Happy Birthday to Me!

Normally about this time of the month I post a mortgage update giving all the details of how much progress we’ve made, how much longer we’ve got, etc.

Since it’s my birthday month, I decided to take a slightly different approach. We recently celebrated my birthday, and as a gift to our entire family, we decided to pay off the house early!

We were able to take some money from savings, rearrange some things with my first paycheck of the month that we would normally budget, and come up with a enough to knock the rest of it out!

What’s next?

I’ve posted before about FIRE (Financial Independence Retire Early). Remarkably enough, the initial plan was to go full speed ahead on saving and investing for 10 years from this birthday. I thought originally that we might start a couple of months behind, but as it turns out we’ll be starting right on time.

The plan is to switch from mortgage updates to FIRE updates. I’ll share progress as we go and the strategies that we use. The progress will likely be slow going to start and may be hampered at times by the stock market, but we’ll keep the plan in mind to not get discouraged.

We have a specific number in mind that we’d like to hit. That number doesn’t include the value of our house, car, or college savings accounts. It’s mainly composed of what we have in savings and investments. For obvious reasons, I don’t plan on sharing that final number at this time.

One common rule that I’ve seen to find your number is to take your annual spending and multiple it by 25 (up to 50). That gives you a pretty good starting point. Our final number is about 37.5 times our annual spending to give us some extra room.  Given what we have invested so far through our 15+ years of working, we’re about 20% of the way to our final number. That means we’ll save the other 80% in about two-thirds the time it took us to do the original 20%. Pretty crazy, but entirely possible.

Final notes

What do you do to celebrate your birthday? What crazy gift could you give to yourself this coming year to change you and your families future forever?

May 2018 – Mortgage Payoff Update

mortgage blackboard

At the end of May, our remaining payoff balance was at 12.78% of our original mortgage that we took out in 2007. That is a reduction of 1.57%.

How much longer until the mortgage payoff?

Once all of May’s payments were applied, we’ll have reduced our mortgage balance by about $2138 this month. That brings our balance to almost $17k. According to our schedule, we have 3 payments left. That means our mortgage will be paid off on September 1, 2018.

We’re getting really close to this series of posts being wrapped up. I’ve been searching for ways to potentially just wipe the mortgage out right away because the end is near. It’s possible, but more likely that this type of action will happen in July and not June.

Progress slowed down a bit in May because I transitioned to a new position. That means the gaps in paychecks occurred. However, June should be back on track and the side business is really picking up steam. All of this happening at once could potentially push the mortgage to be paid off by the end of July! More updates to come and you can rest assured there will be a post the day the mortgage is paid off.

Budget Series

May has been pretty busy, but I still plan on covering our “activities” budget next.

April 2018 – Mortgage Payoff Update

At the end of April, our remaining payoff balance is at 14.35% of our original mortgage that we took out in 2007. That is a reduction of 3.38%.

How much longer until the mortgage payoff?

Once all of April’s payments were applied, we’ll have reduced our mortgage balance by about $4590 this month. That brings our balance below $20k. According to our schedule, we have 4 payments left. That means our mortgage will be paid off on September 1, 2018.

The side business is starting to be a bit more consistent, which means regular extra income coming in each month for it that is helping to promote paying down the mortgage. This last month was a bit larger than usual, but I’m looking forward to other similar sized ones in the future. After the house is paid off the extra income will help to move forward other goals, such a early retirement.

Budget Series

The next category I’ll be covering is “activities”. This is different than entertainment in our budget.

220k and counting

car dashboard

No, that’s not our current net worth. That’s how many miles we have on our 2006 Toyota Prius, and we have no plans on replacing it. We could replace it if we wanted to and go buy a newer vehicle with all the bells and whistles…

…but we won’t

When you start to look at a vehicle as a tool to get you from point A to point B, you realize that any tool will do. Any car will fit the bill and any newer car we might purchase will do pretty much the same thing as our Prius.

The joy from a newer car (or new anything) will wears off in time and you’re left with the realization that the money is gone, never to come back. We’re not going to magically get better gas mileage or lower cost of ownership by buying a newer car and the fun will wear off in about 6 months or so.

 

Benefits of driving our current car

You may be thinking, “new cars have these great features that make driving so much better!” But really, driving our existing car has a ton of great “features”.

  • We’re no longer losing much, if anything, in depreciation
  • When we get a dent or scratch, we don’t fret over it
  • Newer cars have issues too, but over the course of having ours, we’ve put in a relatively small amount into repairs
  • Car payments are a thing of the past
  • Money saved from not buying a newer car is worth a lot more later
    • $10,000 invested at 10% is worth over $16,000 after 5 years! That’s an extra $6000 we can make by not buying a newer car.

But what should you do?

I’m not sure what your car situation is. Maybe you’ve got car payments or have been without car payments for a long time. We made a decision several years ago that we were never going to have car payments ever again and so far we’ve stuck to that.

The best place to start is decide what you want your future to look like and then take the necessary steps that will move you in that direction. If you want to retire early or save more money, you should ask yourself if purchasing something moves you in that direction. “Stuff” will fade away, but relationships and special experiences that create memories can last a lifetime.

Final note

If you look above, I didn’t say “new” car very often, but instead used “newer”. That’s because we plan on only purchasing used cars in the future after they’ve lost a large portion of their value in depreciation. We also purchase vehicles know for reliability which ensures they’ll be problem free well into the future.

That being said, you don’t need to be like us. Someone needs to purchase the new cars that we will buy a couple of years later at a discount on the used car lot.

March 2018 – Mortgage Payoff Update

At the end of March, our remaining payoff balance is at 17.73% of our original mortgage that we took out in 2007. That’s a reduction of 2.19%.

How much longer until the mortgage payoff?

Once all of February’s payments are applied, we’ll have reduced our mortgage balance by about $2971 this month. That brings our balance to just above $24k. According to our schedule, we have 5 payments left. That means our mortgage will be paid off on September 1, 2018.

We didn’t have anything extra of significance to throw at the mortgage this month, just some small amounts here and there.

I’ve had some projects wrap up with my side business and have gotten paid for them. That’s how we’ve been able to cut off an extra payment. In order to reach the September 1 deadline, we were going to have to use some money from savings. From this point forward, anything extra we throw at it over what is planned, will reduce what we take out of savings to achieve the September 1 goal. Once we don’t need anything from our savings, then we’ll work towards cutting off an extra payment.

Budget Series

I’ll be publishing an update on this soon!

February 2018 – Mortgage Payoff Update

shack

At the end of February, our remaining payoff balance is at 19.92% of our original mortgage that we took out in 2007. That’s a reduction of 3.46%.

How much longer until the mortgage payoff?

Once all of February’s payments are applied, we’ll have reduced our mortgage balance by about $4713 this month. That brings our balance to just above $27k. According to our schedule, we have 7 payments left. That means our mortgage will be paid off on October 1, 2018.

We made significant progress this month thanks to a small tax refund and we kept our spending in check so we were able to put the full amount we plan on each month towards it.

We’ve had a project put on hold with my business, but nothing that can’t be made up with a new project or two. Once a project or two wraps up, we should be able to cut another payment off and be done by the beginning of September.

Budget Series

I haven’t forgotten about this, but the side business has kept me pretty busy. The next category I’ll be covering in the budget series is still going to be about gifts.

January 2018 – Mortgage Payoff Update

Home Interior

At the end of January, our remaining payoff balance is at 23.39% of our original mortgage that we took out in 2007. That’s a reduction of 3.01%.

How much longer until the mortgage payoff?

Once all of January’s payments are applied, we’ll have reduced our mortgage balance by about $4086 this month. That brings our balance just below $32k. According to our schedule, we have 8 payments left. That means our mortgage will be paid off on October 1, 2018.

We’ve been plugging away pretty steadily this month at the mortgage. We were given an unexpected gift that we applied. It helped to get us back on track and give us a bit of buffer room.

Any extra money that we’re finding is going towards the debt. Now that Christmas is behind us, the number of unexpected expenses has dropped a bit and should make it easier for us to stick to the budget.

On a positive note, several things are happening with my software consulting business, Adro Solutions. As different projects are added to the pipeline, completed, invoiced and paid, we may be paying it off sometime this summer!

Also, Julie has started a new business. I’ll hopefully have more information on that soon as well! Exciting times in our house.

Budget Series

The next category I’ll be covering in the budget series is about gifts. Do we budget enough?

Photo by brad.coy

Is your bank or credit union for or against you?

Back around Christmas time I wrote a post about the holiday loan offered by our local credit union. I gave plenty of reasons at that time why you shouldn’t get one of these loans.

But then they came back to surprise me with a vacation loan advertised on their digital sign. Seriously? A loan to go on vacation? They advertise it by showing a beach and saying “it’s only a vacation loan away.” This is accompanied by a “spring into a home equity loan” ad. I’ve also seen one advertising their great rates on car loans.

You know what I haven’t seen? Anything about savings rates, investing, or getting into better financial shape. I had them advertise Financial Peace University once on their digital sign and it worked out great. That was until I got a call telling me they had to take it down because it was a conflict of interest because they wanted their members coming to them to discuss financial problems. Hmmm, maybe for consolidation loan?

All of this begs the question, is your bank or credit union for or against you? Do they have your best interest in mind when they offer you a product or service or are they just trying to maximize their shareholder value, pad their pockets, or make a quick buck?

Banks and credit unions make money when you borrow money and not so much you save it. They can be extremely giving when they’ve got incentive.

Keep this in mind the next time you’re bank or credit union has something new to offer you. Consider how they’ll end up coming out ahead in the end before accepting anything.

What crazy debt products have you seen offered? Do you have any stories about your bank or credit union where they helped you get ahead? Leave them in the comments below.

Photo by 401(K) 2013

When is it time to slow down or take a break?

If you’ve been paying off debt or on a savings spree, at some point you’ll probably get tired and just wish you were done. You will just want to take a break or slow down a bit.

But when is it okay to slow down and spend some of the money you’ve set aside?

There are a couple things to consider.

  1. If paying off debt is more important than whatever you want to spend money on, then you probably shouldn’t break your stride.
  2. If whatever you want to spend money on is important to you, then check whether it will delay your other financial goals. Are you willing to accept that delay in accomplishing your goal?

Ultimately, the choice is yours. Just remember that every time you decide to take a break or slow down you lose some momentum.

If it were me, I wouldn’t take many breaks until my consumer debt is paid off, unless it’s going to be several years before the debt is gone. In that case, I might schedule in some breaks along the way (a weekend away for the year or a night out every couple of months).

After the consumer debt is paid, then I’d slow down a bit more and schedule breaks more often. It’s easier to weigh whether a savings goal is more important than taking a break at this point.

Build in your breaks. Plan them if you can. And be honest about how taking a break or slowing down will affect your financial goals.

What are some things you want to take a break or slow down for? Let me know in the comments below.

Life without credit cards

Credit Card

Can it be done? Can someone really live without credit cards? I mean, you need one to build credit right? What about when you’re in an emergency?

Let me start by telling you that credit cards are not your friend. Even though we ALWAYS paid them off on time and never paid interest, we decided not to keep them around. When I was in high school I got a credit card with a small limit to pay for gas and other stuff. It was to “build credit”. Then before my wife and I got married, we got another credit card to earn cash back on all of our big purchases we were going to have for the wedding. I remember that we used it to buy our rings.

So in 2007, our eyes were opened and we learned that we could live life without credit cards. We decided that we were going to pay off all of our debt and there really was no reason to have the plastic there as a temptation. So we ended up calling up the credit card companies and cancelled both of the cards that we had. They really turned on the charm with the cash back card. “Why do you want to cancel when you’re making money off of us since you always pay it off on time?” The truth is, you tend to spend a bit more when you use a credit card, and we had occasionally fell into the we can pay it off with our next paycheck routine. Yeah, well what if an emergency pops up that we need to use that next paycheck for.

I guess it’s probably a good idea to dispel some of the rumors that fly around about why you NEED a credit card.

  1. It will help you build credit. Credit is only necessary if you plan on going into debt for things. You can get a mortgage without every having a credit score.
  2. What about refinancing my home to get a better rate? We refinanced our house twice since canceling both cards. I think the bank liked the fact that we had money in the bank, jobs, and no late payments on our credit report more than anything.
  3. The discounts are just too good to pass up. Seriously? I already told you that you’ll spend more on a credit card because you don’t feel it the same way when it doesn’t affect you at that moment. When the cashier checks you out next time and asks you if you’d like to save more money by signing up with a credit card, try telling them that you don’t believe in credit cards but you’d like to know if you could still get the discount anyhow. It may not always work, but their reaction is sometimes priceless.
  4. Some bills like car insurance give me a better deal because of my good credit. Hmmm, we pay about $650 a year for our car insurance for two cars. Yep, I said for the whole year. If a place you do business with does check credit to get you a better deal, chances are they are looking for late payments more than anything.
  5. Yeah, but your credit score was already high from having a credit card. True, because we did the responsible thing and always paid our bills on time. However, our credit score has dropped from being in the 700’s to being somewhere in the 600’s since we’ve closed the cards, and honestly, we don’t care.
  6. How will I pay for stuff? If you decide not to use a credit card, then you’ll know that anything you buy, you can afford. If you don’t have the money for it, you can’t buy it. It’s pretty simple. I know there are some people who are in a cycle of using credit cards and then paying them off and they may not have the money at the beginning of the month to make the transition. If that’s you, you may have to make the transition over the course of a few months. As you can, try to purchase less so you’ve got some extra cash at the end of the month and can put even less on the card the next month.
  7. What if I have an emergency? Using a credit card in an emergency is like chopping your finger off to take care of a paper cut. You solve the immediate problem and exchange it for another one later on down the road. If you didn’t have the money for the emergency in the first place, when you’re bill comes you probably won’t have the money then either. Then you’re paying interest on it for who knows how long. Getting rid of your credit cards causes two things to happen. First, you save money for emergencies. Second, if you don’t have the money, you come up with creative solutions you wouldn’t have thought of if you had the credit card as a crutch.

Let’s say that you do want to try life without credit cards, but you’re not ready to chop them up yet. I’ve got just the plan for you. Take a plastic cup, fill it with water, drop the cards in, and then put it in the freezer overnight. Your credit cards will not longer be available for easy access. When you see that “gotta have” item at the store, you’ll have to run home, and thaw the cards. Hopefully, in the time it takes for them to thaw, even under hot water, you can really think the purchase over before you buy something you don’t need or can’t afford.

Have we regretted getting rid of our credit cards? Not in the least.

Finally, I want to leave you with this classic Saturday Night Live video. It’s always been a favorite of mine.

I have to wonder how many people watched this on a TV they were making monthly payments on, while sitting on their 90 days same as cash couch.

Featured Image courtesy of sixninepixels / FreeDigitalPhotos.net