How we paid off our house in three years

[Bylo Selhi]

Clearly not for everyone, but when you're young it's worth considering some short term "pain" for long term gain.

How we paid off our house in three years

Have you ever wondered what you could accomplish if you saved 80% of your pay? Well I can tell you, because I did it. Most people have trouble saving just 5% or 10% of what they make, but my wife Tiffany and I decided that it was worth living like paupers for a few years if it could give us a huge jump start on life. Saving as much as we did was challenging, but what we accomplished was amazing - I still can't believe it myself sometimes. When we started, we had a rusty old Toyota Tercel, no house, few possessions and a crushing debt of $37,000. A few years later, we had two almost-new cars and a beautiful new four-bedroom house on a 46-ft lot in Milton, Ont. Everything was completely paid off - we had zero debt. During this time, neither of us made much more than $60,000 a year at any one job, but by working several jobs and saving almost all of our income, our net worth increased from negative $37,000 to positive $420,000 in less than five years...

Let me make it clear that I wouldn't recommend the number of hours that I worked for most people. But was it worth it for me? Absolutely. It's been challenging and tiring, but exciting and rewarding too. Right now, I wouldn't change anything for the world. We're only in our 30s, but in a lot of ways, we're set for life...

If you want to jumpstart your finances, you don't have to be an extreme saver like the Goertzens, but you can apply some of the principles they used:
• Start early
• Set concrete goals
• Live on what you were making five years ago
• Pay in cash when you can
• Pay off your mortgage faster

[Shakespeare]

How we paid off our house in three years

Can I take a little longer and have a life?

(My own house is paid off.)

[Bylo Selhi]

How we paid off our house in three years

Can I take a little longer and have a life?

Yup. After three years of hell

That said, I paid of a $40k mortgage in the late '70s with a single job. (There were some 80 hour weeks too and no overtime pay.)

Clearly this guy went overboard with his obsession to pay off the house, etc. But the general principles apply even if you do it more slowly. Moreover, if you develop good financial habits in your youth it's a lot easier to stay with the program through out your life. If anything, my wife and I now need to learn how to spend more. And that's a great problem to have at this stage of our lives. Especially compared to the opposite situation.

[AltaRed]

Agree that some sacrifice is worth it to get a head start. Spouse and I bought a home in late '74 in Burlington, ON with a 1st and 2nd mortgage AND a personal loan from a relative for a down payment... along with student loans I was still paying off. By keeping spending habits well under control, we had the personal loan, student loan and 2nd mortgage paid off by late '79 (with 2 kids born during that period as well). That brought the 1st mortgage payments well within comfort range.

[arnyk]

Well not exactly the healthiest way to do it...that's just gotta (literally) hurt after a while I'd think.

Do ya figger they could've invested instead and come out ahead (without the aches and pains)? I mean 5.20% fixed is decent, I'd rather have a life than earn 5.20% after tax by scrimping.

Maybe they could've planned the purchase better, maybe if they had waited an extra year or two they could've been in a better financial position to effectively manage the mortgage without working 100 hours a week (approximately my sleepage time ).

Myself, I run my "life" like a business, quarterly income statements/cash flow statements/balance sheets, I even hammer out an annual report every year for kicks (and of course there's a budget thrown in there somewhere). It keeps me on top of and aware of my financial situation, it also helps me fine tune my fundamental analysis skills (spending 50 hours trying to make the damn spreadsheet work is NOT fun, but sure gets you familiar with the details and how the statements inter-relate).

I'm no where near buying my own house yet (need to get outta school first), but when it happens, I actually have a Debt/Equity figure (along with interest coverage numbers and the such) I'm aiming for myself, just to make sure I can comfortably manage the debt, and to give myself the flexibility to make those lump payments if I choose to.

IOW, summing up all that crap I wrote, I think we should all just enjoy life as we go along, sure be financially responsible and all, but honestly I'd rather have a great time over the next 50 years than have the shittiest life for 10 years followed by 40 years of glory. Besides, how many years do you think that guy took off his life by doing what he did?

[AltaRed]

IOW, summing up all that crap I wrote, I think we should all just enjoy life as we go along, sure be financially responsible and all, but honestly I'd rather have a great time over the next 50 years than have the shittiest life for 10 years followed by 40 years of glory. Besides, how many years do you think that guy took off his life by doing what he did?

If you read the post carefully, the pain was under 5 years. When you and spouse are in early 30's (or lets say about 30) and have a negative net worth, it is not that hard to wake up one day and say, damn it.... we are going to fix this now while we are still young enough to do it and get on with life thereafter.

They had lots more spunk than I would or could have done, but I have some admiration for what they have done. Kudos to both of them.

[worthy]

The key is that they are a couple sharing the same mindset about money and savings. Two smart people who realize you don't make money by spending money, that capital formation is the key to real wealth.

With no steady job, I still paid off my first house in six years. No stereos, no colour tv, no cable, no take-out food, laundromat instead of a home laundry, no credit cards. Every penny scraped till the branches were bare. But I still bought two new vehicles for cash over that time and had respectable furnishings.

With the first house paid off, I sold it for a gain, then leveraged the proceeds to the max and bought seven more the following year. But that's another story.

[bubbalouie]

Actually I did one better than that other guy.

My wife and I paid off our first house ($109,000) in 1995 and it took us only 2.5 years. During that time we sacrificed EVERYTHING, and we probably lost a couple of friends along the way because we were so friggin cheap with our money.

Looking back, I'm not sure it was the greatest thing we ever did. Those were the prime years of our lives and we didn't have much fun. Of course, financially we did okay but that's not the whole story.

Maybe we should've enjoyed life more; afterall, we're dead a lot longer than we're alive.

[2 yen]

What I like about this story is that they beat the system. The system is designed to make you a slave for 20 plus years by paying off huge mortgages. Other ways to beat the system are to avoid all debt as much as possible, pay off credit card balances, own one or no cars, don't buy a shiny new plasma TV etc. Anyway, I applaud these two for what they did.

[dakota]

Anyway, I applaud these two for what they did.

Ditto! I paid my first duplex off in 10 yrs and paid cash for the second and built a new rental paid it off in 5yrs and paid cash for the others, but I had rental income to help me which made a whole lot of difference.

[Bylo Selhi]

Besides, how many years do you think that guy took off his life by doing what he did?

How many years would he have taken off his life if he spent the next few decades under the constant stress of having to make his next mortgage, car, credit card, yadda, yadda, yadda, payments?

[arnyk]

Besides, how many years do you think that guy took off his life by doing what he did?

How many years would he have taken off his life if he spent the next few decades under the constant stress of having to make his next mortgage, car, credit card, yadda, yadda, yadda, payments?

Which is why I wrote he probably could've planned it better, BEFORE taking on a mortgage, credit card debt, yadda, yadda, yadda, yadda hindsight.

[InvestingQueen]

Well done to everyone who took the contrarian approach!

My husband and I did the same from 1985 to 1990 - at one point my mortgage was 10.75%

We did without most everything and retired a $150,000 in 4 years!

Just kept on trucking, we live a modest life and have lots of cash

Like a previous poster, I am having to learn to spend $ because "time is precious and is slipping away".

Our entire culture is designed to separate you from your cash and it takes a strong contrarian philosophy to go against the prevailing trend.

Another poster was right - a couple must have the same philosophy or it won't work

Well done everyone - and at the same time we denied the banks revenue (almost as good as denying the govt revenue)

InvestingQueen

[worthy]

Ironically, ever since paying off my first home, I've carried mortgages up to seven figures. The difference is that the money borrowed has all been for investment purposes and the interest paid is written against the income they generate. And doubling the irony, the income generated is often on debt-consolidation mortgage loans to people who haven't gotten the message the savers here have learned.

[andyt]

We bought a townhouse in May 1977 with a $25,000 mortgage at 9.5%. In May 1982 the mortgage was up for renewal, at 19.75%.

Luckily I had worked a lot of overtime and we had lived frugally while my wife stayed at home with the kids. The mortgage officer was surprised when we told him we would just pay it off.

I have no regrets for the lifestyle we led thosr 5 years, the result really put us ahead, especially being able to avoid 19.75%. If I had to, I would do it again I am so debt phobic.

We bought single home in 1989 with a $50,000 mortgage, paying it off in 1994.

In 1996 I observed my father-in-law (extremely debt phobic, frugal) noticing how he could not spend money and enjoy it. I knew that if I didn't change, I was destined to be the same, I was looking into a mirror, as a result I was able to begin spending.

He passed away in 1999, I never told him what he did for me but I am very grateful.

andyt