Just got this comment:
my husband passed away dec 2007 i've just gotten 500k from life insurance the insurance agent wants to invest all of it and give me an allowance a month. I'm 40 two children who have their own 85k each when they hit maturity. I owe 230k on my house I have a job and ss for the kids untill they are 18 ( 9 & 11 now) I want to pay off my mortgage invest 150k for retirement and have the balance for emergency also smaller investments. I feel like he's pushing me he also wants control of the childrens UTMA accounts once I have guardianship. What sounds right. I'm picking up the check today.
What suggestions do you have for her?
To everyone who says that paying off the house isn't a good idea. Let me bring these up for you.
As we have all found personal finance is not always about the numbers. On paper you could make a point that it is slightly better to do A over B but there are a couple of things we forget...
1. In this situation the lose of a spouse is a huge emotional hit. To know that you own your house and that it is yours and all yours and you potentially never have to worry about a roof over yours and your childrens head is HUGE!
2. One thing that always gets forgotten is that a person has to live SOMEWHERE. In just about every personal budget there is about 25-35% that is set aside for housing. We base salaries on this and cost of living. She will have a whole chunk of her income that is no longer going to housing and can be saved and invested. This is HUGE. Basically the paying off of her house allows for an income stream of whatever her house payment was to begin with. It's almost like she is owning her own rental property!
3. Never ever EVER do something just because of the tax write-off. Tax write-offs are nice but should only be used as icing and not the cake itself. It is nice that I can flow a lot of expenses through my business but they are expenses that I have to have anyways and the writeoff helps. I don't do it just because I get a write-off. If you want to get a $2500 tax write off per year just give $10,000 to your local church or a food bank. I am sure they will put it to better use then then the mortgage company!
Posted by: J.J. Merrick | May 17, 2008 at 11:13 PM
I disagree on some points.
1. I understand the emotional hit with losing a love one. But, when making financial choices, it's usually our emotions that get in the way of making better decisions. Is it better to own your house, not have a mortgage, and it be difficult to access all that money? Or, have money that is earmarked for that house, have a payment (with a tax benefit), and have 100% control over your money?
2. Yes, buying a house means that she won't have to worry about a payment. But, we have to remember that we finance everything. We either borrow money to buy and pay interest, or we put cash down and forgo the interest we could have earned. If you put all that money into the house, you have discarded the earning potential of those dollars. And besides, no one every really owns their house. Stop paying your taxes and you'll see who really owns it...the state.
3. I agree to not do something just because of the tax write-off.
Posted by: sow | May 18, 2008 at 09:33 PM
Call the insurance agent and say the following..."You're Fired!"
Put the money somewhere safe, go to the library and read one personal finance book each month for the next six months. Then you'll know what to do.
Sorry for your loss - good luck.
Posted by: Mike S | May 20, 2008 at 11:05 AM