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The home mortgage is quite often the largest expense in yourtypical annualbudget. Since yourmortgage eats up such a huge chunk of your monthly income, completely ridding yourself of itcould be quite freeing.
My wife Nicole and I completely agree with this sentiment of mortgage freedom. We're just not interested in having a mortgage anymore. So, we're getting rid of it.
In 2013, our goal was to have the mortgage on our newly purchased $350,000 house paid off in less than 5 years. By following these 6 nerdy money guy rules,we'd be completely debt and mortgage free by the time we turned 36 years old.
Fast forward to today, our mortgage balance sits at $33,069.20 and we're on target to completely pay it off by December 2017. That's 1-year ahead of schedule! Mortgage free by 35!
We're thrilled to see the principal balance continue to drop rapidly each month. Each time we see a smaller and smaller number, Nicoleand I look at each other and say, “Wait a second … We're actually going to pay this thing off!!” When we have that epiphany, we start to dive into what's next for the Hill Family.
By my calculations, we'll have about $35,000 more each year (after taxes) to upgrade our lives.So … what to do with all of that money?
What are our planswhen the mortgage is paid off?
Vacation More
We live in Michigan. Our winters can be long and brutal. The first thing we put on our “mortgage freedom list” was to get out-of-town for a tropical vacation each winter. We've already got our winter 2018 trip planned! We're going to Puerto Vallarta, Mexico to celebrate my parents 50th wedding anniversary for a week in December. We're going to play with our kiddos on the beach, order poolside all-inclusive drinks and soak up some much-needed vitamin D. I can feel the sun now!
Each year, it could be somewhere different. Disneyland (through travel rewards) is on our list for 2018.
As our kids get older, we'll get more adventurous with skiing trips or European travel. Nicole and I are so excited to make these memories together with our kids. They'll remember these experiences for the rest of their lives.
How do the numbers break down?
$35,000 – $5,000 (additional vacation spending annually) = $30,000 left
Max Out Roth IRA
Last year was the first year we were able to max out our Roth IRAs at $5,500 each. We were able to do this because of an unexpected tax return and a bonus I received from work. Going forward, we'll have a lot more money available to ensure this is an annual part of our budget.By maxing out our Roth IRA accounts each year, we'll be rapidly increasingly our retirement savingsand taking advantage of tax-free growth.
How do the numbers break down?
$30,000 – $6,000 (additional annual Roth IRA allocation) = $24,000 left
Save For First Rental Property
One of our main goals after the mortgage is paid off is to increase our passive income. We like the idea of our money working for us instead of us constantly working for money. Rental real estate will be the first passive incomestrategy we'll be taking advantage of.Combining Nicole's excellent eye for design and my frugality super powers, the Hill Familyis bound for real estate success.
How do the numbers break down?
$24,000 – $20,000 (rental property annual savings) = $4,000 left
Increase Kid's College Funds
I've heard the cost of college tuition increases at 6% each year! How are we supposed to keep up with that!?
We've been funding Zoey and Calvin's 529 college funds since they were born, but I'm thinking we're going to fall short of the “recommended” savings requirement for a 4-year in state university. And honestly, we're totally okay with it. There are jobs our kids can get in college, scholarships they can earn, community colleges they can attend for a couple of years and if push comes to shove, student loans they can take out.
Nevertheless, we'll be slightly increasing our kid's college savings to help them combat the gigantic tuition bills in 2030.
How do the numbers break down?
$4,000 – $2,000 (additional annual 529allocation) = $2,000 left
Paying for college just got easier @ScholarshipSYS https://t.co/cMDcT8U61L
— Andy Hill (@AndyHillMKM) March 20, 2017
Give More
Last, but not least, we'll upgrade our giving as well. Right now, our giving centers around two children we've “adopted” through World Vision, a local family we sponsor for Christmas and our local church.
All of those areas of giving provideus great joy because we know we're truly helping people in need. We want to raise our kids tosee the importance of giving your time through volunteer work as well as giving financially.
How do the numbers break down?
$2,000 – $2,000 (annualdonationincrease) = $0 left
Only 7 more months to go until the mortgage is gone forever! This4-year journey of mortgage destructionmay be concluding, but a new chapter in our lives is just beginning.
I'm so excited to be stepping into this bright future with my best friend, my wife Nicole. Thanks for putting up with my frugal ways darling!
