New York Times bestselling author Ric Edelman is one of the nation's best-known and most successful financial advisors.

His Ordinary People, Extraordinary Wealth is filled with the advice of everyday people who entered the world of personal finance and found ways to accumulate astonishing amounts of money.

Jody Pearce, housewife: "Save on a regular basis, even if it's $10 a week, and invest it into a good mutual fund. But just save something. Get good financial advice from a planner; ignore your friends' advice."

Duncan Campbell, graphic artist: "The best thing to do is be aggressive with the money you're not going to use for a lot of years. If I don't need it for twenty years, it goes in stocks."

Michael R Burke, defense analyst: "Get as much of a mortgage as you can for as long as you can. Using someone else's money is always better than using your own."

They Carry a Mortgage on Their Homes Even Though They Can Afford to Pay it Off.

If you had enough money to pay off your mortgage right now, would you? Many people would. In fact, "The American Dream" is to own your home -- and to own it outright, with no mortgage. Imagine owning your home without having to send a check to a mortgage company or bank every month! Being so fortunate must evoke such a sense of security, satisfaction, and well-being that you could only dream of it! Imagine the feeling you'll enjoy when, after 30 long years -- 360 monthly payments -- you finally make your last payment, and the house is yours forever!

If The American Dream is so wonderful, how can you explain the fact that thousands of financially successful people -- people who have more than enough money to pay off their mortgage right now refuse to do so?

Consider these facts derived from my survey research. Of the respondents:

1. The average home value is $255,700; the average mortgage balance is $142,000. Even though 100% have the ability to own their home without a mortgage, 83% carry a mortgage anyway.

2. 100% have the ability to send in extra money along with their monthly payments, to eliminate the mortgage ahead of schedule -- but 90% choose not to. Instead, 85% of the respondents have a 30-year loan and no one in this group sends in extra principal payments or participates in bi-weekly mortgage plans.

Clearly, these successful Americans are not bothered by carrying a big, long mortgage. Compare yourself to them. If you have a mortgage and are struggling to pay it off, or if you're dreaming of the day when you make your final payment, you're trying to do something that financially successful people do not do.

What do they know that you don't?

It's vital that you understand what's happening here. And we begin with the fact that talking about mortgages is not a conversation about economics or finance.

It's about emotions.

You "love" the idea of owning your own home. You "hate" your mortgage. If you're like many, you may even "fear" it. All of these are emotional words; none of them are financial. Yet, a mortgage is a financial tool -- not an emotional state of mind.

Why, then, do you feel the way you do about your mortgage?

Blame it on your parents.

Just about everything you've learned about money, you've learned from your parents. Even though Mom and Dad never said a word to you about money, they had lots to say about mortgages -- especially when you announced you were planning to buy your first house. "Make a big down payment," they told you, "and keep the mortgage payment low." "Pay it off early, child. You don't want that mortgage hanging over your head."Indeed, your parents and grandparents made it very clear to you that mortgages are bad, something to minimize, or to avoid whenever possible. A necessary evil at best. But what they never told you was why they felt this way about mortgages. It's important you understand their perspective or you'll fail to understand why their advice is bad for you. So let's look at mortgages from your parents' and grandparents' point of view.

 

Ric Edelman, CFS, RFC, CMFC, CRC, recently wrote Financial Security in Troubled Times to aid consumers in the aftermath of September 11. He is also the author of three bestsellers, The Truth About Money, The New Rules of Money and the #1 New York Times bestseller, Ordinary People, Extraordinary Wealth. His firm, Edelman Financial Services, Inc., is one of the largest financial planning firms in the nation, handling $2 billion for Americans across the country. Ric lives in Great Falls, Virginia, with his wife, Jean, and their weimaraners, Dojar and Liza.

 

Ordinary People, Extraordinary Wealth by Ric Edelman
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