Quote:
Originally Posted by bizaro86
While this is a good theory, it doesn't work as well in practice due to a natural lack of self discipline. Paying the mortgage (including the principal payments) is a top priority because if you don't the bank takes your house (==debt). Those principal payments are forced savings.
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It's not forced savings though, because your house isn't a savings plan. You can't just withdraw money from your house, to access that money you have to sell, and then you'll be left homeless, or renting which will eat up the money you "saved".
Paying the mortgage is good (especially by retirement) because it increases your cashflow so you can either live the lifestyle you desire more easily, or make your retirement savings go much further without having to pay a mortgage.
But just because some people lack self discipline doesn't mean everyone does. Like every other decision in life, it has to be made in context; people who can't abide uncertainty get fixed rate mortgages and contracts for their utilities.. people who don't have the discipline to keep to a budget will enforce their plans by not using HELoCs or setting mandatory higher payments or something
Which is all fine, but you can't say something doesn't work in practice just because some people can't do it.
Quote:
Originally Posted by bizaro86
But renting and investing the difference doesn't work that way. Sure, the rent gets paid (eviction still has you homeless if you don't pay your rent) but the savings part can become discretionary. (I need that vacation/new car/designer clothes/designer coffee, etc).
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I'll let the people that I know who do this know their plans aren't working because they'll spend the money rather than investing it
