Security, cash flow, and equity. I’m going to run them through actual math on each one, and we’re going to see that what you may think you’re doing isn’t what you’re achieving. All right, so let’s go. All right, so I often say that the quality of your life comes down to the questions that you ask. And most people, they just ask pretty terrible questions. And when it comes to, should you pay off your home early? The question most people are asking is, it’s the wrong question. Should I pay off my mortgage early? Should I apply extra principal? Should I make two payments a year? See, that’s binary thinking.

It’s yes or no, it’s on or off. And binary thinking will keep you exactly where you are. So, the right question isn’t, should I pay it off? The right question is, why would I want to? Because once you know what you’re actually trying to achieve, then decision starts to make itself. Now, from coaching thousands of students on this, I found there’s really only three reasons people want to pay off I feel safe that way. Number two, it’s cashflow, right? If I eliminate the payment, then I have more money, you know, every single month.

And number three, it’s equity, I want to build up the asset value in the home. So those are the three main concerns, the three main reasons that I’ve discovered after coaching all these people. And I want to break down each one, because when you take a look at the math, get rid of the emotions, look at the math, look at the data, it looks completely different for every single one. So let’s start with number one, let’s start with security. Okay, so with security, the belief is pretty simple here. If I can just get rid of my mortgage payment, then I’m safe, right? I’m free from the mortgage, I’m clear, I have nothing hanging over me, I get it, right? I understand the feeling.

It sounds good, right? But feelings, they’re not a financial strategy. Here’s the reality. To stay in your home every single month, you don’t just have one payment, you have five payments or more, let’s break them down. Number one, of course, you have your mortgage, that’s the one that we’re talking about eliminating, on top of that, number two, you have property taxes. So you got to pay the state every single month for your house, whether you have a mortgage or not, if you don’t pay it, they take the house. Number three, you have insurance.

Now, of course, that’s required by your lender. But even if you don’t have a lender, you still want to have insurance for catastrophic loss. So insurance doesn’t go away. Number four, you have utilities, in order to live in the house, you have to have electricity and gas and water, of course, all those things. Number five, maintenance, I mean, you have the roof, the HVAC, things break, they break on their own schedule. So we could go on more, but you get the idea, even if I pay off the mortgage, even if I’ve eliminated exactly one of those five, the obligations, they don’t go to zero, it goes from maybe 3400 a month down to 1500 a month, I save money, but I still have to produce cash every single month just to keep the house.

So the reason why I’m pointing that out is that that’s not security, right? That’s a lower number. Sure. It’s cheaper. Okay. Real security, though, is income that exceeds your total cost of living, eliminating one payment. It doesn’t give you that. So if security is the real reason that you want to pay it off early, well, the math doesn’t support it, which of course, brings to cash flow. And this is where it starts to get really interesting. Okay, so if we if we look at cash flow, we’re getting into the math here.

For this example, I want to use the California since I’m in California, we use the California median home price, which is $875,000, which if you’re not in California, that may sound insane, but that’s what it is. Of course, plug in your own numbers for wherever you live, but the logic is going to be the same no matter where you live. So let’s say that I have that home to 75% loan divided put 25% down the home. Okay, so that put put it roughly to a $650,000 mortgage. Now let’s say that I locked this in a couple years ago, I got it at say a 4.9% interest rate, and it’s a 30 year fixed loan.

So now my monthly payment is let’s call it $3400 a month. Alright, now let’s say that I wanted to pay it off early. So I want to accelerate, I want to I want to start paying it faster. So what I’m going to do is I’m going to put on a 10% down $365 per month, extra towards the principal, right? So that’s it. Option one, I send that $365 to the bank every single month extra. Now if I do that, here’s what actually happens. The money disappears into my equity locked, and I can’t touch that money.

I can’t touch it unless I refinance or I sell the property. And most people haven’t really thought through this, they don’t realize this. But when I make that extra payment, the monthly payments I have, it doesn’t actually change, right? Because the loan is amortized. So even though I’m paying extra principal, I’m not reducing what I owe every single month. Yes, I am shortening the timeline, but the payment still stays at 3400. So that 365 that I’m putting in there, it’s now frozen. And that 365 I’m putting in there every month is doing one job.

It’s saving me 4.9% over the long run. Yes. All right. But so option two, we can look at another option, the same 365 per month, instead of say sit into the bank, I could do something else with it, I could choose to put it to work somewhere else instead. Like I’ve given a couple options, like for example, I could put it just into the S&P 500. The long run average is around 7% on that doing better in the last five years, it probably will continue to do better than 7%. But the long run average is 7%.

And just at 7%, I’m already beating my mortgage rate of 4.9. So now the same dollar is now compounding faster. Let’s go further. Some other options I like is strike STRK. It’s a series A preferred stock from micro strategy or strategy. It’s a stated 8% yield. Currently, it’s much higher than that. It’s a contractual coupon, they have to pay you this. It’s backed by the largest corporate Bitcoin treasury in the world, you can buy it from any brokerage account right now. And the best part, it’s convertible to micro strategy stock. So when the price of the stock goes up, which it will, well, not financial advice, I expect to go up a lot from here, it converts into it.

So not only do I get the yield guaranteed eight right now, it’s probably about 10 or 11%. Plus, I get the upside convexity of the conversion into micro strategy stock. And it gets even better because the yield that they’re paying me is not income, the yield they’re paying me is what’s called a return on capital, which means it’s tax deferred. So I’m not just getting back to eight or 10%. It’s probably more like 14 15% depending on what your tax rate is. So back to my options. So I could put it in my mortgage and save 4.9% a year, or I could earn 10 1214% and have the upside.

Okay, now let’s run this forward a little bit. So let’s just say going back to the 8% keep it easy. Let’s just say at 8% within 20 years, which is what it would take me to prepay that mortgage anyway, at 20 years, the income from that 365 a month now covers my entire mortgage payment. This means the investment now pays the mortgage. Wasn’t this my my goal in the first place to get my mortgage payment taken care of. So I achieved the same thing, except for now, I have an investment. And here’s where it even gets more sophisticated, right? That same brokerage position, it can also serve as collateral, collateral for a securities back line of credit, and maybe three, four or five percent.

So now that dollar is generating 8% income or more is providing access to cheap capital simultaneously. And that capital is working now. But the cash flow, it’s only part of the picture, right? The bigger question is the equity. And that math, it’s a completely different conversation entirely. Alright, so I want to talk about the equity game. Now, this is where most of the conventional wisdom lives. The idea is that your home is like a when you make your payments every single month, your equity builds up. And then after 30 years, you’ve got a paid off asset.

And so now, the retirement secured, right? Well, there’s actually something inside that logic that works in your favor, right? Something most people never think about inflation arbitrage. What that means is that your mortgage payment is fixed, right? It’s locked in today’s dollars, but the dollars being debased every single year. So what this means is that your $3,400 payment right now, maybe it feels heavy for you. But in 10 years, in 20 years, it’s gonna feel a lot lighter. Because as the government keeps printing money, your fixed debt keeps getting cheaper and cheaper and cheaper.

So the service that over time gets easier. You borrowed yesterday’s expensive dollar, but you get to pay them back with tomorrow’s cheaper one. That’s what we call arbitrage. Now it only works if you keep the mortgage. It only works if you keep the mortgage. If you pay it off early, you don’t. So the trap is on the other side. Every dollar you accelerate into your equity is frozen and it can’t compound. It can’t generate income. It’s locked inside the walls of your house earning the rate. You’re avoiding 4.9% and nothing more.

And now you have debt equity. And debt equity is the worst performing asset on your balance sheet. So now if we run the full spectrum, just to compare it, if you pay down the mortgage, what you’re really doing is you’re saving the 4.9%. Now your money is locked, it’s doing one job. But if I would put that money in the S&P 500 to 7%, the same $365 a month over 30 years is about $450,000. You’ve beaten your mortgage rate and the money stayed mobile, stayed flexible, you had control. If I would have used STRK, you know, instead, maybe with the security back line of credit, 8% yield generating cash flow.

Now the same position is collateral for cheap credit, 3, 4, 5%. Now the income eventually covers the payment. The compounding gap between this and the option isn’t incremental. Now the gap is generational. And then there’s Bitcoin. I know the historical Bitcoin numbers, right? 68% compound annual growth rate KAGR over the last 10 years, 44% over the last three years, 30% if we look at the look at over the 200 weekly moving average, but let’s be even more conservative. Let’s say it’s 20% going forward, conservative at 20%. That same $365 a month over 30 years that you could be putting into it.

It doesn’t get you 450,000 like the S&P 500. It gets you somewhere between, ready? $18 and $22 million. I know what you’re thinking. That number sounds cherry picked. It’s not, right? Because you’ve already seen the S&P 500 case, you’ve already seen the strike case. Bitcoin is just the far end of that same spectrum. The point isn’t to tell you where to put your money here. Like I’m just giving you options. I’m just giving you the math and breaking this down for you. But the point is this, nowhere on that spectrum, just paying down a 4.9% mortgage compete, not even close.

Most financial advice is designed to keep you out of trouble, designed to keep you from dying. But it’s designed to keep you from losing, but it’s not designed to help you win, not win the game of money. Now, safety and protection, they don’t lose, they’re designed not to lose. But that advice was built for a different era. We were in an equity based system, a gold backed equity based system all the way up until 1971. It’s only been about 50 years that everything changed. And so in that world, back in the equity based system, paying down debt, you know, saving conservatively, all that made sense, right? In your grandparents’ generation, your parents’ generation, maybe your generation, it worked back then.

It’s just we’re not in that world anymore. We’re now in a debt based monetary system. That means that the old rules that guaranteed a specific outcome, just, you know, it worked, but not the one that you’re hoping for. The new system, the debt based system, it rewards people who understand how to use fixed, low cost capital, how to deploy it at a higher yield, and how to keep it mobile while it compounds. Look, revenue is what you earn, but wealth, it has to be engineered. It’s something that we have to plan, we have to build.

That’s why right now today, 60% of six figure earners, they earn a lot of revenue, they’re still living paycheck to paycheck. High income is not enough, you have to turn that income into wealth. In order to do that has to be done intentionally, right? It has to be done intentionally has to be engineered with the system. So let’s go back to the question that we started with. Should you pay off your mortgage early? It’s up to you to decide. Nobody knows what you’re trying to achieve. But if now that you’ve seen the security argument, it doesn’t hold.

Now that you’ve seen the cash flow math deployment beats pay down every time. And now you’ve seen the full equity spectrum from 4.9% all the way to the to the end of the Bitcoin in. And so the question was never should I pay it off? It’s what am I actually trying to achieve? It’s a different question. And once you know that the answer to what you’re trying to achieve, then the question is, how do I get more of that? How do I get more of that faster with the capital that I already have? You see, that’s the engineer’s mindset.

That’s instruments, how to layer the leverage, how to get your capital doing multiple jobs simultaneously. Now, if you want to check that out, I’ll put a link to that down below. If you want to know the five year Bitcoin retirement plan, you should probably go watch this video right here. And I’ll see you over there. As always say to your success. I’m out. [tr:trw].

See more of Mark Moss on their Public Channel and the MPN Mark Moss channel.