Debt Free Building Wealth

 Been a long time since I posted here. Pretty much since the posts I used leverage to pay off the house, I cleared all debt, and am now building wealth. I am practicing the best FIRE I can. 

After many years and many regrets in my financial life, I have decided to kick retirement savings into high gear. Last year I paid off all my debts. I was pretty broke in my savings and bridge account. But since then I have put a majority of my paycheck toward different things. 

I opened a personal Roth IRA (a little late in my 40's but ever little bit helps). I stopped traditional contribution and opted for ROTH now that I understand it. I was not screwing the government by making my taxes lower, I was screwing my future self. 

Since the endeavor of the house leverage payoff. I have cut debt out completely. I have went to barely 400k to over 557k network. I expect to break 600k this year. With the contribution max in my Roth IRA (done), and Max Contribution to my 401k by the end of the year. I also opened a High Yield Savings Account for my savings. Why I never did this earlier is beyond me. Regular banks just disrespect their clients by not giving High Yields. So how did the finances change.

Step 0. Educated myself more in retirement and investing knowledge.

Step 1. Cleared all debt, cut up the credit card (I am now like I was prior to the ex-wife)

Step 2. Opened High Yield Savings and started funding it. 2 months made 93 dollars. 5.16% yield.

Step 3. Opened a Roth IRA (I needed somewhere to stash extra retirement fund. It is best not to just rely on 401k wish I was doing this in my 20's.

Step 4. Max Contributions to the 401k and moved to Roth contribution vs traditional. 

Step 5. Automated some of the contributions and trades.

Step 6. Started saving for a car in ten years.

Step 7. Paid attention to my money and where it is invested. Started investing in index funds and stuff. 

Step 8. Started making Financial Goals.

Overall I am pretty happy where I am in my retirement planning. I have a paid for house, paid for vehicle, no debt, and most of my money goes to the future. One day I can retire, probably earlier than I thought. 

I suppose I can drop by and write some about retirement planning and investing a little more often. I will try to do more on here.

Update for the Year of 2021

 Well it is time to recap and give a updated judgement on the process I have been doing since 2018. When I started tracking this in 2018 (though the loan was refinanced in 2016 and I was paying off other things), this is where it started when I started to track it. 

 

 So the end of the year is here. This year I had some medical bills, an AC needing fixed, Dryer replacement. Thing is with all these extra stuff I still made surprising progress. The motorcycle crash totaled my bike, but gave me ability to pay more on the house, so I am thankful either way. 

So here is where we are on the process.

 

 

93 payments is 7.75 years by the way. For a 15 year mortgage. The goal is to finish this by June or July and get out from under it. 

 What about the truck. Well I have been making normal payments on it, and still ahead of what my bad calculations had me at.

This is supposed to be the estimates for the items at hand.

Car

 

The only thing not in accordance or ahead of schedule is the savings. It is to be expected though since I have been putting my all to getting the house down. ;) 

 So overall I am very happy with this experiment, and unfortunately it will be ending soon. I will have to figure out a different way for the truck to pay off quickly but I already have an idea for that. A secondary savings I can rotate though. 

The process is done, house paid off.

Update Sept. 2021

 

..:: Tracking Update 3/18/2019 ::..

Well I thought I would do an update on the financials and what has occured recently.
First the estimate on the house went up according to the Mortgage company, by roughly 30,000. So score there.
Before I get into the numbers, I did decide to toy around with Lending Club, and to tell you the truth I am enjoying it, even wrote me a python script to auto purchase based on criteria I setup. so far since January I have made $10.00 off the $1000.00 seed I put in. So to the numbers.

====Mortgage======

Extra Principal Paid: $6,462.00

Interest Saved: $2,817.00

Payments Saved: 17

Current Loan Maturity: 4/1/2030

================ 

I am on my target as far as the financial calendar I setup for myself as well. So we are in good shape at this point, plus I just put another $500.00 on the pricipal that is not reflected.

January 2019 - Drivers Ready -

So today was payday from the job. Everything was caught up and I still had extra so for the time being I put the rest of the money into savings so I could figure out where to allot the finances. The HELOC would be 0'ed out and so would the Credit card. Put $1000.00 into savings and had $400 still left in the checking.

I could have left it as it was, however, I get paid 3 times this month. So I decided to put $2000.00 onto the house principal like I had planned for next month according to my sand box schedule.Now this puts my HELOC into a -1700.00 but will be pretty much 0'ed out by next month. I am still awaiting payment at this time to be reflected in the portal but we will see where it lands in the next day or two. I will put the results in the edit section.

===Edit===

Extra Principal Paid:   $4,462.00

Interest Saved:   $2,015.44

Payments Saved:   12

Current Loan Maturity:   9/1/2030

Another 6 months off the loan. :)

==End Edit==

..:: Continued Theories ::..

      So this last November 2018, I started the actual theory on the item I learned it from, The mortgage. I put $2,000.00 down on the mortgage. Instantly the mortgage calculation did a savings of close to $1,000.00 savings in just interest alone. Saving up to 6 payments.
     I would have to say not bad for a start. it is December same year. I bought an expensive birthday present and well, I am still not that far behind my schedule I did for paying off the house. The next scheduled payment is in February 2019. Then every 3 months after. The plan is to end next year at or close to $51,657.28 for the mortgage left. I am entering the year with $63,930.85.
     Just over 4 years with this calculation and some savings along the way and the mortgage will be paid off. Of course, the question is when does one start looking at what to do after that? How early is too early, or too late to start looking at what to do?
        I would say it is never too early to have a plan. So I started to research on what to do after a house is paid off tonight. Not surprising I see invest it. Put it into a brokerage and such. That might be an option, but I still want to investigate other options like Self Directed IRA's or other avenues. Not just the typical stance people suggest.
      I did not go by the conventional methods to get all this debt taken away, and I did not go the conventional route to start paying this house completely off. So why should I stick with the conventional methods of what to do after? I do plan on buying the land up in Kentucky as well and start the retirement preparations there. Winters will be hard, but I will find a way to manage, even if I have to dig into the ground for warmth. I say that half joking by the way.

..:: Tested Theories ::..

Theorium Name: Leveraged Home

Goal: Pay off debts or home, by leveraging your equity

Items Needed: Home, Equity, HELOC, low-interest credit card, job, understanding of finances

Conceptual: This is to use the equity in a house to pay principal down quickly, effectively saving money of time or MoT. First, you pay your whole check toward a bill. From there you live off the Credit Card, remembering budget practices. Once your Credit card bill is due, you pay it off by your HELOC. The next couple of cycles you put the paycheck toward the HELOC, while still living off your credit card. In two or three cycles the credit card and HELOC are zeroed out, start over again.

For most people MoT is what catches up with them, the amount of money spent wasted on interest rates and time. This process is to lower and eventually eliminate it.

The test performed is as below.
Car amount:  6,000 roughly 6-7% interest 3 years left
Water Filtration: 12,000 roughly 14% interest, 5 years (I would say avoid at all cost clearwater loans)
Windows: 10,000 roughly, 14% interest, 1 year same as cash
Roof: 11,000 roughly, no interest paid out.
Total debt: 39,000 debt target over 2 years

I started this 2 years ago, and have cleared close to 40,000 in debt. Clearing the way for the process to go to the house, which still has 70k left on it. The process works, however, there is one flaw. As you get used to living on Credit Card one tends to forget budget, so that is key to remember things. The above does not tell the whole story either, I still have electric, house bill, truck bill, for 1 year HELOC Insurance (not worth it), and auto insurance. So there was money going out just in daily life stuff as well. This essentially shows I can clear roughly 20k in debt destroying power a year, pending issues.

Roughly 5 years to pay off the house, saving an immense amount in just MoT power. At this time due to the roof, I have suspended the aspect of this structure and returned to the traditional methods in order to build up savings.

In the last 2 years, I have probably spent about $200 in interest rates to leverage the whole paycheck to clear various bills and save in MoT. So I would say this method is well worth it in the long run. I do plan on going back to it once I have 6 months back into my savings.

One other thing this did was increase my FICO exponentially.