This installment of our interview series shows the power of setting financial goals… and it’s even filled with a little surprise! So we’re excited to share it today. We’ll let Andee take it from here…
Tell us your story.
We bought a house in July of 2013. We had been working on a different big financial goal, and once we accomplished it we felt really good and decided we should use that motivation for something even bigger. We decided — with the help of some intense excel spreadsheets — that our next financial goal would be to pay off our mortgage in 4 years. Our goal was big, and frankly really scary. But we made a plan and just stuck to the plan and kept going. Our official beginning of the plan was January 2014. In 2014 we paid a little over $41,000 towards our mortgage. If we’d paid only the minimum required, we’d have paid $9,840. It was a big win for us! We had spent 52% of our taxable income on our mortgage, and we were able to live on less than half of what we made.
We knew we were on track and if we kept going our house would certainly be paid off by late summer 2017. One of our motivations was that once we got our house paid off, one of us could quit working and stay home with a future, imaginary baby. I had spreadsheets about the timing of that, too. Right after celebrating the success of 2014 we got a big surprise — we were going to have a baby in 2015.
So first things first, how were you able to save and put so much toward paying off your mortgage?
Once we decided that paying off our mortgage was our top financial priority, we set up a budget designed around this one goal. Once the budget was set, any money we earned above that was automatically put towards our house payments. The key to making a budget work for us was to have it be tight, but not unbearable. We don’t have cable or the internet, and only one of us has a smart phone. We budgeted only $70 a month for each of us for fun/personal money (clothes, eating out with friends, anything not somewhere else in the budget), which may sound like a lot to some people and like nothing to others. We both drive cars that are at least 10 years old. I think the main thing that made putting more than 50% of our take-home pay towards our mortgage possible was keeping the “why” in the front of us. I would cry joyful tears when I imagined how it would feel to stand in our yard and feel the grass under my feet and know that we owned every bit of it. Knowing and feeling the “why” of our goal was what kept us going. We would talk and daydream about how wonderful it would be when our house was paid off.
Congrats on your surprise baby! What expenses are you preparing for?
When we found out we were having a baby, we started saving money immediately. We need to save enough to cover my out-of-pocket max after insurance and the out-of-pocket max for the baby in case of unexpected medical expenses (i.e., a NICU stay). The absolute total we need to save for medical expenses is $5,710; mind you, this is a worse case scenario savings. We could end up not needing it all. Whatever we don’t end up needing will go to our mortgage. The other expense we need to save for is maternity/paternity leave. I will have five weeks of paid vacation by the time our baby gets here, so I will take that as 20 hours a week for 10 weeks, and then I’ll take an additional 2 weeks unpaid. We aren’t sure how much time my husband will take off work. Originally, we thought a week, and now with every month that passes I say, “Maybe you should take 2 weeks” or “Maybe you should take a month.” So we saved enough cash to cover our budget for three full months less than the vacation time I will get paid; we saved a little under $4,000 for our living expenses. This way, if we are completely overwhelmed and our life turns into newborn meltdown city, there will be no pressure for my husband to go back to work sooner than we can handle.
For actual baby things, I have been stuffing any cash left over from our monthly budget into a envelope labeled “baby”. I scour craigslist every day for the stuff we need. I’ve found the key to this is patience. I looked for a crib every day for four months on craigslist before I found one. But it was exactly what I wanted and was only $60.
What concerns do you now have about reaching your ultimate goal of paying off your mortgage?
I have a personality that tends to get easily discouraged when things don’t go according to plan, so a surprise baby left me feeling financially discouraged. We’ve set aside our mortgage payoff plan for three months while we saved money for the baby. And in the grand scheme of things, a three-month delay is nothing. My main concern is the cost of child care. Another $800 per month expense will derail our mortgage pay off plan a little every month, which will add up to another year of mortgage payments. It can be overwhelming to try to balance all the progress our incomes have made possible with trying to decide what is best for our baby. I know it’s a goal we will reach eventually, and my husband reminds me that even if it takes us five or six years instead of four years, we’re still doing something really difficult and worthwhile.
Any final words?
We didn’t wake up one day and say, “Hey, let’s pay $41,000 on our mortgage this year.” We had smaller financial goals along the way that helped us build up our discipline and tenacity. First, I paid off a car loan and then a student loan. Right after we got married, we paid off the last of my husband’s student loans. Then we decided to save $20,000 in a year — and even after doing all those small goals spread out over years, it was still scary to create such a large, audacious goal. Start with a goal that feels just a little beyond your reach and then stretch to meet it.
What an awesome accomplishment! When it comes to making the most of your money, goals are everything. We remember feeling some of Andee’s same worries before Sally was born, but somehow it all works itself out. And we promise that little bundle of joy will be well worth every extra month of mortgage payments (and then some!). Thanks for sharing your story, Andee! If you have any comments or questions for her, feel free to leave them in the comments below.