Monday, March 14, 2016

Paid Off My Rentals! Goal Achieved! FI Declared!

PAID OFF MY RENTALS!

The title says it all.  Earlier today I took a wad of $100's (43 of them to be exact) and visited my local mortgage company.  I walked in the door, handed over $4,279.22 and in so doing paid off the final rental house.  I am now officially debt free (aside from a fixed interest credit card loan I arbitraged for a higher tax refund).  Just over three years of blood, sweat and tears...Okay, I exaggerate a little.  But as you can imagine, it wasn't easy by any stretch of the imagination.

In doing so, however, there was no drumroll, no trumpet blast marking the occasion.  I never even got a "congratulations!" from the mortgage office secretary who handled what would prove to be my last mortgage related transaction from the bank.  But it's okay.  I know what I accomplished with my three plus years of sacrifices and determination.  My laser focus hit the bulls-eye.  I'm proud of the accomplishment and no anticlimactic secretary is gonna take that away.  No, sir!

GOAL ACHIEVED!

I beat the stated goal of paying off 3 rental mortgages totaling $177,650 in 42 months by three-and-a-half months.  I now have an additional $1,476.46 in my pocket each month.  That is now added to the previous passive income and it is enough to declare myself... 

FI!

I now work because I want to.  I don't have to keep a job to pay my bills.  My passive income can take care of us now.  I'm not rich.  Don't even have a savings account.  But I currently have enough passive income to live comfortably.  With all my volunteer work, I'll be busier than ever--doing the things I want to do.  Ahhhh!  Gotta admit...it's a great feeling.  And yet it, for all the hype, it feels just a bit anti-climactic at the same time.  Weird.  Must be a combination of having blogged about this eventuality for the past three years and just not having had enough time to let it all sink in.  I don't know.  I'm sure I'll gradually feel the reality instead of the theory sink in.

WHAT NOW???

That's easy.  I've been wanting to build up a diversified, dividend growth portfolio for some time now.  I've learned a lot about myself over the years and one lesson I've learned well is that I don't have the discipline to ride out the ups and downs of the stock market while I have debt hanging over my head.  Now that the debt's gone and my monthly financial needs are cared for outside of the stock market, I can comfortably ride out the volatility while collecting dividends which grow faster than the rate of inflation.  I still have a business bringing in a fair amount of income.  Income that will now flow to our dividend growth portfolio so that we can diversify into another passive income stream.  Sounds like great fun and a personal challenge to boot!

CONCLUSION...or...is it?  A few final observations about getting out of debt.

Don't know.  Maybe I'll write an occasional post describing how I'm meeting the above challenges.  Either way, this is THE blog post I've been waiting more than three years to write.  I hope that my posts will encourage others pursuing FI and debt-free living.  Getting out of debt is not easy.  Getting into debt is about the easiest thing to do in our consumer-oriented society.  It's like walking downhill, whereas getting out of debt is just the opposite.  Uphill all the way.  Exhausting.  Daunting.  Excruciating at times.  It tests your resolve each and every month.  I just kept remembering that time passes.  I needed to do my part and time would take care of the rest.  And, true enough, here I am.  It is done.  Previous posts layout my method of staying motivated.   If  you want or need motivation, just go back to the beginning - January 1, 2013 and read forward.  The story technically goes back further than that and the debt deeper than $173k. I was actually closer to $300k at one point.  I started with my personal residence and then just kept paying off houses one by one letting the snowball effect help me along the way. 

MY REQUEST OF YOU

Share your stories here.  I'd love to read them.  I was motivated by one particular blogger who had accomplished that same goal of paying off and blogging about his monthly progress.  Help others by sharing the good, bad and ugly of it all.  Just writing and sharing will help you stay the course.  Blog for accountability.  It helps.

Here's wishing the best to all!  Keep up the fight.  It's worth the sacrifice.

END!

Tuesday, February 2, 2016

Update - February, 2016 - Sooooo Close!


Paying off large amounts of debt is like moving a massive pile of dirt with a shovel.  It seems daunting at first, but you simply have to roll up your sleeves and get started.  At times it gets exhausting and discouraging when you've worked your butt off and still see a huge pile of dirt remaining.  At times, you might get to borrow a bigger shovel, or even a tractor and remove huge amounts of dirt all at once (such as in the case of a windfall, like a tax refund or a gift or selling an unused or unnecessary item and applying that money toward the debt).  But those moments are few and far between.  At many points along the way you just have to just take a deep breath and resolve to continue.  Slowly but surely you see that pile disappear.  Three years of shoveling is a lot of work.  The bottom line:  It's the sustained effort that gets the job done.

February turned out to be an unexpectedly fantastic month on the payoff front.  While we were beginning to hold out hope for the possibility of beating our original July, 2016 payoff goal by a month or possibly two, we voluntarily took a pay cut that began to erode those chances.  However, we got our hands on a bulldozer to move a large amount of debt...our janitorial company had been accumulating some additional monies in the bank over the past year and all of us owners met and decided to take a significant distribution totaling $6k each.  Since my lovely wife in one of the owners and totally on board with the payoffmyrentals plan, we pooled the distributions and plopped all $12k down and cut a couple of months off the goal.  This was in addition to the $4,600.00 principal payment already set aside for February.  Therefore, we paid an additional $16,600 on the balance.  In all honesty it feels painful and satisfying all at the same time.  Like taking too big a swig of Coca Cola.  It burns, but it burns good!

That leaves our pile of dirt, er, I mean, debt at only 4% of where we started just over three years ago.

Jan 1, 2013 (Beginning Bal).                                           February 1st, 2016                                Amount Paid Off
==========================================================================
House #1 - $70,908                                         House #1 - $7,664                       $63,244
House #2 - $57,619                                         House #2 - $ 0                              $57,619
House #3 - $49,123                                         House #3 - $ 0                              $49,123
-----------------------------                                    -----------------------------               -----------------------------
Total:       $177,650                                                          $7,664                      $169,986 (-95.68%)

We're so stoked over this progress.  It's not hard for me to remember back to when we started on this debt payoff journey.  That mountain of debt loomed large, blocking out the sun while casting a dark shadow over our future plans for FI.  Now it's a mere wheelbarrow's worth of debt.  We should be able to finish this off in two more months.  So, we are officially calling April 1st, the projected end.  That would take the original 42 months required down to 39 months.  As a result, April 1st will herald the official proclamation of FI for this family.  If that isn't incentive, I don't know what is.

The bank will no longer extract $553.88 of our precious resource every month.  We keep every last cent and use it to enjoy freedom, independence and peace of mind.  Priceless.  There's great satisfaction to finishing a project.  Believe me, I've started many over the years only to allow life and distraction to get in the way and give up mid-stream.  NOT THIS TIME!  This project will be seen though to its utter completion.

Carry on, everyone.  Keep the vision in focus.  Let your sustained efforts keep you on track and join the chorus of the many thousands who have been able to enjoy the tranquility of debt-free living.


Friday, January 1, 2016

Update - January, 2016 - Minimilism

What a difference a couple of months makes. 

  • Two months ago we were living in a paid-off house.
    • Now we live in a paid off 29' R.V.(2006 bumper-pull trailer).
This is a move toward a more simplified, liberated, freer lifestyle.  What's really amazing is that my wife is totally on board (though not without having had to overcome some typical reservations, i.e. Where will we put all of our clothes?  Where will you put your office?  Where will I go when you start to snore?).  We've been able to resolve everything but the last concern.  That will resolve itself when I drop ten pounds.  Now I have no excuse since we are literally parked across the street from a gym...dang it!

We currently own seven houses.  We've lived in two of them over the years.  But now, living in what amounts to a "tiny home", we couldn't feel more content.  That's due in part to the fact that we have a reason, a purpose for this life-style adjustment:  We want maximum mobility at minimal cost.  We want to be able to travel and move around at the drop of a hat.  We want to live on a small passive income.  We don't want chaos and clutter.  We don't need a lot of room to be happy.  And you know what?  It's working.  For example, we just returned from a couple of weeks in Costa Rica and we're getting ready to fly to California for another week and a half to visit my wife's parents.  I'll likely do some volunteer work in New York this Spring for a month or so, and the list goes on.

We are beginning to reap the rewards of our rental mortgage payoff journey.  But that goal has always been combined with the reduction of spending and increase of savings.  As our budget now stands, we live on just under $2,000 p/mo.  That includes $670.00 per month for a high-deductible health-care plan.  Our cost for the ACA plan rose 50% for 2016.  That was a shocker and one that caused me a mini-fit.

Mind you, this is all completely voluntary as we still reap the rewards of a business we own and draw about 75k a year from.  This money has largely been earmarked for the rental mortgage payoff plan that is the subject of this blog.  We have that business on the selling block and are readying ourselves for the loss of most of that income going forward.  If it sells, than we'll pay off the balance of this final mortgage.  If not, then we'll stay the course with the high monthly principal payments and just invest the rest until things change. Either way, it's all good. 

Speaking of that final mortgage balance...

Jan 1, 2013 (Beginning Bal).                                           January 1st, 2016                                Amount Paid Off
==========================================================================
House #1 - $70,908                                         House #1 - $24,733                      $46,175
House #2 - $57,619                                         House #2 - $ 0                              $57,619
House #3 - $49,123                                         House #3 - $ 0                              $49,123
-----------------------------                                    -----------------------------               -----------------------------
Total:       $177,650                                                          $24,733                     $152,917 (-86.07%)

Looking back over last year, we have paid off nearly $40,000.  The balance last January was $63,163.  It now stands at $24,733.  Wow!  That's a lot of smackers thrown at the mortgage!

While we sent an additional $4,000 to the principal this month, that's not as much as we should've sent.  We decided to maximize the tax advantages of sending the final contribution of more than $2,000 to finish out the 2015 HSA contributions.  I feel good about that.  Also, we had tiled the floor and shower and replaced the water heater of our house before moving out.  We also paid for the Costa Rica and California trips on top of everything else.  That set us back a bit.  However, I believe we are looking forward to a hefty principal payment for next month as we'll dip into the rental monies to add to our payment.  I relish the thought of getting that balance under $20k.

This is the final stretch.  Three years ago when I started this blog we said we would pay off $177,650 in just forty-two months.  We are now down to the last six months and it looks like a checkered flag I see waving in the distance.  Once we pay that last house off, I will officially declare ourselves FI!  The additional $1,476.46 added to our other previous rental real estate income will be more than enough to make that declaration.  We're turning the page to a new and very exciting chapter of our lives.

In the meantime, let's all make this a productive year and stretch forward toward the realization of our goals.  I know we're not the only ones out there working hard, making sacrifices and displaying resolute determination to achieve financial freedom.  Let us know how your doing.