1. Preserving Liquidity And Flexibility Keeping part of your wealth in cash or liquid investments gives you options. It allows you to: • Handle emergencies without stress • Take advantage of investment opportunities • Help children or family if needed • Fund business ideas or professional opportunities • Sleep better at night knowing you have reserves Many advisors suggest that people maintain several months of living expenses in liquid form, and often more for higher income or self employed households.
If buying in cash would drain those reserves, that is a red flag.
2. Using Leverage Carefully Real estate is one of the few areas where lenders will routinely offer large, long term, fixed rate loans. This allows you to control a valuable asset while using some of your money elsewhere. If your long term expected investment return after tax is higher than the effective after tax interest rate on your mortgage, then keeping a mortgage and investing the difference can potentially leave you better off over time. Of course, investment returns are not guaranteed and markets can go through long flat or negative periods. That is why this is a conversation to have with a financial advisor, not a decision to make solely from a rule of thumb. 3. Managing Risk Over Your Lifetime The answer to the “cash vs mortgage” question often shifts as you age and as your priorities change. • Early in your career, you might prioritize liquidity and growth • In peak earning years, you might balance growth with 56
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