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Saturday, January 26, 2013

mortgage meltdown

I do not like the feeling of being in debt.

I feel so lucky to have exited my (many) years of college without student loan debt, thanks to a combination of family assistance, working while studying, and frugal living/planning. I have my final term's nursing school tuition waiting in the bank, unfortunately in a low-yield savings account.

We also thankfully do not have auto loan debt, another common type in the U.S., this time due to Minou's foresight. At the time, my understanding of how much more you pay over the life of a loan due to interest was limited, and it made me nervous to nearly empty our savings to pay off that debt. But I am grateful now, both for the money saved and the introduction to the concept. That was back in 2005, when I first checked out from the library and read "Personal Finance for Dummies".

Eye-opening! And initially, anxiety-inspiring. For a number of reasons, I grew up without much practical knowledge of personal finance, and even into my late 20s preferred to let Minou take the lead in that arena. I have since seen the light, and we are now equal partners in our family budget and planning (I think I enjoy playing around with the numbers more than he does).

Our house and urban farmette  are not yet our own, and this is driving me crazy.
I know I need to let it go, since it won't be entirely our own for quite a while.
I also know that there's a lot of debate out there about whether it makes good financial sense to pay down your mortgage early. In this case, if only for the strong emotional reason of being so debt-averse, I think it does. So, I have decided to prioritize it. I'm calling my campaign "The Mortgage Meltdown".

I made a very basic, low-tech tool for our refrigerator door. I took a piece of graph paper and blocked out the number of squares we still owe on the mortgage, with each square representing $100. Each time we pay off another $100 from the total owed, I color it in.

Initially it was somewhat discouraging. There are a lot of squares. Since only a third of the monthly payment goes toward the principal, they are not getting colored in very quickly. However, by adding more toward the principal each month, it speeds the process. I am updating my system now. P'tit minou deux suggested making an even bigger graph, where each square represents $10. I think this was a good idea, even though it initially seemed like so much farther to go. It's easy to spend $10, thinking "Oh, it's just $10,".... a bakery trip, a cheap movie jaunt, library fines (oops).

But each $10 put toward the mortgage principal helps melt it away, even if slowly. It's a visual representation of progress. And it helps cultivate the habit of planning, saving, and strategizing, one little square at a time.

How about you? Do you have a mortgage or other debts, and if so, are you trying to pay them down?

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