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MONEY DO’S AND DON’TS: Stop managing your money like it’s the 50’s!


Paying Off Your Home
Many Americans still believe that paying off their home or sending extra mortgage payments each month is a good idea. At one time, it might have been, and in some instances today it might be, but when a person considers today’s world, “renting from the bank” might make more sense.

“But all of that interest!”
Paying off a home comes from what I think is 1950’s thinking. America had just come out of the Great Depression, then World War II trauma and rationing, so owning a home provided security. More importantly, in those days a person COULD AFFORD to pay off their home with a variety of reasons why they wanted to:

  • The median home price in the 50’s was $7,354 (1) equivalent to about $79,000 in 2022
  • Monthly housing cost was about 22% of the annual budget
  • Homes were much smaller at less than 1,000 square feet, one bath, kids shared a bedroom
  • People tended to stay in their home for a long time, sometimes the rest of their lives.

Compare that data to today and one can easily see why it might not make sense to pay off your *current home:

  • Median home price in 2022 is roughly $400,000 (2)
  • Monthly housing costs average 44-50% of the annual budget
  • Average square footage in America today is about 2,300 square feet (3)
  • In 2020 the average family lives in a home for about 13 years (4)

In my next write-up, “You Can’t Eat Your House” I’ll detail the actual numbers that show why many would be better served not paying off their home or sending extra payments.

  1. https://dqydj.com/historical-home-prices/
  2. https://www.fool.com/the-ascent/research/average-house-price-state/
  3. https://www.census.gov/construction/chars/highlights.html
  4. According to the 2018 1-year American Community Survey.