domingo, 21 de octubre de 2012

Fourth, Pay Off Your Home

Imagine a home of your own. Not just a house that you live in, but a home that is all yours. No mortgage payments, no rent checks. A home that is completely, 100 percent paid for, free and clear. Yours. Sixteen years ago, Stephen Acosta broke his back in a motorcycle accident. He was lucky to regain the use of his arms and legs, but his days climbing around on construction sites as a licensed electrician were over. Between the medical bills and the lost income, he was pretty much wiped out. He was just out of rehab when his house was posted for foreclosure. Stephen got a repair job in an electronics shop, and then took a second job working weekends as a security guard in a downtown office building. He cut his spending to the bone, and pretty soon he was caught up on the mortgage. “I kept picturing that orange sign on my front door, saying someone else was gonna take my house. 
And every time I thought about it, I got mad all over again, and I sent another hundred bucks to the mortgage company. I figured they could take my whole paycheck, but I’d never let them take my home.” Three months ago, Stephen threw a big party. He invited all his friends, and his mom came, too. After everyone arrived, he thumped his fist on the table, telling everyone to be quiet because he had an announcement. 
All eyes turned to a big green bowl with some papers in it. Stephen explained that this was his mortgage, he had paid it off and gotten it back from the bank, and he wanted everyone he loved to witness while he burned it. “Everyone cheered while I fired it up. Then my mom cried, and I even choked up a little. I pulled myself out of a hole and now this place was mine forever—no matter what.” Sound good? The fourth step in your lifetime money plan is to create a plan to pay off your home. Paying off your home is the double win in the savings world—a tremendously smart financial move that is also tremendously satisfying. After all, where else can you build substantial wealth and smile over your flower bed, all at one time? Paying off your home is a great part of your retirement plan. When it comes time to retire, you can live rent-free, which means that your Social Security and retirement savings will go a lot further. If you end up in a situation where you need a lot of cash, you can sell your house and move to something smaller. And if you stay in your home until your last days, the house will be a wonderful legacy to pass along to your children or to your favorite charity. Paying off your home also does something many financial planners neglect to mention: It gives you freedom. Once that mortgage is gone, just imagine all the freedom in your wallet. Freedom to spend more money on fun, freedom to give more to the people you love, freedom to work a little less and play a little more. Think of this as yet another form of sleep tight insurance. How do you pay off your home? A little at a time. Squeeze out some extra money from your monthly spending and put a second check in with your mortgage payment (about five percent of your take-home pay is a good target). Or if you get a Christmas bonus, put it toward paying off your mortgage. If your mom gives you money for your birthday, or if you get some unexpected overtime pay, put it towards your mortgage. There are lots of ways to do it, but the main thing is to begin. The goal is to chip away at your mortgage, so that you pay it off faster. If you keep making the extra payments, you can get your mortgage paid off years ahead of time—all while saving yourself tens of thousands of dollars.

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