As we continue on our exploration of the seven baby steps to financial freedom we have moved from being in debt with no savings, through being debt free, investing and saving for your kids college education. Now we finally onto the last two baby steps which is to build wealth and give like crazy.
Baby Step Six: Pay Off The House!
Now that you have become debt free and begun saving for the future you can now begin to work on paying off your house. This step has sparked heated debate in the financial community. The traditional wisdom was that you wanted to keep your mortgage around for as long as you could, using the interest you paid as a tax deduction. However, Dave points out that this advice is folly. If you think about it, you are paying interest to the bank to keep from giving money to the government in the form of taxes. Over time you will wind up paying more to the bank in interest that you ever would have paid to the government. The only one who wins here is the banker.
The benefits of paying your mortgage in full and owning your home 100% free and clear will always outweigh any negatives of keeping your mortgage around forever.
Baby Step Seven: Give Like Crazy
If you have followed and completed all of Dave’s baby steps you are finally living on Financial Peace Blvd. You are now at a place in your life where you have the ability to live like no one else, and give like no one else because you made the sacrifice to live in a way that allowed you to take debt by the horns and get rid of it one baby steps at a time. As you continue to invest your money and make it work for you, you will be building wealth for your and your children’s futures.
Eventually you will reach a point where the money from your investments will make more than you do. It is at that point you can decide to retire, move to a less stressful job, spend your days as you see fit. It is also the point where you can enjoy “giving like crazy”, make contributions to your favorite charity, surprise someone with a generous gift, buy groceries for the person in line behind you, use your imagination! At this point, anything is possible.
If you have made it this far, congratulations! If you, like me are still working on paying off your debts and working the baby steps then don’t give up, I know you can make it!
Incase you missed it you can also check out part one and part two of this series.
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