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

Wednesday, April 16, 2008

Defining Retirement

I read an interesting article recently which illustrates the power of compounding over time. While the math is sound, I don't buy into one of the author's principal assumptions. That's his assumption that retirement begins at the arbitrary age of 67. This is the full retirement age for recipients of US Social Security Retirement benefits who were born after January 1, 1960, but it's still an arbitrary number.

Working until age 67 may be acceptable to some, but not for my wife and me. Our goal is to transition to a retirement lifestyle as soon as possible. Our assault on our mortgage debt is the main component of reaching this goal.

So how do we define a retirement lifestyle? The main asset that retirees have, and which the employed population lacks, is time. Retired individuals can set their own schedule. They can be as active or inactive as they want (depending on their health). They can even go to work if it suits them. But they don't have to work if they choose not to. This control over time is, to me, the key element of retirement.

As I write this, my wife and I don't have full control over our time. Our employers expect us to give our time to them in exchange for our salaries. Most everything we do is based on a schedule that is set by someone else: office hours, school calendars, company holidays, late meetings, mandatory overtime. Furthermore, a significant part of our "free time" is spent preparing for work. We don't have much free time that isn't already committed to sleeping, eating, or caring for ourselves.

And so, we continue to work, exchanging our time for pay. Now that we have a goal (pay off the mortgage in five years or less) and a plan (reduce spending and maximize additional principal payments), we see work in a new light. Instead of exchanging our time solely for money, we're exchanging today's work time for future free time. Every month I work full-time in 2008 represents a month I can work part-time in 2013, perhaps, and another month I can go without working at all, maybe in 2018. This gives more purpose to the daily grind. I'm not working to make my employer happy...I'm working so that I can shift control of my time from my employer to myself.

Fortunately, my wife and I have been good "retirement" savers, and find ourselves in a position to best the hypothetical return of the 26-year-old described in the article, assuming (yes, another assumption) that our investments match the author's proposed 10% average annual return. Unfortunately, that money will remain off limits until one of us is at least 59½ years old, unless we want to pay a penalty (probably not) or the laws governing retirement accounts get changed (plausible, but not likely). So our next challenge will be to find a way to bridge the gap between freedom from mortgage debt and complete freedom from employment. However, we are still a few years away from meeting that new challenge. I think it's best to focus on one goal at a time.

First things first! Death to the Mortgage.

Monday, April 7, 2008

Do It Myself

As we prepare to sell our car, I've been trying to do a better job of keeping our bicycles tuned up and in good operating order. I haven't had a lot of experience with mechanical things, so something as straightforward as bicycle maintenance was a bit of a mystery to me at first. Thankfully, there are a lot of How To guides online. One video in particular came in handy recently, after I got frustrated while inflating one of the bicycle tires. I had difficulty removing the pump nozzle on completion, and managed to tear the valve away from the innertube, instantly flattening the tire.

This is something that the "old me" would have fixed by driving the bike down to the bicycle shop and paying the service department to fix the flat (and while they were at it, maybe do two or three other unnecessary things). But the "new, improved, more focused, and goal-oriented me" decided to limit myself to the purchase of $6 worth of repair parts and learn how to replace the flat tube myself. I'm pleased to report that the experiment was a success, and the bicycle rides great on its new, fully-inflated innertube.

I know this was not a major task, but to me it represents a significant achievement, because I managed to learn something new which I can use again in the future. As we continue to attack our debt, I hope both of us can acquire skills like this, so we can save on the cost of other people's labor. The $6 probably represented a small fraction of the repair cost had I taken it into the shop.

Unfortunately, we had another mishap over the weekend. Someone vandalized our car, which means we now face the choice of either spending $250 to have the auto mechanic replace the broken side mirror, or do without and drive a slightly damaged car for a while. Is this a task we can do on our own? Or does it make more sense to leave this to the professionals? Time for more research.