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Monday, April 24, 2017

The 20 Month Dash

Posted by Tim Stobbs on May 26, 2011

As it currently stands I’m about 2 years from paying off my mortgage.  Yet because that date is so close to the end of 2012, I looked into the difference to finish it off at the end of 2012 instead of early 2013.  Total cost was about $5500.  Now given that is about 20 months from now I think I can manage to find that extra money in that time frame.

So that is what I’m going to do and try and have my mortgage completely paid off by Dec 31, 2012.  Yes, I’m going to try and pay off a $68,000 debt in just 20 months.  It isn’t impossible, but I know it will have some challenges as I’m cutting into my usual margin of error.  So to get that extra $5500 paid off I’m going to have to either divert money from other items or just earn more.  Yet the amount is still reasonable since it works out to an extra $275/month.

To get that done, I took a recent minor raise and dumped that into my mortgage payment for about $75/month (or $1500 in total).   Then I am taking some extra cash from our investing accounts and moving it over as well for another $750.  So without too much effort I’m already 40% towards that extra $5500 being paid off.

The rest of the extra money will now have to come from either my wife or my businesses earning more or savings on other items.  While not impossible, it will provide some motivation for the next year and a half to get creative on what we do.

Now an obvious question on this plan would be: why bother?  I’m going to be done in a few more months, why bother pushing it.  The reason in this case is simple: I like a challenge.  Saving for a long period of time is well, boring as hell, so you have to get creative on making the journey interesting at times.  So this is why I think we get these odd experiments like the 100 mile diet, owning just 100 things or paying off large amounts of debt in short time frames.  You won’t know what you can do unless you push yourself.

So what is your thought on the 20 month dash? Pointless or interesting?  Would you ever do something similar and push yourself further than you think you can go?

Comments

15 Responses to “The 20 Month Dash”
  1. Mike Holman says:

    In this case, I don’t think it’s worth it. I’m in a very similar situation and while it’s tempting to make sacrifices to get the mortgage done early – what’s the point?

    So what if I’m mortgage free next May instead of Sept? Yes, it’s nice, but not worth a lot of sacrifice.

  2. I agree with Mike. And I think the added scheming has other negative externalities – like your wife killing you. :)

  3. Jacq says:

    With the benefit of hindsight and “do what I say, not what I did”, I’m with Mike and EI – unless it’s something really enjoyable that you can do that doesn’t take away from your family time / experience…

    Having said that, I guess it’s not a big difference since you’ve already accounted for 40% of the shortfall. I would imagine you could find just marketing the heck out of your book for one month might cover it and give you some personal satisfaction as well.

  4. Tara C says:

    It sounds doable to me – and I like challenges too. :-) I had an emergency fund goal of $20K with a deadline of 9/12 but I have upped it to $35K since according to my calculations, it’s doable, and desirable. We’ll see how it works out!

  5. Robert says:

    I’m more interested in what you’ll do after you pay off the mortgage. I’m not saying you’ll have this problem, but here’s an experience someone I know had. They paid off their mortgage in their late 30s, then they felt like they had nothing specific to work toward. The mortgage payment is a huge chunk of what you do right now. What will you do when you have $1000 – $2000 extra cash each month. Accumulate an emergency fund? Invest? Increase your spending?

    If it were me, I’d balance the mortgage payments with whatever I’m planning to do with the money after, probably investing (since you’re planning to retire early). That will give you some learning and experience investing before you start putting a couple thousand dollars a month towards it.

  6. Mark says:

    I am in the same situation but I have to agree with Eclectic Indulgence. While I am tempted to sacrifice some more to make it 2.5 years down from the 3 that is scheduled to finish right now I have driven my wife crazy with the cuts we’ve made to bring it down to the now scheduled 7.5 years instead of 25. I love the challenge myself.
    I am starting to think I’d like to live to enjoy the extra money a couple of years from now!
    Robert makes interesting idea in that it may be a good thing to start gathering the experience and dabbling in investing so you’re an expert in a couple of years when you will have much more money to put there. I love the challenge
    Good luck

  7. George says:

    I’m in the same boat, only it’s 52k and 15 months to go. We’re already paying quite a bit extra, so accelerating the payments further doesn’t seem worth it. Very little of our payments are going toward interest anyhow.

    Mortgage-free at 34! Next stop, retirement by 45? We shall see…

  8. jon_snow says:

    Yeah, my wife and I are currently doing a mortgage payoff “dash” – 10 months and 90k for us…

  9. Kaye says:

    The concensus seems to be not to pay the mortgage off early but my husband and I put our first house on a 15 year mortgage and paid it off in 11 years. It was an excellent feeling to be totally debt-free (we never had credit card or auto loan debt).

    After the mortgage was paid off, we focused more (we had already started 401Ks and TDSPs) on saving and investing. The investing turned out to be fun for my husband and he is good at it. He is retired and spends a fair amount of time at this.

    Paying the mortgage off early might not make great financial sense but it is not necessarily harmful either. From one who has been there, it feels yummy!

  10. Dave says:

    My wife and I had a similar experience with student loans not too long ago. We had a plan to pay off our student loans so much per month, etc. But as the end drew closer, we were tempted to deviate from our original plan to get out of debt quicker, which we ended up doing. Looking back, it stressed financially over the short term. While it was nice to get the debt gone earlier, we had a plan and should’ve stuck to it because it was designed to help us reduce our debt quickly, but comfortably. If you can still do that, then I think an accelerated pay-down might be worth it.

  11. deegee says:

    I began my dash in March of 1997 when I owed about $50k on the loan and made some large payments throughout the year and into early 1998 until the last payment was made in late April of 1998, just after my 35th birthday.

    Looks like George’s plan is a lot like what I did. I hope he retires at 45, too.

    The tipping point for me to paying it off early was the realization that I would not be affected by the loss of deductible mortgage interest on my state income tax return because I could switch to the standard deduction which acted like a floor.

  12. Canadian Dream says:

    Mmm, interesting points everyone. Thanks for the feedback. I’m still thinking of continuing the dash regardless of the small impact on the overall plan.

    As to Robert’s point, I have started discussing the post mortgage world a bit with my wife and will get a bit more into detailed planning next year on it. Generally speaking the first while will be to build up a cash reserve for some future expenses like a replacement for our car. Then put some cash into TFSA/RRSP accounts for investing, so I’m ready to go when I make some decisions on what to invest in.

    The point won’t to be just to invest because I can, but rather invest in what makes sense for us.

    Thanks,
    Tim

  13. 1Vikinggirl says:

    Life beyond mortgages and student loans is unimaginable while still trying to pay them off. But a few months after the zero-debt-dates, mentally the alternatives open up. Investments, sure but also the feeling of complete freedom.
    The freedom to be able to pack up, rent out and take off if need be is breathtaking and opens alternatives up unimaginable with a mortgage.
    Allow yourself to do all you can to let your new life begin.
    Mortgage is not safety!!
    From the other side,
    All the best, it is so worth it!!

  14. George says:

    No sooner than I post the comment above and my wife approaches me with the suggestion that we “pour on the coals” and get the mortgage paid off in 12 months instead of 15. So, the next year is going to be the “year of the mortgage payment”. June 2012, and we will be having our mortgage burning party!

    Lesson learned: if your wife suggests something that sounds a bit crazy, listen to her. :-)

  15. Mr Orange says:

    Very interesting topic and timely for exactly the decision we are looking at right now. At our current rate, we are about 3 years out. With a little sacrifice, we can pull that down to 2 years.

    Why?! Well, my goal is to get rid of all debt before my wife’s 45th birthday (we got married and bought a house late). I’ve had it in my head that I’d be debt free by the time I was 45 since I started university. If we do this I’ll be 4 years ahead of shedule.

    Does it really matter if we get it done before 45? nope…but you need to have goals, and then you need to have stretch goals and audacious goals! :)

    Goal: Be debt free by 45
    Stretch Goal: Be debt free by 43
    Audacious Goal: Be debt free by 41

    Tim paying it off a few months early is no more a silly goal than Freedon 45 is, so if you can do it without straining the REALLY important things in your life (family), I say go for it!

    Good luck!

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