Happy U.S. Government recognized New Year.
I had a wonderful experience last week at Eastridge High School after a CARE presentation. A senior came up to me and thanked me. She said that I had spoken to her personal finance class when she was a sophomore. I had talked about the importance of saving, and that everyone needed a savings account. It is what we all had in the 1950s and 1960s when we were small children and there were bank books. It was how to learn about delayed gratification, saving for things rather than “needing them right now,” and having money for emergencies and anticipated expenses. I had emphasized that those things are three of the key building blocks to avoiding unnecessary debt.
She said that she went out the next day and opened a savings account, and started saving. She later was able to purchase a big-ticket item that she wanted, and felt good about it, because she had saved for it. For me, it was one of the best Christmas presents ever.
Whether you normally make New Year’s resolutions or not, how about making just this one? If your children or grandchildren don’t have a savings account, get one opened for them before the end of January.
One of my CARE teachers, at the school where it all started, contacted me last week. Let’s call him “Teacher A+ Financial IQ,” because he has always been so on top of his finances. He has taught his students, by example, about having financial goals and working toward them. He and his wife have planned and saved for emergencies, their retirement, and their children’s educations, and they have avoided debt as much as possible. They have made some necessary financial sacrifices along the way, and have been frugal, in order to achieve those goals, but they have also enjoyed life, and have truly appreciated everything that they have.
He wanted me to know that they had just paid off their home mortgage and they were now completely debt-free, because he knew that I would appreciate hearing that. He and his wife were going to celebrate, as well they should. I say, Congratulations!
That got me thinking about my parents’ and grandparents’ generations when they used to have mortgage burning parties when they paid off their mortgages, a goal that they all had then, as they prepared for retirement, when they too wanted to be debt-free. Today, things are very different. So many people go into retirement with mortgage and other debt. Sometimes it was incurred to educate or to help children or other family members. Sometimes it had medical underpinnings. Sometimes it was just to live above their means. In any case, it seems that having mortgage and other debt in retirement is no longer the exception.
As for mortgage debt, including home equity mortgages, in the past we have discussed that it could be financially beneficial in some instances. Using it to pay off or down higher interest debt without re-incurring that debt, or because you can make a greater after-tax return with the money, are just a few examples. It always comes down to your actual financial circumstances.
That being said, let’s return to celebrating paying off your mortgage. Wikipedia tells us that mortgage burning is a 20th-century American custom that is the ritual burning of a paid-off mortgage document by homeowners. It is done as a celebratory event, and is sometimes accompanied by a party in which extended family and friends are invited.
By the way, if you are so inclined, you can search mortgage burning parties on the internet, and find some great decorating and other ideas for a party. Here are some other ways to celebrate paying off your mortgage, as reported in realtor.com:
1. Paint your front door red, which is an old Scottish tradition.
2. Use your last loan pay off-statement as a dart board. (I didn’t say they were all good ideas.)
3. Pay the former monthly payment into your grandchildren’s college fund.
4. Donate the former monthly payment to a charity that helps people in need find housing, or helps them with utility or other related expenses. You can get a tax deduction also.
Finally, the Tax Cuts and Jobs Act is now law. It should be a most interesting 2018 for tax accountants and lawyers as they work their way through the law, and advise their clients accordingly. Maybe those are the jobs the law is referring to. Or could they be the moving companies, as some individuals in high-tax states, like New York, who can no longer fully deduct their local, state and real estate taxes, finally leave.
John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at http://www.mpnnow.com/search?text=Ninfo or at http://www.monroecopost.com/search?text=Ninfo