MONEY DO’S AND DON’TS: Stop managing your money like it’s the 50’s!
ESTIMATED 2MIN READ
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.
- According to the 2018 1-year American Community Survey.