Mortgage Paydown Challenge

by Gary Foreman

They had lived in their home for about two years when an inspiration hit them. Why not pay off the entire mortgage in the next five years. Since then they've shared the birth of a daughter, Gayle's started a new home business and Charles has continued with his education. Two and a half years have passed. Is their dream turning into a nightmare or into a reality?

To find out we spoke with Gayle from her suburban Atlanta home. She reports that they're making great progress. "About two and a half years after we moved into our house we both got a vision to pay off our home in five years. We started putting in an extra $1000. It was pretty hard because we didn't make a lot. The time we've been in our home, which will be five years in January we've paid it down from $88,000 to $53,000."

Much of the prepayments come from borders. "We rented out one room three and a half years ago. That went really well." A second renter was added. "Then we had a room and a bath built in the basement. We figured out that would pay for itself in a year, which it did. Once we started renting out the rooms that started bringing in $1100 per month."

It's not surprising that Gayle lives frugally. "My father was a minister. My grandfather and my father always told me not to owe any man anything. Not to be in debt to anyone. To always live on one income even when I got married. Because you never know what happens.

Gayle clearly relishes the freedom that comes from a simple lifestyle. In summarizing their style of money management, she echoes centuries old wisdom when she advises, "Do not be a slave to the lender. Because a lot of people are slaves to the people they owe."

One final note. With about two and a half years left on their plan, at their present rate of prepayment it does look like Gayle and Charles will be very close to meeting their goal for the mortgage burning party. We hope to get an invitation!

"I've always felt like I don't want to look rich, but I always want to have money." That desire led Gayle to save money even as a child.

Today she works from her home placing people in high tech jobs. Her husband is a help desk analyst who resolves software/hardware networking issues.

She was 29 when she married Charles. "When I met him, he was the type that even though he saved, if he had money in his pocket it burned a hole. He had to think of some way to spend that money. I'm just the opposite. I don't even like spending money." Converting him wasn't a problem. She says that he's flexible and trusts her judgment.

From the beginning they prepared for a family. "I always knew that when I had children I wanted to have a choice of not working. We decided that although I made double his income, that we'd live off his earnings. He was still in school so he didn't make much money. We always pretended like my money wasn't there."

Controlling their money is a routine part of their lives. Gayle explains that, "we have our budget on Excel (PC spreadsheet software). We go over it every week. We have an envelope system where we put money in every two weeks. For instance, when we needed for something to be done on the car we would go to 'car maintenance' rather than getting thrown off budget. When we want to go out to eat we go to the 'entertainment' envelope. If there's no money we can't go out to eat. We just got back from Florida on vacation. We had been accumulating that since last August." Unlike the miserly stereotype who hoards money, Gayle claims that the budget has had a freeing influence. They give regularly to their church and other charitable organizations.

The birth of their daughter has brought expected changes to their household. "Last year I started working from home and I stopped working when I was pregnant. Our income was $31,000. When I think about it I wonder how it can be just $31,000 when nearly half of that money went to the mortgage."

Does Gayle have any advice for other newlyweds? "I would tell young couples to sit down before they're married and talk about what their goals are. Talk about what money means to them. Be in agreement about their money when they're starting out so that money won't be a problem."

When asked if she feels deprived, Gayle answers "No, because I've always lived like that. I don't even like going shopping so that's not a big deal for me." In fact, she says that the best part of their lifestyle is the freedom. "We hear our friends worry and they're in debt and can't sleep. We have so much freedom. I quit working when I was pregnant for three months. There was no change because we were already prepared. I could still not work now because we've always lived on one income."

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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