Today’s Debt Free Story comes to us from MustardSeedMoney.com. He and his wife have been 100% debt free for a few years now, which has given them the opportunity to travel, take care of their family and the freedom to choose a career path. Don’t miss how debt payoff was accelerated in this story. It goes to show a little creativity and flexibility can pay off!
Tell us about yourself.
I grew up in Northern Virginia about 30 minutes outside of DC and have never lived anywhere but Virginia. I didn’t even leave the state for college. With that said, I am super close to my family and extended family, all of whom live within a 20 minute drive of my house. My wife and I actually lived seven houses down from each other for many years but didn’t date until after college.
I am one of the biggest investment/financial nerds that I know, and it wasn’t until I joined the PF community that I found like minds. My wife was incredibly thankful as I finally had an outlet to connect with others about my passion. I seriously have a one-track mind and could talk with friends, family, or even strangers about this stuff for hours. I probably spend more time at work on my breaks discussing finances than actually eating my lunch, but it’s totally worth it to share my passion with people.
I first developed my love for investing my senior year of high school when I took a computer class, where we tracked investments and used that data to build the financial models. Learning about investments just before the tech bubble also helped as the stock market seemed like a magical place where stocks only went up.
What type of debt did you have?
I am incredibly blessed in that my parents paid my college tuition in its entirety. On top of that, I was fortunate enough to get a job right out of college and lived at home for a while as I saved up money for a down payment for a house. Because of that, I never accumulated any sort of credit card debt. I also opted for well-loved, used vehicles so that I did not need to take out loan for those purchases. So, the only debt I’ve ever had was a hefty mortgage, which I paid off four years ago, shortly after I got married.
What was the defining moment that made you decide to tackle your debt?
My parents stressed early on that I should think about paying off my mortgage debt as quickly as possible. They emphasized the freedom that would come with debt elimination. When I first bought the house, I wasn’t overly concerned with paying off the house since my mortgage payment was reasonable because I had roommates living in my home, whose rent covered a portion of the mortgage.
I think it was about six months into having a mortgage that I decided that while I loved living in my house, I absolutely detested paying my mortgage each month. Watching that much money leave my bank account each month was tough. On top of that, I felt somewhat trapped at my job at the time and thought, if I didn’t have this mortgage, I would have the freedom to pursue something else.
What was your plan for paying off the debt? How did you prepare?
Initially, I used an Excel loan amortization spreadsheet template to see how long it would take to pay off my house. I then started to play around with it to see how the numbers would work out if I paid things off faster or slower.
After I saw that I could significantly lower the amount of interest that I would pay over the life of the loan by paying more up front, I created my plan. I cut my expenses down to the bare bones in order to make an extra principal payment every quarter. Instead of a meal out, I cooked for myself or went to my parent’s for a free meal. I purchased a programmable thermostat and my heating/cooling bill dropped. Pretty much any way I could save a few bucks, I did. And those bucks added up. In hindsight, I should have just paid whatever extra money I had towards the mortgage monthly instead of quarterly.
Where did you find the extra money to put toward the debt?
Initially, I had three roommates. At one point, I moved out and back in with my parents for a year to rent out my whole house out in order to accelerate payments. While I enjoyed living with my parents, it felt a little silly to live at home while I owned a property close by. Thankfully, one of my roommates decided he wanted to live elsewhere, so a room opened back up and I moved back in.
The rent I charged was fairly cheap, and in the seven years that I lived with roommates, I only increased it once. I probably could have increased it more along the way, but number one: I really loved living with those guys, and number two: I thought if I could help them save money to buy their own place while they help pay down mine, it’s a win/win situation.
So having stable roommates for seven years and also receiving some raises along the way allowed me to continue accelerating my payments. I also took any bonus money that I received each year and applied it towards the mortgage. Of course, at the time, it wasn’t fun putting all that money towards my mortgage, but it was worth it to gain financial freedom.
Finally, when I got married, my wife had saved up some money for her own down payment for a home. Since she moved into my home, she applied that money towards the mortgage, which allowed us to be debt-free at the start of our marriage.
How long did it take you to pay off the debt?
I was able to make the final mortgage payment in December 2012 after 7.5 long years.
How did you stay motivated to continue on your path to debt freedom?
Every month, I loved updating my Excel loan amortization spreadsheet and watching that balance drop. It also helped that during that time, the stock market was getting crushed, and I thought to myself, at least I’m getting a guaranteed rate of return.
I actually ran the numbers a couple of month’s ago and found that if I had invested the money into the stock market or had paid off the mortgage the difference was only 0.1% in favor of the stock market.
For me, not having to make another mortgage payment on my home again is well worth forgoing the extra 0.1%.
Did you make any mistakes or hit obstacles that slowed or stopped your progress?
The biggest obstacle that occurred was when my beloved Mazda MX-6 car engine died on me. It was a great, reliable car that met its demise much too early. Unfortunately, I ended up donating it because I could get a bigger tax write up than trying to sell the body. I then had to find, and pay for, another reliable car, which was not in my plan. I ended up picking an affordable Honda, but it was still an outlay of money that I had not anticipated.
How is your life different now that you are debt free?
In my 20’s, I traveled once outside the US to Mexico. Since my wife and I got married and no longer have debt, we have been able to travel all over the world. On top of that, it has allowed me to not fret over climbing the corporate ladder to make more money. I’ve been fortunate to select jobs that interest me instead of ones that would pay very well but where I would be miserable.
On top of that, being debt free has allowed my wife to stay at home and take care of our son and also her special needs sister full-time. This would not have been possible if we still had a hefty mortgage.
What advice or actionable tips can you give people who want to pay off their debt?
Start today!!! Write down your dreams, and then set up financial goals along the way to reach your ultimate goal. I ask friends all the time what their life would look like if they didn’t have any debt. Most of the time, it isn’t what they are doing now. So, I encourage anybody that is living a life that doesn’t line up with their dreams due to debt to quit delaying and start moving in the right direction today.
Mustard Seed Money is a financial blogger who works for the federal government as an accountant. His real passion lies with personal finance, though. He is on his way to achieving financial independence by 2020. Read his thoughts and insights over at Mustard Seed Money.
Thanks so much for sharing your inspiring story of debt freedom, Mustard Seed Money!