A comment from a reader, Joe, on the recent article outlining why I paid off my mortgage has prompted me to complete this follow up article on what happens next!
How Does It Feel?
In Joe’s comment, he offered up that I had missed a reason to pay off my mortgage and that is the peace of mind that it offers.
While he is correct that it does offer peace of mind knowing that as long as I pay my property taxes, my house will never be taken away from me, it honestly doesn’t ‘feel’ any different.
It isn’t that I expected to feel much different without a mortgage payment every month, but for some reason I expected to feel something. Maybe I expected to feel relief, or satisfaction?. In any event, I do not regret the decision whatsoever, but the shift of stress now seems to have planted itself squarely on the shoulders of replenishing the investment and savings account(s).
What To Do With That Extra Cash Flow?
Because the majority of the cash that was used to pay the mortgage off came from a brokerage account, the former mortgage payment is now being directed to that account to replenish that capital. I have automatic transfers set up and am currently treating this as a ‘bill’ that required being paid each month just like the mortgage did.
Treating the transfer of funds to my investment account as a bill is likely part of the reason that it doesn’t feel any different not having a mortgage. I set this up on purpose to ensure that I do not fall victim to lifestyle inflation . I certainly don’t need to frivolously spend that extra cash simply because I don’t have a mortgage payment any longer.
Since I already max out my retirement accounts, have no other debt and an emergency fund, the replenishment of the brokerage account will be the top priority. Some of those funds will also be earmarked for a few things that have been neglected in the quest to pay off the mortgage. The earmarked funds will be directed to the following categories:
1.) Vehicle Replacement Fund – Although both 2003 Hondas are still serving us well, replacing one of the vehicles in the next few years is likely inevitable.
Disclaimer – I absolutely hate buying vehicles. I believe that they are the worst use of money and generally cause people more financial troubles than housing debt. More on this in an upcoming article.
2.) Home Maintenance – While major repairs such as a new furnace or air conditioner would be covered by the Emergency Fund, a more general home maintenance fund will take care of deferred maintenance such as new paint, upgraded finishes, shingles etc. A home should maintain or increase its value over the long term, especially if it is well maintained. And, a well maintained home is more efficient and comfortable to live in.
3.) Vacation Fund - It was important to my family not to sacrifice too much in the quest to become completely debt free, so we did take vacations every second year. However, with the additional cash flow from paying off the mortgage, some of the funds will be earmarked to increased vacation time. This doesn’t mean frequent air travel and/or all inclusive luxury vacations, but simply more time with friends and family. Spending from this fund could include local camping, visiting friends and/or family in their homes, or destination vacation travel. The idea is to invest some money and time in fostering relationships with others – including the immediate family. Often, being away from the distractions of home life allows people to focus on just being together.
As you can see, there are plenty of places to direct the additional cash flow from what used to be the mortgage payment. Due to all of these different competing priorities, it doesn’t feel like there is extra money to go around. That said, regardless of which account the funds get transferred to now, the net result is the accumulation liquid assets.
Did I miss anything that you feel is important? What is the first goal that you will focus on when the mortgage is paid off?