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Originally Posted by SeeGeeWhy
But! The first thing I did with my money was clear all debts. If you are paying interest ANYWHERE it is sapping any and all efforts you are making with your other money and should be dealt with immediately. The only debt I have right now is my mortgage... and I am not so sure I am going to keep it for that much longer.
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Be careful with this statement.
Not all debts are bad, especially mortgage debt. Take a look at you cost of capital ie. if you can get a better return on your investment than what you pay in interest you should do the investment.
For most people CC debt is the first thing that should go as that is a 12-28% after tax return that they would need to replace, which is tough for most people to expect.
Mortgage debt however is the cheapest money most people will ever get, and finding an investment that will provide greater than a 5-7% after tax return is not too tough especially in a sheltered account like an RRSP.
Use a spreadsheet or quicken and compare in 30 years the difference in your net worth between paying off a 6% mortgage and investing in an 8 - 10% RRSP... the decision should be obvious.
I try and keep no more than 25% equity in my home at any time, and will strip any excess out on a periodic basis in order to invest at a better return, and to increase the leverage on my real estate gains.
Best regards,
~bug