Debt free. No. But in some people's minds we are because we don't carry a credit card balance and we don't have a car payment. In addition, we don't have a cable bill. But we do have two tuition bills and we belong to a pool each summer. So how do we do it living on one income?
I believe that we as a family tend to spend what we make so we need to lock the money away and make it work for us. Prior to stopping working, I started investing in 529 plans and a Roth IRA for myself. I wanted to save money while we had two incomes.
In May 05, we leased and purchased two new cars. At this point, both cars are paid off, the lease and the financed car. We did a snowball payment to pay down both debts. Now we are paying down the mortgage the same way. I continue to need encouragement in this endeavor because I hear negative things about paying off my mortgage. The comments don't make a lot of sense to me because 1) it can't be that much of a tax break having a mortgage and 2) I would like to own more than just one brick of my house.
My Financial Plan Part I
1. Cut out cable? Not really, we never had it in the first place.
2. Buy lottery tickets? No, that did not seem to be a good option if we were trying to save money.
3. Invest more? Nope. Not that either.
4. We looked at all our debt and decided to do a debt paydown or a debt snowball.We had three main debts.
A) leased minivan
B) financed minivan
C) mortgage on our home.
I. Each month we applied extra payments to our leased minivan until it was paid off.
II. When the lease was paid off, we took the extra payment, the leased minivan payment and the financed minivan payment and paid off the financed minivan.
III. Next we applied the extra payment, the leased minivan payment and the financed minivan payment to our mortgage.
Part 4 was not the hard part. The hard part was getting the money together for the extra payment.