One Small Step Toward Financial Independence

I’ve been an avid fan of the FIRE (Financial Independence, Retire Early) movement for a while. If you’re unfamiliar with the concept, members of the FIRE movement live debt-free and save/invest the majority of their income (sometimes up to 70%) in an attempt to retire early and live off of dividends, passive income and other means. The goal is to be able to leave your regular job to travel, spend time with family or just sit on the couch and eat potato chips. 

While the dream of FIRE will probably always reside within me, the reality is that it’s probably not in my future and that’s okay. Most of the FIRE success stories I’ve read are written by dual income, no kids households. We’re a single income household with 2 kids and plans for more. Typically, people that succeeded in achieving FIRE start discussing a return to the workforce (at least temporarily) when kids come along or an unexpected event occurs (thanks, Coronavirus).  

Even though retiring early likely isn’t in the cards for me and my husband, the (more important) goal of financial independence is. It’s a slow process but something we’ve been working together toward since we got married.

The first step in this process is to clear all debt. Luckily, we are both very debt-averse. Currently, our only forms of debt are a car payment and a mortgage. We are incredibly blessed to have been able to save and put down 20% on our home. This ensured we did not have to pay Private Mortgage Insurance (PMI) each month in addition to our principal and interest payment. 

Recently, we refinanced our mortgage to obtain a lower interest rate. Since we were only a couple of years into our mortgage, we refinanced to another 30 year loan, but our new interest rate was 0.65% lower than our original rate. By obtaining a lower rate, we dropped our monthly payment by about 10%. 

Since we already had a solid emergency fund in place, we debated quite a bit as we explored our options regarding the freed-up money. We narrowed it down to 3 possibilities:

  1. Overpay on the mortgage
  2. Invest in the stock market
  3. Put toward home improvements

Ultimately, the choice was easy: overpay on the mortgage. Yes, investing in the stock market is probably going to yield the best financial return on the money. But, reducing the amount of debt we have provides a level of emotional relief. Plus, by overpaying the mortgage each month we will save thousands of dollars in interest and pay our mortgage off about 5 years early. (Since we refinanced 2 years into our first loan, it’ll take a total of 27 years to pay off our house instead of 30).   

While paying off our mortgage entirely is still a long way off, we sleep easy at night knowing that we’re making small contributions now to lighten our load in the future. It might not be one of the highly popular, rapid FIRE success stories all over the internet, but it’s a small step in our goal toward financial independence and retirement. Are you working toward financial independence? What are your goals and how are you achieving them?

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