Question: My > > question is, other than paying taxes, what is the overall WORST waste of > > money where most folks are concerned?
> > Dan
> Mortgage interest for people who intend to live in their houses a long time.
> Most people think they “have to” buy as much house as the bank says they can > “afford” and finance this with a 30 year mortgage. Best to buy less house, > and pay it off in 15 years or less.
> A 100K mortgage at 7.5% interest for 30 years will cost you 151,721 dollars in > interest. Paying it off in 15 (an additional $228/month) will save you 84,859 > dollars.
> So where are you to save more money than that, other than not buying the house > at all?:-)
Answer: Yes, but this one is like taxes. You are limited on your options. If you want to raise your kids in a good neighborhood, you need to spend some serious cash on your home. And where I live, any house that cost less than $100K most likely has wheels on it (i.e. Mobilehome).
Fortunately, most people who itemize can write off 28% to 39% of the interest they pay on their homes against their taxes. In addition, your house has the potential to increase in value. So that loss of $80k will be diminshed by the return on your investment. Also, you need to consider the low price of a home loan today. The average return of a domestic equity mutual fund is 14% since 1929. Most financial professionals today will advise against paying off a 7.5% home loan early and recommend you put the money into equity funds (assuming both being long term investments).
Therefore, I still have to say that automobiles are the biggest waste of money. It can cost $30,000 for a good safe car today and it starts losing value the day you drive it off the lot.
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