When I visited my dad in Tarpon Springs, Fla., last year, he and I met up with a reader named Cheryl. The three of us sat in a Dunkin Donuts talking about life and money. One of the things she mentioned was a rapid mortgage paydown.
Recently she wrote to say she is now completely debt-free, 14 years ahead of schedule.
Cheryl also included a letter she wrote to her niece, a mid-20s newlywed who’s trying to vanquish student loans. While I’m loath to throw around the word “inspirational,” this note fits the bill. That’s why I’m excerpting it:
“When I closed on my house (the) realtor encouraged me that if I applied just $100 towards principal each month, I’d pay off my loan in half the time. (She) may as well have said $1000 – because I didn’t have a hundred to squeeze out of my budget!
“But I always paid more than the minimum and applied the extra towards principal. Even if it was only rounding up to the next dollar. I refinanced to a 15-year loan and dropped my interest to 4 percent, which also lowered my payment – but I kept my payments the same as they were before the re-fi.
“I enrolled in bi-weekly mortgage so that an additional payment was applied to principal each year. Over the past few years I doubled up my payments – because I had the means to do so – and suddenly, that (balance) really started dropping.”
“You have to want it more”
Cheryl lived a frugal lifestyle:
“I scrimped, and I saved. I pinched pennies and applied them towards the principal of my loan.”
That lifestyle even included one of my longstanding hacks: picking up money, which contributed anywhere from $25 to $50 annually to the paydown effort. Bit by bit, it added up to something that she “dreamt about for years” and that is now reality.
Cheryl hopes this example will help her niece focus on her own financial goals:
“Whether it’s running a half-marathon or paying off a marathon of debt – you can do anything you set your mind to. All you need is patience, self-control and determination.
“You have to want it more than a new iPad, a shinier car or that Coach purse that everyone else has.”
Could I get a big ol’ woo hoo! here, everybody?
Mortgage gone = new life
If some of you think Cheryl’s name and story sounds familiar, maybe it’s because you saw her comment on my “Six good things” post. One of the blessings she noted was “I paid my mortgage off last month – 14 years earlier than the bank said I had to!”
Seeing that reminded me that I’d meant to write this post. But I’m glad I waited, because now the piece can include some of her other good things:
“I got a new (to me) car and because my financial house is in order and my credit is good I was able to donate my old car to someone in need of dependable transportation.”
“We’re only two months into the new year and I’ve already been able to give back more to my favorite organizations in need.”
Cheryl decided to honor her hard work and good fortune by channeling some of her newfound solvency into helping others. I’m impressed.
Yet she’s also putting on her own oxygen mask, as evidenced by a third good thing:
“Because my mortgage is now paid, I am able to use those monies to max an IRA.”
Smart, smart, smart.
More excellent advice
I’m writing this not just to honor Cheryl’s financial acumen (which is considerable), but to present an object lesson on setting financial goals. She wanted to pay her place off early, so she took careful steps to do so:
- Paying extra each month (even if could afford only a little)
- Trimming the budget in order to pay more
- Refinancing the mortgage
- Signing up for biweekly payments
Incidentally, Cheryl is single – that is, there’s no second income to pay off the house and balance the budget.
Cheryl lived lean to realize her dream. Now she’s reaping the reward of being able to save for the future and help others in the present. I think hers is an example worth touting.
The final good thing on her list was also worth highlighting:
“I’m surrounded by friends who support my thrifty ways.”
Essential! If you’re surrounded by people who second-guess (or even deride) your money habits, you may start to question your own goals. At the very least you’ll be in the position of defending your decisions, and that gets old fast.
So find your frugal tribe, be it in real life or on the pages of a blog like this one. You have nothing to lose but aggravation. Bonus: You get to read about people like Cheryl.
Related reading:
- Can’t get ahead? Try a “savings challenge”
- Why aren’t more people frugal?
- Living the “pre-solvent” life
It is a very comfortable feeling having the mortgage gone. We did it so we did not have to work after retirement. I AM still working PT, but don’t need to. The only downside is that a lot of our net worth (800K) is in the house and if something happens to it and insurance stiffs us, we are taking a big hit. If you have a large mortgage you can just walk away from a disaster.
Awww, thank you Donna! That brought a tear to my eye! It’s reading inspiring blogs like yours that helped me along the way of my debt free journey –
I have the “Loan Payoff” letter from the bank hanging on my refrigerator — makes me smile with pride every time I see it!
Susan’s comment touches on exactly what I was thinking. I understand the desire to kill all the debt, but one really should make an effort to understand what they’re potentially giving up before they make the choice to prepay a low-interest, fixed rate, affordable mortgage at the expense of tax-deferred saving and investing.
Filled your 401k to at least the match, or better still the annual maximum? Funded your Roth every year? No? Don’t even think about prepaying the mortgage! Same if you have CC balances, SL’s, or a car loan.
The earlier one saves and invests, the fewer actual dollars they need to save, due to the magic of compound interest. Plus, it’s likely that Cheryl’s rates are unlikely to be repeated in the next decade or more. Too bad, she could have hung on to those low rates for the full thirty years, and had plenty of bragging rights in addition to plenty of additional cash.
The other thing is that inflation is the fixed-rate mortgage holder’s friend. When inflation goes up and erodes your purchasing power, the net cost of your fixed rate mortgage keeps going down. If you wait to start saving for retirement until you “kill” your loan, you’ll never catch up.
A house will always require money to pay taxes, insurance, utilities and maintenance. Better not to have to worry about a hole in your roof and no money to fix it in your old age.
If Cheryl had paid off all other debt, fully funded her retirement accounts, her Roth, and then invested all extra cash until she had enough money to pay off her mortgage in one fell swoop, I would gladly be the leader of the ticker tape parade in her honor.
Wouldn’t it be awesome if help could help each other out by teaching/sharing the most efficient ways to reach Financial Independence?
I’d like to note that I have no other debt – my mortgage was the last to go, and a small fraction of my net worth.
I do fully fund my 401k, have a healthy emergency fund and am now maxing an IRA as well.
And the object lessons just keep on comin’….!
As she notes in another comment, Cheryl has fully funded her 401(k) at work and has an additional IRA. Now the money that would have gone toward her mortgage is going into that extra IRA.
It’s my hope that we can help one another out by teaching and sharing — in the comments section of these blog posts.
Incidentally: If anyone has topics to suggest, feel free to e-mail me at SurvivingAndThriving (at) live (dot) com. Can’t promise I’ll do every single one, but I’m always interested in new ideas.
Debt, at any interest rate including 0%, brings risk along with it to the indebted person’s finances: risk of foreclosure, risk of bankruptcy, risk of having to take a job you don’t like in order to make the loan payments each month, etc. I’d much rather be debt free than indentured. Earning interest (and compound interest too) on my money is much better than paying interest.
Hear, hear.
P.S. to Cheryl – Make no mistake, you are to be congratulated on paying off your house! However, the very first comment illustrates the possible pitfalls of doing so too early. I don’t know all of your story, so I’m really hoping that you’ve been taking care of filling up all the other buckets available to you as well. Here’s to your success!
We paid off our mortgage 2 years ago. The freedom we had led me to take a risk and accept a job transfer across the country.
We sold our old home quickly and purchased another home for cash!
We love our new life and freedom from debt!
I was not surrounded by friends who supported my thrifty ways. Newly made friends fell away because I did not participate in their spendy ways–weekends in the mountains and such. These women all had homes from their marriage, but lost them due to their spendy ways. One woman told me she sold all her mother’s antiques to pay the mortgage. Well, a person has only so many antiques. She had to party and buy clothing for partying. She eventually lost her home to foreclosure. It was lonely for awhile, but I valued my home over fun or friendships.
My mother emphasized two things–own a home and get an education. Well, these were the biggies and I accomplished both. I eventually made friends with the same values as I.
Education is overrated. Millions of underemployed college graduates will never be ale to own a home.
I agree.
I agree with Practical Parsimony.
Congrats, Cheryl!
After many years of working our butts off, we already have the other essentials covered so while I’m actively investing in taxable accounts, I’ve also set up our mortgage payment to always pay down some extra principal.
I’m actually both uncomfortable with having this large mortgage AND with paying it off quickly because it’d be such a large portion of our money sunk into an “asset” that doesn’t do anything but cost money (taxes, if nothing else). So I take the lesser of the two evils and pay down a little faster than usual and focus more on investing while we have time for that to grow.
Whoo hoo, Cheryl!! Congratulations!! I wholeheartedly support this goal. We paid off our home in Dec 2016; a 30 yr mortgage paid in 7.5 years!! Our only remaining debt are 2 much small mortgages on 2 rental properties purchased in 2012 & 2013. Both are on 30 yr mortgages but should both be paid off in the next 18 months, so within 8 years of purchase.
Bravo to Cheryl!! BUT this very thing is a bit of a puzzle to me….Not so long ago I could have borrowed money in the form of a mortgage for a little over 3% for 15 or 30 years. My thought was to borrow the money and then send it over to a mutual fund company that I have had a good relationship with…thereby taking the tax deduction AND getting the benefit from the investments. Had I done so last year the return on those two funds was 28% and 35% respectively… A very wise businessman once told me “the time to borrow money is when you don’t need it”…BUT the peace of mind of having a paid for home is ….PRICELESS…
“BUT the peace of mind of having a paid for home is ….PRICELESS…” – YES, this!
Way to go, Cheryl! I love that you set a goal, found ways to work toward it, and achieved it, and that you’re sharing with the next generation.
I think you did the right thing by prioritizing paying off the mortgage. I suppose that in theory you “lost” money by not paying the minimum and investing any other money, but for me the security of knowing no one else had a claim on my house, and the relief of not having a monthly payment hanging over my head trump that theoretical money. And you *were* investing, so…well done all around!
“the security of knowing no one else had a claim on my house, and the relief of not having a monthly payment hanging over my head trump that theoretical money” – totally agree with this.