I continue to read a lot of articles on-line and in magazines that pose the popular question of what makes more financial sense – use extra in-pocket monies to pay down mortgage debt or to add to retirement savings. I want to quickly address this question from another angle that is widely ignored by most pundits.
To begin, I want to point out that there is no “one-size fits all” answer to this question. So please take this information for what it’s worth – information. Secondly, the manner in which this debate has been framed, in my opinion, is flawed. Most articles I’ve read position it as a choice of one over the other. Having said this, the idea I want to plant in your mind is why not consider both!?
Admittedly, the basis of my argument is not pulled from rigorous algorithmic calculations or based on any hard financial data, which is certainly one way to look at this question. Rather I base my opinion on a simpler concept called “balance”.
Most of us have heard the term “don’t put your eggs in one basket”. In considering whether it is more advantageous to pay off mortgage debt or to save for retirement, I say exactly that: “don’t put your eggs in one basket”.
When discussing finances with families and business people, I like to use the table analogy which goes something like this; a table has four legs and each leg represents one aspect of your financial life. Let’s say, for example, you choose to put all of your extra hard earned dollars you were able to save towards making extra mortgage payments. At this same time, you have completely ignored making contributions to your retirement savings program. Using my analogy, you build superior strength with one leg at the table (debt) and demonstrate great weakness with the other leg (retirement savings). When life does not go according to plan (we all experience events in our life that we are not prepared for), the heavier load on your financial table is bound to collapse it.
So to those trying to decide which decision is better, I say I would rather eat sitting at the table than on my hands and knees on the floor.