Charlotte from @lookingafteryourpennies joined me on this episode to discuss a very common question - if you have some extra money per month, should you use this to invest more or pay off your mortgage quicker?
First, we talked about the benefits of investing more per month. Conclusively, by investing more per month, you're likely to earn a higher return. This is because the stock market averages around 8% per year over the long term. But, even if this annual average return is much lower at 3% then this is still likely to beat the interest rate you will pay on your mortgage. Hence, from a mathematical point of view, investing is likely to be better.
Second, we talked about the benefits of using this extra money per month to pay off your mortgage quicker. Doing this is likely to be psychologically better, as people don't like debt, even if it is a mortgage. Paying off your mortgage quicker allows you to achieve debt-free status earlier and lifts a weight from your shoulder. Eliminating this large monthly payment also puts a lot more money in our pockets each month.
Charlotte and I then went on to discuss whether we could do both at the same time - and this is exactly what Charlotte does personally!
We then went onto talk about further pros and cons of each approach, as well as looking at - based on certain personality traits - whether one approach or the other may be better.
Listen to the podcast for full details!
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More investing:
📝 Download my free investing guide to help you start investing - https://www.makingmoneysimple.co.uk/Free-Investing-Guide
📕 Get my book Stop Waiting, Start Investing (available as a physical, digital and audiobook) - https://www.makingmoneysimple.co.uk/swsi-book
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⚠️ Disclaimers: I am not a financial advisor and this does not represent financial advice, it is for entertainment purposes only. Please seek professional advice to get the best information for your personal situation. When investing, your capital is at risk and you may get back less than invested. Past performance does not guarantee future results.
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