Progress to Date

  • Original Loan Amount: $204,000.00
  • Balance at Beginning of 5-year Goal (1/1/08): $188,983.82 @ 6.00%
  • Balance at Refinance in February 2009: $148,000.00 @ 4.625%
  • Outstanding Balance: $0.00 (PAID IN FULL!!!)
  • Latest Payment Date: April 2011
  • Latest Additional Principal Amount: $17,623.22
  • Amount Ahead of Schedule (since refinance): $121,462
  • Time Ahead of Schedule (since refinance): 7 years 10 months
  • Interest Saved Last Month: $23,972.48
  • Total Interest Saved: $28,435.55 ($1,037.74 on original mortgage; $27,397.81 on current mortgage)
  • Months Remaining in 5-year Goal: 20
  • Average Monthly Principal Needed to Meet Goal: N/A (Goal achieved)
  • Progress List Explained

Monday, March 3, 2008

Our Attitudes about Debt

Time for a little bit more background information about my wife and me. By some amazing stroke of luck, I was fortunate enough to meet a woman who eschews debt as much as I do. At the time of our marriage, neither of us carried any debt, with the exception of the mortgage I had on my previous residence. As I've mentioned before, we are not wealthy, but we have been disciplined enough in our spending that we've been able to avoid purchases which would have required us to borrow from lenders.

When I bought my first home, one of the initial changes I made was to replace the carpeting throughout the interior. I didn't have enough cash on hand to cover the bill, so I signed up for one of those "No Interest for One Year" promotions that the big home improvement stores offer periodically. I made a habit of setting some money aside each month in a savings account, making sure that I wouldn't fall short on the due date (as anything less than a 100% payment of the outstanding balance would trigger back interest on the entire amount). However, I would get irritated each time I received a monthly statement showing the outstanding balance. Finally, I couldn't take it any more and scraped together enough extra cash to get rid of the loan before the year was up. Even that relatively small debt (the total loan amount was, I believe, around $2200) drove me crazy. Since then, I've avoided debt traps like that, instead opting to save up in advance, or (more commonly) foregoing the purchase altogether.

It was a great feeling when we paid off the HELOC (second mortgage) in December 2007. That was an adjustable loan with a higher interest rate than our main mortgage. I realized that it made no sense for us to pay additional principal to the main mortgage until the HELOC was gone, because it was more expensive to pay the interest on the second mortgage each month. I could not imagine trying to juggle additional loans on top of that. I have a great amount of respect for others who are working to eliminate all of their debts (including credit cards, car loans, and student loans) in addition to their mortgages. That must feel like a more daunting task, requiring more discipline and focus than tackling a mortgage alone.

I'm very thankful that my wife and I have been fortunate enough to find ourselves in our present financial situation. I believe a combination of luck, discipline, and a supportive environment of family and friends have enabled us to get this far already.

  • We both come from families who understood the value of money, and taught us the basics of saving, spending, and using debt and credit judiciously.
  • We both have generous parents who started planning early to fund our education, and paid the majority of our education expenses. They also taught us how to be good students, which meant we received some aid in the form of scholarships. Because of these two factors, we had no need to take out student loans.
  • We both purchased reasonably priced automobiles, and independently managed to pay off our auto loans early, before we met each other.
  • We both use credit cards as our primary method of making purchases, but have the discipline to limit spending to a strict budget, and pay the balances in full each month. Neither of us has carried a balance on our credit cards for years.
  • I was fortunate to buy a condo during favorable market conditions during the early 2000s and sell it at a profit when we purchased our current home. This allowed us to make a larger down payment on our house than we would have been able to save up on our own.
  • We have both been fortunate enough to find ourselves in good health, though we are still relatively young. The few issues we have had have been relatively minor, and primarily covered through our employer-sponsored health insurance.
  • I was fortunate to get a job with a financial services company after graduation which taught me good investing and saving habits.
  • We both work and contribute income to the household each month, which allows us to reduce our debt more aggressively than a single income would.
  • We both share the common goal of eliminating all debt from our lives so that we can make future choices without feeling tied to a monthly mortgage payment.
Lately I have been wishing we had started this plan earlier, so that we would be even farther down the path than we are already. But patience is part of the plan, and we are determined to succeed.

1 comment:

*maggie* said...

thank you for your kind words. this is a very difficult time for me as he was the one constant through the past five years of life, job and location oriented transitions.
my commute increased by only 5 miles each way, but the interstate driving was replaced with a two lane curvy mountain road (about 15 minutes earlier to work). i have not really noticed much of an increase in commuting costs as i have a rather efficient car, and the reduction in housing costs equals good saving opportunities.
kudos on being so ambitious with the mortgage and again, thank you.