We did it! We paid off the mortgage! As of Friday, August 3, 2018 we are completely debt free. For the past 7 years we’ve been focused on paying off debt. Nearly $200,000 of debt in total.
In 2011 we were sitting in a bank lobby applying for a home equity loan because both of our bathrooms were leaking in to the basement. We had nearly $50,000 in student loan debt, a $100,000 mortgage, two car loans, and had just agreed to pay a few hundred dollars a month for a lake house that my parents purchased.
We were definitely on the hamster wheel with no slowdown in sight.
A moment of clarity came over us. We needed to make changes immediately. Thankfully, we came to this realization relatively early in our lives. I was 29 at the time and my wife a few years younger. She had gone back to school to get her teaching certificate and would be graduating soon. I was starting to work my way up the ladder at a quasi-governmental organization.
While our income has increased over the years, for most of our journey we made less than six figures combined. My wife as a public school teacher never made more than $40,000. Combined our salaries are about average for a dual income family of two college graduates. Our gross pay has been in the low six figures the last few years, but our take home pay has never exceeded six figures.
Paying Off Debt is Hard
It has been a long road to get here. Anyone who says that paying off debt is easy is lying. It’s really hard. Not because it’s complicated. Really it is the opposite. It’s so mind numbingly boring that it is difficult to remain focused. Paying off debt requires patience and discipline, both traits that humans aren’t especially good at nor find satisfying.
We lost our focus several times during our journey. In 2014 and 2015 we spent more than $30,000 on newer vehicles. First taking out new car loans, then immediately regretting the decision and paying them off with money from savings. Our journey constantly felt like two steps forward, one step back. At least we were usually moving in the right direction.
There was another time we had a rental property under contract that would have been funded by home equity. We backed out of the contract primarily because of the uncertainty of the inspection and worries around using home equity for our first rental purchase. Up until that point we weren’t planning to pay off our mortgage. That experience made us realize that buying a rental property with leverage didn’t feel like financial freedom. Especially since something going wrong could have meant losing our personal residence.
The Decision to Pay Off the Mortgage
After the rental house experience we made the personal decision in 2016 to go all-in to pay off the mortgage. There was just over $60,000 remaining on the balance after we pulled money out of savings to further pay down the mortgage.
For the next two years we put all large expenses on hold. No home improvement projects, fancy vacations, or other large purchases. Month after month about 50 percent of our take home pay went directly to the mortgage. It wasn’t easy to make that payment every month thinking of all of the other things we could have done with the money.
The Feeling of Being Debt Free
We are obviously excited about being completely debt free. I’m not sure the feeling is fully appreciated yet though. In some weird way, paying off debt has become part of our identity. We’ve made significant commitments to pay off debt during the past seven years.
With that being said, the benefits of being debt free have already been realized. After the birth of our second child earlier this year, my wife decided to step away from teaching for a few years until our daughter is old enough to go to school. If my wife continued to work we’d certainly be able to accelerate our journey to financial independence. However, that is not what this journey is all about. It’s about living an intentional life focused on our values and priorities. And our two small children are our top priority right now.
What’s Next After Paying Off the Mortgage?
So how do we plan to celebrate paying off the mortgage? First, we are planning a trip to Orlando to go to FinCon! My wife will likely join Friday or Saturday and we’ll stay in Florida for a few extra days, kid free. Our other big milestone for the year is to make some much needed home improvements. Our kitchen is especially in desperate need of updates.
Additional short-term goals include increasing our contributions to pre-tax retirement accounts and increasing our charitable contributions. I don’t think we’ll be able to max out all pre-tax retirement accounts this year, but hope to position ourselves to be able to do so next year.
Giving is something that we also value. We plan to increase giving to a few of the institutions we currently contribute to including our church, the United Way, the International Institute, the Epilepsy foundation, and the two children we sponsor in Uganda and Nicaragua. The goal is to increase our total contributions for the year to 10 percent of take home pay. Someday we hope to increase our contributions to 10 percent of gross income or even more.
Longer term the goal is to get involved in buy-and-hold real estate. I’ve long wanted to try my hand at real estate investing, but never felt comfortable going further into debt to do so. Additionally, the home we’re in now probably isn’t our forever home. Within 3 to 5 years we will likely move to a new home. Where we end up will likely be dependent on the school district my wife ends up at when she returns to work.
Retiring early has never been the goal for us. Eventually getting to financial independence is all about having options. I currently work at a job with great people, a great boss, and has interesting and challenging work. However, I’m also not naive enough to think it will always be this good. Bosses change, layoffs happen, and other factors outside of my control occur in organizations. When I entered the workforce 11 years ago I made a commitment to myself that I would never work a job I hated. Pursing financial independence is a way to ensure that never happens.
We Paid Off the Mortgage: Our Debt Free Journey
Anyway, that’s our story. I’m sure there will be future related posts with more details around “the how” of paying off debt. I’ll do my best to jazz up the immensely boring process of paying off debt for seven years. Here’s a sneak preview: avoid lifestyle inflation, automate your finances, increase income, and stay disciplined. The concepts are simple, but the doing is hard.
I’m sure a few weeks or months from now being mortgage free will hit us, and I’ll probably tweet about it or something. With all that being said, I’d like to close by saying…