The word mortgage is derived from a “Law French” term used by English lawyers in the Middle Ages meaning “death pledge“, and refers to the pledge ending when either the obligation is fulfilled or the property is taken through foreclosure.
Literally, mortgage = death pledge.
“A man in debt is so far a slave.” – Ralph Waldo Emerson
Debt is horrible: it is mentally draining, financially draining, and affects your entire life if you are weighed down by the large barbell of debt.
The main benefit to paying down debt is increased cash flow. No more giving your hard earned cash to those pesky lenders!
If you choose to pay down debt, you will want to put extra cash towards your debt each month. This will increase the speed at which you pay down your debt. By sacrificing short term and putting extra cash towards your debt, you can eliminate those debts in a much shorter time frame. In addition, by paying off your debt faster, you will save money on interest!
Let’s have an example together.
Let’s say you have a $20,000 loan with a 6% interest rate and a 10 year term. Using an online calculator, your monthly payment will be $222.04. Over 10 years (120 months), this will cost you $6,867.01 in interest. If you pay $100 extra a month, you can cut the time you are paying off your debt to 6.25 years (75 months) and you will pay $4,008.09 in interest. By paying an extra $100 a month, you will save yourself $2,858.92 and will be debt-free 3.75 years ahead of schedule!
As shown above, by paying extra each month, you can save money and reduce the amount of time you are paying off your debt. In addition, once the debt is gone you effectively give yourself a raise; you have more money falling to the bottom line each month for you to save, invest, donate, spend, etc.
Mustard Seed Money Paid Off his $400,000 Mortgage in 7 Years, Could You? – Episode 6
My guest today is my friend and fellow blogger, Rob. Rob is a successful accountant who paid off his $400,000 mortgage in 7 years, saves nearly 70% of his income each year, runs a blog which receives over 100,000 page views a month, and is active in his community teaching individuals and couples about how to reach financial independence.
I’m very excited to share with you today’s episode where we chat about how and why he paid off his mortgage in 7 years, how being debt free is incredibly freeing, what saving 70% of your income each month looks like, and talk about his involvement in the community and how everyday people like you and me can improve our financial literacy.
With all episodes, I want to leave you with some takeaways for you to improve your life. For this episode, I have a few takeaways:
- Being debt free is a freeing feeling. The word mortgage literally means death pledge (in Latin). Work on becoming debt free, and I won’t be surprised if you become much happier.
- Look for deals at the store to reduce your expenses. Buy in bulk, and cut coupons. Some of this is pretty obvious, but many people don’t do it!
- Personal finance is just that, it’s personal – it’s starts with you and your goals. How are you spending your money? Is it on things that improve your life or not?
Check it out here, or on iTunes or Stitcher!
For more information on Mustard Seed Money and Rob’s story, check out his site here: Mustard Seed Money.