And you can bet your sweet as we’ll be funding a college plan soon! We haven’t done 100% of the research yet, but I’m pretty sure we’ll end up with a 529 from our state and start low – maybe investing $100 or two a month automatically – and then as the years go by, or we start making more, keep increasing it until we’re at the $500 or $800/mo range. Or until we amass a nice portion we feel would cover stuff – whatever comes first. Long term I hope to have more than enough ready to go by the time he’s 18 and/or double/triple if we have more kids! Which is def. in the plans ;) So, I guess we’ll be needing to invest in this stuff forever, haha… always gonna be worth it though! And I want to give them the paid for education like my parents did for me – it made a HUGE difference in my life.

Oh, and yeah – I’ll be tracking all of this stuff in my new baby cost spreadsheet! That bad boy is gonna add up!!

Thanks to you I now track everything myself except I won’t be tracking all the baby expenses. My wife and I are set to have our 1st child in August.

I disagree with so on the arbitrage argument as well. But I feel like we could go back and forth on that all day. I’m fine with leaving it there, especially since we’re two days past the initial post. Hopefully you and I can go back and forth on financials here in the future. I also love a good argument over money.

By the way, don’t be put off by the all caps. I use that for emphasis since I don’t feel like writing HTML code for italics in everything I write. I promise I’m not sitting here yelling at my screen and banging on my keyboard.

Peace of mind and focus. It is more difficult psychologically for many retail investors to invest aggressively and weather swings with the drag of a large monthly nut. Even tougher for most self-employed folks, because the wolf is perpetually at the door. Plus, if he wants to lock in the benefit of the principal payments, he can always re-finance or re-cast. I disagree that there is no benefit to payoff — it’s a consistent tax free return.

Plus, it’s only a ten-year plan, and (if I recall correctly) J is in his thirties. So for the last half of his working life, he’ll be able to invest all of his income without a monthly nut during 20 of his peak earning years. That sounds like a plan to me.

I appreciate your passion, but at the very minimum, your fixed income investments should go to payoff. F a 2% treasury yield.

“Also, of that $45 of interest he’s paying a day, the federal gov’t in [sic] kicking in 20 percent.”

Meh, only to the extent his total itemized deductions exceed the standard deduction. It’s an OK deal, nothing great, and since the federal gov’t will take 15 percent or more of his investment gain on the back end, it washes out.

As for arbitrage, it’s only free money when your alternative investment goes up — if you were making an arbitrage play in 2008, you’d have been forsaking a 5-6% return to eat a 30% loss, and if you’ve been making a similar arbitrage play over the last ten years, then you’d have been forsaking a similar return on the mortgage for a flat equity market. And that’s not even considering transaction costs.

I’d rather be secure than chase the arbitrage yield. Assuming an 8.5% return over 10 years gives you 3 extra points on J’s $24K investment. That works out to about 3.3% compounded over 10 years. That’s only $800 a year under IDEAL market conditions.

I’ll take the paid for house.

@Big Dion – Haha… so I guess peace of mind and feeling like a champ doesn’t count for anything? ;) I def. admire your enthusiasm and strategy there – it probably IS the best move financially over time, I won’t doubt it – but I think it’s important to factor in everything else non financial with these moves too. The idea that I could have a paid off house in 10 years AND cut my *need* for an income down by 50% going forward is an awesome goal to hit. And there’s nothing saying you couldn’t then invest $4,000+ in the market at that point and go full force if you still were bringing in 100% of your income too.

So for me, the goal of paying down my house is still the right move for what I’m trying to do, but I think your route is just as sexy as too. Just depends on what motivates you and what’s more important. I don’t think there’s a black and white answer here…

@so – Thanks for the interest reminder ;)

Also, of that $45 of interest he’s paying a day, the federal gov’t in kicking in 20 percent. A smart investor – like one who has increased his net worth by $100,000 since October – can easily make that on an investment and significantly more over a shorter time frame. It makes NO sense. What do u get for that extra principal payment? Nothing. The full balance is still due the next month.

Finally, arbitrage = free money. I don’t know about you, but free money will always be in style at my house, whether it’s 2007 or not.

He’s paying $45 in interest a day.