Three years ago, I paid off two mortgages: our primary residence and a three-bedroom house that my wife and I rented for $1,500 a month.
I felt I was on the right financial track. I was officially debt-free and also ran a successful music blog and business coaching service — both of which brought in a combined annual income of $1 million. Before that, my family and I lived on food stamps.
But now, at 39, I regret paying off my two mortgages. Just a year after paying off the mortgage, my wife and I enrolled our daughters in a school an hour away from our home in Tampa, Florida.
Getting closer would be ideal, but most of our money was already tied up in real estate. Our options were limited and I felt trapped.
But the experience taught me several important lessons:
1. Have your own philosophy about money.
I didn’t grow up learning much about money, but I knew I had to get my finances in order after I got married at 22. So, I turned to self-help books and experts for guidance.
Having watched family and friends struggle with debt my entire life, I was drawn to the camp of money advice advocates for zero debt, even mortgages.
But different people have different situations. Eliminating my bad debt but maintaining a lot of liquidity would have given me the most financial flexibility.
After months of fighting the banks, I was able to refinance a house and buy a new one closer to my daughters school. But this time, I followed my own money philosophy.
I only put 50% into my new home after selling my old one and invested the remaining 50% of the value of the new home into an index fund.
2. It’s okay to get emotional about money.
Money can be a source of stress and hardship, and it’s okay in some situations to let your emotions play a role in your decisions.
I assumed that having a paid off house would reduce my stress. As it turned out, a paid off house with little access to money ruined my sleep. I had to develop a more practical approach to my mortgage debt.
My investment of 50% of my house’s value in an index fund wasn’t just an attempt to build wealth. It was mainly to give me peace of mind that I could access my money in the event of an emergency or major life change.
If you’re about to make a big financial decision, do a “sleep test.” In any given financial situation, ask yourself, “Which choice will help me sleep better at night?”
3. Your money goals should be constantly evolving.
While I still believe that getting out of mortgage debt can be a fantastic goal, it took me a while to admit that my goals were changing.
At first, I was just worried about making enough money to support my family. I then became involved in becoming debt free and used all of my business profits to pay off the debt.
But now, with an income of $1.6 million a year, keeping my money easily accessible and building wealth are more central goals. I also try to give more: My goal is to donate 50% of my earnings to my church and the causes I believe in.
What is one goal you could focus on that would help all your other goals become more attainable in the future? Does it pay off the debt? Increase your income? Starting an investment account?
There is no right answer – only one that motivates you to take action.
Graham Cochran is founder of The Recording Revolution and author of “How to get paid for what you knowHe has helped more than 3,000 people start and improve their own businesses. Follow him Instagram and Twitter.