The Financially-Dumb Answer to Pay Off the Mortgage or Invest

Should you pay off the mortgage or invest, should you pay off debt before investing? It’s the most common question I get and the common answer is totally wrong! You heard right. The answer you get from ‘financial experts’ will leave you in financial ruin!

In this video, I’ll explain why the conventional wisdom on paying off debt versus investing is a one-way ticket to the poorhouse. I’ll show you all the numbers, which costs more between student loans, mortgage debt, credit cards and different investments. Then I’ll reveal two reasons why you should ignore the numbers and make a financially-dumb decision.

Everyone says to pay off debt before investing. This means paying off student loans, the mortgage, all your credit card debt before putting a penny in an investment account. It makes sense if you look at the numbers, i.e. the interest rates versus the returns.

But that ‘makes sense’ answer is the WRONG one! It means most people will never start investing and will always be living paycheck-to-paycheck. It means never having the opportunity to get out ahead.

I’m not saying you should borrow debt to invest. That’s a completely different question. I’ll give you two reasons though to start investing now, even if you owe high-interest debt. Don’t stop investing to pay off debt!

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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.

[josephhogue]

What do you think? Should you pay off debt before you start investing? Why? What factors played into your decision?

[kjbkmb]

Life takes on a whole different meaning when you pay off your mortgage. The fact that so many disagree makes it all the more clearer to us.

[azteca]

We paid off the mortgage early. My husband wanted to do that. Since I battled cancer in the past, when I was single and had the mortgage. And recently found another tumor in my kidney. Thankfully, this one was benign. He didn't want me to stress out about the mortgage. In case I had to stop working due to cancer OR any illness. Not having mortgage is a great feeling. And one less thing to worry about.

[arturaugustynek]

I knocked out my mortgage first, now I’m investing everything that would go towards the mortgage.. why pay the bank interest when you can make interest work for you via dividend stocks

[notvanillamedia]

Do both -double principal and some invested every month. You don't want to miss 25 years of compound interest over the years.

[marktalksmoney]

Paying your mortgage is an investment in security

[realmadera]

Nah I'm almost done with the mortgage. After my debt free scream I'll start investing. In case something happens like bad investment or layoff at least I'll know I have a home my home not the bank's.

[johnristheanswer]

No better feeling than paying off the mortgage regardless of what the other options are. Great series of vids.

[Azel]

Debt adds stress. Stress shortens life. A shorter life = shorter time to grow investments. Pay off debt first ;)

[BudgetGirl]

Thanks for doing this video with me! I have to say I hate the reasoning that shopping is too fun, but I can see where some people might never invest if they aren't willing to sacrifice to get out of debt.

[jaredlove]

Hey Joseph love the video. And all your videos. I really admire how you refer your views to another person's view point. Everyone is always so sure they are right and wont recognize anyone else's

[antdel]

i think it depends on your age. Im 43 and im too far in to stop investing, so Im trying to balance both at the same time. if i was 23 i would definitely try to pay off all my debt then max out my investing.

[jaymarcum]

Do what makes you most comfortable. Just be intentional and take action.

[SixFiguresUnderFamily]

We're in the "pay off debt first" camp. We paid off $144, 000 of student loan debt in three years (we set the goal when we were only making $39K/yr). So much freedom came from achieving that goal! Now we have a goal to pay off our $363K mortgage in five years. We're a little behind right now, but we're not giving up. Being mortgage-free will free up SO MUCH of our income, just as our oldest child (of six!) is starting high school.


We're still maxing out my Roth IRA each year and my husband has a pension working for the State of California, so it's not like we're completely ignoring investing.


We LOVE and VALUE the PEACE that being DEBT-FREE brings! :)

[ContrarianExpatriate]

My solution is to pay half towards debt and the other half towards investments!

[BL-gthn]

It's a tough one. Investments return about 8%, compared to paying 4.125% on the mortgage. I also chose investing over the mortgage payoff. Still, I hate making the bank rich.

[moneymanfernando]

Both, pay off debt as fast as you can but you should also be putting money away in 401K or IRA.

[PassiveIncomeTom]

This is ALWAYS a tough question (similar to what came first, the chicken or the egg?) but you gave an EXCELLANT answer!👍

[lindalong]

Came from BudgetGirl and enjoyed your perspective. I’m the type person who has enjoyed being debt free for years and a one thing at a time type brain. Lol

[simonethach]

It's a hard decision one is mathematics other is emotional and peace of mind. I personally kept 401k while paid off all debt before investing in other things. Don't want to add on risk and debt, if anything happens to my investments or job I can live with small income because I have no debt it's give me peace of mind.