A few weeks ago, J.D. and I were chatting when he asked me what it felt like to be debt-free. He'd read on my blog that I had no debt and was curious if I'd write about it for Get Rich Slowly. In particular, he asked me to communicate both how I managed to pay off my mortgage (the biggest debt most people have) as well as how it felt when we did so. I was happy to accept his offer.
Just to note, the purpose of this post isn't to debate whether or not paying off all debt is a good idea (versus only making mortgage payments and investing the rest, for example), so I've purposely left it out. My goal is simply to tell you our story — what happened and how we did it. From there, you can decide whether or not this path is for you. Since my wife and I are debt-haters, this option simply seemed natural to us. In addition, I can also tell you that living ten years without any debt has been a great feeling.
In the mid-90's, we moved to the southern part of the U.S. Here's how we paid off our mortgage in 1997 and haven't had one since:
- We spent less than we earned starting as soon as we got married in the early 1990's. We saved quite a bit, combined it with some previous savings and the equity from the sale of our Northeast home, and were able to come up with a down payment of about 35% of our new home's value.
- We bought a house we could afford. Instead of stretching to buy the biggest house possible, we decided what we needed in a house and purchased a place that met those criteria. In the end, we only borrowed about 60% of what the bank said they'd let us borrow.
- We applied everything we could to retire the mortgage: extra payments (from still spending less than we earned), pay raises, bonuses, income from a side business, my wife's income, and gifts. If money came in, it usually went to paying down the mortgage. However, we did not sacrifice what we considered to be better investments, such as fully funding my 401k.
- Within five years, we had the house completely paid off. We lived there a few more years, then when we moved to Michigan, we sold the house and paid cash for our new one. It's now been ten years since we've had a mortgage.
In the early years, I got the biggest thrill out of paying extra on the mortgage. I'd make an additional payment and wipe out six to eight payments at one time (Quicken would show me the results.) During the first year, I eliminated several years of payments on a 30-year mortgage (something like eight years) and the thrill of making such great progress simply built and built into a snowball of enthusiasm. Each payment I made had a dramatic impact on the total, which fueled more payments, which had more impact, which fueled more payments and so on and so on.
Then there were the big hits — when I got a bonus or when we decided to forego a big vacation to put it against the mortgage. These large impacts to the debt made a huge difference and added fuel to the fire.
As we got close to paying off the entire amount, we were looking for anything we could find to put towards the mortgage. When the day came when we paid off the whole thing, we were thrilled, but I don't think we realized the comforting feeling that was to come.
It's been a long time since we've had a mortgage, so much of the “newness” and “excitement” has worn off. But it's been replaced with a very peaceful feeling. You often hear the words “debt freedom” talked about, but can't really grasp what they mean unless you are free from debt. I can honestly say that there is a great financial peace in knowing you don't owe anyone anything.
Since we've paid off our mortgage, we've been able to save a bundle and give more to charitable causes we support. We're now on track to retire by age 55 with more than enough to live on and no debts outstanding.
Author: John ESI Money
ESI Money is a blog about achieving financial independence through earning, saving, and investing (“E”, “S”, and “I” — get it?). It's written by an early-50s retiree who achieved financial independence, shares what's worked for him, and details how others can implement those ideas in their own lives. (Note: ESI is also the owner of Rockstar Finance, the leading curation site for top personal finance articles.)