Dear Dave,

My wife and I owe $90,000 on our mortgage and we have no other debt. We are able to save about $20,000 a year, so we could have the house paid off in just over four years. She likes the idea of having lots of money saved up, but I would love to be completely debt-free. Should we pay off the house or hang on to the savings?

Jason

Dear Jason,

Let’s pretend your house is already paid for in full. Would you borrow on your home so that you had enough cash that your wife liked it? You say you wouldn’t, so what’s the difference? If you had a paid-for house and you wouldn’t borrow on it to have cash laying around to feel better, why wouldn’t you use the cash laying around to pay off the house? It’s the same thing.

The first thing you want to consider is having an emergency fund of three to six months of expenses. You also need to make sure you’re putting aside 15 percent of your income for retirement. Other than that, if you have enough cash laying around to pay off your home and you don’t, it’s the same thing as having borrowed on your home in order to have cash laying around.

If I’m in your shoes, as soon as the emergency fund is in place — six months of expenses since your wife likes the security factor — and 15 percent is being put away for retirement, I’d take the other money and throw it at the house. Get that thing paid off as fast as you can!

—Dave