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When To Pay Off Your Mortgage

When seeking financial advice, smart Kiwi's look at three specific stages in building their financial stability...

The first stage is to determine your short-term goals. This could encompass a wide variety of objectives, such as repaying debt, purchasing motor vehicles, buying a home, or starting up your pension plan. Think about what you want to accomplish in three years and how you can go about achieving those.

The second stage is to determine your three-to-ten-year goals. This list may include some of the same items from your short-term goal list but it might bring up all sorts of other things because you may have moved as a person into a different stage. Here is when you might be planning on having children or starting a business or you might pay off your mortgage. Because it's a different stage, you need to look at your financial plan in a different way. You may choose other products to achieve this next set of goals.

The third stage is to determine your long-term goals. On this list would be your retirement goals. You would ask yourself, “What do I really think I'm going to do down the track when I ultimately retire at 65 or 70 or whenever that's going to be?” We're all different there.

One of the most important ideas here is to treat this goal as if you are budgeting to retire today. If you are retiring today and assuming that you've paid off debts and you'd invested wisely—you'd done all the things through the stages of your life—how much money in today's terms will you need at this stage? Because we can't factor in an inflation rate for three years down the track, we can only look at today and assume an inflation rate.

So these are the three stages of financial services I look at when I want to see what a person wants to do. Now we can talk about setting up a target because there's no way a person could ever hit a target, unless way in the beginning they've already aimed at the target, correct? And, you have to remember that targets always move, so you need to have the ability to change.