Lately I’ve been seeing quotes about keeping track of the company you keep; usually the one that says you are the average of the 5 people you surround yourself with. I had always thought of myself as an independent thinker and maybe, even, a mild rebel. However, I realize that I am absolutely not as independent-minded as I think (wish?) I were. And that is how I find myself paying off my mortgage.
How did this start? I ask myself.
I remember hearing about mortgage burning parties when I was in college, when several parents of my friends had some. They were old, though; that was a thing for older people with grown children, not me. [Sadly, I think I’m older now than they were then. That’s another story.]
I heard more about getting rid of the mortgage in the context of Dave Ramsey and his program for becoming debt-free. People in huge amounts of debt would follow his plan and get rid of all their debt: not only credit cards and student loans, but mortgages too. That was nice, I thought, but I don’t have credit card debt. Or student debt anymore. My mortgage rate is nice and low, at 4.5%. Heck, I remember seeing mortgage rates in the ’90s, and thinking that getting under 7% was awesome! Why would I pay that money off early when I could invest in the stock market and likely get a better return on my money?
After hanging around on personal finance sites, I was even thinking about the power of inflation. That is to say, paying $1000 now is more painful than paying $1000 in 10 years. Not because I get to put off paying my debt for 10 years, but because–thanks to inflation–in ten years, $1000 will be worth less. About the same as $744 now, if you think inflation will run 3%.
These are all reasons to let the mortgage run its full course. Just pay my bit every month for 30 years, and at the end, I own my house. Of course, I’ll be over 70 by that time, and maybe I won’t want to be working and bringing in the dough those last few years.
On the other hand, I knew when I bought my house that the power of interest is pretty compelling. For a loan of $100,000, borrowed at 4.5%, I’d pay $87,407 in interest for the privilege of borrowing that money. Making extra payments reduces the interest I pay over time, in addition to helping me end my mortgage before I want to claim Social Security.
Given this abbreviated version of the pros and cons of paying off the mortgage, how did I go from rounding up my mortgage check to going full tilt to kill this sucker?
First, my college friend who works in tech told me she was paying off her house. I thought, that’s nice. Her house cost less than mine. My mortgage is huge, and will take forever to pay off. I’ll wait. Then she bought a brand new car, for cash.
A year later, another friend, a physician, paid off her house. Soon after, she and her spouse went on an international trip. Coincidence? I think not.
The three of us sometimes hang out together, usually chatting over warm beverages and baked goods on a weekend. It was strange to find myself in the minority, at least as far as mortgage status.
It’s not that my friends were pushing me to pay down the mortgage. But having their examples before me made me realize it could be done. Seeing what the extra cash flow could do for me was intriguing, as was the thought of being able to cut back on work once the obligation to pay off the mortgage was gone.
I’m now in my 4th year of paying down my mortgage aggressively. Some months I’m just rounding up the payment, but I’ve also dug up some big sums: car funds, bonuses, accumulated “hidden savings” that were taken off the top of my monthly check. Though I’m in a hurry to have this project done, when I look back at my statements, I can’t believe how quickly the pay off accelerated. I think this is part of what gave me the confidence to take a pay cut this year, to work on getting some work-life balance back.
All this happened because I had examples before me of people who had managed this seemingly Herculean-task. I feel very lucky in my friends–mostly because they are awesome people, but also because they inspired me to try this myself.
To me, this underlines the importance of surrounding yourself with people who will inspire you to do things you feel are worthwhile. Pay off a mortgage, or work on fitness, learn new skills, be good people. I shudder to think what I might end up doing if my friends were all about buying the latest in clothing, purses, and/or new cars every 3 years.
I guess if I’m not going to be a rebel, I should pick friends who make the best crowd possible to run with.
What kind of crowd do you run with financially? Do you find yourself swayed by their examples, or do you hold firm to your plans? Do you hear your parent reciting that old bromide “if everyone else was jumping off a bridge, would you do it, too?”