We Paid Off Our Mortgage And Hit Baby Step 7!

Last month, we decided to pay off our mortgage. It wasn’t an easy decision.

By the way, no, that’s that’s not a picture of our house, silly! That’s just a stock photo. I wouldn’t put a picture of our house on the internet. I only put up all of our finances for the world to see. 🙂 Got your attention though, didn’t I?

Anyway, we had a 15-yr fixed rate mortgage at 2.0%. What made the decision difficult was the opportunity cost. We had about $210k left on the mortgage. We had just sold another house that we owned and the proceeds left us with more than enough to pay off the mortgage. I understand that I can fairly easily get a higher return than 2.0% (Series I Savings Bonds!), but here’s why we paid off the mortgage anyway:

Cash flow – Having a mortgage means we are paying a lender every month (negative cash flow) until the mortgage is paid off. We don’t have payments anymore unless we go back into debt.

Peace of mind – It gives me a little more peace of mind knowing that my wife and kids will have a place to live if I’m gone.

Plenty of time to invest – My wife and I are both 36, so we have plenty of time to invest without having to go into debt.

Life goals – Ever since I picked up The Total Money Makeover by Dave Ramsey and started listening to his show in 2008 or so, I’ve always wanted to hit that elusive Baby Step 7. I don’t follow everything he teaches and don’t listen to his show as much anymore, but I do credit him with putting me on the right financial path. I’m part of a FB called Dave Ramsey “ISH”.

My goal was never to be ultra-rich. I’m happy with how things are going, and I’m fine with growing wealth slow and steady and giving generously along the way.

If you will live like no one else now, later you can live and give like no one else! 

-Dave Ramsey

For those of you who are not familiar with Dave Ramsey’s Baby Step’s, here’s a Cliffs Notes version:

Baby Step 1 – Build up a starter emergency fund of $1,000
Baby Step 2 – Pay off all debts except the mortgage (if you have one). This includes any credit card debt, car payments, student loans, etc.
Baby Step 3 – Fully fund your emergency fund with 3-6 months of expenses.
Baby Step 4 – Invest 15% of your income into retirement.
Baby Step 5 – Start saving for your kids’ college (if you have kids).
Baby Step 6 – Pay extra on your mortgage until it’s paid off.
Baby Step 7 – Build wealth and give.

In other news, I completed my Financial Planning Certificate Program at UVA a few months ago. It took about 3 years and a little over $6,000. I don’t think I’ll go into the field as a career, but who knows. My main takeaways from the program were that asset allocation determines most of your investment returns, risk should be managed with proper insurance planning, and income tax planning and estate planning should be used to minimize taxes. Basically, a good financial planner is probably worth it if you’re rich and don’t know how to manage your money.

That’s all for now. Thanks for reading!