This is the third part in a series about how my thriftiness came to be, and about the financial decisions I have made in my life to get me to where I am now. Read Part I: The Beginnings of a Thrifty Life, and Part II: Newlyweds for more of the story.
My husband and I had been married for just over a year when we decided to take the next step and buy a home. Chad felt that paying rent was like "throwing money away" and he was eager to have his paycheck go toward something we would get to keep. I felt the same way, and I figured that as long as I had dreams of a debt-free future, we might as well start paying on that mortgage right away.
To get more information on the process involved in purchasing a home and more information on personal finance in general, I turned to yet another book: The Complete Idiot's Guide to Personal Finance in Your 20s and 30s (see sidebar for more information). This book clarified a lot of the mortgage jargon and helped us to make an informed decision regarding our home financing options.
I would like to point out that we were blessed enough that we did not have to save up a great deal of money for a down payment. Sadly, my grandmother passed away that year and left me an inheritance that was enough for a down payment, closing costs, and moving expenses. It was a sad time, but my grandmother was a big inspiration for me as far as money was concerned, and I knew that this was the kind of investment she would have wanted me to make. She gave so much to me during her lifetime, not just in love, but by her example with her finances. I remember that she and my grandfather owned a beautiful farm, and when he passed away she chose to sell it and move to a very modest townhome where the upkeep would be minimal and the expense much lower. I know that it must have been a difficult decision for her, with all the years of memories from that farm, but her main concern always seemed to be that her family was taken care of and that she was not a burden to anyone. I appreciated that about her very much, and I am so grateful to her for all she has given me.
We were able to find a nice home just under 2,000 square feet, with 4 bedrooms and 2.5 baths for $150,000. The price was very reasonable for the area (quite a good deal, actually) and it is in a nice neighborhood and we have a large backyard. We were happy to know that we were in a home that would have enough space for a growing family. We weren't eager to move again anytime soon! The month after we moved in I became pregnant with our son.
Things stayed the same for a little while, we were just trying to balance the mortgage payment along with the other new expenses of owning a home: electric and gas bills, water bills, yard equipment, etc. Shortly after our son was born, my husband started his 401k. Then we got to share another Aha Moment together.
This Aha Moment came in the form of a set of cds loaned to us by Chad's parents. They were excited about them, and were eager for us to listen to them as well. We did listen to them, mostly, as I recall, while in the car driving to and from his parents' house (about a 2-hour drive). The cds were Transforming Debt Into Wealth by John Cummuta (see sidebar below), and they presented an entirely new idea to us: we could be debt-free. Not just debt-free in the usual sense, but debt-free including our home. I will never forget John's voice on the cd asking us to imagine what our life would be like with no mortgage payment, and having visions of spending our days together as a family, without the stress and hassle of Chad's unpredictable work schedule. Our expenses would be so minimal without a mortgage payment. And his voice had suddenly made it sound not just like a dream, but possible. Really possible!
We would frequently stop the cds to talk about what we were hearing, and our conversations would get more and more animated, as we grew more and more optimistic. It was almost as if we could taste that future on the tips of our tongues, and we were hungry to have it all.
From that point on, complacency about our finances went out the window. We had dreams- we had dreams of living a life free from debt. A life where the roof over our heads could never be taken from us, and where we had freedom to just be- be a family and live our lives for the sake of living them, not just to make ends meet and pay bills. Dreams are powerful things.
Those dreams propelled us to create a set of goals that became our financial compass pointing us in the direction of complete financial freedom. Each goal is a step closer toward our ultimate goal in which our dreams will become a reality. Every financial decision we make now gets held up against that financial compass, whether it be buying a stick of gum or purchasing new windows for our home. If it doesn't help us get closer to our goal, then chances are, we won't do it. The most important thing has been for us to remember that it takes time. Sometimes the steps are slow and tedious, and the end result seems far off. But with every debt paid, a small victory is achieved, and the dream gets that much closer.
To sum up the last few years, we have paid off our car and added the payment on to our mortgage, which we pay bi-weekly as part of an Equity Accelerator program (I highly recommend this for anyone with a mortgage!!). We are on track to have the house paid off in 11 years, though we plan to do it even sooner than that. We have increased our savings by 70% with the goal to have our emergency fund of $12,000 in place within a year, and we implemented the Way-2-Save program with Wachovia.
I have to admit that in some ways I am still anxious about the future. With 2 growing kids I know that our expenses will just increase, and it is not likely that my husband's pay will grow to match. And there are always those unforeseen events that can throw a wrench into things- illnesses, major repairs, etc.. But at least for now, we are on track. And we have made allowances for the unknown by starting to build up our emergency fund and by living well within our means.
The learning will always continue, and I'm sure that more Aha Moments are to come. I will be sure to share them with you when they do!
What factors have influenced you to have a thrifty life? How has creating a financial compass changed the way you make everyday decisions regarding money? Leave a comment and share!