TFSA contribution vs. paying down mortgage?
Hi all,
My husband and I have been discussing our finances (as is everyone else!) and are trying to decide where to put our money. We are newlywed. Perhaps I should mention that my husband has investments (mutual funds, company stock and bonds), and a life insurance policy with his company. We both have RRSPs and are repaying into the new home buyers plan. We are otherwise debt-free, save our car lease and mortgage. Given the economy going as is, the idea of a TFSA became interesting as extra liquidity in case one of us loses our jobs. But so is paying off our mortgage as early as we can.
I have $5000 saved up from last year. Are we better off putting this in a tax-free savings account, and then investing it, OR should we put this into our mortgage as an extra payment?
Any guidance would be appreciated.
Open up a discount brokerage account like Charles Schwab or Fidelity.
Put 6 months salary in there and buy some cd’s or bonds for now.
This will give you comfort in case an emergency comes up, or unemployment.
Then pay off your cars. No more car leasing. Every calculator I see says its cheaper over the long run to buy.
Then, and only then, you can pay down your mortgage. Make an extra check and write in the memo “towards principal”
At the same time, if you have extra cash, open up an IRA and take the $5,000 yearly deduction.
The brokerage account with your 6 months salary will come in handy when you have kids heading for college. Keep putting money into it.
David Trahair, author of Enough Bull, on investing in mutual funds vs. paying down mortgage
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