Written By: Valerie L. Richter
What if I told you it was possible to pay off your home mortgage early? Strange thought? YES! But it IS possible! Imagine your life with absolutely NO debt…what could you do with that money? How could you be blessed and bless others? Now is the time to start planning for that day and optimistically look forward to a comfortable retirement.
Look forward to a comfortable retirement!
If you have been following the blogs on this site, Meaningful Journey, you have already learned how to do a monthly zero-based budget, utilize the debt snowball and eliminate non-mortgage debt. The next security step in your financial plan is to save 3-6 months of EXPENSES. These are the basics: food, shelter, utilities, transportation and clothing. For example, if a family needs $5000 for basic expenses, they will need to save $15,000-$30,000. Financial expert, Dave Ramsey, recommends that this emergency money be put into a money market account or savings account. These funds can be easily accessed for true emergencies. Once those funds are securely in place, you can now invest in your retirement and start paying off that mortgage early!
Start paying off that mortgage early!
It is important to note that when buying a home in the first place, you should do one of two things as suggested by Dave Ramsey: Pay 100% cash for the home (or) get a 10 or 15 year mortgage with 20% down; never get a 30-year mortgage. If you are not able to do so, then you are not ready to purchase a home.
Ramsey also suggests that your monthly house payment be NO MORE than 25% of your monthly income. So, if you are currently in a 30-year mortgage, have a significant amount to pay on that mortgage, and the interest rates are low enough, it may be prudent to refinance the mortgage into a 10-year or 15-year mortgage. This will save you hundreds in interest! But before we get into paying off the mortgage early, let’s talk about the next step.
Put 15% of your monthly income into retirement investment vehicles.
Now that you’ve paid off all non-mortgage debt, the next step is to start making a plan for retirement. Dave Ramsey suggests that you put 15% of your monthly income into retirement investment vehicles. These are simply your 401K (or other plans offered through your employer), Roth IRA and IRA. These will be your steady retirement investments every month. If you have questions about these kinds of investment vehicles, you can contact one of Dave Ramsey’s ELPs (Endorsed Local Providers) for free. These providers have “the heart of a teacher”, so they will not make you feel silly for asking any type of question. They are there to help. https://www.daveramsey.com/elp?ictid=tp.nav&snid=recommends.elps
We will pay off a 15 year mortgage in 7 years!
As you are putting 15% of your income into retirement, you now have the freedom to save for college tuitions (children/grandchildren) and/or pay off the mortgage early! Aggressively pay down the mortgage every month with the amount left over from the last debt snowball payment minus the amount needed for the 15% retirement amount. You should be able to pay off that mortgage A LOT earlier than you ever thought was possible! Speaking from personal experience, we will be able to pay a 15-year mortgage (which we began by refinancing three years ago), in a TOTAL of SEVEN YEARS! That is A LOT of interest saved! Plus, we were able to help pay college tuitions for our three children (Rebecca Richter-Cole, our daughter, pictured below).
Once your home is 100% owned by YOU (doesn’t that sound good?), you can delve more into additional investments above and beyond the initial 15% you are currently putting into retirement. Again, Dave Ramsey’s ELPs are a great resource for investing.
For more information on principles discussed in this blog, I highly recommend the book, Dave Ramsey’s Complete Guide to Money, past blogs on wordpress.com/post/meaningfuljourneysite.wordpress.com, Dave Ramsey’s Radio Show (airs every weekday) https://www.daveramsey.com/show/home/?snid=show and Chris Hogan’s retirement calculator https://www.daveramsey.com/smartvestor/investment-calculator.
Keep on keeping on in your quest to become completely debt free so “You can live and give like no one else”!
Meaningful Journey 