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

Tuesday, December 28, 2010

2010 in Review

2010 is growing old. Time to wrap up Year Three of the Death to the Mortgage project.

When we set our goal in December 2007 to pay off our mortgage in five years, we also implicitly set a goal to pay off at least one-fifth of the starting principal balance in each calendar year. On Dec 31, 2007, our mortgage stood at $188,983.82, which means we hoped to reduce the principal amount by at least $37,796.76 each year.

In 2010, we obliterated that number by chopping $49,937.23 off of the debt, which was more than 132% of the yearly goal. We've been able to exceed our goal in each of the first three years (see also 2008 and 2009), but 2010 has been our most successful year to date, by far.

As the principal amount dwindled, the interest we paid each month followed suit. The amount of interest in the December 2010 payment was slightly more than half the amount we paid in December 2009. Our mortgage is now caught in a debt snowball of sorts: as the interest shrinks, the amount allocated to principal reduction keeps growing.

Or course, shrinking interest payments weren't the only reason we exceeded our goal for 2010. We also benefited from other events.

  • My wife brought in extra income over the summer months doing contract work at a second job.
  • Based on her contracting experience, my wife applied for (and was hired to) a new full-time position with the company she had been working for over the past few summers. The new job came with a higher salary, which increased the amount we could allocate to mortgage prepayments in the last three months of the year.
  • There were no changes to my job status in 2010.
  • I received a modest inheritance from the sale of my grandfather's house.
Three years into this project, it mostly runs on autopilot now. I budget at least 6 months in advance, so I always have an idea of how close we are tracking to the plan. My wife and I discuss purchases in advance (no matter how insignificant), so our spending doesn't jeopardize our mortgage prepayments. What was once a change to our financial routine has now become the norm.

I feel like we have a lot of momentum going into 2011. Since we're ahead of schedule for the project as a whole, we have a buffer to insulate against unexpected major expenses or disruptions to either of our incomes. This makes us more determined to pay down the remaining debt as fast as possible, so we can wipe the obligation from our future expenses, and appreciate an added certainty in our lives.

Happy new year!

Monday, December 27, 2010

Monthly Summary: December 2010

I'm sitting inside, looking out at the tall evergreen trees swaying in the strong winds of a blizzard, feeling thankful that the power has remained on throughout this storm. We had plans to visit my family this week, but the weather has postponed our travel for now.

December was mostly a good month for us financially. Although we did have a high veterinary bill due to our dog's surgery, we were otherwise able to keep expenses at reasonable levels, even with the usual holiday gift, food, and travel costs included. On the income side of the ledger, December was one of the two months in 2010 when my wife received three biweekly paychecks (instead of the usual two). Since I only budget for two paychecks per month, this provides an extra boost to use for debt reduction. On top of that, my employer unexpectedly announced an extra year-end bonus for all employees. By shedding some employees over the past few years, the company has been able to keep margins high. This is the silver lining of layoffs from an employee's point of view -- although job cuts are stressful and disruptive, those of us fortunate to remain on the payroll are able to benefit from the improved cash flow. (This once again reinforces our motivation to pay off the mortgage as quickly as possible. We don't want the monthly debt obligation hanging over our heads if one of us loses a job on short notice.)

We sent the 22nd of 120 scheduled payments on our ten-year mortgage in December, which was the 36th payment since we began this project three years ago. That's right, three years of mortgage-killing are now in the history books.

The balance was $63,917.61 at the start of December. We were able to add $4,500 to our regular payment (thanks to the extra paycheck and the bonus). The total principal reduction brought the balance to $58,121.17.

We realized $242.16 in interest savings in December, bringing the total realized interest savings to $3,635.99 since January 2008.

The balance of our ten-year mortgage is $67,598 less than it would be if we'd never made any extra principal payments. We'll pay off the loan four years and nine months early if we stop sending prepayments at this point.

There are two years left in our five-year goal period. We have to average $2,421,72 of principal reduction each month to eliminate the mortgage by the end of 2012.

I'll write a separate entry for our 2010 progress, but I'm quite pleased that we were able to end the year on a high note by dropping the mortgage balance below the $60K mark in December.

Tuesday, November 30, 2010

Monthly Summary: November 2010

The year 2010 keeps chugging along. It seems like I just made an entry a few days ago, but a whole month has passed.

November was a solid month for us. I've updated our budget to include the pay from my wife's new job. However, I'm still not quite certain what extra amount we'll be able to allocate to the mortgage over the next few months for a few reasons:

  • My employer may offer a year-end bonus, though the size is unknown at this point.
  • We've been sending estimated tax payments to the IRS for 2011, so our tax bill may be much smaller than it has been over the past several years.
  • After unsuccessfully trying to rehab our dog for a year, we finally bit the bullet and made the decision to pay for an expensive veterinary surgery which will hopefully restore her to full health (a leg/joint injury had made it difficult for her to be fully active). This expense will require us to either (a) reduce the amount we include in future mortgage payments, or (b) pull some cash out of savings.
If things go well, we could manage to make pretty substantial dents in the mortgage this winter. But for now I'm leaving more conservative numbers in our budget.

We made the 21st of 120 scheduled payments on our ten-year mortgage in November, which was the 35th payment since we began this project at the start of 2008.

Our balance was $69,474.69 at the beginning of the month. We added $2,500 to our required payment; the aggregate amount reduced the balance to $63,917.61 at month's end.

We realized $231.72 in interest savings in November, bringing our total (realized) interest savings to date to $3,393.73.

The ten-year mortgage balance is now about $62,856 lower than it would be had we never made any additional payments. We'd pay off the debt four years and three months early if we stopped making prepayments from this point forward.

Two years and one month remain in our original five-year goal period. We must average $2,556.70 each month to kill the mortgage by December 2012.

Winter feels like it is upon us already. There was snow on the ground for Thanksgiving here in New Hampshire. I need to put the studded tires on the bicycle soon so I don't slip on any icy patches while riding to work.

Sunday, October 31, 2010

Monthly Summary: October 2010

Happy Halloween! October has treated us well. We've been spending time with family and enjoying the beautiful autumn colors here in New Hampshire.

My wife is settling into her new job. Rather than going to work in the same location every morning (as she did in her prior role), she must travel on a regular basis in this job. Fortunately, she is able to work from home on her non-travel days. Although her day-to-day duties are more variable, her income is going to be much more consistent than it was when she was doing contract work for this organization. Once she gets her first full paycheck (net of all deductions and withholding), I plan to update our budget to get a more accurate projection of our ability to attack the mortgage in the future.

We made the 20th of 120 scheduled payments on the ten-year mortgage in October. This was our 34th payment since beginning the DTM project in January 2008.

When October began, our balance was $69,474.69. Because we made such an aggressive payment in September, we were able to add only a modest amount ($500) to the principal when we sent in the mortgage check this month. When combined with our required payment, this reduced the balance to $67,699.47 at the end of October.

We realized $228.92 in interest savings this month, bringing our total realized interest savings to date to $3,162.01.

Our balance is now about $60,124 lower than it would have been if we'd never made any prepayments on the ten-year mortgage. We're still on track to pay off the debt four years and three months early even if
we stopped making extra principal contributions going forward.

There are 26 months left in our original 60-month goal period. We have to average $2,603.82 in principal reduction each month to reach this five-year goal.

Looking forward to November, I'm optimistic we can make a more substantial dent in the balance next month. Even though we have already shattered our 2010 goal, I'm looking forward to finishing the year strong.

Thursday, September 30, 2010

Monthly Summary: September 2010

September was an exciting month for my wife and me, especially within the context of paying down our mortgage.

First, my wife accepted a new job offer. She has been doing contract work over the past three summers with an organization whose mission she very much believes in. An opportunity to move from contract to full-time presented itself in September, and she jumped at the chance. It's great that she will be working in a role which she will find more challenging and fulfilling. As an added bonus, her new salary will slightly exceed her total earnings from each of the past several years (which includes her former salary plus the extra compensation she made by contracting with her new employer). This means potentially more money for us to use to pay down the mortgage and save for our future. It also means my wife can focus on a single set of professional responsibilities instead of juggling two jobs during the summer months.

Second, we received a large portion of my wife's contract pay in late August and September, which allowed us to make a significant extra payment toward the mortgage in September. After tallying up our progress, I see that we have now exceeded the goal we set for ourselves in 2010 after just nine months.

We made the 19th of 120 scheduled monthly payments on our ten-year mortgage in September, which was also the 33rd payment since we began the DTM project in January 2008.

The balance was $77,717.74 at the beginning of September. We made our highest-ever extra contribution to principal, adding $7,000 to our regular payment, which reduced the debt to $69,474.49 at month's end.

We realized $201.16 in interest savings in September for a total of $2,993.09 in realized savings since the beginning of the project.

The ten-year mortgage balance is $59,395 lower than it would have been if we had never made any extra principal payments. If we ceased prepayments at this point, we would still retire the debt four years and three months early.

Twenty-seven months are left in the five-year (sixty-month) goal period. We must average $2,573.13 in principal payments to reach the goal within the five-year window.

I expect we will make more modest progress throughout the rest of the fall season, but it feels good to already find ourselves ahead of our 2010 twelve-month goal after only nine months. Once my wife's new pay starts coming in, I'll have to re-run our future numbers so I can get a better handle on how much progress we'll be able to make by the end of this year and in 2011.

Tuesday, August 31, 2010

Monthly Summary: August 2010

At the risk of sounding like a broken record, I have to again recognize my wife's contributions to our finances this summer. She has been working almost nonstop for the past 9 weeks and has brought in a substantial amount of extra income as a result. Although it sometimes feels odd to be making additional payments on our mortgage debt when there are so many news stories about people who are losing homes to foreclosure, I counter that with the knowledge that my wife is earning every penny through a lot of stress and sweat and hard work. It is very much appreciated.

We made the 18th of 120 scheduled payments on the ten-year mortgage in August. This was our 32nd payment since the project began in 2008.

At the start of the month, our balance stood at $81,944.70. We added $3,000 to the regular payment which reduced the debt to $77,717.74 by the end of August.

We realized $188.87 interest savings this month. We've saved $2,731.93 in interest since kicking off the project.

The balance on the ten-year mortgage is now $52,194 lower than it would have been if we had not made any additional principal payments. If we stopped making extra payments at this point, we would still pay off the loan three years and nine months early.

Twenty-eight months remain in our five-year goal period. We have to average $2,775.63 in total principal payments to achieve this goal on schedule.

I'm pleased with our progress this month. I'm also looking forward to continuing the attack on the mortgage debt in September. We should hopefully have more good news to share in the coming weeks.

Thursday, August 12, 2010

Personal Finance Articles

Two articles intrigued me over the past several weeks.

The first is about choosing a modest lifestyle in exchange for more freedom from professional obligations and the associated stress, baggage, and politics that accompany a full-time job.

This article puts into words exactly what my wife and I are striving toward: the ability to reduce or eliminate our monthly obligations so that we can step back from full-time employment, and enjoy our (simple) lives together. We'll be making memories together instead of accumulating possessions (and the maintenance, upkeep, and other responsibilities that accompany them).

The second article discusses (among other things) viewing mortgage debt reduction as a type of fixed-rate investment.

My favorite part:

In the past, financial planners typically recommended that homeowners devote as little cash to real estate as possible, and to invest it in the financial markets instead. But with stocks essentially where they were 11 years ago and market volatility seemingly on the rise, people are rethinking that wisdom. Devoting extra cash to repay a mortgage early is among the safest ways to produce an investment return.
I never agreed with the advice which said that it was wiser to invest in stocks than to pay down a mortgage. This relies on an assumption that past returns in stocks over the long term (meaning the span of a human life, or longer) will continue into the foreseeable future. This to me is a risky assumption to make.

If by some series of fortunate events, you were able to invest in safe, guaranteed debt instruments (think government debt with a fixed coupon) which pay a higher rate than the rate on a fixed mortgage, then I do think it would make sense to invest in those securities instead of paying down a mortgage. But I can't think of a realistic example of how any homeowners would find themselves in that scenario. For now, the only non-retirement money we have set aside is held in cash -- all of the rest goes toward the mortgage debt.

Saturday, July 31, 2010

Monthly Summary: July 2010

This summer has been a busy time for my wife. As I mentioned in last month's progress report, she is once again away on a business trip. She's picked up a lot of extra work this summer, earning some much-appreciated additional income which we will be dropping on the mortgage over the next couple of months. I'm excited about the potential progress we can make during the remainder of this calendar year.

Something unexpected happened in July. My grandparents' house finally sold after being on the market for over a year following my grandfather's death. My dad told me that it had been Granddad's wish to leave something behind for his children and grandchildren, so my wife and I became the grateful recipients of some money. My parents advised us to "spend it mindfully". Since both of my grandparents were frugal, and Granddad in particular had an aversion to mortgage debt, my wife and I couldn't think of a better use for the money than to give our own journey to mortgage freedom an extra boost.

Granddad and Granny, I appreciate this final gift, on top a lifetime which was already full of kindness and generosity from both of you. Granny, I'm sorry you never got a chance to meet my wonderful wife; I think the two of you would have gotten along very well.


The July mortgage payment was the 17th of 120 scheduled payments on our ten-year mortgage, and the 31st since we began this project at the start of 2008.

The balance was $89,641.99 at the beginning of the month. By adding my grandparents' gift to some of our own funds, we were able to make an extra payment of $6,500, which when combined with our required payment amount reduced the balance to $81,944.70 at month's end.

We realized $163.19 interest savings in July to bring the total actual interest saved to date to $2,543.06.

Our ten-year mortgage is now $49,005 lower than it would be had we never made any extra principal payments. If we stopped making extra payments now, our work so far would allow us to pay off the mortgage three years and seven months early.

We have twenty-nine months left in the sixty-month goal period. To reach our goal, we have to average $2,825.65 in principal payments per month. We're getting excited about our ability to reduce this number even further in the near future. This project is gaining momentum in the second half.

Wednesday, June 30, 2010

Monthly Summary: June 2010 (Halfway Complete)

The year 2010 is almost halfway over -- July 2 marks the halfway point -- and summer is in full bloom. I love this time of year.

According to the calendar, June 2010 also marks the halfway point of our five-year goal period. Thirty months are in the books, and thirty months are left to go. Fortunately for us, we've made sufficient progress in the first thirty months that our mortgage balance is now less than half its amount at the end of 2007 (when we dreamed up the project). In fact, the debt is over 52 percent lower, which means we are slightly ahead of schedule overall -- especially when considering that we had to pay proportionally larger interest amounts at the beginning of the project (and our current interest rate is lower than it was in 2008).

Another way to summarize our progress to date is that our mortgage is (at least) halfway dead.

My wife is not here to celebrate this milestone with me today. She's started her summer contract work and is away on a business trip. Because we'll have her extra income during the next few months, we were able to make a large prepayment of $5,000 in June. I like seeing the big reduction in the mortgage balance this month, but because of our relatively lower principal payments earlier in 2010 (March through May), we are still slightly behind my goal pace for this year. Hopefully we can make up the difference in the second half.

We made the 16th of 120 scheduled payments on our ten-year mortgage in June, and (as I mentioned earlier) the 30th payment since beginning the DTM project two and a half years ago.

At the start of June, our balance stood at $95,185.47; by adding the $5,000 additional principal amount to our required monthly payment, we reduced the balance to $89,641.99.

We realized $143.47 interest savings in June, bringing the total realized interest savings to date to $2,379.87.

The ten-year mortgage debt is $42,342 lower than it would have been if we never made any extra payments to principal. If we quit paying additional amounts after this month, we would still pay off the mortgage three years and two months ahead of schedule.

There are thirty months remaining in our sixty-month (five-year) goal period. We must pay an average of $2,988.07 each month to eliminate the debt within this time frame. Fortunately, the principal portion of our required payment amount is around $1,200 (and steadily rising), so we "only" have to come up with around $1,800 additional each month these days -- over $500 less per month than when we began the project. However...if we can continue to find that $500 and add it to our payments, we could potentially (dare I say it?) reach our goal even ahead of the five-year deadline. It's nice to imagine that happening...we just have to keep working toward making that a reality!

Wednesday, June 23, 2010

Summer Update

Happy Summer. I didn't get laid off from work this month, though I know some people who did.

If we pay off our mortgage according to plan, we will save ourselves around $8,500 more in interest than if we just started paying off the required monthly amount going forward. More motivation for us...

More to follow at month's end when I reconcile our standing at the halfway point of this project.

Monday, May 31, 2010

Monthly Summary: May 2010

What a great Memorial Day weekend. Why can't every weekend be three days long?

I managed to ride my bicycle every work day in May (20 for 20), repeating my April accomplishment. Unfortunately I already know that the streak will end next week, as I have to work in Boston one day, which means I have to take the bus. Oh well. At least now I can take some vacation days and not feel guilty about them.

We made the 15th of 120 scheduled payments on our ten-year mortgage in May. This was the 29th payment since starting our DTM project in January 2008.

The outstanding balance was $97,890.63 at the beginning of May. We made a $1,000 prepayment to go along with our regular payment, which reduced our loan amount to $95,815.47.

We realized $138.98 interest savings in May, bringing the total realized savings to date to $2,236.50.

Our balance is $37,199 lower than it would be if we never made extra principal payments on the ten-year loan. We would still pay off the mortgage 2 years 9 months early if we had to abandon the project at this point.

Thirty-one months remain in our five-year goal period. We must average $3,090.82 principal payments per month to meet the goal. My wife's employment status is once again certain (she found out that her position is no longer on the chopping block), but there are rumors of layoffs happening at my office next week. Hopefully my name is not on the list.

Finally, a quotation from Will Rogers, which was sent to me a while ago by my dad:

"Too many people spend money they haven't earned to buy things they don't want to impress people they don't like."

Although Rogers died decades ago, his words still ring true today. Don't you agree?

Saturday, May 1, 2010

Monthly Summary: April 2010

April is gone, and I have no blog entries to show for it. I get Spring Fever around this time of year, and I don't seem to have as much tolerance for sitting in front of the computer. That is not to say that April wasn't an eventful month for us.

First, we sent a huge chunk of money to the US Treasury for tax payments. The bulk of it was settling up our 2009 taxes. Because we've had large tax bills each of the past two years, we'll be sending estimated payments in advance for 2010, in the hopes that we won't have to take such a big hit next spring. Our first 2010 estimated payment went through in April. Our total tax payments this month dwarfed the amount of money we spent on the mortgage (which is usually our largest spending category).

Second, my wife learned that her position at work is going to be phased out over the next few months. Fortunately, her manager seems to value her abilities, and has asked her about moving into a new opportunity that just opened up. Talks with HR are pending, but it appears that my wife might even be able to increase her salary if the new position works out. We're keeping our fingers crossed, hoping for good news here. (By the way, no news is good news as far as my job is concerned).

Third, for the first time ever, I managed to ride my bicycle to the office on every single work day in a month. There were 21 work days in April, and I was on the bicycle for all 21 of them. It helped that the snow and ice are behind us, but I did ride through my fair share of rainy days. Strangely, even though I feel like I'm in great physical shape, I find that I've been steadily gaining weight over the past few years. I can't tell where it's accumulating on my body, however. My wife thinks it's all going to my legs.

Because we had to set aside cash for the tax payments, we had only a token amount available for extra payment on the mortgage in April. We made the 14th of 120 scheduled payments on the ten-year mortgage, and the 28th overall since we began the DTM project in January 2008.

At the start of April, our outstanding balance was $99,639.41. We added $500 to our required monthly payment, which reduced the balance to $97,980.63.

We had realized interest savings of $136.52 in April, bringing the total savings to date to $2,097.51.

Our mortgage balance is $36,060 lower than it would have been without making any past principal prepayments. We would pay off the loan 2 years and 9 months early if we stopped making extra payments going forward.

There are 32 months left in our five-year goal period. We have to average $3,061.89 in principal payments per month to meet our goal. Since the big tax bill is in the books, we should have an opportunity to get ourselves back on track for meeting our 2010 goal. It would be much easier for us to plan for upcoming payments if my wife is able to get confirmation of her new position at work. We're hoping this process doesn't drag out any longer than it has to.

Wednesday, March 31, 2010

Monthly Summary: March 2010

Every year I have the same thought when the end of March rolls around. Although the year still seems new, a quarter of it is already in the history books. This has been an unusually warm and rainy March for New snow to speak of, but ample rain over the last two and a half weeks. Luckily, we've been spared the flooding that is affecting other communities in the region.

We made the thirteenth of 120 scheduled payments on our ten-year mortgage in March, and the 27th overall since we set our five-year goal in January 2008.

At the start of the month, our balance was $101,291.80. Because of recent expenses (home repairs and taxes), we added only $500 to our regular mortgage payment. Still, this was enough for us to reduce the principal below $100K, as the end-of-month balance now stands at $99,639.41.

We realized $134.08 interest savings in March, bringing our total savings to $1,960.99 since the beginning of the project.

The loan balance is $35,423 lower than it would be had we never made any prior prepayments. We would still pay off the loan two years and eight months early if we stopped making extra principal payments.

Thirty-three months remain in our five-year goal period. We have to average $3,019.38 in total principal payments each month to meet our goal.

Although it feels great to break below the $100,000 mark, we still have a long way to go before we are completely mortgage-free. We are going to be conservative with our prepayments for the next few months because of the expensive start to 2010, which should allow us to rebuild our savings. There is also a little bit of uncertainty in both of our jobs right now (rumors of job cuts this spring). We have no specific reason for concern over either of our positions, but it's hard to predict the whims of employers. We are fortunate to still have two steady income streams when so many are without a reliable paycheck.

Sunday, March 28, 2010

Winter Cycling

Now that spring has officially arrived, I've had a chance to reflect on my success in cycling through the winter. In 2009 I resumed commuting to work by bicycle during the last full week of March, and now that the same calendar week has passed in 2010, I can truthfully claim to have been a year-round New Hampshire cyclist.

I started riding my bicycle to work in the spring of 2007, and continued through 2008 and 2009. In previous years I always stopped cycling by the time Daylight Saving Time ended (late October or early November). I didn't have the confidence to ride in the dark, nor in cold weather. Since my wife and I share one car, we had to carpool during the October-March stretch. This was less enjoyable for both of us: my wife had to stay at work longer than she might have liked, and I had to spend more time driving in afternoon traffic to pick her up. I looked forward to the start of spring riding so we could both regain our transportation independence.

Some time during the past year I met another guy who works at my office who regularly rides his bicycle into work, winter months included. He also introduced me to another gentleman who rides to work year-round in Boston. Both of these men are in their 50s, unassuming, and not what anyone would call muscular (in fact, one of them is pretty scrawny-looking). I figured if they could ride safely during the winter, so could I (since I am of course young, incredibly fit, and nigh-invulnerable). So I solicited their recommendations on clothing, equipment, and riding techniques.

I will say that riding a bicycle during the winter requires more preparation than in the warmer months, but once I got into a routine, it didn't seem all that different from my summertime rides. In my opinion, there are four main challenges to overcome, listed more or less in order of importance:

  1. Illumination
  2. Sharing the road with winter traffic
  3. Keeping warm
  4. Keeping the bicycle maintained
I believe proper Illumination is the most important consideration when riding after DST ends. During the darkest months (November through January), it can get as dark by 4:30-5 PM as it is at midnight. I used one high-intensity LED lamp mounted to the top of my helmet as my "headlight" (with a steady white beam) which enabled me to see the road/trail ahead in total darkness. I also attached four flashing lamps on my bicycle to allow others to see me as I pedaled down the road: one flashing white LED in the front (mounted on my handlebars), one red flashing LED on the end of each handle (shining right and left so I could be seen from the sides), and one bright red flashing LED on the back of my bicycle.

I was pleased to observe that when I rode with all of my lights shining brightly, most cars seemed to give me more clearance when passing then they tend to offer when the sun is shining and I am riding without lights. Still, I found I had to adopt a few strategies during the winter while sharing the road with winter traffic in order to feel safe. First, and in my opinion most important, cars are not expecting to see a bicycle on the road in January. For this reason, I rode more slowly in the winter, double- and triple- checked before making turns or merging with traffic, and paid close attention to trouble spots (like narrow streets, hills, and spots with poor snow clearance or large snowbanks). Second, although I purchased and used studded winter tires which made me feel very confident about my ability to gain traction on snow and (especially) ice, I was not always confident that cars would be able to stop in time to avoid colliding with me in tight spots. So I made sure to yield whenever a car might have had trouble passing me, and kept off the main streets whenever possible to minimize my chances of coming into contact with heavy traffic. Even though the side streets get less attention from the snow plows, I figured I would be better off working harder to ride down snowy, empty streets than I would be fighting for space on the narrow side of a heavily-trafficked (but better-plowed) main thoroughfare. (And as a side benefit, it allowed me to avoid snow plows when on a bicycle...they are no fun to be around, whether they are in front of you dropping salt, or right behind you looking to clear the road on which you are pedaling).

Although it might seem like it would be at the top of the list in order of importance, I found that keeping warm was not as difficult as I expected. Though I'll concede that the winter of 2009-2010 was not one of the coldest I've experienced during my years in NH, I still rode on mornings when the temperatures were in the single digits F. Keeping my core warm was remarkably easy: I used a single wick-away shirt as a base layer, with a pair of thermal bib cycling tights for my torso and legs, and a lightweight barrier shell jacket (windproof/waterproof) on top. On days when the temperatures were below 30 degrees F, I used a balaclava for my head and face, so that only my eyes and nose were exposed to the elements; on "warmer" days I used a simple skull cap. Regardless of the headgear I always wore glasses (clear or tinted depending on the time of day) to cut down on the cold wind hitting the eyes. I had been given special "lobster" cycling gloves for my hands, but I found that on the coldest days, those gloves were not warm enough, and I relied on an old pair of standard ski gloves which kept my hands warm and dry. The footwear was probably the biggest challenge for me. The method which I finally adopted was to tuck a thick wool sock into my high-top Gore-Tex backpacking boots. The boots were heavy, and probably to the disappointment of the cycling purists, there was no way to attach them to the pedals, but they kept my feet warm, which was my top priority. With this set of clothing, I never found myself too cold to ride, and by the time I reached my destination I would often be on the verge of overheating, even on the coldest days.

Keeping the bicycle maintained in the winter is definitely a challenge. The roads get covered with sand and salt, which when mixed with snow and ice makes for a nice corrosive coating on the chain, gears, and brakes. On top of this, it's not really feasible to hose down the bicycle when it's 17 degrees outside and sleeting. So some sacrifices have to be made. I bought a heavy-duty lube which I would never use for summer riding (as it would attract far too much road gunk) and liberally soaked the chain and other moving parts with it. It kept things in decent working order. I took old t-shirts and wiped down the frame and other parts when they got especially wet and grimy. I also used a stiff-bristle brush (made for cleaning tile grout) to scrub off the chain and gears. On a couple of fortunate weekends (when the temperatures had risen to the high 30s during a thaw) I did take out the hose and sprayed down the bicycle, though this was more an exception than the norm. And I counted on the fact that I would need to replace the cassette and the chain after the winter ended, since the sand/salt mixture put far more wear on those parts than they are subject to during the rest of the year.

My wife also started riding her bicycle to work during the winter. She has to be more selective about the days she rides (since she does not have a place to shower at work) and therefore she stuck to the dry, clear days when she would not get soaked with precipitation or road spray. She adopted similar dressing and riding strategies as I did, though she did not opt to buy the studded snow tires this year (I think I'll encourage her to do this next winter).

Of course, there were some days when the snow was falling too fast or accumulating too quickly for me to feel safe on the bicycle, but fortunately they were not too common. For example, the month of January had 19 working days; I rode my bicycle on 14 of those. As a reward, I find myself in the best shape at the start of the spring season as I can remember for many, many years. And the sense of accomplishment is carrying over into other aspects of my life, giving me confidence to keep trying new things which had previously seemed daunting (like home repairs).

Sunday, March 7, 2010

Cost vs. Value

Whenever the wife and I go shopping, we make sure that the products we buy are giving us the best value. This may mean buying a higher-priced item if the cost per unit is lower (assuming the product's performance is similar).

For this reason, I've been irritated by a recent change in an essential item which has significantly reduced its value. Many brands of toilet paper are now up to a half inch more narrow than they used to be. Sheet count is also being reduced, and in some cases the cardboard support in the middle of the roll is getting larger (giving the perception of an identical roll size, only with less usable product).

I emailed one of the offenders (the makers of Quilted Northern) and received the following response.

Thank you for contacting the Georgia-Pacific Consumer Response Center. Georgia-Pacific places tremendous importance on the opinions we receive from our customers. We understand you may have some concerns about the roll width and/or sheet count of Quilted Northern Soft & Strong. As noted at the bottom of the package, Quilted Northern Soft & Strong is about 1/2 inch narrower than before, and we have slightly reduced the sheet count.

Because of today's economy, cost is a factor. We made the decision to slightly reduce the roll to bring you the bathroom tissue you trust and not raise our price to retailers. Quilted Northern Soft & Strong continues to provide the cleanliness and comfort you have come to expect, making it a great value in today's economy. As always, Quilted Northern Soft & Strong is thick, absorbent, and gentle on your skin. The bathroom tissue features strength and durability for cleanliness, with softness and thickness for comfort. With Quilted Northern Soft & Strong, you do not have to compromise comfort for clean.

In fact, we've heard from many of our most loyal customers about how important the quality of our bathroom tissue is to them. For more than 100 years, consumers have trusted Quilted Northern Soft and Strong to deliver what they want most in a bathroom tissue: cleanliness and comfort. We would never make this change if our core consumers didn't approve of the product.
Apparently Georgia-Pacific thinks it makes sense to decrease the quality of their product as long as they can keep costs the same. I'm guessing they are also hope that a significant percent of their customers don't notice the change. Companies seem more than happy to write phrases in big bold lettering like, "NOW, 20% MORE FREE!!!" -- but when product size decreases, they pretend that nothing has changed. They prioritize cost over value.

This is certainly not the first time a company has surreptitiously reduced the size of a product in order to cover their increased costs, and it unfortunately won't be the last time. Although it's disappointing to buy a smaller box of cereal, the product inside the box doesn't conform to a standard. Toilet paper, however, is meant to hang from a roll of a specific size, and fit comfortably in the human hand. To me, reducing the width of toilet paper rolls is almost as inconvenient as it would be if paper companies started selling writing/printing paper in sheets a half inch more narrow than before -- when so many devices (printers, photocopiers, notebooks, and so on) are designed for a standard paper width.

Sadly, even though it's still possible to find a few brands which offer the older (wider) rolls, I think it's only a matter of time before the remainder follow suit. Which means that we, as consumers, will have no say in the matter, unless we want to all suddenly convert to using bidets or leaves or making our own toilet paper. I'll of course continue to look for the wider rolls as long as they last, which means I'll be avoiding the inferior Quilted Northern from now on. My wife and I still prioritize value over cost. Unfortunately, TP manufacturers seem to think we are in the minority on this issue.

This line of thinking is part of what motivates us to pay down the mortgage sooner. By increasing the monthly cost of our mortgage payments in the short term, we're increasing the value of our money in the long term, by paying less interest to the lender.

If you want to read more about
the smaller (and skinnier) TP roll trend, below are links to two articles from a blog called "toiletpaperworld" (I am not making this up) with details.

Sunday, February 28, 2010

Monthly Summary: February 2010

February turned out to be an expensive month for us. In addition to learning that our tax bill would be even larger than anticipated, we paid a plumbing company to replace our failed water heater, and have to start thinking about repairing the water damage to our basement. I am glad we never stopped putting money away for emergencies during the Death to the Mortgage project. We'll be able to tap some of our savings to help with the taxes and repairs while staying on track for our DTM goal.

In February we made the twelfth of 120 scheduled payments on our ten-year mortgage, and the 26th overall since we started the five-year DTM project in January 2008.

When February arrived, our loan balance was $104,432.09. We included a $2,000 prepayment along with our required payment, reducing the debt to $101,291.80 by month's end.

Our prior efforts saved us $125.89 interest this month, and $1,826.91 in realized interest savings to date.

The balance is $34,789 lower than what it would be if we'd never made any extra payments on the ten-year mortgage. If we had to abandon the project after this month, we'd still pay off the note two years and eight months early.

We have 34 months left in the five-year (60-month) goal period we set for ourselves. The average total principal we must pay each month to reach this goal dropped to $2,979.17.

We reached a couple of milestones in February. First, we've now paid down over 50% of the original mortgage balance (which began at $204,000 in 2006). Being more than halfway through the debt is a good feeling.

Second, I believe we reached the break-even point on refinancing the mortgage in February 2009. It took exactly one year (twelve months) for the interest savings to offset the costs (fees, etc) involved in the refinance transaction. I calculated this by comparing the amount we actually paid on the newer ten-year loan against the amount I believe we would have paid if we'd kept the old 15-year mortgage. I reduced the hypothetical payment on the old loan by the difference in required monthly payment amounts (about $175 less now than before). Going forward, the reduced interest charges represent pure savings to our bottom line.

One odd fact to note...if we had not paid down the mortgage so aggressively over the past year, we would have reached the refinance break-even point sooner than we did -- because there would have been a higher principal balance each month to generate interest charges (and the reduced interest charges with the new mortgage would have been more substantial). Of course, by paying down the balance, we're also saving ourselves interest charges, so I'm not disappointed by this at all.

I'm looking forward to the return of daylight saving time in will be nice to be able to ride my bicycle to and from work without my headlight and taillights!

Wednesday, February 17, 2010

Hot Water

I woke up this morning and went downstairs to the basement to get some clothing from the laundry room. I noticed it was warmer than normal, and humid. After walking to the other end of the basement, I found our hot water heater had completely failed sometime during the night, pouring its contents out all over our (carpeted) basement floor.

I spent most of the day hauling stuff out of the affected area. The room where the water heater lives is also where we keep things we don't use on a regular basis: seasonal decorations, old books, mementos, extra lamps and fans, exercise equipment, and boxes and bins full of random life accumulations. My wife came home from work and together we quickly sorted items into "piles" in the garage: things to keep, things to donate or sell, things to recycle or throw away. A few items had to be trashed, because they had soaked up too much water. But fortunately, we discovered the flood before there was excessive damage, and a lot of our items (especially the decorations) were protected from the standing water because they were stored in waterproof plastic bins.

Although I'm not happy about the circumstances, I am glad for the opportunity for us to get rid of things we were holding on to for no good reason. There's nothing like a frustrating morning of hauling boxes out of the basement to make you think to yourself, "Why do we even have this?" I realized that I had lost the emotional connections to a lot of things which I had packed away earlier in life.

I was surprised to learn that our home insurance policy covers clean-up and repair of the water damage to the house, but not replacement of the water heater itself. So unfortunately, we have to dip into our emergency savings to replace it. We are going with at tankless "on demand" model with automatic shut-off (to prevent flooding). It costs more than a tank model, but it is supposed to last about twice as long, and may help us use less natural gas fuel over time.

Since we bought our house four years ago, we've had our fair share of plumbing mishaps, including upstairs toilets and shower drains leaking through the ceiling onto the main floor. I am wondering if we should proactively inspect and replace the other fixtures to ensure that we don't have to discover any more unexpected water damage. I had hoped to replace the water heater after the mortgage project was complete, but obviously that didn't happen. Seems like plumbing repairs are always more of a hassle and expense when we haven't planned for them.

Sunday, February 7, 2010

Taxes and Interest

I completed our 2009 tax returns this weekend. Happily, almost exclusively due to my wife's hard work, our income was almost eleven percent higher in 2009 than it was the year before. And because of our focus on killing the mortgage, we paid about 37% less in mortgage interest in 2009 than in 2008.

It would be easy for me to say something like, "Unfortunately, because our income rose and our deductions fell, we owed more in taxes in 2009 than we did in 2008." This is true, but not unfortunate. We did lose enough of the mortgage interest deduction in 2009 that it was no longer advantageous to itemize our deductions (the standard deduction was higher). But overall, we reduced our expenses. I think it's important to consider the relationship between expenses and deductions on taxable income. Here's an explanation.

Our two largest deductable expenses over the past few years have been our mortgage interest payments and our state and local property taxes. These are out-of-pocket expenses which we pay in installments, but which cumulatively reduce the amount of money we have left to spend on everything else. The other expense which significantly reduces our income is our total US Income Tax due each year. This is roughly calculated by taking our income less any deductions and multiplying by a percentage (which gets progressively higher as each tier of our income exceeds certain thresholds). It's also paid in installments, in the form of withholding from our paychecks (and a lump sum due April 15 if our withholding was not sufficient). I've tried to express the total impact of these three expenses on our finances for 2008 and 2009 in the statements below, along with a few other bits of info, in an attempt to evaluate our progress last year.

  • Income: 2009 > 2008 (increase of 11%)
  • Mortgage Interest Payments (MI): 2009 < 2008 (decrease of 37%)
  • Property Taxes (PT): 2009 > 2008 (slight increase)
  • US Income Tax (UST): 2009 > 2008 (increase of 18%)
  • Total Interest and Tax Expense (MI + PT + UST): 2009 < 2008 (slight decrease)
I think the first and last points above are key. Our income was higher in 2009, but our total interest and tax expense was lower. I personally don't really care whether we're paying more (or less) money to our lender or to our government from one year to the next, as long as the total amount of money we part with continues to trend down.

This is more evidence to confirm my suspicion that the mortgage interest tax deduction is not the great benefit that some claim it to be. Hypothetically, it makes sense to me that it's not advantageous to pay interest on a debt so as to save 25 (or 28 or 33) percent on taxes. And after running the numbers in a real-life scenario, I can see that my assumption holds true. Our efforts to pay off our debt reduced our total interest and taxes in 2009. Projecting this into the future, I look forward to the year in which we pay zero mortgage interest -- not because I want to pay more taxes, but because I want to reduce our total expenditures as much as possible.

Wednesday, February 3, 2010

Credit Card Strategery

My wife and I recently received a credit card "reward" payment, which is something of a regular occurrence for us. I've been receiving them for years, but for whatever reason I had never thought to keep track of them until the most recent one appeared in our savings account.

If you've ever read any news articles about credit card companies, you may have heard that they use endearing terms like "deadbeats" or "freeloaders" to describe customers who make purchases on credit each month, but who pay off the balance in full by the due date (thus avoiding any interest charges). I hope we always fall into this category, since I'm not a fan of paying interest to anybody. We're using our credit cards as if they were charge cards, which no longer seem to be in fashion here in the US (but may still be elsewhere).

We keep three active credit card accounts. One is our primary card, which offers "rewards" of 2% on every purchase. Our backup card offers 1% back, but occasionally offers special rebates of 3-5%. We also have a Discover card, which ordinarily pays a very paltry "cash back" rate, but which features a 5% "reward" on a certain category of spending (like gasoline or groceries) which changes every few months.

Over the past year, we've received $600 in rebates from the credit cards we use. We just dump this money into our savings account, so I was able to sort through our transaction history online and find each of the credits, typically appearing in amounts of $50 or $100. Assuming a 2% rebate rate, that means we spent at least $30,000 on our credit cards over the last twelve months. And I'm happy to say that we didn't pay interest on a dime of it.

It seems like personal finance bloggers fall into one of two camps when it comes to credit cards. One group avoids them at all cost, citing the tendency to overspend and lose track of purchases. The other group (which includes the wife and me) embraces the "charge card" method of using credit cards for most purchases, which allows the convenience of cashless transactions, consolidated spending reports, and the rebates that come along with most cards held by responsible spenders.

I used to think that by using our credit cards this way, we were getting an "automatic two percent discount" on everything we buy. I've come to the realization that we're probably doing something more like paying the true cost of things. Since credit cards assess merchants a fee for each transaction, which apparently can range from two to four percent of the charge, merchants typically respond by raising their prices by the same amount, and passing along the expense to their customers (usually regardless of whether the customer uses cash, check, debit, or credit). Some frugal shoppers try to avoid this by negotiating discounts for cash transactions. We just try to use the card which will offer us the largest rebate on each purchase.

We have debit cards which we could use in a similar fashion, but in my opinion debit cards fall short of credit cards in a few areas. First, the money is withdrawn from the associated checking account immediately. This means that if there are any mistakes, the account is more likely to be overdrawn. And I'm sure our bank would be more than happy to charge us one (or more) "overdraft protection" fees if there was any sort of mix-up. Some merchants (like gas stations and restaurants) will reserve more than the purchase price as a "temporary authorization" which could also lock up our checking account if we paid with the debit card more often. For example, my wife bought gasoline from a station which charged a $250 preauthorization last week (the actual amount of gas she purchased was about $20). Since we used a credit card, it didn't cause us any issues -- as we never come close to reaching our credit limit, this was not a problem.

Other reasons I prefer using credit cards over debit cards, in no particular order:

  • Our checking account history shows only one payment to each credit card every month, along with our other bill payments. This makes it easier to reconcile spending when there aren't a bunch of little expenses on the statement.
  • Though "reward" debit cards exist, I haven't found one which rebates as much as the typical "reward" credit card.
  • I can budget for an expense without having to have the cash for it right away. Since the two of us get paid in regular intervals, it makes sense to have our expenses debited at regular intervals as well. I know when credit card bills come due, and I can plan to have cash allocated to cover that bill as needed. With debit purchases, I think we might modify our behavior to purchase items at only certain times of the month. This seems like an unnecessary inconvenience to me.
  • We can pay for occasional business expenses (for which we eventually get reimbursed) without having to immediately allocate some of our own money to cover the debit. And, as a bonus, we get the rebate for those purchases as well.
Having said all of this, I still keep a close eye on our credit card spending, typically logging into our account four or five times a week to make sure our spending is in line with our expectations. I also make sure to read everything that the credit cards send to me so that I'm not caught by any surprise changes in terms. For example, if one of our cards ever started to charge an annual fee, or removed the grace period for purchases, I would immediately pay it off and cancel the account. I'm not about to give the credit cards any extra money in fees or interest. If the credit issuers ever decided to change terms at an industry-wide level, we'd ditch our credit cards and use another spending strategy. But until that happens, we're satisfied with being a couple of "deadbeats".

Saturday, January 30, 2010

Monthly Summary: January 2010

Even though the coldest days of the year are upon us, the sun sets later and later with each passing day. Today is cold but wonderfully clear. The front door is open and sunshine is streaming through the glass, making the dogs happy as they soak up the warmth.

In January we made the eleventh of 120 scheduled payments on the ten-year loan, and the 25th overall since we started the five-year DTM project.

At the start of 2010, our mortgage balance stood at $108,058.40. We added $2,500 to our regular monthly payment, which reduced the outstanding balance to $104,432.09 at the end of January.

Our prepayments saved us $115.80 interest in January, bringing the total realized interest savings to date to $1,701.02.

The balance is $32,663 lower than what it would be had we never made any prepayments on the ten-year loan. If we stopped making prepayments after this month, we'd still pay off the mortgage two and a half years early.

Thirty-five months remain in our five-year (60-month) goal period. The average monthly principal payment needed to meet our goal dropped this month to $2,983.77. Since the principal portion of our required monthly payment has risen above $1,100, this means we only need to come up with an extra $1,800 a month to stay on track. (I say "only" not because $1,800 is an insignificant sum, but because we had to add almost $2,400 extra each month when we started the project.)

Saturday, January 23, 2010

Progress List, Explained

Some of the items listed in the "Progress to Date" section at the top of this blog may not be as self-explanatory as I had hoped. Here are definitions of the terms.

Original Loan Amount: This was the amount we financed when purchasing our home, not the amount we paid for it (we made a down payment, and also had a HELOC to bring us up to 20% equity to avoid paying PMI). This number ($204,000) obviously never changes.

Balance at Beginning of 5-year goal (1/1/08): This was the outstanding loan balance when we decided to start aggressively paying down the mortgage. The difference between the original loan amount and this amount ($188,983.82) came mainly from the portion of our regular monthly payments which was applied to the principal. Looking back, this amount seems paltry, since we only paid down the balance by $15,000 (even though we'd made over a year and a half of payments). This number is our goal starting point. This balance was covered by our first mortgage, which had a coupon of 6.0%.

Balance at Refinance in February 2009: We decided to refinance to cut our rate from 6.0% down to 4.625%, and reduced the term to ten years. The newer mortgage had an initial balance of $148,000.00.

Outstanding Balance: This is the amount we currently owe, as of the most recent mortgage payment. It changes (hopefully by growing smaller) from one month to the next.

Latest Payment Date: This is the last month we sent a mortgage payment (including any prepayments).

Latest Additional Principal Amount: This shows any amount contributed to the principal balance above and beyond our standard mortgage payment. It is my hope that this number is always at least $500.

Amount Ahead of Schedule (since refinance): This figure may not make much sense. I start with a standard amortization schedule for our ten-year loan, which excludes any prepayments. I then compare our current Outstanding Balance against the balance from the standard amortization schedule. This number represents the difference between the balance we have now, and the balance we would have had if we'd never paid anything above and beyond our required monthly payments. It's a combination of the extra principal we've paid out of pocket, along with our realized interest savings. Since I've used our refinance amount ($148,000) as the starting point for comparison, this number doesn't capture our total progress since January 2008.

Time Ahead of Schedule (since refinance): Again, I get this by comparing our current loan to the standard amortization schedule. Since we've made prepayments, our loan will be paid off ahead of the normal ten-year completion date. This shows how far ahead of ten years the mortgage will be dead.

Interest Saved Last Month: This is yet another number which I calculate by comparing our current progress against a standard ten-year amortization schedule. This shows the difference in what we paid for interest last month compared with what we would have owed in interest if we'd not made any prior principal reduction payments.

Total Interest Saved: This is the running total of the realized interest saved for each month going back to the beginning of our 5-year goal period. This is only realized interest, as there is a larger amount of unrealized interest savings compounding in the future. When we finally pay off the mortgage, we'll realize the rest of the savings.

Months Remaining in 5-year Goal: Counts down backwards from 60. One more month is deducted after we make each payment.

Average Monthly Principal Needed to Meet Goal: This is a simple calculation of the outstanding balance divided by the months remaining. This figure is the total principal needed, not just the extra amount we must add on top of our regular payment.

Tuesday, January 5, 2010

Don't Get Ripped Off

Nobody wants to be taken advantage of, or tricked, or ripped off, right?

And when I write "nobody" I assume this includes executives and board members of companies large and small, right?

So why do corporate policymakers insist on subjecting their own customers to the very same doublespeak, dishonest practices, and confusing terms that they themselves would want to avoid?

This article is the inspiration for today's post. It is intended for a US audience, but I assume similar tactics are used by companies throughout the capitalist world.

Our strategies:
1. Use a credit card for everyday spending, but keep tabs on it daily and consider the money spent as soon as we use the card. Pay the balance in full, on time (early) each month.

2. Don't use a debit card. Keep a healthy buffer in our checking account (several hundred dollars), and watch it like a hawk to ensure balances and transactions are in line with our expectations.

3. Read every piece of legalese that we receive in the mail from banks, credit issuers, investment companies, and so on. Read them until I understand them. Call customer service if something doesn't make sense. Modify our behavior if needed to avoid new fees, etc, and look for a new service provider if changes in terms are not in our favor.

4. Have a minimalist cell phone. Don't use features like text messaging or web browsing. Get the cheapest plan the company offers and the free phone that comes with it. Read bills carefully each month to ensure nothing odd shows up. Ignore the latest technology and take advantage of the new features when they are several years old (and therefore cheap or free). Keep bills as low as possible (currently we spend around $30-$40 per month, which is still painful for me).

5. Save up cash to buy a car. And buy cheap used cars. And ride a bicycle as much as possible (even in January).

Sunday, January 3, 2010

2009 in Review

Year Two is now in the books! Three years left to go.

First, the numbers. As in Year One, our goal for 2009 was to reduce the mortgage balance by one-fifth the amount of our balance at the start of the project. This nice, round number is $37,796.76 (one-fifth of $188,983.82). We managed to pay down the principal by a total of $39,985.39 in 2009, meaning we achieved over 105% of our goal for the year. Hooray!

  • $29,500 of the debt reduction in 2009 came from our own pockets as extra payments to principal. This averages around $2,460 per month. We actually had a wide variety of prepayment amounts during the year. Our lowest of $500 happened twice, and our highest of $6,500 also occurred twice. We went one month without making any payment at all (February, since we refinanced our mortgage during that month).
  • The principal portion of our "regular" monthly payments (not counting prepayments) continued to rise as the interest portion fell along with the outstanding balance. The principal portion rose from around $970 to over $1100 by year end. This number will continue to grow in Year Three and will be a more formidable part of our debt reduction as the number of months left in our goal period continues to shrink.
My wife and I were evaluating our "DTM" progress during our time spent traveling together over the recent holidays. Contrasting the first year (2008) to the second year (2009), we noted some shifts in our own attitudes. In the first year, the project was new, and we made some substantial changes to our routines to cut expenses and free up cash for extra mortgage payments. We were enthusiastic about the project, but weren't completely confident we'd be able to stick to the new routine after the first few months. It was a pleasant surprise to finish 2008 ahead of our goal.

By the time the second year was underway, our routine had changed. We'd adopted the habits associated with less spending and more debt reduction. In 2009 we knew what we were capable of; we just had to remain committed to our plan. Reaching our goal for the year was no longer a hopeful aspiration, but an expected outcome. In fact, despite our success in 2009, I think we may have been able to push ourselves even further than we did. Perhaps that's something to focus on for Year Three.

If anything looks to be different in the coming year, we believe it will be the uncertainty of our existing sources of income. Neither of us has any specific reason to fear we will lose our current jobs, but general employment has obviously continued to sour over the past couple of years. My wife has also enjoyed extra income from a second job during the past two summers; there is no guarantee how much contract work will be available for her to take on in 2010. While it would be unfortunate to fall behind on this project due to forces outside of our control (the whims of our employers), it's nice to know that our current practice of living well below our means (along with our emergency savings) would allow us flexibility if one of us did have to spend some time unemployed. I'll knock on wood and hope that nothing like that happens, but mentally it helps to be prepared for the worst when uncertainty is looming.

I'll close by repeating something I've said in the past, which is that our success in this project so far has come primarily from the great partnership my wife and I share. When one of us temporarily loses motivation, the other one helps keep the focus on the goal. When one of us gets frustrated with work, the other one reminds us why we're putting up with the aggravation. And both of us keep adding detail to our envisioned future life after we've put the mortgage debt behind us. Two years down; three to go. It's not that far off.

Monthly Summary: December 2009

Happy 2010! This update is a few days late since my wife and I have been away visiting family during the holidays (and therefore I didn't have all of the detailed information I needed to make this entry).

I am going to make a separate entry summarizing our 2009 accomplishments, so this post will focus only on December.

We made our tenth of 120 scheduled payments on our ten-year loan in December, and our 24th overall since we started working on our five-year goal.

Our balance was $112,168.87 at the beginning of December. My wife is paid bi-weekly, so twice a year she gets three paychecks a month instead of the usual two. December was one of those happy three-paycheck months. This means we were able to add $3,000 to our our regular mortgage payment, which when combined with our regular payment reduced the outstanding balance to $108,058.40 to finish off 2009.

Our prior prepayments saved us $103.84 interest in December, bringing the total realized interest savings to date to $1,585.22.

Our balance is $30,047 less now than it would have been if we had never made any prepayments on our ten-year mortgage. If we ceased all prepayments from this point forward, we'd still pay off the loan two years and four months early.

There are now three years (36 months) remaining in our five-year (60-month) goal period. If we average $3,001.62 in principal payments every month, we'll meet our goal on schedule.

Here's looking forward to continued success in 2010!