135R | The Plot Thickens

135R | The Plot Thickens

Jonathan and Brad discuss life hacks and take another look at whether you should pay off your mortgage or invest.

Spam Caller Life Hack

Jonathan gave a quick shout out to an Andriod life hack that blocks spam callers. Basically, Google has the option for a call screening service. When you see a call, you have the option to screen the call. An automated Google voice will ask the caller to state why they are calling and you will see the transcript immediately. At that point, you will have the option to either report the call as spam, block the call or take the call.

If you are inundated with spam phone calls, then this could be a huge win!

Frugal Win Of The Week

Brad's solar panels are up an running! Not only will that have a huge impact on his electricity bill, but it also allowed him to gain some travel rewards.

He paid for the solar panels with the Barclaycard Arrival Plus and hit the minimum spend in one swipe. The bonus was around $1,000 in free travel.

Unfortunately, the Barclaycard Arrival Plus is no longer an option. However, you still have many ways to achieve similar travel rewards results. One of the best options is the Capital One® Venture® Rewards Credit Card. With this card, you can

Learn how to apply for this card here.

If you are looking for more ways to maximize your travel rewards, then check out our free travel rewards course here.

Life Hack For Small Business Owners

With the end of quarter two, many small business owners are preparing for tax time. If you are a small business owner then you may be able to save time by sending in your quarterly tax payment electronically.

EFTPS is an easy way to pay your federal taxes online. Depending on your state, you may be able to pay both federal and state taxes through this site.

Net Worth Check-In

If you think in terms of quarters, then you may think it is time for a net worth check in. Jonathan checks his net worth once a year on Personal Capital which he likes because he can use the software to look back and see his net worth at any point in time. You can get started with Personal Capital here.

Brad checks his on a quarterly basis. Brad uses a spreadsheet to track his net worth and can look back at his historical data easily.

How do you track your net worth?

Achieving FI On A Modest Income

Joel shows us that it is completely possible to create a solid financial future with FI in sight on a modest income. It is unrealistic to think that everyone will have the same path to FI. The amount of income you earn will have an impact on your path. However, Joel showed us that with a willingness to hustle, anyone can make FI happen.

He had a plan. And in order to reach that goal and succeed with that plan, he had to hustle.

It is not easy to hustle. Joel was working full-time, commuting, and power washing houses in the mornings. It takes determination to hustle.

With his lower income, Joel had to be creative. He needed to find ways to create some financial space in his life to achieve his goals. For example, he found a reliable car to buy in cash and searched for a house that would serve as a home for his family and an investment property.

If you put your due diligence in, if you do your research, this will transform the trajectory of your financial life regardless of what your income looks like.

Joel found ways to put money into things that he understood. Real estate was one of those things, but he had to learn from somewhere. Perhaps he learned from Bigger Pockets BRRRR strategy or another source. Either way, he learned what he needed to build a better financial future for himself and his family.

How To Prepare For The Road Ahead

Joel made a great point about taking action to be prepared for whatever life throws your way. Wherever you are at now, you have the option to prepare for your future.

You have to be prepared that even if you are the best worker in your entire department, you could lose your job tomorrow.

Be realistic about the future and prepare yourself. If you prepare for a change, then you will thrive when it happens.

Listen to the full episode with Joel here.

Should You Invest Or Pay Off Your Mortgage?

As a hotly debated question in the FI community, Brad and Jonathan share some feedback from the listeners. Many readers pointed out other considerations that were discussed on today's episode.

Mortgage Deduction

It is correct to mention this in the debate. However, most people just take the standard deductible of $24,000 for married couples and $12,000 for individuals. Unless you are able to improve on the standard deductible, then you would likely not make this a line item.

For most middle-class home, the mortgage deduction will not be a big player in this equation.

Capital Gains

Depending on how long you left your investments in the market, you would be required to pay differing amounts of capital gains.

If you sold the stock after owning it for less than a year, then you would pay regular income tax on the gains. If you sold the stock after owning it for more than a year, then you would receive preferential tax treatment.

The capital gains should be factored into your individual equation. Listen to the Capital Gains Harvesting episode if you would like to learn more.

Guaranteed Vs Speculative Return

As Sean Mullaney, the FI Tax Guy points out the question boils down to your risk tolerance. If you prepay your mortgage you are guaranteed a rate of return of the mortgage rate interest. However, if you take the speculative approach through investing the money then you cannot guarantee the return.

If you are younger with a long path to FI, then you may prefer the growth over a guaranteed return. If you are older and close to FI, then the guaranteed return may be more worthwhile to you.

Resource From Glenn

If you are interested in solar panels, then Glenn has the perfect resource for you. He has recently installed solar panels and documented the whole experience. The resource will be coming in the newsletter soon. Make sure to subscribe to the newsletter to receive this resource from our community member.

Related Episodes:

New to FI? Be sure to check out Episode 100: Welcome To The FI Community!

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9 thoughts on “135R | The Plot Thickens”

  1. Thanks for the update on investing vs. paying off mortgage!

    Another great debate is the 15-year vs 30-year. Should you take a 30-year mortgage and invest in a Roth IRA or take a 15-year with guaranteed returns but not enough cash flow to fully fund your Roth? I post I just wrote runs the actual numbers (taking capital gains, standard deductions, and other tax issues into account!) you might want to check out to see 15-year or 30-year.


  2. Is this venture capital credit card the one that allows you to just erase the expense on the back end for anything travel related? Also how do you know what is classified as a travel expense?

  3. I feel like you guys are really downplaying the risk of investing when it comes to investing vs paying off the mortgage:

    1- Your worst case scenario seems to be a 6% return. How about a 3% return or a negative return? How about asking people how they will feel when in certain years when money saved paying off their mortgage exceeds, possible far exceeds what they make in the market because of a down stock year. I feel like you guys have become too much of cheerleaders for the investing side of the argument because of recency bias related to 10 year bull market. You should have a greater analysis of how this could go poorly for people and always point out that just because the market has had positive returns in the past does not mean it will work out like that in the future. (I am not arguing against overall investing. I am simply asking for a more balanced discussion of a guaranteed return in paying off your mortgage vs investing. I would be quite interesting to have a guest on who has the oppositive view, a more Dave Ramsey view to get a more balanced discussion).

    2- Are you only advocating a 100% stock portfolio? That is aggressive and many people prefer to hold some bonds as a hedge whether it be a 90/10 or 80/20 stock to bond portfolio. If you are holding bonds, would replacing those bond holdings with your mortgage prepayment make sense? So if say you are saving an extra 10K a month, you could put 8K towards stocks and 2K extra towards the mortgage and that would offer you the same 80/20 stock to bonds mix.

    • My husband and I have gone back and forth about paying off the mortgage. We like the idea of viewing extra principle payments as investing in bonds. We have moved ahead with paying down the mortgage so it is paid off when it is time to FIRE. Housing is our biggest expense. Besides the interest saved is guaranteed whereas the stock market returns are not.

  4. Hi guys. Thanks for the additional insight on paying off mortgage vs. investing question. Another consideration I think is important, but never mentioned, is twofold:
    1. The liquidity given up when paying off the mortgage (especially critical for folks who are still investing and trying build wealth and pay off the mortgage at the same time).
    2. The loss of diversification and higher degree of risk that comes with concentrating so much of one’s wealth in one physical asset (a house), in one community, in one city, in one state, in one part of the country, one local economy, at a particular time.
    I’m certainly not anti-home ownership since we have owned 12 in our 52 years of marriage. But I think these considerations are usually overlooked.

  5. Thanks for the deeper dive into the mortgage payoff analysis. Another variable to consider is how the two scenarios affect college financial aid. The EFC (expected family contribution) formula on the FAFSA does not include your primary residence as an investment amount. So from a financial aid perspective, it could make a significant difference if you pay off your house early by effectively sheltering the taxable investment money in your home.

    Depending on market returns and mortgage rates, the best of both worlds would likely be to invest your money over the course of the mortgage and then pay off the house before the EFC formulas kick in. This would generate a larger return, shield you from a larger expected financial aid contribution, and allow you to maintain your net worth. Liquidity would be reduced, but long term expenses would also be reduced since the mortgage balance would be paid off.

  6. I appreciate how you’re willing to return to a topic and continue a conversation, and readily backtrack if you realize you were wrong or changed your minds. It’s refreshing! It seems there are many obscure consequences to taking one path or the other.

    My question is, as someone who is three years into a 15 year fixed rate mortgage, could it make sense to refinance to a longer term if reading on this topic has changed my mind?

    With a growing family and plans to continue building toward FI, I’m seeing how nice it would be to have that extra $300-400 per month to invest and add to our financial flexibility. Thanks for your thoughts!

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