We paid off our mortgage on 3/15/13. I can't believe it's been 6 months now. It is so wonderful to owe no one anything!! I highly recommend paying off the mortgage (even though there is much debate about it).
We had champagne (the kids had shirley temples). We then went out to a hibachi restaurant for dinner. Normally, I won't go out w/o a coupon or a deal and we order pretty strategically (i.e. My daughter and I will share an adult meal). On this celebration night, all bets were off. Everyone got what they wanted (lobster, filet, apps, desserts) and we just went crazy celebrating.
Here is something I wrote for ourselves just to remember our journey....
We opened a $200K HELOC in August 2011. We used the funds to pay off our 15 year fixed rate mortgage. The interest rate on the HELOC was variable and it was quoted at 2.75%. Because of the poor economy, many people thought that interest rates would NOT go up in the next year to year and a half. We opened the HELOC with the goal of paying it off in 2.5 years (when our oldest daughter started middle school). Our plan was to allocate every spare dollar to the HELOC. Any money left over after necessities would be used to pay down HELOC. Assuming the rate minimally increased in 1.5-2 years after opening the HELOC, we calculated we would still be in better shape than if we stayed with our mortgage on our accelerated payment plan. We “rolled the dice” so to speak on interest rates staying low. My husband was out of work at the time…but we took a risk hoping he would be back to work soon.
Because DH was out of work for most of 2011, we had become pretty bare bones on our expenses. We focused mostly on buying “needs” as opposed to “wants” and quit going out to dinner unless it was a birthday or special occasion (for example: report card dinners). When we did go out for dinner, we made sure we had a coupon. DH went back to work in October 2011. We continued on our fiscally responsible journey and really saved as much as we could. Having said that, one area we agreed to not scrimp on was vacations. Vacations are lifetime memories…and we will never get these years with the kids back. So, we still spent on long weekends and vacations. Other than travel, we really delayed any unnecessary spend. We seriously stopped buying clothes and household things. We needed new towels so badly in the end…but that purchase was delayed until the HELOC was paid off. Yes, our towels were fraying…but, they still dried our bodies!! People can get caught up in the needs vs. wants and argue the semantics…but if you are committed to debt reduction, you truly know what you need to live. Groceries and gas are two things…manicures and movies are not.
We did some things many folks might not agree with to pay down the debt so quickly…but, once that “payoff the HELOC” ball started rolling, we couldn’t hold it back. For example, we cut the amount we save for the kid’s college fund from $500 a month to $100 a month. We also sold some investments that we had inherited. They didn’t amount to much ($1,500 in total), but every bit helps. I changed my 401K contribution to just 6% (I didn’t want to lose my employer match). DH’s 401K was actually increased to max out the annual contribution since he had money to make up after being out of work most of 2011.
We also sold junk on Craig’s List. We had always sold the kids stuff that they grew out of in the past…but, this time we got more serious and actually “looked” for things in our home that we did not want or need. I became more diligent about couponing and spent less in the grocery store. I planned meals around what was on sale as opposed to what the kids were bugging for. We joined a farm share. We paid money up front, but that entitled us to fresh, organic fruits and veggies each week from April to December. One great bonus is that we all became healthier eaters! I love to run…but running shoes and races can be costly. I started working as a coach at my local running store. While the position was unpaid, I was compensated with free shoes, free race entry fees, and other free goods (shirts, food, etc). It was a win-win…I got to continue a hobby I enjoyed and save money by not having to buy her own sneakers.
So, what was the big motivating factor…why did we do it?
Quite simply…peace of mind. When DH was out of work, it was stressful for me to think about what would happen if I lost my job, too. We hated having a big mortgage over our head and the stress that came with it. We had no other debt other than the mortgage…and we liked the freedom of only having one “bill” to be responsible for each month. If we liked that freedom, imagine how we would feel with no debt!!! People say we will be sorry come tax time. We don’t think people understand taxes when they say that. Why would we want to spend $1 in interest to save $.33 in taxes.
We think we live in a society that spends far too much. People live beyond their means to keep up with the “Jones” and to impress others. As we mentioned, we are pretty much followers of Suze Orman’s philosophy. We stand in our truth. We know what income comes in, we know what expenses go out, and we manage it to the penny. We don’t buy things we can’t afford to pay cash for. Only one letter separates owing and owning…but they are two very different concepts!
It’s our goal to remain debt free for life. Cars will be purchased with cash only when we have enough saved. We will maintain an 8-month emergency fund. We will bump up my retirement savings to max it out and increase the kids’ college savings as well now that the HELOC is paid.
Will we go out to eat a bit more and buy some new stuff now that the debt is done (towels were purchased within a week of payoff!!!)? SURE…but, I bet we will be back to our fiscally responsible lifestyle within a month or two. That’s just who we are.
