My wife and I made it a goal to pay off our home in our mid-thirties and it took a while for it to fully sink in when we accomplished our goal. It was a wonderful feeling to know that the bank no longer owned our home. It gives me great satisfaction to know that my wife and children will be able to stay in our home should something happen to me. The weight that is lifted off of you when you don’t owe anything to anyone is amazing. The sense of freedom you experience when car payments, student loan payments and mortgage payments are in your rear view mirror is something else.
There is a mathematical argument for taking more risks with investments when you are young and going for a higher rate of return than you can get by paying off your mortgage. You don’t have to be a financial nerd like myself to see that a 10%+ return in the stock market is better than paying off a mortgage with a 4% interest rate from a purely mathematical standpoint. The truth is, that a lot of folks who buy into the mathematical argument either underestimate risk or don’t actually invest the funds they would otherwise put on their mortgage. It is hard to spend year after year making extra payments on your debt when it seems like everyone around you is putting their extra income into consumption/lifestyle. Although it is not for everyone, we certainly do not regret going down that path.
So how did we pay off our student loans and mortgage by 35?
- We worked hard to avoid “lifestyle creep”. I’ve been very blessed to have worked in prestigious law firms. A very nice income is a huge asset when you are paying off debt. When we went from being poor college students to having a nice income we noticed that most of our friends that also had nice incomes wanted a prestigious law firm lifestyle. The “normal” thing for a new lawyer with undergrad and law school debt to do after joining a law firm and making a nice salary is to go sign up for more car debt, get as nice of a home as they can afford and invest heavily in their lifestyle and appearances. When you have sacrificed to “make it big” it is easy to justify spending thousands of dollars on clothes, amazing vacations etc. It is easy to justify buying timeshares, joining cruise clubs, and generally paying for a lifestyle that shows you have arrived. My friends who enjoy a very high standard of living have a lot of fun and some of them have made a calculated and intentional decision that they will never make a serious effort to pay off debt. That may be fine for them, but something that is very important to me is having a lifestyle that is easily sustainable because it gives me so many more options for the kinds of things I want to do…such as helping others pay off their debt that desire to do so, allowing my wife to be a stay-at-home mom and spending more time with my children than I could otherwise.
- We have thick skins. Sure, we got made fun of from time to time for not “living like a lawyer” or “living like an attorneys wife”…but we had a goal that was more important to us than what other people thought.
- We sold stuff. While we were working hard to pay off debt we didn’t keep many of our difficult to sell assets – we found ways to get them sold, even if it didn’t seem like there was a market. We got creative in figuring out ways to find the value and markets for assets such as small real estate notes, small non-producing mineral interests and undivided interests in real estate and minority interests in closely held entities. It can take a huge amount of time and effort, but finding a way to sell your stuff that most people don’t want to buy can help create cash to pay off debt or fund your own dreams or needs. So now we have a side business helping people do just that.
- We were blessed. Financial challenges during the time we were working to pay off our debt included the birth of three children, large unexpected medical expenses and going from a two income household to a one income household. Despite a few setbacks, we were blessed in having a good income and not having any catastrophes. Lady Luck certainly has a role in meeting any goal. One thing that helped us avoid small road blocks becoming bigger obstacles, was our commitment to always keeping an emergency fund of 3 to 6 months of expenses.
We have been very fortunate to be able to meet our goal of becoming debt free at a relatively early age. It may not be for everyone but it was a very rewarding and worthwhile goal for us.