Sunday, October 17, 2010

Day 1: The Mortgage

October 15, 2010

Day 1 of the $60k project was a big one. Mike and I decided that in order to successfully pay off this very large amount of debt in 365 days, we would need a flea flicker to get an early lead in the game. We scrounged up every last penny we could possibly find - withdrew from checking and savings, emptied the change jars, searched under the couch cushions (seriously) - in order to pay off the smallest debt we owe. The flea flicker worked:
10:30am - Arrive at Bank
10:33AM - Skip Out of Bank
I can't even begin to explain to you how good that felt. I tried to express to the bank teller my feeling of exuberance but she shoo'd me away before I could tell her for the eighth time that I was paying off my mortgage. Some people.

Wait a minute, Sarah - you have a mortgage? Does that mean you just paid off a house? you have all of this debt and a paid for house? I don't get it.

You know how you can set your relationship status to "It's Complicated" on Facebook? I think my mortgage relationship status would be closer to "It's Really F'd Up". About four years ago, I convinced myself that I officially had a lot of money to spend because of my "good" income. So I decided it would be a great idea to help my mom purchase a smaller, more manageable (and affordable) home. (Mom, just stop reading here and skip to the next paragraph - nothing to see here). Since my mom's credit is less than stellar due to her inability to pay bills, I came up with the down payment, got approved for a mortgage and became a homeowner. Once the old house sold, my mom paid off both the old and new house mortgages with the proceeds. So technically I do have a house in my name, but in reality it's my mom's house because she paid for it. Although the ownership seems to revert back to me when taxes and insurance are due. Or when the roof needs to be fixed. By the way, I would highly recommend NEVER doing anything remotely like this. Even if you have good intentions, mixing family and finances is about as tasteful as brushing your teeth and gargling with orange juice.

Once the new house was paid off, I decided to take out another mortgage and pay off all of my credit cards (which turned out to be a good move since shortly after I did this the housing market collapsed and credit card interest rates skyrocketed). So ultimately the house isn't really mine and Mike and I just paid off all of my old credit card debt. The main point is that we scrounged up enough money to pay off $7920.89. A HUGE win for us.
Why is this so important? Our payoff strategy (I'll explain this in more detail later) is to attempt to live on one person's paycheck - living expenses, minimum debt payments, fun money, everything. The other paycheck will be used to pay extra on the debt. Paying off the mortgage immediately freed up an extra $335 to live on since we will no longer have a monthly payment. That's the logical answer. Psychologically, completely paying off a debt is a great sense of accomplishment and also a great motivator.
Now reality sets in - there is no extra money out there for emergencies. There is only one paycheck to live on. Serious cutbacks are ahead of me. I'm not sure I know the definition of frugal. A serious post from a slightly freaked out person. Can we really do this? Are we setting ourselves up for failure? Are we just plain crazy? Send me some positive vibes.
What's Coming: Getting to know us and our financial situation a little better. "Mike's Corner". Laughing (you), crying (me), taking care of business.
Stay tuned,
Sarah
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