A few weeks ago, Tara commented that she didn't see the point in being frugal, frugal, frugal just so she could be a millionaire when she and her husband are 80! What is the fun in that?? Maybe some of you have had the same thoughts as you've thought about coupon-ing, garage sale-ing, eating at home. . . Hopefully, I can give you a glimpse at where this whole Frugal Life thing is really headed.
If you have credit card debt, car loans and/or student loans, most people (when you finally get very serious about it) can pay all of it off within 3 years. We have never carried credit card debt, but we've had a few car loans and we had over $60,000 in student loans back in the 1980's -- so about $130,000 in today's money. We paid minimum payments for a number of years, and then we got religion. We paid off our car in about 8 months and our student loans in about 2 years. So we paid off all our consumer debt in right around that 3 year mark. We weren't making tons of money and we had 3 children. We were extremely average. You could probably pay things off faster than we did.
Our next step was paying off our house. We knew a couple of families our own age (early 30's) who had paid off their houses. We were AMAZED. Could we do that too?? How long would something like that take? We owed about $160,000 on our house at the time. As a little family we confronted this monumental financial goal with everything we had. We printed out an amortization schedule (numerous pages of small type -- very scary), and taped it ALL to the back of the door where the bills were paid in our house. Every month when we paid our regular house payment, we also added as much extra $$ as we could scrape out of our home budget and sent that along to the mortgage company too -- that extra money goes straight to the principle. We often gathered our 3 girls into the room while we marked off the payment amount with a highlighter pen and circled all the skipped interest payments that NEVER HAS TO BE PAID-- EVER!! Did we starve through this time? Live on nothing? Never leave the house? No, we actually took a few pretty decent vacations along the way and fed and clothed everyone. Probably saw a few movies too. But we stuck to our house payback schedule. We threw everything we could at this debt and in 3+ years we received our title, free and clear, in the mail. That is a moment never to be forgotten.
We paid that house off in 1996. In 2003 I wanted a bigger house (we had more children, the older ones were larger, and we wanted to live in a better school district). We found the house we wanted and went back into a $100,000 mortgage (we were able to pay for MOST of the house with cold, hard cash from the sale of our first house -- that felt very, very nice). We paid off this new mortgage in about 2 years. I thought I would mention here that both times we got down to the last $30,000 on our mortgage, extra money just started appearing. I can't even explain it. It's like the Lord knows you are serious about taking care of your family and your finances, so He blesses you beyond anything you've ever seen. The last $30,000 was paid off about 5 months earlier than scheduled -- both times. When you get to that point, let me know if this happens to you too!
So, when you've paid off all of your debt -- in under 5 years probably -- how does life look? It is an amazing place to be. Think of the amount of money you bring home every month in your paycheck. Now think of how much it would cost you to live with no major bills. No credit card payments, no car loans, no student loans, no house payment. Can you even wrap your mind around that?
You still have to buy food, electricity, gasoline, car insurance, clothes, property taxes. That's about it. Hmm. How much would that add up to in a month? Not very much. All the rest of your take home pay is YOURS. Wow.
What will you do with it?
Saving is a big thing. Putting as much money as you can into tax-free or tax-deferred programs is very smart.
Beyond that, you can spend it on anything you want. You could buy a new car with cash -- every few months! You could buy a brand new boat in cash, also in just a few months. You could redecorate your entire house. Put in a backyard pool. You can be generous beyond anything you can imagine. Travel to Europe, Asia, Africa -- every few months. All for cash.
You will finally be free. All the hard work you (or your spouse) puts in to bring home money, will finally benefit YOU. All in about 5 years.