Archives For Finances

5 Year Mortgage Goal

We have decided to share our goal to pay off our mortgage in 5 years for accountability and to encourage others in their personal finances.

You see, we’re a family of 5 living on one income. While my husband makes a comfortable income, we’re not rolling in money. Our monthly budget is comfortable – we don’t feel we’re doing without but we do have to spend carefully and watch where our money goes.

Managing your money wisely helps you financially.

You do not have to have a large income to succeed with personal finances.

Our goal to pay off our mortgage in 5 years seems like it is an unattainable goal for a family living on one modest income. However, there are several factors that make this goal a realistic one for our family.

How does a young family living on a budget think they can pay off their mortgage in just 5 years?

1. We have no other debt.

We both graduated college debt free and we never have had credit card debt or car payments. The lack of these debts allowed us to focus on saving for a house downpayment upon graduation. 

2. We own our vehicles.

We began our marriage driving vehicles that our parents gifted us before college. We saved for years for ‘new’ vehicles and our savings coupled with the money from the sales of our old vehicles allowed us to pay cash. Our ‘new’ vehicles are both older models, I drive a 2004 model minivan and my husband drives a 2002 pickup.

3. We put 20% down on our home.

A 20% downpayment saves us from paying private mortgage insurance. And, the exciting part of a large downpayment meant that we owned 20% of our home the day we moved in!

4. We currently own almost 50% of our home.

Our 20% down payment coupled with regular extra principal payments for 2.5 years plus refinancing to a lower rate has really knocked down principal. We currently have paid almost 50% of the purchase price in the 4 years we’ve lived in our home. We believe we can buckle down and pay the remaining 50% in the next 5 years.

5. We bought a home below our price range.

We qualified for a mortgage amount that was nearly twice the amount of the purchase price of the home we’re in. Instead of buying a house at the top of our mortgage qualification range, we chose to purchase a modest house. Choosing to live in our smaller home frees up money each month to pay towards the principal.

6. We have budgeted extra principal payments.

We reworked our budget when we set this 5 year goal and have budgeted a couple hundred dollars each month to pay towards principal no matter what. Intentionally budgeting money towards the extra principal is playing a huge role in reaching our goal. 

7. We’re sticking to a budget.

We have a written budget and we’re sticking to it!  We’ve budgeted our entire marriage but we’ve had a tendency to cheat. We’ll overspend in certain categories and then move money around from other categories to cover our overspending. While we haven’t gone into debt doing this, we’ve been ‘stealing’ from other areas that could be used to pay extra towards our mortgage at the end of the month. We’re committed that when the money is gone out of the budget category, there will be no more spending.

8. Shopping is no longer a hobby.

Shopping at thrift and bargain stores used to be a hobby. We were finding all kind of great deals and ‘saving money’ on things we ‘needed’. If you stay out of stores, you won’t be tempted to spend! I’m convinced that succeeding financially has a lot to do with controlling consumer spending on smaller purchases.

We believe that paying off our mortgage in 5 years is possible for our family.

This is a stretch goal for us but we think we can reach the goal!

What’s your goal?

Are you trying to pay off your student loans? Finally ready to cut up the credit cards and get them paid off? Are you saving up for a house downpayment?

No matter where you are in your financial journey, the decisions you make today will have an impact on your future.

Set financial goals and work towards them.

Some goals may seem impossible today but with focus, discipline and a little frugality, they can be achieved.

Do you have financial goals? 

Mortgage Payoff Goal

Writing down goals is powerful and sharing those goals creates accountability.

We’ve been pretty open about our finances because we want to encourage others that it is possible to live well on one income.

We recently set some new financial goals with our big one being to pay our mortgage off early.

In March of 2011, we purchased our home. We put 20% down and financed the rest with a 30 year mortgage. We started making extra principal payments soon after we moved in, with the hope of paying off the mortgage earlier than 30 years.

We refinanced in early 2013 to a 15 year loan with a 3.25% interest rate. The monthly mortgage payment only went up $80 by doing this.

We strategically started paying $300 extra towards our principal each month because we didn’t want to be saddled with a mortgage for 15 years.

In late 2013, we stopped making extra principal payments and started saving the money because we wanted to make some improvements in our kitchen and laundry area. Thankfully we had that money saved because in early 2014, we had to replace our septic field lines (the joys of home ownership, our kitchen and laundry still haven’t been updated!)

Then in April 2014, we put our home on the market and continued saving the money that was budgeted as extra principal money.

Once we decided selling our home wasn’t the best move for our family, we stopped making the extra principal payments – we saved most of it but we also started dipping into that money for other things.

We started to have the attitude that since we’re living in a very affordable home, we can live a little and spend our money a little more freely. We lost sight of the goal of paying off our mortgage early.

In May 2015, we attended a Financial Learning Experience at our church led by Joe Sangl of I Was Broke, Now I’m Not.  We left the event ‘fired up’ again about our personal finances!

We took some time and wrote down some personal and financial goals for our family at the end of that weekend.

The big goal that we set was to pay our mortgage off in 5 years.

This is a bit of a stretch goal but we’re excited about the challenge and focused on achieving our goal.

To be honest, our 5 year goal looks impossible on paper but we know with a little creativity, frugality and focus we can reach our goal.

In the coming months, I’ll be updating you on our progress for accountability, sharing details on how we’re planning on paying off our mortgage in 5 years and posting about different ways we’re saving money to help us reach this goal.

*We’re sharing our story and this goal in a hope to encourage you in your quest for debt free living! We all have different circumstances due to consumer debts, student loans, mortgage amounts and income levels but we all can take steps to improve our finances. Setting financial goals is a great way to motivate you to work towards paying off debts, living within your means and inspiring you to set big goals, like paying your mortgage off early. No matter the state of your personal finances, you can take steps to turn things around!

Small House

Earlier this year, we made an offer on a small farm and put our home on the market. The seller wasn’t willing to negotiate one bit, our home didn’t sell and we realized it just wasn’t the right timing. At the beginning of May, we decided to take the ‘for sale’ sign down again.

So, why are we staying? 

We like our home. It’s in a great location about 15 minutes from my husband’s work, our church and town. We have great neighbors, we love our shaded front yard, fenced in back yard and garden plot. And, while our home is small, it’s just right for our family.

Living in our small home comes with benefits like a very affordable mortgage and there’s less to clean!

A week after we took the sign down, our church had Joe Sangl of I Was Broke, Now I’m Not teach on personal finances. We attended his financial coaching leadership seminar and church wide financial learning experience. His teachings gave us renewed excitement about our finances!

At the end of the weekend, we set several goals for our personal finances. The big goal we set is to have our mortgage paid off in 5 years (and we’re really hoping to knock it out before then!)

We are willing to sacrifice our dream of owning a small farm temporarily so we can put ourselves in a better financial position to purchase a small farm in few years. By waiting until we are in a better financial position to purchase a farm, we will eliminate a lot of financial stress that comes with having a large mortgage.

We’re staying in our small home because it makes the most sense for our family financially. 

Now that we’re focused on this goal, I’ll probably be sharing a bit more about our personal finances and how we’re making steps towards this goal. I’ll also be writing even more about living minimally in a small space since we’re fully embracing the home we’re in.

Defining Frugality

Frugal is a word that I often use to describe our lifestyle.

To our family, living frugally is positive. Many people think of frugality in a negative light, viewing it as deprived or miserly living.

What exactly is frugality? Is it positive or negative?

Here’s a definition:

Frugality- The practice of acquiring goods and services in a restrained manner and resourcefully using already owned economic goods and services to achieve a longer term goal. 

This definition of frugality explains our lifestyle in one sentence.

“The practice of acquiring goods and services in a restrained manner”

The first thing that comes to mind when I read this is budgeting. When you are on a budget, you are restraining yourself from excessive and haphazard spending.

We definitely approach goods and services in a restrained manner; shopping is not a hobby for us. We truly evaluate wants versus needs and give in to very few wants.

As far as services are concerned, my husband cuts our boys hair, I never get my hair cut at a salon (my husband will trim it for me or my friend cuts it), and we change our own oil.

“and resourcefully using already owned economic goods and services”

Instead of purchasing items the minute we want or need them we will evaluate the things that we already have to see if something else can be used or made into the item that we need.

An example of this, I once needed a bedskirt for our guest bed. Instead of spending $20+ for a new one, I took a queen size flat sheet and made it into a bedskirt for the full bed. Not only is this being frugal, it’s also being conscious of consumption.

“to achieve a longer term goal”

For us longer term goals are the reason we live a frugal life. When we married, we didn’t have much money, but we agreed and started working towards two financial goals. The first was that I will stay home with our children and the second was to own our home and have it paid off in 15 years.

If we didn’t live frugally, it would be very difficult to raise a family on a single income without feeling constantly deprived (we’re content with our 10+ year old cars, our small home and minimal wardrobes). We also wouldn’t have been able to put a significant down payment on our home and only have a 15 year mortgage. Achieving these goals are why we live frugally.

I hope this gives you a better understanding of exactly what frugality is. It is possible to live frugally without being miserly.

Do you agree with this definition of frugality? Do you view frugal living in a positive or negative note? Does this explanation change your opinion of frugality? 

*Definition of frugality from Lifestyle of the Tight and Frugal: Theory and Measurement by John Lastovicka