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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.
This week’s episode begins with List of financial tasks to do in the new year.
Then we move on to this week’s money question From Benjamin, who left us this voicemail:
“Hi Sean. This is Benjamin from Portland, Oregon. I’m calling because I’m trying to figure out what I’m doing with my money. I have a mortgage on a $550,000 house. I have $236,000 left for a 20-year mortgage. I’m paying $2,000 a month and I’m splitting it with my partner.
We keep getting applications for mortgage insurance and I’m trying to figure out where to put the extra income. I already have a Roth IRA. you did not. Our finances are not merged. I take out the maximum of my business every year. I have about $20,000 in the bank, some stocks already.
I’m really trying to figure out the best bang for my buck. Should I pay off my mortgage sooner? Should I invest in life insurance or mortgage insurance? Should I invest in the market? Should we go on more vacations? “
Check out this episode on any of these platforms:
We took over the money duties in the new year
January is as good a month as any to take stock of your finances and start making changes, if needed. For those who want to retool their budgets, conduct a spending review and look for expenses that can be reduced or eliminated. You may also want to look at your retirement accounts and Increase your contributions. Even a 1% bump will make a difference over time, like NerdWallet Retirement calculator Shows.
Reviewing your credit report is another financial task that can really pay off. Access your report for free annualcreditreport.com, then look for errors and unfamiliar accounts – these can be signs of fraud. Identifying fraud sooner rather than later gives bad actors less time to rack up charges in your name and potentially damage your credit score.
Other financial matters include setting savings goals, reviewing your credit card portfolio, and planning a vacation. You will earn it after managing your money carefully throughout the year.
We took payment for the house early
For many of us, our mortgage is our largest debt, so it’s understandable to want to pay off your home before the loan term expires. Doing so will free up money in your budget to spend elsewhere, and you’ll save money by paying less interest. However, before you start an aggressive campaign to get your mortgage off the books, be aware of the potential drawbacks as well. Once you pay off your mortgage, you lose the mortgage interest deduction, if you itemize instead of taking the standard deduction. And the extra money you put down to pay off the mortgage might be better spent in other ways, especially if your interest rate is low. Keep in mind that the average stock market rate of return is around 10%, and saving more for retirement and emergencies are higher priorities than paying off a mortgage.
Our tips
- Think about your priorities: There may not be a “right” thing to do with your money. Focus on what is important to you and will give you the life you want.
- Consider returns: If you have a low mortgage rate, you may get a better return on your money by investing rather than paying off the mortgage early.
- Compare insurance products: Life insurance can be beneficial if your death would hurt someone financially. On the other hand, mortgage insurance may be a good idea if you do not qualify for life insurance.
Have a financial question? Text or call us at 901-730-6373. Or you can email us at podcast@nerdwallet.com. To listen to previous episodes, go to Podcast home page.