Tag Archives: totally debt free

Lifestyle Creep Checkup

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Well, I decided to give myself a Lifestyle Creep checkup and report back my findings!

Now a lot of you are more familiar with the phrase: Lifestyle Inflation, but I prefer the more precise phrase: “Lifestyle Creep”. The two concepts are slight different and to me the more accurate representation of my experience is Lifestyle Creep. If you are interested in the differences between the two terms, check out my article called “The Difference Between Lifestyle Creep and Lifestyle Inflation“.

Before I go into my lifestyle creep checkup, let me discuss what has enabled lifestyle creep to come into my life in the first place.

At the beginning of 2010, I finally became totally debt-free! By totally debt-free, I mean no credit card debt, no car loans, no home mortgages or any other type of debt! Eliminating all of my debt increased my income stream by so much at I wrote an article about it called: Paying Off Your Mortgage is Like Working at a Second Job! This increased discretionary income stream is the source that has been fueling my slow lifestyle creep advancement. Now onto the checkup!

My Lifestyle Creep Checkup

  1. Increase in more expensive vacations, versus in the past occasionally skipping vacations for certain years. (I’m okay with this, and I totally accept and want this!)
  2. Increased consumption at gourmet coffee shops (This lifestyle creep element has to be stopped or reduced!)
  3. Lack of concern about sudden expenses. My wife got a speeding ticket recently and we just below it off. In the past, we should try to account for the expense (not to mention the increase in our car insurance payments). (complacency is enemy of those trying to become wealthy, this is not acceptable!)
  4. Kids are entered into sports without cost considerations (I’m half and half on this. If the program offers value to my kids, then “lifestyle creep” be damned, if not then I need to cut it out!)
  5. Dinning out, multiple times during the weekend. Sometimes, we go out to eat up to three times in one weekend. (This is horrible! Need to sharpen the Axe)
  6. Both my wife and I go out and spend money with friends on movies, lunch, golf and special trips. (I’m half and half on this too, some lifestyle increase is good since we derive a lot of value out of these experiences)
  7. I didn’t carpool with a friend from work when gas prices went over $3! See this post: Carpooling to Save Money and Reduce Gas Prices! I found that I enjoy my personal time too much to share it anymore. Plus, when I drive to work, I think of blogging ideas. (This is horrible, but I accept it anyway!)

Overall, for this past year, I would give myself a “B+” on my Lifestyle Creep Checkup, and here’s why:

  1. I’ve been able to pay my credit card bill in full each month.
  2. I increased my contribution to my 401(k) to near the max that is allowable. I didn’t max it out totally because of the unpredictability of bonuses and other extra monetary rewards.
  3. I’m participating on my employer’s ESPP! Read this article: Getting Over 15% Return By Saving Money In An ESPP for a way to make better money than the typical stock returns, with little to no risk (It’s been all up for me!). I consider this one of the more intelligent moves I’ve made recently!!!
  4. I’ve been able to make a little money by blogging. This is a win-win scenario for me because I get money for doing something that I really enjoy!!!

Lifestyle Creep Checkup Conclusion

Yes, I have some lifestyle creep in my life, but I’m still saving over 25% of my income and investing it. I’m also living a more balanced life and really enjoying my vacations without worrying about how I’m going to be able to afford them!

I will have to cut out some fat in my lifestyle if I want to remain debt-free, but I don’t think it will be that difficult to accomplish.

Hope you enjoyed my lifestyle creep checkup. How are you going, are you experiencing any such phenomena?

MR

 

 

I Am Debt Free, My Mortgage Countdown #1 – Equilibrium

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I’m Debt Free!  I don’t have credit card, car, mortgage or any other type of debt!

At Equilibrium

 

On the Wells Fargo website I selected the send “Payoff form” option for my last mortgage payment.

I filled it out and printed it so that I can have Wells Fargo to pay our real estate taxes from our escrow.  Now that they did that, I still have to pay our house insurance at the beginning of March, but… I sent in my last official mortgage payment!

Actually the check is sitting on my kitchen counter downstairs, waiting for me to put it in the mail. Tomorrow, I will drop it off at the post office, and then I will be finished with it!!!  (Booyah)

I ended up paying off my house in 10 years.

So how did I do it?

Well, first I created an excellent excel spreadsheet to do some analysis on an amortization schedule.

Primarily, I used primarily 2 sheets in my spreadsheet:

  • The actual payment was recorded to a sheet.  This sheet was the real deal!  As soon as I made a payment on the house, it was recorded in this sheet.  Not much to this one, pretty cut and dry.  At the top, I calculated the reduction in interest paid by pre-paying, the shorting of the life of the years of the mortgage by prepaying, and the total cost of the initial mortgage plus the interest.
  • The “What If” analysis sheet. I used this to create a strategy to pay my house mortgage off early. I was able to calculate how different extra payments would affect the duration of the mortgage and also calculate the reduction in interest paid for the entire loan. I used this sheet so many times to calculation my payment schedule! It might not be obvious, but this was a great tool for wealth accumulation for me.

Next for the first year of the mortgage, I made double payments on the mortgage amount, with the excess going toward paying down the principal.  Then later after my son was born, I lessened the payment amount to only 1.5 times the original payment amount.

I’m still in disbelief!  I’m at a point of balance and having an “equilibrium moment”, so to speak!

As of this point forward, I will be solidly marching on a wealth-building path (or at least I hope, life sometimes throws some wild pitches at you…).

As the last phase of this final numbness wears off, I’ll tell you what it feels like being debt-free in a future post!

-MR

Update:  An equilibrium moment is when something is in perfect balance!  I don’t owe any debt anymore and nothing is owed to me either!  With the “debt phase“, I’m in perfect equilibrium.  This phase is over!  I don’t plan on ever going into debt that I can’t pay in a month’s time again!

Here are some links to former post in the Countdown series