Hello, everybody, it's Sam and Sydney from the Financial Samurai podcast. And in this episode, we want to talk about how paying off your mortgage may not provide the joy you expect. Because I spent hours and hours writing about the top financial moves to make to relieve stress and anxiety.

This is what we did over the past, well, a couple decades, actually, but more recently, since the pandemic, to help us alleviate stress because the past three plus years have been stressful. And one of the items that didn't get its specific bullet point was paying off your home. I did mention paying off your forever home as a paragraph as part of a sub bullet point, but it wasn't a dedicated bullet point paying off your home.

And I wanted to discuss why this was, for those of you who are gazelle focused, extremely focused, laser focused on paying off your mortgage debt, ASAP, I think there's going to be a letdown, there's going to be a anti climactic moment once you send off your last mortgage payment.

And it's really interesting, because after we had paid off our vacation property rental, I wrote a really bullish positive post called the triple benefits of paying off your mortgage early. And it did very, very well. A lot of people came out to support and comment, Google News picked it up, and it got spread all over the place.

And it was interesting that I so quickly forgot that I had written that post. And so quickly, I forgot about the triple benefits of paying off the mortgage early, that I wanted to discuss more in this podcast why this was so. So Sydney, you were in charge of paying off the vacation property mortgage.

So what were your thoughts? How did you feel once you finally paid it off? I felt great about it. And that joy has stayed with me. And I think one of the reasons why you kind of forgot about it is because we have a separation of tasks per se.

This vacation property mortgage was more of my responsibility. You know, I deal with all of the management company issues, the guests, you know, when they have issues that come up, the maintenance, the fees and all of that, and the property taxes. So it's, I think it's stuck with me a lot longer, I still feel really proud and, and glad about it.

And I do have less stress, there's, there's still the stress of dealing with the management company, there's always stuff that comes up. But I feel really great about having paid it off, I will say that I did. I did have a new unexpected stress. When I sent in the last payment was like, Oh, wait, what happens now?

You know, what am I have to make sure I don't forget anything. So I had to remember to call in actually speak with someone to turn off the automatic payment, for example, because there wasn't an easy way to do that online, I had to actually speak with someone did we get the payoff letter?

Yes. And that's the other thing I had to make sure that we would get everything you know, that we needed to to make it fully official. So that had a little bit of stress temporarily until all that was sorted out. And it doesn't happen immediately. Like, I had to wait a certain number of weeks for the paperwork to come back to me in the mail.

I called the local assessor's office. Yes, assessor's. Yeah, just like make sure I was like, you know, this is what my lender is saying, can you please confirm just to get a little more comfort. And then once all that got taken care of, I felt so happy. Really? Okay, well, that's good.

You know, it's interesting, because I wrote about mortgage mortgage payoff procedures to know, and it's not just okay, that's it, you've got to make sure your bank and you are on the same page. And you get that payoff letter amount. Yeah. And then it's recorded at the assessor's office that you paid it off, and you don't have that lien that the bank holds, right?

You get the reconveyance letter, it might be a little bit different in every state. But yeah, conveyance letter. But I didn't forget, you said I forgot about I didn't forget, forget, but I feel like the emotional aspect, maybe I feel stronger, since I've kind of focused more on this, and you focus more on our primary house.

So I don't think about that as often. As a result, when did we pay it off? Do you remember? I'm pretty sure it was July of 2022. And so here now, May 24, summertime 2023. Do you still feel good about it? Yeah, I won't say that I think about it every day.

My mind is cluttered with all kinds of other different things that are on my to do list and whatnot. But if I stop and think about it, like we are in this discussion, I felt I felt really good about it. And it has reduced some of your stress and anxiety, because that was my main point.

What are the financial moves to reduce your stress and anxiety? Yeah, because it's one less payment that I have to ensure goes out every month. I mean, most of the time things run smoothly with your bank, it's automatic. But you know, if by accident, I didn't, I wouldn't have enough funds in the bank account for that month.

And it, you know, things could happen, right? So it's just one less thing to worry about. So less financial clutter. Yeah. Well, that's, that's good to know. And I think you're right, that because you were in charge of paying that mortgage. Yeah. And you know, paying the property tax and all that stuff.

It's it was more beneficial to you, right? It alleviated you more, whereas I didn't really think about it as much, right. So the feedback we got from the commenters was was really great, which is one of the reasons the main reason why we want to do this episode, because it made me realize something very important.

I did highlight five things as to why paying off your mortgage wasn't a big stress reliever for me. And let me just go through that quickly. And then I'll highlight an epiphany, not really an epiphany, but just a realization, thanks to the readers. So first of all, ongoing property taxes, we pay our property taxes twice a year, I mean, it's December 10, in April 10.

And every time I have to pay the property tax, it's like, oh, that stinks, right? And we have built a rental property portfolio, real estate portfolio that is large enough where we have hit the limit in terms of our property tax annual payments. And we're talking six figures a year in property tax payments.

And if you think about that, folks, you know, if you're going to pay 20,000 30,000 50,000 $100,000 a year in property taxes, that doesn't feel good, especially when you start reading about corruption in your city, or inefficiencies. We've asked the city to do things before to fix things that would be good for society, the city, and they just won't fix it.

And then you hear about stories about just, just bribing and all that stuff. It's just like, ah, you guys are killing me. And, and by paying property taxes, you're just kind of feeding the beast of inefficiency and corruption. Yeah. So number two is ongoing maintenance issues. Doesn't matter if you pay off your mortgage, you're still going to have to change the roof, change the HVAC unit, change the dishwasher.

Yeah, you know, we bought our house in 2020. And since then, you know, our doorknob stopped working, though, that was easy. Try to replace the water heater, replace the water heater, change several rotten wood planks, we fixed a leak that went into the chimney when those like the once in a hundred year storm, what's going on.

So there's always going to be things to do. And therefore there's always going to be stress involved. Yeah. Three, we're in a negative real mortgage interest rate environment. Inflation is still at about 5%. But I would say 95% of us have refinanced to below 5% or have mortgages below 5%.

40% of homeowners supposedly have no mortgage. Anyway, if you have a sub 5% mortgage right now, paying off your mortgage now is suboptimal. And it's fine to still pay it off because paying off debt is always a good thing, I think, in general. However, when you can now get risk-free 5% plus returns and our mortgage, our primary mortgage is 2.125% for another five years, four and a half years, it's like, no, it actually feels worse paying off your mortgage when it's so low, when you can get more than double risk-free return.

Four, what else? Investing FOMO. That's a huge one. That's something that I experienced. You don't experience that, do you? Not really. You definitely do. I do because I'm in charge of the finances. And I've written before that investing is like a part-time job or it could be a full-time job.

And we have over 40 financial accounts. You got to track everything. That's why we use Empower. It used to be called personal capital to track everything because it's like going to the grocery store. If you go to the grocery store and you don't have your grocery list, it's stressful.

It takes much longer. Much longer. You're like, oh, what did I forget? And then you get everything, you go back home. You're like, oh, I forgot the eggs or whatever. I forgot the tomato sauce, whatever. I can't make the spaghetti no more. And so using an app like personal capital and power now is very helpful because it just alleviates that mental load.

And so investing FOMO is tough, right? Because you want to stay disciplined in your asset allocation, investing, your goals. You know who you are. But in 2020, 2021, ridiculous things were booming and you're like, oh, pay down debt. But things could be booming. So every year there's some kind of hot new investment, right?

And in 2023 and probably for years and years to come, it's going to be artificial intelligence. And I'm playing around chat, GBT. It's still like, eh, not that great, but it helps build structure. And it's kind of like a shortcut. And I'm looking for AI investments. I'm like, oh, AI investments that could be a hundred baggers, 10 baggers, or pay down your mortgage of 2.125%.

Come on now. And then fifth and finally, the financial winds never really elevate your happiness for very long, at least for me, it's hedonic adaptation, right? We quickly revert back to our steady state of happiness after achieving any type of success, which is why I'm pleased to hear that since July of 2022, since paying off the mortgage, you still feel good about it because I've seen you on the couch when we're watching trash TV on Netflix, you dealing with, um, you know, the property manager, the property manager causes me headaches because they're not detailed.

And I mean, if, if people are curious, we had, we had one company and it got so bad that I was like, we have, well, they weren't happy with us. We weren't happy with them. So we parted ways and we went with a different company that was working out so well for, I think it only ended up being about a year because they got acquired by the company that we had left.

And I was like, Oh my gosh, are you kidding me? So we're back to square one. You know, there's so much employee turnover. I can never figure out who to contact because the person that I did last time is now gone. And you know, they didn't, they didn't do X, Y, and Z right on our invoices.

And Oh, it's, it's always something. So this is my hesitant when people just hesitancy on hiring a property manager, people always ask me, well, Sam, why don't you just hire a property manager to manage your property? And I always think to myself, well, who's going to manage the property manager?

Yeah. There's a lot of things they do that are helpful, but it's never a hundred percent smooth sailing. Something will always come up. Yeah. And I'm just wondering, can you maybe just chunk all the errors that they do for the whole year and then just submit the whole thing at once and say, pay us back?

I mean, maybe, but I'd rather, I'd rather stay on top of it every month because I don't want to, I don't want to have money going out of our pocket that, I mean, who knows what, what if this company ends up being acquired and then it'd be even harder to get money back, you know?

Right. So anyway, I don't know the property manager solution. You got to get lucky. Just kind of like, you're lucky to get a really trustworthy auto mechanic. Who's not going to rip you off or say you, you need $10,000 worth of stuff done when you just need $500 worth of stuff done.

So yeah, property managers, not the silver bullet, but in conclusion, thanks to reader feedback, I learned a couple of things about myself and this should help you as well. The first thing is paying off your mortgage is a more powerful stress relief. If that mortgage is your primary residence, and if you are paying it every single month, you are responsible for it.

If you're responsible for it, it's your primary residence, you're enjoying it. Yes. Paying off the mortgage will feel more wonderful. If you're paying off a rental property mortgage, it's not as wonderful because it's just more like money, right? You pay it off, your cashflow goes up. You have one less thing to do, but it's just money and money itself provides only a certain amount of stress relief, but after a while, it just, it's not that big of a deal.

And then the final realization I had is that the greater the value of the property is as a percentage of your net worth, the more stress relief it will provide. So for example, I'd say the typical American household has about 80% of their net worth tied up in their primary residence, which I think is a no-no.

My recommendation is to get that down to about 30% or less. But if you have 80% of your net worth in your primary residence and you pay off your mortgage, you're going to feel really good. You're gonna be like, yes, 80% of my net worth is safer now. But if on the other hand, your property is worth, let's say 10% or 5% or a couple percent of your net worth, you're not going to feel that emotional victory as much.

So we paid off our vacation property rental and that vacation property rental is worth less than 5% of our net worth. So in my mind, I just feel it's not that big of a deal. We paid off the last remaining mortgage amount was like 40 to $50,000 in 2022.

That's a good amount, but it's not really going to move the needle. What are your thoughts about that? I think that makes sense. I mean, yeah, definitely. If you're paying off your primary residence, that is a huge bulk of your net worth. It feels more impactful. It makes a lot of sense.

Makes a lot of sense. And also the duration. If you've been paying, let's say 25 years of your mortgage and you finally paid off, I think you're going to feel better than if you paid it off in three years. But you know what? Actually, I don't think so. Because I also concluded in my post, the harder you work for something, once you get that something, the more you kind of miss the goal.

You might miss the goal or you might say, well, of course I should achieve this goal because I worked hard for it. I deserve it. I crushed it. The 25 years of pain and suffering and sacrifice. This is what I felt after writing "Buy This, Not That" and once it became a Wall Street Journal bestseller.

After two and a half years of worrying, writing, editing, marketing, when I achieved that result, I was like, well, yeah, you're damn right I achieved that. I worked so hard for it. But the reality is less than 0.3% of nonfiction books ever make it on a national bestseller list.

It's that competitive. And so what happens is our minds really, we justify our achievements because of our work ethic, duration and hard work. But we also forget, conveniently forget to put things in perspective. So I would say for all of us, try to put things more in perspective. Any of our accomplishments.

Write them down. Write them down. Review them. Show gratitude. Ah, and there's also another way to think about the value of a financial move in terms of alleviating stress. And that is perpetual versus temporary or permanence versus temporary. For example, the greater the permanence of the financial move, the more it will relieve stress and anxiety.

Let's say you got a revocable living trust or a death file that was in the right hands. You're going to feel good that there's a permanence involved until you die, that things will be taken care of if something were to happen. And so regarding paying off your house, well, if you live in your primary residence permanently, and you pay it off, I think you're going to go you'll feel you're going to feel better.

But if you are a temporary holder of that property, and you plan to use it as investment or sell it within several years, paying it off and then selling and getting rid of it, it's it's not going to feel as great. And there's a there's a parallel to life insurance, because I said life insurance was something that gave me the most amount of stress relief.

And that is term versus whole, we have a 20 year term policy. And I feel good about that. Because I think in 20 years, that our mortgages are all our debts will be paid off. And our children will be 23 and 26 years old. And they should have the wherewithal, the intelligence to take care of themselves and know right from wrong.

So I feel good about that 20 year amount. But along the lines of permanence, maybe we should have got whole life insurance at around age 3035. So it will permanently cover us no matter what happens. Because in 20 years, maybe our kids won't have it together. Maybe they will be spoiled.

Maybe they won't understand or maybe there'll be an accident, God forbid, right? So we just don't really know anything can happen. So it's good to think about permanence and temporary in terms of financial moves you want to make. At the end of the day, life is temporary, everything we own, and even our time is temporary, because we will all pass away one day.

So let's make the most of every single day. Appreciate each other. Appreciate all your positive reviews and sharing of this episode and various podcasts. And please stay in touch. We're at financial samurai.com forward slash news for our free weekly newsletter. And if you want to support our work, and exit a job that you really dislike, take a look at our newly revised edition of how to engineer layoff, make a small fortune by walking away at financial samurai.com forward slash h t e y l and use the code save 10 s a v e t n to save $10 at checkout.

Thanks so Thanks so much, everyone.