The 9th Wonder of the World

Filed under: Financial Planning

Today’s topic is a bit of a stretch, but it’s something that I wholeheartedly believe! I often talk about “doing real estate right.” Here’s my correlation for today:

The 8th and 9th Wonders of the World

There are 7 man-made Wonders of the World, like the Great Pyramid of Giza, the Coliseum, the Taj Mahal, and more. According to Albert Einstein, the 8th Wonder of the World is compounding interest.

I’m going to suggest that the 9th Wonder of the World (no it’s not cryptocurrency) is mortgage amortization. Stick with me so I can explain.

As we follow Einstein’s lead to say that compounding interest is the 8th Wonder of the World, it begs the question: what is it about interest that is so great? It’s doing the small things over time and letting the compound interest happen over many years.

I have this conversation with my kids, who are in their 20’s, all the time. Start investing today – because small investments today get very big in 30, 40, or 50 years from now.

Similarities Between Compound Interest and Amortization

I think the same thing holds true with mortgage amortization. People might stop me here and point out that any type of debt is very different from any wonder of the world.

What I say: it is going to cost you to live somewhere. It doesn’t matter if you are going to rent or buy, you’ll be paying the money. You might as well live in a place that you own so you can pay off that mortgage one little chunk at a time. Eventually it takes care of that mortgage – allowing you to enjoy retirement for a nominal cost of living. You don’t have a mortgage or rent payment, so all you need to cover is taxes and insurance. In the bigger picture, taxes and insurance will be way cheaper than what rent is going to be 30 years from now.

Doing Real Estate Right

I say this over and over again: real estate done right will absolutely make sense in the long run. When I say “done right,” it means buy it smart and do it with good financing (fixed loans over 15 – 30 years). Stick with that and pay it off over time and it will make an enormous difference in your retirement, just like the compounding interest (the 8th Wonder of the World).

If you want to learn more about leveraging these financial strategies through your homeownership, then I’m always here to answer your questions. Contact me any time to talk about mortgages and refinancing – I’m here to help!

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