Money Savvy
I am so thrilled at viewing your videos because you have finally helped me organize my financial life step by step. It has not been easy.... I finally have my emergency fund in place and I have filled out the PAPERWORK to reallocate my stock investments according to my age and risk comfort zone in my 403 b plan at work. Now I am ready for the next step .What is it? Do I focus on paying off my mortgage? Save for my kids college funds? I have momentum now and I do not want to drop the ball!
Paying off your mortgage depends on many factors. One of the biggest advantages is piece of mind. However, one of the biggest disadvantages is OPPORTUNITY COST. In economics, it's the cost of the next, best alternative action that must be given up in order to pursue a course of action. In other words, why use money that could be earning 8-10% (long-term in the stock market) to pay off a 5% loan? I'm not a fan of debt, but your house is probably the cheapest source of funds you'll ever have.
Instead, you may want to look into refinancing before paying off your mortgage. The biggest factor here for me is the interest rate on your mortgage vs what you can get currently. Mortgage rates are at some of the lowest I've seen in years. If your rate is north of where you can refinance now, then you may want to look into doing so. For example, if your mortgage is 6-7% and the going rates are somewhere in the 4-5% range, then it might make sense. If you want to try to avoid the closing costs, you may want to call up your bank and ask them if they can "modify" your loan to a lower interest rate. I just helped a friend do that and it only cost her $500 in fees, but it is saving over $3,000 a year in mortgage payments.
As for college savings, look at 529 Plans. These are tax-advantaged (no capital gains taxes and distributions are tax free) accounts designed to pay for college for a designated beneficiary (each kid). So if you have 2 kids, you would need 2 accounts. Each state has a plan and while most states allow out-of-state account holders, there can be some significant advantages to creating the account within your own state. For example, I'm in New York State. NY offers two types of plans: a direct-sold and an advisor-sold that accept balances of up to $235,000. A website that I have found helpful in outline state-by-state plans is Savingforcollege.com.
One word of caution though, the homepage seems to push finding an advisor. I think you could probably avoid paying an advisor if you educate yourself thoroughly and there are a ton of resources on the internet. Just be careful of those "pushing products". I set one up by myself.