[Don’t bother looking for debt paying tips #’s 1-66, I make things up like a weirdo]
If there’s one thing I hate more than debt, it’s owing someone something. So any chance I have to speed up the process to be utterly, and completely, free of that dirty D – mortgages included! – I’m all for it ;) From crazy schemes of paying off $2,000 extra every month (since suspended) to finding ways to have someone else nix it all for me (still trying to solve that one), my brain never stops working.
My wallet, however, sometimes does. And unfortunately you can’t pay off your liens with scoops of hate, unless you’re a Lannister.
So for the rest of us, we’re left to be as scrappy as we can muster, while at the same time enjoying a nice and happy life too. Which is a lot easier to say than do :)
One of the ways I’ve found that works WELL, however, is by simply rounding up my payments. And more specifically, to the 2nd nearest *hundredth.* For example:
- My first mortgage is $1,866, but I always pay $2,000.
- My 2nd mortgage is roughly $65* but I always pay $200.
That means that every single month we’re paying $269 *extra* that chips away at the principal . It never seems like that much when you’re actually making the payments each month, but multiplying it by 12 makes it $3,228 by year 1, and then $22,596 by year 7 – which is roughly the amount we’ve been doing this so far… And that’s ON TOP of the built in amounts going straight to principal with every payment too! Not to mention all that future interest you’re saving – or the fact it’ll be paid off faster.
Every time you round up you’re getting closer and closer to debt freedom without noticing it much. And if $269 is way too much for you to stomach, rounding it up to the actual nearest hundredth also works like magic. In this case you’d be paying $69 extra towards principle monthly which is still $828/year! And all better than $0.00!
You can also do this in other areas too:
- Credit card bills where you have a balance
- Loans you owe people
- Donations (the opposite works too, in giving back! :))
- And my favorite: with all spare change you get after buying stuff. Only instead of rounding up to pay something off, you pay yourself instead in the form of money in a jar (the “rounded up” part of the bill you just broke) which you later bring to the bank and make a hefty deposit. So more of a “savings” way of rounding up, if you will.
You make ANY of these a habit, and I promise you you’re golden. And just like all habits they’re hard as $hit to break too, once engrained.
I haven’t missed a rounded up mortgage payment in 7 years straight despite having a rather crappy past 12 months in the cash-flow department! But I’m a creature of habit, and I know the second I start taking breaks I’ll manage to undue the whole damn thing, so I don’t even dare risk it. Even when it makes me “lose” money that month (“lose” in a sense that I go into negative cash flow territory, but not obviously losing the money since it went towards paying off debt). It’s a long term play, and I’ll always take the hits to reach the finish line quicker.
I highly urge you to give it a shot if you haven’t tried so already. It’s nothing new and enlightening here (tons of people have done this long before the weblogz came out, and even books for that matter!), but it does work. And only adds to your arsenal on top of everything else you’re doing too.
So keep chipping away with every dollar! A BudgetsAreSexy reader always pays his debts!
*Our 2nd mortgage is a HELOC which is an interest only loan @ 2.8%. So even MORE important to pay off extra every single month for these guys – without doing so you’re never touching principal!
UPDATE: Here’s another awesome way to use rounding up to your advantage, courtesy of “Not Quite Sexy” below in the comments:
“I heard this tip when I got my first bank account, and I think we’re the same age. It said that when tracking expenses on your check register (remember those?), round up all your expenses and round down all your deposits. Manage your money to those dollar totals, then at the end of the month/quarter/etc, transfer that money to a savings account. You’ve already been living as if it was gone, so it’s easy. Plus, the math was always easier using whole numbers”
[Awesome Lannister Card via Imgur.com]
PS: Some of my favorite tools:
|Personal Capital (FREE) -- If you’re looking for a robust financial tracker, Personal Capital is the way to go! They’re like Mint, but on steroids and have much better tools for investment and net worth tracking. // Full review|
|Digit (FREE) -- A super easy (and automated) way to save. Every day Digit analyzes your income and expenses and will push money aside for you any time it sees extra sitting there. I've saved over $4,000 myself using them so far! // Full review|
|Acorns -- Having trouble finding money to invest? Check out Acorns – they round up all your transactions to the nearest $1.00 and drops the difference into an investment portfolio for you. Easy way to start investing! // Full review|