Tuesday, July 19, 2016

Money Talk: Being Debt Free at 27

This is a topic I’ve hesitated to write much about because it feels a little braggy.  We did get a few lucky breaks in being able to pay off our mortgage in 5 years but we also made sacrifices and many choices that allowed it to happen.  The fact is that we paid off our mortgage, the only debt we had at the time, at 27 and haven’t had any loans since.  Any.  To start with some of our lucky breaks:

-Very little college debt-
Both our parents had similar plans: give us a set amount for college and anything over was our responsibility.  For Matt, going through a 3 year program in town and living with his parents that whole time, that meant his tuition and fees were completely under what his parents were offering to pay.  For me, going to college out of state for 4 years, living in the dorms and an apartment, I had a little bit of debt.  $15,360 to be exact.  We had that paid off 2 1/2 years after I graduated.  If Matt had gone away for school or either of us had immediately continued past our initial degrees we probably would have accrued more debt and had a later start on earning actual money.

-Winning a raffle-
A few months before we actually paid off the mortgage, we won $5,000 off a $100 raffle ticket.  Now, after paying taxes (Federal and Indiana), tithing, and taking our parents out for a nice supper (where I’m pretty sure they thought we were going to have a baby announcement…oops), that left us with about $3,500 to put against the mortgage.  Not an insignificant amount, for sure, but also, if that amount would have paid off our mortgage we we would have been pretty darn close already.  As it was, it sped up our payoff by a few months but we still would have paid it off soon regardless.

-The no kids thing-
It’s hard to see the blessings in this but being more financially secure is definitely one of them.  If we had kids shortly after getting married, or even just a few years earlier, I would have started staying home sooner which would have meant loosing my income sooner.  It also means we would probably have outgrown our “starter” house by now.   We had paid off the mortgage almost exactly two years before Luke came home which means kids certainly could have come earlier but if they had been in the first 5 years of our marriage I’m not sure we’d be debt free now.

All those things certainly helped us climb out of debt, much sooner than most.  But those things, alone in a vacuum, wouldn’t have done it.  We did make choices along the way and made paying down all our debt (student loans and mortgage) a priority.  We live a decently frugal life which is largely what helped us be debt free by 30.

-Buying a small house (and staying in it)-
We bought a definite starter house.  Our house is not one you would buy with children, besides possible empty nesters.  Our house is 1200 square feet and was under $100k.  We’ve watched enough House Hunters to know we live in a very affordable area but bigger and more expensive houses definitely exist here too.   We were pre-approved for a higher mortgage but wanted something we knew we could easily afford on one income (knowing I’d be staying at home once we had kids).  And as soon as I saw a picture of our house we knew it was “the one”.  I didn’t even have that instant of a reaction to meeting Matt!  Only one kid in ten years certainly helps and also wasn’t where we thought we would be, ten years into our marriage.   If we had the ~4 kids we thought we would have by now, we would have had to move already.  Now, we are hoping to make it here another 5 years and have plans for how we can fit in 3 kids (as in, Luke and two more).  We’ll see if those hold if we get two more kids but for now, that’s the plan.  (Living "free" is hard to give up.)

-Living Off One Income-
We didn't consciously do this when we were first married but once we became serious about paying down the mortgage, we made extra mortgage payments each month with my entire income, as well as the normal monthly payment out of Matt's (we've had a joint bank account since being engaged but I just added up all my paychecks for the month and made that as an extra payment).  This didn't completely work because we were still occasionally living like we had two incomes (vacations...) but it did get the mortgage paid off!

-DIY It-
I find it slightly ironic/humorous that we DIY almost everything we easily can but “outsource” the one thing most people do themselves (babies).  But besides that, we DIY a whole lot of projects around here.  That usually gives us higher quality, more custom items for less money.  I can count on one hand the number of house things we’ve hired out (other than paying family, mainly Matt’s older nephews): installing carpet, new big garage door, poured concrete pad, and two AC repairs.  A lot of other projects, from house things to Matt building furniture, to my sewing, we DIY.

-Budgeting, and sticking to it-
I've mentioned this multiple times but we do keep a budget, record all our expenses, and mostly stick to the budget.  I don't look at it as being limited, but rather being proactive about where our money goes, making sure too much of it doesn't go where we don't want it.

-Being Frugal, Really Frugal-
That's really the bulk of it.  I've realized we don't spend money like many other people, although I also know people who are even better at saving/not spending than us!  I've talked about our savings & splurges before and often mention our allowance system.  We were frugal when we were paying off the mortgage but I'd say even more so now.  We just try not to spend money and get by with what we have.  Of course, there are probably many examples to the contrary, we aren't perfect at all!  But we do still live under our means, even saving for our next house! 

It's hard to think about how we paid off the mortgage because this frugal living has been so ingrained in both of us.  Coming from large families, we were both raised by frugal parents who taught us the same.  So much of this not spending/making due/fixing instead of buying comes from what we saw our parents do as we were growing up.  Neither of us ate out at restaurants a lot as kids.  We both grew up going to the library.  We both have parents who shop sales and do DIY.  I lived in hand me down; Matt still has some of his hand me downs.  I hope we can pass all these same lessons onto Luke!

It's also worth mentioning that neither of our parents had a mortgage for most or all of our growing up years (and still don't).  I was never taught that debt was a necessary part of living, in fact, the opposite!  I've heard people say something along the lines of "Why not borrow money when it's so cheap!" something that makes me cringe, very much.  That's the exact opposite of how we were raised.  Instead of that, how about "Why not pay off the mortgage/car loan/student loan?".  Sure, it's not possible for everyone due to varying life circumstances, but it might be more possible than you think.

I gotta say, living for "free" is pretty dang nice.  Being able to save for our next house so we can (hopefully) buy it with just the proceeds from this house and cash?  Also, very very nice.  Having some extra money in the bank?  Very very very nice.  Most definitely worth every sacrifice we've made along the way.

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