Mortgage extra Payment Calculator

Oh man. You got me started. Here goes:



First, I’ll start by saying what I’m about to write is NOT intended to judge or begrudge anyone or the way they want to live their life. I take no joy telling others how to live, nor do I think I’m right and someone else is wrong. To each their own.



I’ll also say that this is only intended to apply to personal debt. A farmer taking out a note to buy more land or more equipment is investing…not going into debt. Home mortgages are partially under this umbrella, but not in all cases (buying more than you need or can afford is not something that I’m OK with…but buying a house that meets your needs is fine even if you can’t throw down cash to purchase it).



Now that that’s out of the way, for me the effect of incurring debt is a really simple concept – at best it just makes things cost more…or limits your choices in life – at worst it is slavery…or a cancer that eats away at you. What do I mean by that?



First you have to talk about what debt is and where it comes from. Debt is essentially a method of buying things that you can’t afford….by obligating your future self. It is literally living beyond your means. The worst part is that a lot of debt is driven by things people don’t NEED (taking a loan to go on vacation does not compute for me).



Why is that a problem…I can easily make all my payments? I can think of a couple reasons:

1.)It makes things cost more than they should. 4% interest on a car loan might not sound bad, but really you are paying your creditor 4% and taking 6-7% out of your future self’s pocket had they taken the same $ and invested. That’s 10-11% interest…doesn’t sound as good, does it? With CC debt it can be more like 25%.

2.)It limits the choices you have in the future. Debt is an obligation – and obligations limit flexibility…not just now but especially in the future

3.)Let’s say your boss an a-hole…you hate your job…or have dreams spending less time working and more time enjoying life. With a car payment, house payment, boat payment, and CC debt it gets much harder to tell your boss what you think of them and walk. Want to spend more time with the kids and take a lower paying job that has better hours? Hard to do with a cloud of debt hanging over your head. You are stuck…doing something you don’t like to do…for someone you don’t like….when you’d rather be doing other things. Doesn’t sound great does it? It’s really the perfect storm of suckage. All because you needed that flat screen TV, next model up truck, etc. Sounds eerily like slavery.

4.)Debt eats money and chits stress – and that chit rolls downhill to you. This is bullet #3 taken to the next step. Even if work is great, you love what you do, who you do it for, and have plenty of time to do the things you want to do in life, what if that income stops - you get layed off, get hurt and can’t work, get sick, etc? Now you have payments that need to be made and no way to pay them. Doesn’t make for a great night’s sleep. Lack of peace of mind eats at you whether you realize it or not…just like cancer.



This country’s obsession with buying things on credit has gotten out of control…and the lending institutions are fueling the fire to line their own pockets. Case in point – credit scores. They tell you that you need debt to get a good credit score….so that you can get more debt. That’s the dumbest thing I’ve ever heard of. You know what my credit score is? Neither do I. You instantly become a freak if you pay cash for something. I bought a new van a few months back and the dealership finance guy borderline berated me for not taking the 0% financing offer. I wanted to break his jaw and walk out…and in hindsight I should have (well, walk anyway…still undecided on the jaw breaking). This is a fundamental problem with our society/economy…and I don’t see it changing.



I don’t need all this crap (TVs, PS4, new SUVs, fancy VACAs, cable TV) to be happy. I’ll take having the freedom to do what I want to do, peace of mind, and time with my family over any of that any day of the week.



Alright, lukem, sounds good…but getting out of debt is easier said than done.



Is it? I I’m 33…single income family…5 soon to be 6 kids…nice house…nice cars…etc. I make about the same money that your average rural middle class family makes. I just don’t buy crap I don’t need…or spend money on things that only make life a tiny bit easier or more enjoyable. I’ve reached the position where I can live very comfortably on not a lot of money – and I couldn’t do that with debt and excessive spending in my life. Getting here wasn’t easy…or fun…it took 20 years of HARD work and sacrifice. But, God willing, I’ll be retired by 50 and the next 17 years are shaping up to be pretty easy. The key to it all isn’t saving…it’s not spending.



How did I do it? Well, I got my first job when I was 12…and was financially independent at 16…(parents let me live rent free in the house and fed me, but that’s about it). I had a lot of cash in high school that would have been real tempting to buy a fancy truck with…but I drove my 87 base model Ranger with 225K miles instead. After high school I had enough cash stashed and got enough academic scholarships that it paid my tuition and then some…all the while working a good part time job. After I graduated I had opportunities to live pretty much anywhere…but I chose to stay here in a low cost of living area…with my degree and fresh out of college in 2003 I could have moved to a high-tech Mecca if I wanted. I bought an abandoned house for cash…totally remodeled it while living in it…and sold it for 100% profit. I bought another house (the one I’m in now) that needed work but is in a desirable area with a very small mortgage (25% of the value). 55% of my paycheck I never even see…45% goes straight to saving and 10% to charity. I could live pretty large if I wanted to…but I don’t want to. I fully realize I’ve probably been lucky and definitely blessed. Things have been pretty much best case scenario.



For those of you not there yet, treat debt with urgency it deserves – get rid of it…at any discomfort. It literally opens up your world being debt free.

 

I agree. My great grandparents bought there house in the late 50's early 60's. I don't know what the old man made than but they paid the house off in around a year. It was $14000 which to them was enormous. I know when he retired in the early 80's he was making 8 bucks an hour. He taught me you don't need the biggest, baddest, best of anything, but look for the quality of it and see if you really need it.

 

Great post lukem.

I almost completely agree except for this bit.

All 4 of your points still apply here. Especially #1 & #4.

I won't consider myself debt free until I truly am.

 

Good for you. That's a better way to look at it...depending on how you have the farm business organized. I would as well but expanding your business and buying crap are two different things and I wanted to make that clear.

 

When my wife worked for 3 years out of college before our first kid her paycheck went straight to savings because we knew it wouldn't be there forever and we didn't want to depend on it.

 

How much faith/trust does everyone have in the government and banking system? We saw what just happened in Cypress. I've been leery of committing too much to 401K/IRA for fear that the federal government will decide to start seizing them at some point.

 

I don't think govt seizure of assets personal or business is likely. Politicians love to be loved...and keep their power.

 

What's your other option? Hiding cash in coffee cans buried in the back yard? I think the money is better off in some sort of retirement account where compounding interest works for you. I could see the government coming after money from us in other ways (like even higher income taxes) before going after retirement accounts.

 

I don't know all the details of what happened there, but if you are worried they might raid your 401k, then you would be worried they would raid your savings account as well? then where do you put your money, cash under the pillow?

Sure there is risk, but there is risk in anything. They may also retroactively change the tax treatment later also (like Obama just tried on 539s and you saw how fast that got squished). I think its a risk worth taking for two reasons:

#1 - For all our difficulties the USD is still the world standard and we are still trusted more than the troubled Eurozone economies. I dont see that changing soon
#2 - Because of annual contribution limits, you dont get a second chance at it. If your concerns dont pan out you might find yourself at 50 or 55 very far behind and the contribution limits (even the catch up limits) wont let you make up for decades of lost compounding time.

I used to stay up nights worrying about this crap and things like peak oil... time after time the sky didnt fall and life went on. I'm trying to be more optimistic.

 

I wouldn't put anything past our federal government or the global banks and corporations.

 

Part of my problem is I'm a news junky and I see all the bad news every day. Terrorism, police brutality, medical kidnappings, internet taxes, etc etc etc

it's getting increasingly more difficult to remain sane.

 

Very true. I have good to borrow debate with my best friend almost every fall. Finally he quit buying feeder calves on a note. Unfortunately for him it was after his train wreck.

 

Turn it off then. You'll be a lot happier just exposing yourself to it in small amounts say once a week. A lot of it is just trying to keep you tuning in.

 

Tune it out - you'd be amazed how much your perspective on life will change.

 

Turn that crap off. Hype and propaganda.

 

Same here...............debt free since age 33...................be 51 in April.

 

There is a better mortgage calculator available from Vertex. Excel based
http://www.vertex42.com/Calculators/home-mortgage-calculator.html

When I started to pay down mine it was a daunting task. Looking back on 2009 I was 3yrs into a 30yr mortgage, now I'm less than 2 yrs from truly being debt free.
There's been some bumps in the road along the way, I just go back and recalculate. Maybe it adds a month or two on the backend, but then you realize you don't need that large emergency fund savings when your 2-3(or ten months) from paying off your mortgage. When you have a longterm calculator, there is real definition to how much interest you'll save if you don't make that extra $200 payment 2yrs into your 10yr plan(or whatever time table your on)

 

2009 was only 6 years ago. Are you saying that you will have paid off a 30 year mortgage in 11 years?