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

Sunday, December 28, 2008

2008 in Review

Year One is finished. Our mortgage is one-fifth closer to its death. Although paying down a long-term debt can seem like a maddeningly slow process at times, I am surprised at how quickly the past twelve months have passed. I'm pleased with the progress we've made so far, and look forward to continuing the attack on our mortgage in 2009.

Although I never published this in any previous entry, my goal for 2008 was for us to pay down one-fifth of the balance at the beginning of our project. This amount was $37,796.76 (one-fifth of $188,983.82). We actually reduced the balance by $40,940.03, which means we achieved 108% of our goal in 2008.

  • Of the $40,940.03 we paid toward the mortgage debt, $30,500 came out of our own pockets as extra contributions against the balance. This was an average of about $2,540 per month. Our highest extra amount was $5,000, and our lowest was $750. I'm glad we didn't have to skip payments in any month this year.
  • The remaining $10,440.03 came from our regular monthly payments (the principal portion of each required installment). At the beginning of 2008, the principal portion of the regular payment was about $775; by the end of the year, it was over $950. If we had not made any additional principal payments, this number would have only been about $820 by December 2008. The difference between those numbers represents our interest savings each month (I publish that in the monthly summaries).
When we started this project, I calculated that we would need to pay $3,149.73 per month in order to retire the mortgage within five years ($188,983.82 divided by 60 months). Today that number stands at $3,084.25 ($148,043.79 divided by 48 months). In early 2009, the principal portion of our regularly monthly payment will start to exceed $1,000 per month. This means we'll only need to come up with around $2,000 extra each month to achieve our goal. Since we managed to average well over $2,500 each month in 2008, I am hopeful that our progress in 2009 will continue on the 2008 pace.

Our biggest change in 2008 was selling our second car and becoming a one-car family. This hasn't affected our lifestyle as much as I originally thought it would. Aside from needing to plan our trips more carefully, I haven't felt like we've lost much in the way of freedom. We're spending time together in the car now, which suits me just fine (I like my wife's company).

My wife and I have talked about how we've shifted our behavior so we don't automatically buy something if we sense a need (or want, whim, desire, etc). We discuss our purchases together and decide whether spending money on a particular item or service is our only option. We also think of money in terms of time. Every $1,000 we spend roughly equates to one month less on our mortgage. If we're tempted to buy something that costs $250, for example, we ask ourselves if it's worth potentially postponing our debt-free lifestyle by another week in order to make that purchase (although the answer is sometimes "yes", more often than not, it's "no").

Overall, I would say that Year One has been a positive experience. I've paid more attention to our spending in 2008 than I ever had before. I learned that if one of us lost our job, we could still get by on a single income for an extended period of time if needed (though without the luxury of paying extra toward the mortgage). This is reassuring now when there is so much uncertainty in employment, stock markets, housing markets, and the cost of living. In a way, making the decision to pay down our mortgage has insulated us somewhat from this turmoil, as we have a plan for our future success and are on track to see it through. Our family and friends have been (mostly) supportive of our efforts, which contributed positively to this project.

My wife is a wonderful partner, and has helped me stay focused when the stress of work or unexpected expenses frustrated me along the way. She's shown enthusiasm for cutting our spending, and is focused on increasing our income as well. Thanks, baby, for all of your hard work and determination! I love you.

Monthly Summary: December 2008

December was a great month for killing the mortgage. We were able to make a very nice extra payment of $5,000. Two factors worked in our favor. First, my wife receives a paycheck every two weeks, and due to the luck of the calendar, she was paid three times in December. Second, I was fortunate enough to get an end-of-year bonus at work. I wasn't sure if bonuses would be available this year, so I was thrilled to learn that I earned one. I feel very fortunate that both of us are still employed and earning a decent income at a time when the news is filled with stories of job cuts and economic hardship.

The December payment was the 32nd of 180 scheduled payments on our 15-year mortgage, and the 12th since we set our five-year goal at this time last year.

We started December with a balance of $153,995.28. By adding $5,000 to our regular monthly payment, we reduced the principal by $5,951.49. This brought the outstanding debt to $148,043.79 at month's end.

We are $31,679 ahead of where we would be if we'd never made any extra payments against our mortgage. If we abandoned this project now, we would still be able to retire the loan two years and 11 months ahead of schedule.

We saved $132.73 in interest last month, which brings our total interest savings to $879.34 since the start of the project.

Because we exceeded the average payment from last month, the new average monthly principal amount required to pay off the debt within our goal period fell to $3,084.25.

Although I plan to expand on this in a separate entry, I'm pleased to report that the December payment allowed us to exceed our first-year goal! Hooray!

Friday, December 5, 2008

Bicycling to Work in 2008

Thanks to shortened daylight, I stopped riding my bicycle to work during the last week of October. I'm concerned for my safety riding in darkness through a couple of congested areas. It's also been getting pretty cold here in New Hampshire, and icy roads will start to make an appearance in the very near future. Since I stopped riding, I've been driving the car to work, and picking my wife up from her job on the way home from work (she gets a ride from a co-worker each morning).

I really miss pedaling home each afternoon. Instead of dealing with the afternoon traffic jam, I rode down gravel trails, through wooded areas, and on residential back roads. Instead of arriving home frustrated by the antics of other drivers, I'd feel refreshed from the exercise. The opportunity to be alone with my thoughts for about 30 minutes was a great opportunity to shift my focus away from the work day and toward my free time at home. And beer from the fridge tasted much, much better after I'd burned off some calories (and worked up a thirst for it).

I bought the bicycle in the spring of 2007 with the intention of riding to work about half of the time. This was before my wife and I had decided to wish Death to the Mortgage, so we had two cars back then. My cycling goals were to get in better shape, to spend less money (on gas and maintenance for operating the car), and to create less pollution and carbon emissions. I rode to work about two or three times a week, in good weather, and got a taste of the demands of commuting by bicycle. Unfortunately my cycling experience was cut short last year when I was injured midway through the summer. So the bicycle sat in the garage and collected dust for about seven months.

By the time 2008 rolled around, my wife and I were toying with the idea of selling one of our cars and becoming a single-car family (which we did), so I decided to commit myself to relying on the bicycle as my primary form of transportation to and from work during the warmer, brighter months of the year. I started out in late March, pedaling along in a hat, thick gloves, and boots. The hat and gloves kept my body warm; the boots protected my feet for the last 1.5 miles of the commute, where I had to walk/ride my bicycle through the melting snows of early spring (still lingering on the wooded trail). Riding a bicycle through snow is difficult. Riding one through icy slush in the shadowy woods is near impossible. But it still beats morning traffic!

I rode through the cold, the heat, and the pouring rain. I rode up steep hills and relished the cool rush from coasting down the other side. I got into the best shape I've been in since I was on the swim team in high school (and I was in great shape back then). And I enjoyed it so much that for the first time in a very long time I didn't mind getting out the door in the morning, since the fun bicycle ride was ahead of me. (If only I could have been going somewhere more interesting every day.)

Depending on the route, my work is between 7 and 10 miles from our house by car. My average bicycle ride was about 8 miles each way. My commuting time increased from about 10-20 minutes each way in the car (depending on traffic) to about 30-40 minutes each way by bicycle (depending on my energy level), although the walk through the snow added about 20 minutes to the route during late March and early April. Between March 24 and October 24, I relied on the car to get to work only about ten times (for a variety of reasons, including a snowstorm, being run down by a bad cold, and the occasional flat bicycle tire). In total, I would estimate I avoided putting about 1,800 miles on the car this year, calculated thusly:

  • Average 16 miles per day not driven to and from work
  • Average 16 days per month I would have used the car (some days would not have required the car, as I either worked remotely from home, took a bus to Boston, or was on vacation/holiday)
  • Seven month duration (March 24 through October 24)
  • 16 * 16* 7 = 1,792 miles not driven
My wife also used her bicycle to go to and from work on occasion, but certain factors (especially the absence of a shower at her work) limit her ability to ride in all weather. Still, there were a number of days during the pleasant late-spring weather where both of us pedaled to work and left the car(s) sitting idle at home.

I can see from my expense spreadsheet that we spent less on gasoline during the summer of 2008 than we did during the summer of 2007, even though the price of gasoline was considerably higher, and we drove over 3,200 miles to and from Minnesota this July.

Looking back at the goals I had in mind when I purchased the bicycle, I can gladly say that I met all three during 2008. I got in great shape, spent less on the car's operating expense (fuel), and avoided 1,800 miles of exhaust from combustion.

I'm looking forward to the return of Daylight Saving Time (March 8, 2009) so I can start preparing to ride again. I'm also looking forward to the eventual Death of the Mortgage so I can regularly ride my bicycle to places more satisfying than the office!