Remember Why You Are Here

    Today I had strange moment. I was trying to help someone by giving some advice that I have found helpful in the past. It struck me though, when I said it, with the gravity of the advice. It was as if I was not only giving the advice, but also receiving it anew. The exact situation was that this friend was upset about making some simple mistakes when transferring answers from the paper where problems had been worked out into the computer where they were turned in and graded. So I asked. "Why are you taking this class?" The answer was, "To learn."
    There it is. I went on to explain that if you did the problem, did it right, and understand it, then as frustrating as making typing errors or silly errors, that shouldn't matter if you learned. The knowledge is the goal. The grade should be a by product.
     This hit me as profound, because I had always applied the logic to my academic pursuits, but I failed to see the application to the rest of life. I find that humans have a tendency to substitute trivial totems in place of real meaning. Grades instead of knowledge. Status instead of self respect. Material goods instead of contentment.
     Part of the challenge is that it is frequently easier to measure one than the other. How does one measure contentment? All too frequently material goods are substituted for contentment, because, the logic goes, if we just get x then we will be content. That holds no more truth than saying if I just get an A I will know the material. In fact, I find that in almost all of these cases, if you reverse the prevailing logic, you are closer to the true path. Get knowledge, grades will follow. Learn to respect yourself and status will follow. Learn contentment and you will have all the material goods you need.

Maybe we are all just backwards.

I need to remind myself:

Remember Why You Are Here

Math, and Why Happiness Isn't an Equation.

     So, anyone who has spent anytime reading modern personal finance philosophy will notice that the consensus is weighted rather heavily toward the side of "don't pay off your mortgage quickly, invest instead." The reason for this is math. Any extra you pay on the principle of your mortgage will yield "returns" equal to your interest rate. You'll notice I put returns in quotations. The reason for that is that you don't see actual returns, what you actually see is savings. I think this is a return because, quite simply, it is still money you would not otherwise have. In our low interest rate years that have persisted for sometime, most folks have an interest rate under 5%. So, at best your early payments yield 5% returns.

    The reason most out there will advocate against early payments is because the stock market historically yields better. Traditionally in the 6-9% range. Keep in mind too, due to compounding, that a 2% difference is not 2% more money. The difference in 10K invested for 20 years at 7% and at 5% is $13,260, which of course is not inconsequential. So of course, if you can save additional money and invest it as opposed to paying your mortgage, with the power of compounding, you can rather quickly get to a point where your passive income from that investment will cover your cost of rent, and much like owning a property, you essentially have no cost for month to month housing (ignoring maintenance of course). 

    Generally, in most cases, you would mathematically come out with more money at the end of the scenario in which you invest excess as opposed to pay down your mortgage. Thus the majority consensus. 

    But happiness isn't an equation. The part that gets left out, is the day to day lifestyle. For some  people, owning the home is an important part of day to day happiness. I think for people who despise inefficiency, or love efficiency, or in most cases both, owning the home is a critical part of day to day happiness. There is something extremely satisfying about seeing a problem, developing a solution, and implementing it. If you rent a place, you rarely have this option. 

    It's true that when you factor in the cost of maintenance of owning vs renting, the rent/invest strategy comes out even further ahead. My only issue is that I derive far more happiness from replacing something broken with an elegant or efficient solution than I would from looking at my bank account before and after the landlord makes repairs and seeing that the number has grown. Just me. 

     I'm going to do a more in depth analysis of our particular case to see exactly what the difference in earnings, net worth, etc. would be in the two scenarios. Full disclosure, I have not done this yet, so I do not know exactly what the gap will be. 

     So why make such an uniformed decision when the math is relatively straight forward?  

Simple. 

We made the decision on happiness. Happiness isn't an equation.