We did a thing a few weeks ago … we submitted the final mortgage payment on 1 of 3 homes that we own. It was such an incredible feeling to accomplish something that I used to think would take the life of the loan to pay off. To bring you up to speed if you are new here, we own 3 properties, 2 of them we use as rentals and the other is our primary residence. We started buying rental properties at the end of 2017 when we sold our home in Houston and moved back to Dallas, TX.
In order to prepare our finances for purchasing rentals and be able to have proper debt to income ratio, we rented for 2 years while saving to purchase our first investment properties. I should note that this was easily the most humbling experience of my life to go from living in a gorgeous home in a beautiful neighborhood to a less than glamorous 2 bedroom/2 bath apartment.
Everyone around me appeared to be thriving – buying big homes and getting new luxury cars, and while I knew that I had a good job with a great salary, I didn’t have anything material to show for it. This period of time really taught me a lot about myself and was much needed in learning how to disconnect wealth from “having things.”
I should note that we do not consider ourselves “wealthy” … (yet!) and we do not come from wealth, but we are working really hard to build a life that creates generational wealth for our family. We are currently on the road to our first million dollars in net worth and each time we pay off an asset we get closer and closer!
So how did we pay off one of our homes in 3 years? And is this something you can do too? Let’s dive in.
First off, to answer the latter question … yes, you can totally do it too. There is no magic to this really; it is all about discipline and planning. I admittedly struggle with seeing the long term goal when everyone and everything around me is conditioned to spend, spend, spend. I am so grateful for my husband’s financial savviness and clear vision, because accomplishing our goals definitely wasn’t driven by me initially.
5 Things We Did To Pay Off Our Home in 3 Years:
1. We Got Serious About Personal Financial Education and Literacy.
We (well mainly my husband but I’m getting there) is a glutton for information, especially when it comes to money. Once we started learning more about lending and mortgages you really start to understand why banks want to loan you so much money over a long period of time. Guess what?! It’s not because they like you lol. Learn what is the best financial outcome for you in a transaction, not what the lender is selling you. What amount of interest will you pay over the life of a loan? What is the amortization schedule of the loan? How much am I willing to pay with my long term financial goal in mind vs. how much can I afford?
2. We set very clear goals for our finances to set up where we want to be financially.
Where do you want to be in 10 – 30 years? Debt Free? Mortgage Free? Financially Free? Get rid of your 9-5? Be A Millionaire? Be a Billionaire? We decided we wanted to build our net worth to be in the 1% of households for our age group throughout our life. This is a moving target and keeps us motivated. This lead to us tracking our net worth on a bi-weekly basis (well, I should say my husband tracks this weekly and then we recap). Being focused on increasing our net worth has lead to more engagement with retirement accounts, stock investments, real estate investments, and now my husband invests in cryptocurrency. Setting your goal has to work for you. We are very ambitious and competitive people. We shoot for the moon, so our investing strategy fits our goal. You may simply want to pay off your house and retire comfortably in a way that maintains your current lifestyle, this type of goal setting would yield a different approach. Once you set a goal then you can begin making plans for action.
3. We created a budget
Where your money goes is very telling about how serious you are about your financial goals. If you don’t have a budget, you don’t have a roadmap to become wealthy. Wealth doesn’t just happen by chance as research from Everyday Millionaires by Chris Hogan shows “79% of Millionaires received 0 inheritance “….and most millionaires are 1st generation rich.” This shows, yes, you too can become a millionaire if you’re willing to work hard, make sacrifices, and live on a plan. Creating a budget is where this plan starts, like setting a ceiling for the amount of monthly income being contributed to housing, food, recreation, trips, shopping, etc. (notice no car loans we don’t believe in those here lol). Once your necessities are accounted for the money remaining is where it gets exciting. This disposable income can help accelerate debt pay off, invest in stock market, invest in real estate market, or become seed money for starting a business. If you don’t have a meaningful amount of money left over in your mind, that’s where we need to have a heart to heart with the decisions we are making about housing, food, entertainment etc. If you can learn to sacrifice now to live better in the future then you have officially jumped the first hurdle that holds most people from achieving real wealth. If you can do that, you can reach places you could have only dreamed of before.
4. We Live Below Our Means
The old adage of “keeping up with Joneses” is keeping you broke. This is the honest truth and the reality is the 1% of net worth households are approaching life in an unconventional manner. It doesn’t matter how much you make if you spend 110% of what you earn. This is a common affliction for American household as we regularly leverage credit to purchase goods when don’t have the income to support our lifestyle. You can’t get out of any debt (like a mortgage) unless you are accelerating the payments against that debt. You can only do this if you have the disposable income to do so. You create this disposable income by being willing to live in a more modest home, drive a more modest car, cook more at home, shop for deals when it comes to vacations, and finding savings anywhere you can to free up more cash to chase your financial goals. I finally paid off my car last summer and didn’t realize what I was missing out on. Meanwhile my husband hasn’t had a car payment in over 4 years. This is now the norm for us, not the exception. Be strong enough in your own mental fortitude to say no when everything and everyone around you is big balling and living on the edge financially. It looks good on the outside but seeing a positive 6 or 7 figure net worth will outweigh any luxury you could’ve had in the past.
5. We Invest!
Invest in your education, time, money, and buy assets. My husband and I bought rental properties and those rental properties generate income. That income was then used to pay down debt as well as make other investments. ‘The Richest Man in Babylon’ by George Clason sums up this idea with the second law of gold. “Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.” In short, use money to make money, and then let that money make money etc. The art of the side hustle really provided a faster timeline for us to pay off our rental property as I was able to generate additional income from by blogging and social media activity. I will get into that on the next wealth post but I hope this helps get your wheels spinning!
Until next week!
I am SO excited about this series! I hope that you all will follow along and I can’t wait to see where it takes us into the new year. Thank you so much for reading and stay tuned for next week’s post about the importance of a side hustle and how to use that income to your benefit!
XO – Steph