Monday, April 1, 2013

Update - April 2013

This is the fourth month into working our plan.  Firm determination and laser-like focus are the name of the game here.   To be perfectly honest, I am always tempted to change the game plan.  For example:  "Do I pay just the first house off and then go back to making minimum payments on the remaining two while investing the rest in the market?".  "Do I take a break and build up some cash reserves and use these funds to buy more real estate?"  These are all viable paths to financial independence and no one path is necessarily wrong.  One of the above options that I have chosen not to pursue might even lead to greater long-term wealth.  Here comes that "personal" part of "personal finance".


Personal Finance is, after all, "Personal"

The goal of our journey is total, absolute and unequivocal debt-free living.  Therefore, that's the path we've chosen and the one we're determined to stick to -- despite frequent temptations to change course.  Like a marathon runner who strips down to his running shorts, we want our financial picture to be simple and unecumbered.  Carrying debt, even the "good debt", is like a marathon runner carrying his laptop or his briefcase during the race.  It will have a detrimental affect on his performance and he risks not reaching the finish line as a result.  We've chosen not to take that chance and, therefore, we'll stay the course we've chosen:  Pay off all our mortgages as quickly as possible to reach the goal of financial independence as quickly as possible.

Like a marathon runner who pictures himself crossing the finish line, we also imagine ourselves with the freedom and financial wherewhithal to quickly save to buy a property for cash, or to purchase large amounts of dividend growth stocks, or to do whatever we want to do with what will prove to be a substantial amount of freed-up monies to invest; and all in far less time that it takes for most people to pay off their note on a new car.

April 1 Stats:

Jan 1, 2013                                   April, 2013                  Amount Paid Off

House #1 - $70,908               House #1 - $69,974                 $ 934
House #2 - $57,619               House #2 - $56,770                 $ 849
House #3 - $49,123               House #3 - $32,484                 $16,639
----------------------------              ------------------------------          --------------------
Total:       $177,650                              $159,228                 $18,422 (-10.4%)

As you can see, we've paid off $18,422 or 10.4% of our total mortgage balance in just four months.  That's very exciting and rewarding.  Of course the added benefit of paying off the mortgages more quickly is that more is applied toward the principal and less toward interest.  In January, the interest paid on House #3 was $185.00 (principal: $239.46).  For April, the interest amounted to only $135.65 while the amount applied to principal was $288.92.  That means nearly $50.00 more is going toward the accelerated payoff.   Once this house is paid off, the PI (Payment & Interest) of the PITI (Payment, Interest, Taxes & Insurance) totaling $548.00 will be added to the $3,400 causing the snowball to grow and accelerate the payoff of House #2. 

Are you currently snowballing your debt payoff?  How's it going?  Feel free to share your experience.


Compounding Income said...

Amazing progress!

I think being debt free is the way to go. You know exactly what your return will be. Always a good thing.

It sounds like you might be interested in stocks and other investments. It may be worth setting aside some money for that to get your feet wet and learn. Maybe you're already doing that, I don't know.

But yeah, I agree, pay off the mortgages. It will be a great feeling when you accomplish it!

Pay off my rentals said...


I've been watching you beat a path toward financial independence on your blog, too. You're building a nice dividend snowball.

I am already pretty comfortable with the equities market. That's why I occasionally battle with myself to not invest in dividend growth stocks as you're doing. But, I console myself with that fact that there will still be plenty of time for that in another three years. I just have to be patient.

There are a few storm clouds on the horizon. My wife will need some additional work done on her shoulder. Seems that it's frozen (limited movement after a certain point) following the rotator cuff surgery she had a few of months ago. Fortunately, we have health insurance, but it looks like we'll be paying the entire $2,000 deductible again this year.

We'll see how this all plays out in the months to come. Keep up the good work on your Compounding Income!

Jaden Allred said...

Your plan definitely worked for you! I must say this is a great progress! I think it's one of the best solutions to be debt-free is to have a good financial game plan. Plan every detail of your finances, and soon you will find yourself out of debt and somewhat financially stable. If it continues, there's no doubt that you'll be out of debt soon.

>>Jaden Allred

Armandina Skerl said...

“Pay off all our mortgages as quickly as possible to reach the goal of financial independence as quickly as possible,” – Couldn’t agree more with this line. It is best to be debt free at an early stage because the longer it takes for you to clear your debts, the harder it is to pay. The feeling of being completely debt-free is very rewarding too.

Armandina Skerl