This week Chris and I begin our journey towards financial freedom, with a goal of becoming 100% debt free.
After church this past Sunday, we talked about how we can improve our finances, and really prioritize paying off both our small debts, and our large mortgage. While we haven’t been in financial crisis, we do have a lot of room to grow in this area.
Here is where we are at right now with FULL transparency friends!
- Car Loan: about $2,500 left
- Monthly payments of $175
- School Loan (0% interest): about $7,000 left
- Monthly payments of $200
- Home Mortgage (4% interest): over $200,000 left (YIKES!)
- Monthly payments (not including taxes, which are insane) of about $1,200
How are we going to tackle these three payments?
We are going to apply the snowball method, which probably comes from Dave Ramsey, although we haven’t actually listened to anything by Dave Ramsey.
First, we will tackle the car loan, doubling up on payments and paying it off in the next 6 months.
Next, we will take the amount we were previously using to pay off our car loan, which would be about $350 once doubled, and we will put that towards the school loan, increasing the payment from $200 to $550. At $550 per month, we will pay off that loan about 10 months after we finish paying off the car loan, so in about 16 months. That will leave us with only our mortgage to pay off, which is obviously a HUGE undertaking!
With no other loans, aside from the mortgage, we will be able to increase our monthly payments by about 50%. We will also prioritize paying off the mortgage with any other possible income streams that come through. In addition, we will have more wiggle room each month, decreasing our stress, and increasing our confidence in meeting the goal of being debt free. Because we did not put down 20% when we purchased our home, we also have a monthly PMI payment of over $100. Once we get to the 20% mark, we will be able to remove that payment, and put even more towards our mortgage.
So lets say we are able to put $700 down each month, in addition to our existing payment. In doing so, we would be mortgage free 14 years SOONER than if we kept the payments as they are now. We would also save over $76,000 in interest, that is huge!
Of course that means we would still have 13 years left on our mortgage, which seems like a really long time. Hopefully as we approach this journey, we will find new and creative ways to save and pay off the mortgage even more quickly that what we can anticipate now; however, simply going off of the information we have now, paying off our mortgage in 13 years, would mean Chris and I would be 100% debt free in our late 30s.
Now, it isn’t exactly #debtfreeby30, but it would still be such an accomplishment for us, and a demonstration of using our finances wisely. By the way, in order to calculate those numbers, I did in fact use a free, online mortgage payoff calculator, by none other than… Dave Ramsey!
Our plan doesn’t take into account changes in our financial situation, our income, or our job stability. It is simply a plan, to give us goals to strive for. This is how we are approaching our finances, but it is by no means a one-size-fits-all approach. We realize everyone has a different situation, and this will be unique across each individual or family.
Furthermore, while becoming debt free would lead to financial freedom, it does not equal true freedom. As Christians, we believe that freedom is not something you have to wait to achieve, but that it can be experienced now, through knowing Jesus, and experiencing the love and forgiveness He offers to all of us.
So friends, do you want to join us in this journey? Are you already on this journey? Comment below and share your thoughts. We would love to walk this road with you, and learn from you along the way.
That’s all for now friends,
All my best,