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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. 

This week’s episode starts with a list of money tasks to do in the new year.

Then we pivot to this week’s money question from Benjamin, who left us this voicemail: 

“Hello, Sean. This is Benjamin from Portland, Oregon. I am calling because I am trying to figure out what to do with my money. I have a mortgage on a $550,000 house. I have $236,000 left for a 20-year mortgage. I’m paying $2,000 a month and I’m splitting it with my partner.

We keep getting solicitations for mortgage insurance and I’m trying to figure out where I should put my extra income. I already have a Roth IRA. She does not. Our finances aren’t merged. I max out mine every year. I have about $20,000 in the bank, some stocks already.

I’m really trying to figure out the best bang for my buck. Should I pay off my mortgage sooner? Should I invest in life insurance or mortgage insurance? Should I invest in the market? Should we just go on more vacations?”

Check out this episode on any of these platforms:

Our take on money tasks in the new year

January is as good a month as any to take stock of your finances and begin to make changes, if necessary. For those wanting to retool their budgets, perform a spending audit and look for expenses that can be reduced or eliminated. You might also want to take a look at your retirement accounts and increase your contributions. Even a 1% bump will make a difference over time, as NerdWallet’s retirement calculator demonstrates. 

Reviewing your credit report is another money task that can really pay off. Access your report for free from annualcreditreport.com, then look for errors and unfamiliar accounts — these can be signs of fraud. Identifying fraud sooner rather than later gives the bad actors less time to rack up charges under your name and potentially damage your credit scores. 

Other money matters include setting savings goals, reviewing your portfolio of credit cards and planning a vacation. You’ll have earned it after carefully managing your money throughout the year. 

Our take on paying off a home early

For many of us, our mortgage is our biggest debt, so it’s understandable to want to pay off your home before the loan term expires. Doing so will free up money in your budget to spend elsewhere, and you’ll save money by paying less in interest. However, before you start an aggressive campaign to move your mortgage off the books, be aware of the potential drawbacks, too. Once your mortgage is paid off, you lose the mortgage interest deduction, if you itemize rather than take the standard deduction. And the extra money you put toward paying down the mortgage might be better spent in other ways, especially if your interest rate is low. Keep in mind that the average rate of return on the stock market is about 10%, and saving more for retirement and emergencies are higher priorities than paying off a mortgage.

Our tips

  1. Think about your priorities: There may be no one “right” thing to do with your money. Focus on what’s important to you and will give you the life you want.
  2. Consider returns: If you have a low mortgage rate, you may get a better return on your money by investing than paying the mortgage off early.
  3. Compare insurance products: Life insurance can be helpful if your death would hurt someone financially. On the other hand, mortgage insurance might be a good idea if you don’t qualify for life insurance. 

Have a money question? Text or call us at 901-730-6373. Or you can email us at podcast@nerdwallet.com. To hear previous episodes, go to the podcast homepage.