What Our Mortgage Freedom Looks Like at 35

What Our Mortgage Freedom Looks Like at 35

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The home mortgage is quite often the largest expense in your typical annual budget. Since your mortgage eats up such a huge chunk of your monthly income, completely ridding yourself of it could be quite freeing.

My wife Nicole and I completely agree with this sentiment of mortgage freedom. We’re just not interested in having a mortgage anymore. So, we’re getting rid of it.

In 2013, our goal was to have the mortgage on our newly purchased $350,000 house paid off in less than 5 years. By following these 6 nerdy money guy rules, we’d be completely debt and mortgage free by the time we turned 36 years old.

Fast forward to today, our mortgage balance sits at $33,069.20 and we’re on target to completely pay it off by December 2017. That’s 1-year ahead of schedule! Mortgage free by 35!

April Mortgage Statement
Our April Mortgage Statement. Now I’m excited to get my mortgage bills!

We’re thrilled to see the principal balance continue to drop rapidly each month. Each time we see a smaller and smaller number, Nicole and I look at each other and say, “Wait a second … We’re actually going to pay this thing off!!” When we have that epiphany, we start to dive into what’s next for the Hill Family.

By my calculations, we’ll have about $35,000 more each year (after taxes) to upgrade our lives. So … what to do with all of that money?

What are our plans when the mortgage is paid off?

Vacation More

We live in Michigan. Our winters can be long and brutal. The first thing we put on our “mortgage freedom list” was to get out-of-town for a tropical vacation each winter. We’ve already got our winter 2018 trip planned! We’re going to Puerto Vallarta, Mexico to celebrate my parents 50th wedding anniversary for a week in December. We’re going to play with our kiddos on the beach, order poolside all-inclusive drinks and soak up some much-needed vitamin D. I can feel the sun now!

Each year, it could be somewhere different. Disneyland (through travel rewards) is on our list for 2018.

As our kids get older, we’ll get more adventurous with skiing trips or European travel. Nicole and I are so excited to make these memories together with our kids. They’ll remember these experiences for the rest of their lives.

How do the numbers break down?

$35,000 – $5,000 (additional vacation spending annually) = $30,000 left

Max Out Roth IRA

Last year was the first year we were able to max out our Roth IRAs at $5,500 each. We were able to do this because of an unexpected tax return and a bonus I received from work. Going forward, we’ll have a lot more money available to ensure this is an annual part of our budget. By maxing out our Roth IRA accounts each year, we’ll be rapidly increasingly our retirement savings and taking advantage of tax-free growth.

How do the numbers break down?

$30,000 – $6,000 (additional annual Roth IRA allocation) = $24,000 left

Save For First Rental Property

One of our main goals after the mortgage is paid off is to increase our passive income. We like the idea of our money working for us instead of us constantly working for money. Rental real estate will be the first passive income strategy we’ll be taking advantage of. Combining Nicole’s excellent eye for design and my frugality super powers, the Hill Family is bound for real estate success.

How do the numbers break down?

$24,000 – $20,000 (rental property annual savings) = $4,000 left

Increase Kid’s College Funds

I’ve heard the cost of college tuition increases at 6% each year! How are we supposed to keep up with that!?

We’ve been funding Zoey and Calvin’s 529 college funds since they were born, but I’m thinking we’re going to fall short of the “recommended” savings requirement for a 4-year in state university. And honestly, we’re totally okay with it. There are jobs our kids can get in college, scholarships they can earn, community colleges they can attend for a couple of years and if push comes to shove, student loans they can take out.

Nevertheless, we’ll be slightly increasing our kid’s college savings to help them combat the gigantic tuition bills in 2030.

How do the numbers break down?

$4,000 – $2,000 (additional annual 529 allocation) = $2,000 left

Give More

Last, but not least, we’ll upgrade our giving as well. Right now, our giving centers around two children we’ve “adopted” through World Vision, a local family we sponsor for Christmas and our local church.

All of those areas of giving provide us great joy because we know we’re truly helping people in need. We want to raise our kids to see the importance of giving your time through volunteer work as well as giving financially.

How do the numbers break down?

$2,000 – $2,000 (annual donation increase) = $0 left

Only 7 more months to go until the mortgage is gone forever! This 4-year journey of mortgage destruction may be concluding, but a new chapter in our lives is just beginning.

I’m so excited to be stepping into this bright future with my best friend, my wife Nicole. Thanks for putting up with my frugal ways darling!


What would you do with $35,000 extra each year?

Please let me know in the comments below!


 

Author: Andy Hill

Andy Hill, a mid-30’s father of two living in the metro Detroit area, pens the MarriageKidsandMoney.com (MKM) blog taking you through the trials and tribulations of being a young parent and husband who is planning for his family’s future and winning with money.

13 thoughts on “What Our Mortgage Freedom Looks Like at 35”

  1. I love the detailed plan for where the money will go after you reach mortgage freedom! So are you saving to pay cash for the rental properties or get mortgages? Had to ask, ha! I’ve been helping an elderly woman with her taxes this year and she’s shared a lot of insight with me about investing in rental properties (she shared stories of drug-dealing tenants in Pontiac and more). Even with all the bad experiences she’s had over the 30-40 years of owning her rentals, she still says it was all worth it. I personally do not enjoy having a rental property (we have one), but I can see how it can be beneficial in the long-run. If we were ever to invest in more rentals, I would insist on a phenomenal property manager and make sure we had better contacts for repairs lined up. Dealing with rental/tenant issues can be really frustrating when you’re already busy with a job and young kids (that’s my two-cents for what it’s worth!).
    If this was my list I would have vacationing more on the very top, just like you. We’ve pushed travel to the bottom of our priority list while we’ve been renovating our home, but after two long Michigan winters, it’s getting back up to the top of my list now.

    1. Yes, Vacations are #1! I hope you travel somewhere awesome with those three kiddos soon (or without them for that matter!).

      I’ve volleyed back and forth about whether we leverage properties (Rich Dad, Poor Dad) or we go continue the debt free lifestyle (Dave Ramsey, Total Money Makeover). I think it’ll be difficult for us to go back to debt once we’re completely out. I will probably have a bad vomit reflex if I have to sign anymore mortgage documents.

      In the beginning, we’ll do a lot of the rental property management ourselves. Overtime, we’ll hire a property management company to support us. I can see it being rough with little kids. We won’t have enough cash saved up until our kids are all in elementary school so hopefully that’ll give us more of our lives back. Who knows? It’ll be some trial and error, but it’ll be a fun adventure for my wife and I.

      Thanks for the good feedback, as always!

      1. I look forward to seeing how it all ends up! But yes, I’d like to be reading about you finally paying off that last bit of mortgage debt while I’m sitting on the beach sipping lemonade later this year. 😉

  2. Are you me? I’m not too sure you’re not me after reading this. I’m turning 35 in May. I live in Michigan in the metro Detroit area. My wife and I just paid off our mortgage this month. We have two young kids (both boys, however). I struggled with taking the cash and leveraging it vs. paying off the mortgage. Hell, we even own a Vitamix from Costco. I think you probably look better in a yellow sweater.

    1. Best comment ever! Wait a second … how do I know you’re not me?!

      Congrats on paying off your mortgage. I’m looking forward to tasting that debt freedom soon.

      I’m with you on the “leverage vs. pay off the mortgage” conundrum. I could probably make more in the stock market, but I’ve heard that the freedom of no mortgage is pretty spectacular …

      Vitamix, 35, two kids, metro Detroit, no mortgage – you’re a winner in my book buddy. But then, am I just complimenting myself then?

  3. Congratulations on being on track to pay off your house by the time you guys turn 35! That’s very impressive and inspiring. My husband and I were just discussing if we could pay off our house by the time we’re 40 and it’s sounding more and more possible and enticing as the days pass. Your mortgage free list of things to do also sounds a lot like what we said we would wanted to do after we pay off our house. We even discussed spending $5K on vacation! Haha

    1. Thanks for the encouragement Kim! We’re nearly there! One thing I forgot to mention is allocating money my wife’s “decorate the house” fund. She’s pumped! Best of luck with combating your mortgage Kim!

      1. Oh goodness! If I tell my husband that your wife agreed to waiting to decorate the house until after y’all paid off your mortgage… He will never let me live it down! LoL. We bought a fixer-upper and we both agreed (me being the one pushing more for it) that we would update it before trying to pay it off. We’re still making compromises along the way though because being mortgage free is sounding more and more appealing!

        1. Oh, she’s definitely been decorating the house quite a bit already. She definitely would not have agreed to the early mortgage pay off with no money to decorate. She’ll just have MORE cash to decorate in January. She’s been very thrifty with it though. She does a lot of Craigslisting, repositioning furniture and waiting to buy bigger items until they are on sale. I love her frugalness!

  4. Andy, can you talk to me about your thinking regarding your Roth IRAs. The fact that you can invest in these tells me that you are not “super earners,” and yet for my wife and me here in Seattle, WA, our giving is our first priority, our mortgage is our second priority, and maxing out our Roth IRA’s is our third priority. When I think about investing vs debt, I tend to think about the Roth a bit differently than other platforms only because elapsed time is not something you can make up (both in the sense that you cannot make up for lost investment time AND the fact that $5,500 today is worth less than that $5,500 was worth one year ago). As such, I tend to prioritize our Roth’s above extra payments against our mortgage.

    I would love to hear your thoughts on why you have chosen to do it differently. Thanks.

    1. Thanks for the comment Jeremie! Over the past year, I’ve learned a lot. Our original plan was to contribute 15% of our income to our retirement. After more research, we decided that maxing out both the 401k at my job and both our Roth IRAs was smarter for long term investing. We were lucky enough to do that for the 2016 tax year with a bonus I received from work. For 2017, it is now planned into our monthly numbers (just in case the bonus doesn’t come through again).

      To your question on my thoughts on why I prioritized my mortgage payments first originally … I thought our overall monthly spending was bonkers. I’d like our family to reach financial independence in the next 5-7 years. Without a mortgage payment, our annual spending will become more reasonable (around $60k per year).

      I hope that helps! Thanks again for the comment.

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