Over the past year, when we carpool to work and when the house is quiet after bedtime, Chris and I have had an ongoing conversation about how we want to spend our years with the boys. Because we are at the beginning and we want to live intentionally and not look back and wish we'd done this or that.
We talk about little things like movie nights and biking to the farmer's market and reading Harry Potter all snuggled together in bed; we talk about big things like being able to spend extended periods of time in Austin with my family and being able to work for ourselves so that we minimize demands on our time that take us away from our family. These are conversations about creating our ideal life and they easily become conversations about money and how we can structure our finances and budget to achieve our dreams.
The ideal life situation would be for Chris and I to be financially independent. In other words, to not have to work for anyone else but ourselves, pursuing only the work we want to pursue. This would allow us to do work that we love on our own schedule while spending ample time with our little family of four and extended family. Chris and I feel deeply fortunate that we already have great jobs (enjoyable work, good pay, great benefits, flexibility) but essentially we are asking, "What if money were no object?"
We've come to realize that we have the capacity to come close to this ideal life in the not too distant future but it will require a significant achievement: we need to pay off our mortgage of $165,000 in the next five years.
Paying off our house would put us in the position of being able to live on Chris's salary alone (i.e. I could stop working at my current job if I chose) while continuing to save money with the goal of enabling Chris to retire early (hopefully by age 50 or at the latest age 55). In this situation we could have significant time together as a family because Chris enjoys a flexible schedule and does not have to work during the summer. I would be able to pursue my creative work (writing, blogging, podcasting) full time (or as much time as I cared to dedicate towards it).
This timeline also coincides with Dashiell starting elementary school, which will significantly decrease our daycare expenses. Two years later, Cedric will follow and with both boys out of daycare we'll see a big bump in our disposable (or more accurately, save-able) income, making it more comfortable to live on Chris's salary but maintain our lifestyle and savings goals. (Currently we pay about $1,700/month in daycare expenses, although this will go down slightly as the boys progress to pre-school programs.)
To achieve our goal of paying off the house, we'll need to be fiercely committed to our budget so that we can save $25,000 per year. Our plan is to invest this amount each year in an index fund while also paying down our mortgage through regular monthly payments.
Savings + dividends + paid principal = paid-off house after five years.
Our current budget, if we stick to it, allows us to save $20,000 per year. So we'll need to make up the difference with additional savings from the teaching and research that Chris picks up during the summer (which we do not count as part of our annual income because the amount varies each year and we don't want to depend on it).
Many things have to line up in order for this to happen in five years time (sticking to our fairly strict savings budget, no huge unexpected expenses). And I'll admit it's a little scary to float this big goal out into the world because what if we fail? Womp womp. But making this public also lends accountability and I really want us to stay accountable to this goal.
It feels exciting that eliminating this big debt is even a possibility and, interestingly, I think it's made me enjoy my work even more. Because with each paycheck we are a little closer to our goal. I've mentioned before that I really enjoy my job and being a working mom and I still feel this way. I am not itching to quit my job and if our big goal doesn't pan out I could see myself happily continuing in my current position. But I'd also love to give working fully for myself on creative projects a go and it would be ideal to do that with financial security.
I'd love to know your thoughts on paying off your house early if you own your home! I know that some people compare the mortgage interest rate (ours is 4%) to the average return from the stock market (~7%) and see investments in the stock market as the better financial decision. But because Chris's job includes built-in flexibility in the summer, our goal is to eliminate fixed costs in our budget so that we can both freely enjoy the summer months with our family and work from there on financial independence. So we concluded that eliminating this debt is the best decision for us.
P.S. Chris and I talk about this big financial goal in the first episode of our new podcast, Matrimoney!