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.