For today’s Blog Everyday in May Challenge, the topic is “educate us on something you’re good at or know a lot about.” Ok, so I’m good at soccer and know a lot about it, but I don’t really think many blog readers will care too much about that so I’ll share what a lot of people ask me about! And that’s BUDGETING!
As you might have read yesterday, my husband and I paid off our house in 33 months, when I was 24 years old (granted I was 4 months shy of my 25th birthday)! It’s one of my biggest accomplishments. And it wasn’t easy. Just a quick background – My hubby, Ryan, bought the house in December 2006. It was a $150,000 house with $40,000 down payment. Ryan saved every penny of this $40,000 from substitute teaching and baseball. He took a $110,000 loan with a 15 year mortgage (that’s very important). Ryan had started working his first teaching job the August before since his last season of baseball was that previous summer. He started paying DOUBLE on the house as soon as he bought it so we could have it paid off in 7.5 years. We married the following August of 2007. I got a teaching job in January 2008 so we threw another payment onto our mortgage (3X the monthly amount, $900). Soon after, we realized we could throw another payment on top of that to make it 4 times the amount we owed. Then as we got closer to paying it off, we tightened our budget even more and paid 5 times the amount, which was about $4500 a month. Our taxes were not bundled with our mortgage by the way (pay those once a year). We basically lived off of less than one of our pay checks. We had no kids, no other debt (you can read my blog for more on that), and made two teacher’s salary. You can look up teacher’s salaries online…yep, we were not making a lot of money. All that to say we know a little about paying off debt. And I cannot tell our story without giving 100% credit to God. He blessed us with jobs and the wisdom to make good financial decisions! I’ll share with you a few things we believe are important when purchasing the PERFECT house for YOUR family!
HOW WE PAID OFF OUR HOUSE IN 33 MONTHS:
*I say “”how we paid off our house” because every financial situation is different and this is simply what worked for us.
1. Choose a house you can AFFORD – The Millionaire Next Door states, your “mortgage should NOT be more than twice your household’s total annual income.” For example, if your household income is $80,000, your loan should not be more than $160,000. Of course, this a general rule, but the point is, your mortgage should be lower than you think it would be (definitely lower than what most Americans buy). This step is the most important.
2. Choose a 15 year note – This one is common sense to me, but most people don’t do this so they can get lower house payments. The monthly payments are not that much lower and if that few hundred dollars is a make or break, you are buying way out of your limit! Dave Ramsey suggests your mortgage be no more than 25% of your monthly take home pay. Think about it, if you bought a house at age 25, you could either pay it off at 40 or 55! And that’s if you don’t make extra payments. Plus, you pay less interest with a 15 year note. I could go on and on about the benefits.
3. Make a goal and make it non-negotiable – If you’re married, it’s important you and your spouse are on the same page. Ryan was the ring leader behind this “paying off our house” thing, but I agreed to it so I could do what God called me to do later, which was be a mom! On one teacher’s salary, there would just be no way we could afford all our bills AND a mortgage. This was my motivation. Our first goal was to pay it off in 7.5 years. Then it got addicting and we saw too many benefits to wait any longer. Don’t get me wrong, I wanted to give up a few times along the way, but kept this goal in mind (and my husband is super encouraging). He even gave me the option to stop, but I jumped back on the bandwagon. I guess I just needed to vent along the way.
4. Reward yourself – Life is short and it’s not all about paying off your house! Although this was important to us and a non-negotiable, we still rewarded ourselves each summer and Spring Break with a vacation. We went to Dominican Republic (twice), Mexico, New Mexico (skiing), Jamaica, and Puerto Rico. I’m glad we did this before kids too! I feel this step made us “normal” in a way and kept us from feeling we were depriving ourselves too much. See what Ryan rewarded himself with below.
5. Be different – Most people will NOT be doing this and will think you are out of your mind for wanting to pay off your mortgage (or buying within your means). I’ve heard a ton of things from people about how it’s “not good to pay off your house early” or “it’s just not doable.” And that was to our face, so I’m sure other things were said behind our back. I will just give two quotes from Dave Ramsey to support this step…
- ”Live like no one else now, so you can live like no one else later.”
- “Debt is normal, be weird.”
If you are different, that means you are doing something right.
6. Pray – With God all things are possible. Reading Scripture and leaning on God to be strong and wise really helped us. We were doing what God called us to do and He doesn’t take us anywhere we can’t handle without Him. Prayer works! These Dave Ramsey quotes are very inspirational as well.
I cannot express the feeling of freedom we have financially and knowing we don’t owe anyone interest. Tightening our budget meant saving in other areas. You can read more in my blog about ways we save money, but it really comes down to spending less than you make! And living through Texas summers in an 82 degrees house to save money on electricity. And using coupons for 9 out of 10 dining out experiences…we still do that now (not the electricity thing…I wouldn’t recommend that)! And no, you do not have to be an extreme grocery couponer…I’m not!
Proverbs 22:7 – The rich rule over the poor, and the borrower is slave to the lender.