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The smartest financial decision that I ever made was paying off my mortgage early. Mainly because it gave me the freedom to take risks at work. Some people believe that you shouldn’t pay off your mortgage because you could invest the difference. However, this is not always better.
I ran the numbers and found that by paying off my home instead of investing in the stock market, the difference was a minuscule 0.1%. During the period that I was paying off my mortgage (2004-2012), the S&P 500 rose a paltry 3.6%, including dividends. In turn, my effective mortgage rate (when factoring the refinancing and mortgage tax deduction benefits) resulted in a return of 3.5%. I would gladly forgo 0.1% in order to get out of debt. Wouldn’t you?
In turn, once I paid off my debt, my work life really improved. Since I no longer had a burdensome mortgage, I took more chances at work. I figured the worst thing that could happen was I could be fired. But since I had the house paid off and had accumulated an emergency fund that could sustain me, I figured I had nothing to lose.
With that mentality, I started to go on the offensive at work. I took on interesting and challenging projects that others shied away from. Some of my friends even warned me that I’d probably fail, so I shouldn’t bother. Heck, I remember being one of those people at one point. Who wants to rock the boat?
I remember like it was yesterday, when I took on my first hard project. I was passionate about the project but knew that it would be incredibly challenging. I’d love to tell you that I achieved a breakthrough, and everyone praised me. But unfortunately, I didn’t reach my goal. But there was a silver lining.
Somehow, I impressed management with the progress that I made. That opened other doors to pursue the projects that I was passionate about. I built success upon success with each new project. Before I knew it, I received rewards from my employer, along with an improved reputation. I received promotions, then bigger promotions and bigger teams. My sphere of influence became greater, and I ended up in a managerial position that I would have never anticipated. I experienced all of that simply because I was able to work fearlessly without a mortgage weighing me down.
Looking back, I kick myself and think that I should have been even more aggressive from the start. But knowing myself, I needed to have the security of being debt-free before I took those risks.
So when you ask me about the smartest decision that I ever made, it’s a no-brainer for me. My satisfaction and overall experience at work has drastically improved since paying off my mortgage.