Dear Financial Samurai,
Based on the reactions to my new post, A 50-Year Mortgage Is Fantastic For Homeowners And Investors, there are clearly a lot of anti-debt folks out there — and that’s perfectly fine. Less debt is generally better than more, and being debt-free by retirement is a great goal.
At the same time, much of the outrage around a 50-year mortgage feels rooted in misunderstanding, just like the long-standing skepticism toward ARMs. It’s easy to hate what we haven’t taken the time to understand.
I prefer ARMs over 30-year fixed mortgages because ARMs better match the actual duration of homeownership. Paying a materially higher fixed rate for 30 years when the average homeowner only stays put for about 12 (and 7–8 years before the GFC) makes little sense. Why not take a 10/1 ARM with a lower interest rate instead?
But because roughly 95% of borrowers choose the 30-year fixed — the most profitable loan product for banks and therefore the one pushed hardest — anyone who questions it gets steamrolled. It can be tough being in the minority, but I’ve been used to that since arriving in America in 1991. All good.
“Ownership” is a misnomer anyway. We don’t truly own anything; we simply take temporary possession, try to enjoy it, and eventually pass on. As personal finance enthusiasts, what we really want is optionality. More optionality means more flexibility, and a 50-year mortgage expands your options to buy, hold, and get neutral real estate. Once you own real estate, you also gain the option to sell it for potential profit.
If you rent, your optionality is limited to reinvesting the cash flow elsewhere or spending it — which is perfectly fine, but you don’t have the option to benefit from a primary residence or rental property’s appreciation.
Personally, I want more options, not fewer. And that’s exactly what a 50-year mortgage can provide for those who understand it and use it wisely. As you read the article, take a moment to consider the simple new concept I’ve introduced: the Mortgage Utilization Rate. If you embrace it, your thinking on debt and real estate might expand in valuable ways.
Fear Is Back And Volatility Continues
Another Thor’s Hammer slammed the markets on Friday. The NASDAQ was down 1.9% intraday before closing slightly positive. Meanwhile, the VIX — our trusty fear gauge — is up 15% since Wednesday. Bitcoin dropped to around $95,000 from $110,000. Even gold, the supposed safe haven, got whacked 2.8% to $4,074 an ounce.
All eyes now turn to NVIDIA’s earnings on Wednesday. Its results will either pull AI out of correction mode or send us deeper into it. Do not disappoint us Jensen!
Personally, I kept buying the dip last Thursday and Friday, just like the week before. But these weren’t table-pounding conviction buys — more like asset-allocation moves. I recently received about $38,000 in distributions from a venture debt fund, and the cash needed a similar risk home.
Managing your household’s finances can feel like a stressful full-time job sometimes. So if you’re not the one managing it, please give your household CFO some love!
My Empower financial review really reinvigorated my desire to analyze all our portfolios, not just the rollover IRA I presented to them. What I found was… sobering. The first 13 years of my 401(k) investing career were pretty dismal.
For at least a decade, I’ve had this narrative in my head that I was a good investor. But maybe that perception was warped thanks to an unusually long bull market. After doing an even deeper dive into my IRA returns going back to 1999, I uncovered several important lessons that should help me become a better investor going forward.
Check out my post: You Might Not Be As Good An Investor As You Think. I have a feeling many of us avoid running the numbers because we’re afraid of what we’ll find!
Be Smart, Not Cool
After putting the kiddos to bed with my wife last weekend, I ventured out into the wild to play in a tech social poker event. And boy, did I walk into a den of thieves. I had to battle hard not to get cleaned out.
What struck me at the event — the same thing I felt attending Berkeley Haas part-time from 2003 to 2006 — is this: if we’re not smart, we’re screwed. And as someone who didn’t get straight As and didn’t crush the SATs, competing on intellect has always been an uphill climb.
We’re not just competing against the smartest and hungriest Americans. We’re also competing against even smarter and hungrier foreigners who are putting us all-in and taking the pot!
As a father who had way too much fun in high school and college, I’m firmly on Team Less Fun, More Studying. Unless the kiddos want to be 28-year-olds living in their childhood bedrooms asking mom and dad to pay their credit card bills, buy them a car, and cover their down payment, they’d better spend 10X more time studying than partying.
Check out: Be An American Nerd, Not The Cool Kid, If You Want To Survive.
Taking Things Down This Week
Although I’ll still have posts up on Financial Samurai next week — I’m not about to break my 16-year streak of publishing at least three times a week — I’m going to take a mental break and focus more on family time. This mainly means emails and comments will be largely missed during my digital detox.
My personal finance 1X1 consulting offering from last week is now closed, but if you’d like to speak with an Empower professional about your finances, you can still sign up and schedule a meeting. If you do, I think you'll enjoy doing a deep-dive about your portfolio returns like I did.
In the meantime, keep reading and sharing your financial wisdom with others!
To Your Financial Freedom,
Sam
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