The 72,850 Lb Elephant In Our House

The Borrower is Slave to the Lender   -Proverbs 22:7

This month we are living with a 72,850 lb elephant.  In previous months he's been larger, but we've put him on a strict diet and he's really coming down in size.  His name, "Morty"...short for mortgage.

If you've read any of my previous blogs, you probably know that Brittany and I have been Debt Free except for our mortgage since March 2007.  When we graduated college in December 2006, we decided to blaze as far through Dave Ramsey's Baby Steps as fast as we possibly could.  Here's a quick rundown:

Baby Step #1:  $1,000 Starter Emergency Fund - We had this prior to graduating college

Baby Step #2:  Debt Snowball - Paid off our only debt ($12,000 student loan) in 2 months

Baby Step #3:  3-6 Month Emergency Fund - Saved $10,000 in about 6 months

Baby Step #4:  Invest 15% for Retirement - Started this immediately after Baby Step 3B (see below)

Baby Step #5:  College Funding - No kids at the time (now we fund our 2 kid's college savings)

Baby Step #6:  Pay Off Home Early - This is where we currently are

Baby Step #7:  Build Wealth and Give - This is where we're heading

When we completed Baby Step #3 (3-6 Month Emergency Fund), we were renting a little two bedroom apartment and were ready to save toward purchasing a house.  Brittany was REALLY ready.  She hated our apartment.  We chose to use the Baby Step #3B option of saving a down payment for a house.  In February 2008 we purchased our first home.  A great little 1,400 square foot house for $131,000.  

At this point we did something I really regret.  We took our foot nearly completely off the accelerator and put our life on cruise.  Yes, we did the smart thing by getting a 15 year mortgage, but we weren't intentional nor intense about paying it off sooner.  

Fast forward to July 2012.  A lot has changed!  With the addition of our second child, we decided that we would like a larger house.  We sold our 1,400 square foot home for $140,000 and rolled our equity into a 2,300 square foot home we purchased for $179,900.  This left us with a mortgage ("Morty" the elephant) of $130,000.  With the purchase of the new house, we decided to once again be both intentional and intense about paying off the mortgage.  It was time to get rid of "Morty" for good.

We've been in our house now for 21 months and "Morty" has been on a consistent diet of low interest and big, honkin' principal payments.  He is down to 72,850 lbs and we are giving him a stricter and stricter diet in order to get him OUT forever.  Our goal as of now is to have his bags packed and kick him out by November 2015.

Here's where you come in.  We need your encouragement.  When you are pushing as hard as we're pushing, sometimes it's easy to get discouraged or lose hope.  Leave your comments of encouragement, telling us we're crazy, telling us you don't care or whatever else you'd like to say.  I will be creating a new updated blog every month after we make our big, honkin' payment to keep you guys updated on our progress, wins and struggles.  

Again, leave us a comment so we know we're not crazy or reinforce that we are!

Four Options

When it comes to your finances, we all fall into one of four categories.  Without exception, you fall into one of these four.

 

1.  Broke and Getting Broker

       Common in our world today is the idea of "just getting by."  7 out of 10 families are living a cycle of paycheck to paycheck.  Their mantra is "Thank God it's Friday...Oh God it's Monday."  These are the folks who accept average (debt is normal, "you're always going to have a car payment," build your credit score by using debt, etc) and are dooming themselves to financial mediocrity for the rest of their lives. 

 

       Some of the people in this category may look like they are doing great (two new cars, a nice house in a nice neighborhood, kids in private school, etc), but the truth is they are struggling with a large mortgage payment, car payments, 10+ year old student loan payments, credit card debt and stress.  The saying, "Don't judge a book by it's cover" comes to mind.

 

2.  Broke and Getting Richer

       Nearly 80% of America's millionaires are first generation rich.  This means that they started out like most of us, broke, and made smart decisions with their money.  They listened to the council of people who were winning with money, took these principles and started living them.  They naturally begin to win in the area of their finances by living on a budget, getting out and staying out of debt and saving/investing for future needs. 

 

       These people may seem a little weird sometimes because they may be driving cars that may not be as new as yours.  They may bring their lunch to work instead of eating out every day.  They may talk about a BUDGET in a positive sense.  You know them...Heck I'm one of them.  We are currently working our tails off to pay off our house so we'll be 100% DEBT FREE!  ONLY 17 MONTHS TO GO!!!

 

3.  Rich and Getting Broker

       The wealthy are not immune to the math that is involved with stupid money decisions.  The very dangerous part of being in this category is that it may take a while to feel the STING of the bad decisions that are being made because the money is there to cover the misbehavior in the beginning.  Sooner or later, though, that safety net will disappear and you'll finally see the mess you've made.  Any rich person who starts playing around with the scum bags at the title pawn/check advance places, playing the stock market with day trading or numerous other bad decisions will soon be headed toward the type of life they are emulating, the broke.

 

       Think about the statistics of lottery winners.  There are numerous stories of families winning millions of dollars by buying a $1 lottery ticket (most of us would call that "life changing money") and being completely broke and even filing for bankruptcy a year or so later.

 

4.  Rich and Getting Richer

       Most of these people are not what you'd think.  I know a lot of you may think of actors or musicians getting paid millions per year, but the vast majority of the people in this category are "regular people" you wouldn't know were rich just by looking at them.  They may be a  small business owner or just plain old hard working team members.  Most of these people don't live in mansions, drive Maserati's and fly around on private jets.  Why?  Because they don't care what YOU think.  They've made good decisions with their money throughout their lives and now are enjoying the rewards of those decisions.

Which one of these categories do you fall into?  Do you like the one you're in?  There's good news!!!  You can make changes today that will begin the path to a new category.