Very rarely will I share some of my personal financial position on our blog, but today our family just made it over a significant hurdle. Our family is on the final stretch of paying off our home mortgage, and becoming debt free! We are now below $100k on our home loan, and on the final leg of our financial marathon.
In marathon terms, it's like we've reached mile marker 20, and we've only got 6.2 miles left. We can see the finish line, and the dream of finishing seems possible.
For me, my motivation has come from both watching my father go through financial troubles with debt, and reading Dave Ramsey's Total Money Makeover. After seeing my dad go through bankruptcy I clearly heard the Lord speak to me, and say “No one can foreclose on you, Charlie, if you owe no man nothing.” As obvious as that truth may be for most folks, we often fail to realize it when we are choosing to go into debt. Secondly, Ramsey's book gave our family the steps to put faith into action in terms of our finances. Through reading his book and listening to his radio show it's become clear that personal finances isn't about numbers, but about modification of behavior. If it was all about numbers and percentages, then all mathematicians would probably be millionaires.
So our family sits at mile 20 of our debt freedom marathon I have a vision of taking a trip. I'd someday like to take a trip with my wife and three kids to Financial Peace Plaza. Pack up our paid off van, and take a 759 mile road trip to visit Dave Ramsey. It'd be awesome to yell into a microphone with my wife and kids, and yell FREEEEEEDOOOOOOMMMMM!!! For all the pain and sacrifice our family has made collectively, then it'd be our 10 seconds to enjoy the fruits of our family's labor! Boy would that be awesome!
So along the way and going forward here are a few of the keys that have helped us get to this point, and will help us get that much closer to debt freedom.
- Put a little extra towards your principal each month – no matter if it's $5, $10, or $50 extra per month at the beginning of your mortgage, it's extremely important to start putting a little more towards your principal. The small chunks at the beginning will have the biggest impact long term.
- Refinance to a 15 year mortgage – in 2011 our family decided to refinance from a 30 year to 15 year, and knock off more thank 1% on our mortgage interest. In doing the math this would shave about 5 years off our mortgage, and save us about $40,000 in interest. While going through the refinance process I was overwhelmed with how much paperwork was involved. I thought and said to my wife, “I can understand how some people would choose not to refinance, and can become stagnent in their finances.” This big process can have huge long term positive effects on your road to debt freedom, so don't become lazy!
- Make one extra payment per year (bi-weekly payments) – it sounds simple doesn't it. If you can save up one extra payment or make bi-weekly payments, then these steps can save about 7 years off a 30 years mortgages. Again it's a small step, but will have long term effects.
- Don't pay someone else to make bi-weekly payments for you – if you are like me, then more than likely you've received on of those letters from your mortgage company offering a “Bi-weekly Mortgage Payoff Program”. For a small, $499 fee your mortgage company will automatically take 1/2 your payment out every two weeks. Don't pay someone to do this for you! Do it yourself, and either pay one extra payment per year or add an extra 1/12 to your payment each month. Also make sure you make this automatic, so that won't involve any emotion or thought, but automatic behavior modification.
- Snowball debt payments – at the beginning of our debt we had about five debts, and each one felt like a shackle. A bondage to another lender and commitment that needed to be met each month. Through reading Ramsey's book, we started by paying off the smallest debt first, and rolling those payments to the next larger debt.
So these are a few of the things we are doing to become financially free. I'd love to hear from our readers on how it feels to be debt free (be descriptive), and any other tips that may have helped you! I think that I and other readers might benefit from others stories as well and provide some motivation.