her why she did that. She shrugged and told me that her mom taught her to do it. Perhaps it will cook faster? So I got curious and I asked her mom why she taught my wife to slice the sides of the turkey. She shrugged in the same fashion and told me her mom taught her to do that! Well, guess that, the real reason why the turkey was sliced was because back then, the oven were a lot smaller than the ones we’ve got today.”

Funny story, isn’t it? Yet a lot of still live in this old way of thinking.

Being a financial advisor I often tell people to think logically, not traditionally. In my true wealth today I discussed the Rule of 72 and the idea of having your money make money. The idea is that you don’t want to let your long-term money sit and collect dust. Long-term money being extra money that you can set aside for future use, such as retirement or your kid’s college fund. You want to invest it and make interest on it and let it compound. So, let me ask you, should you get a 30 year fixed or a 15 year fixed mortgage on your own home, knowing that you should invest your long-term money? Should you pay off your mortgage by putting extra payment?

Think about it. Is your so-called equity in your home making you any money? Is your home making any interest on the extra payment that you put in? You see, people think that your home is your biggest asset, it is, in fact your biggest liability. If you ever lose your job or your income, the bank is not going to let you “slide” on your mortgage payment. How about instead of paying extra into your home, you take that extra payment and put it aside into a tax-advantaged vehicle, where it is invested and you can access it anytime you want? So now that you have a peace of mind, knowing that if you ever lose your job or income, you have at least something to hold you over.

Tags: Personal Finance, Real Estate