Personal Finance And Investing Msn Money

Pay off mortgage or keep money in savings?

This post comes from J.D. Roth at partner blog Get Rich Slowly .

 

It's tough to write a personal-finance blog for five years without repeating topics. New readers come and old readers go. Meanwhile, the needs of existing readers are constantly changing. I try not to repeat material too often, but sometimes it's clear it's time to revisit a subject. Now is one of those times.

 

Lately, I've received several questions like this one from Robin, who wants to know if she should pay off her mortgage:

I've been reading your blog for a while now. It's good for both entertainment and advice, and I like reading through comments on the articles I'm interested in and getting all the various points of view from people. Something I don't think I've seen addressed yet is this: I've saved up enough money to pay off our mortgage. Should I do it? Should I pay off part of it? Should I keep it as our emergency fund ? Here are some of the rough details of our situation: Current mortgage amount -- $250,000. Current mortgage rate -- 4.625%. Years left on mortgage -- 13. Years until retirement (at 58) -- 15, solid salary expected until then. Current place the money is parked -- savings account making 1%. Thoughts about moving -- unlikely any time in the next four to five years; can't say beyond that. Other retirement savings -- substantial IRAs, 401k, and other investment accounts (not concerned that this will be a problem even if we live to 100). House value -- probably about $500,000 in Seattle. Other debt -- just monthly credit cards that are paid in full, no car payments, no student loans, etc. I think it would be great to live mortgage-free, and I hope to do it sooner than later, but I also get that there may be better uses for the money and we aren't in any circumstance to rush about it. What do you think?

We've discussed this dilemma several times in the past. In fact, it seems to come up every six months! Let's review the basics.

Bing: How many Americans own their home outright?

By paying off the mortgage early, Robin would generate a guaranteed return on her cash: She'd be getting 4.625% on $250,000, which is no chump change. On the other hand, this move has drawbacks. Most notably, cash in a savings account (or even in stocks) is liquid; it can be accessed when needed. But if that cash is converted to home equity , it's more difficult to get at.

Making the Most of Customer Service « Personal Cents | Save Money ...

It’s sometimes difficult to connect intangibles directly to personal finance. However, an excellent article on MSN’s money section inspired me to talk, today, about something which is important to all of us and has an indirect, but fundamental, link to our personal finance: customer service. Good customers service can save you money, both in getting quality replacements or repairs for broken products, or in removing errors on bills or statements or in catching fraud showing up on various sources of credit in your name. The article I read lists many important points and resources. However, I’m going to consolidate them here to what I feel are the top 3 most important points to take away from this. With just these three points you can use customer service more effectively, and, ultimately, save yourself some money (and stress) by doing so.

 

Human Interaction: By far the biggest thing you can do is cut through the fronts setup by automated systems, which are designed to keep you away from people. Keep in mind that automated systems are not necessarily evil and put in place to restrict access. They are instituted to save corporations money on customer service though, and their aim is to do as much as they can do without sending you to a customer service representative. As a result, many companies make it unintuitive or difficult to navigate and figure out how to reach that representative. However, if you have a claim to make, or a situation to explain, most automated systems simply won’t be advanced enough to handle those things for you and a human is your only option. Be Professional: This is something which is expected of the customer service representative, but rarely of the customer. Our culture has put such an emphasis on the consumer that it seems to have become standard practice to simply abuse the people serving us. How is this any better than the way Lords treated their serfs hundreds of years ago? Many times you might feel anger towards how you feel a company is treating you, but, remember that the low-level representative you’re speaking to is not in charge of policy, most times they are simply following the script that they’re expected to stick to. By remaining professional, you can better keep their attention while you explain your situation and, as needed, be moved up to someone who can help.