If you want to pay off your house, creating simple milestones is a really important and helpful way to see your progress and reward yourself as you go. As we all know, the biggest reward for paying extra on the principal of your mortgage every month, is when you reach the goal of a paid off house. But along the way, you can reward yourself in two specific ways.
When we first got the house, we printed off the amortization schedule. It ended up being 7 pages with a lot of rows per page that indicated each payment. I numbered how many of those payments we had and then when we paid off each mortgage payment and put extra principal on the house, we struck through that row with a pencil. This was an easy way to visualize our progress and get the satisfaction of striking out a row when we paid extra.
Secondly, when we finished paying off a full page of the amortization schedule, we would celebrate in some small way as a family. It was often ice cream or dinner out to eat. But it was something to recognize the work we had done up to that point. The cool thing about doing it this way was that we were able to get through the first several pages much quicker. This is because you pay more interest at the beginning of the loan. Usually the first half of the amortization schedule has more interest than principal on each monthly payment. But in the beginning, it is pretty much all interest payments. So, extra principal payments in the beginning of our mortgage loan allowed us to strike through more rows and see more progress quickly. Which, this might seem silly but when you are able to strike through a whole half of page in just a few months, it feels significant. This allowed us to feel like we had more wins in the early years of our house, when the mortgage often felt insurmountable. We knew that in the worst case scenario, even if we had to stop paying down the mortgage, we were cutting out years of our mortgage each time we put extra principal on the house.
It’s important with any goal that you are able to develop habits or rhythms toward accomplishing the goal, to allow yourself to feel like you are making progress and to create milestones. In this case, putting our money toward the extra principal first, before it went to other expenses, was the habit. We were able to also see the small steps of progress through striking out each row on the amortization schedule as we paid it down. The milestones were when we finished a full page of the amortization schedule. I also made another game up that helped me visualize the progress. Since our mortgage was $100,000 I would use my fingers to count down every $10,000. Each time we removed $10,000 I was able to take away one finger. This allowed me to visualize progress anytime I wanted to…by simply holding up however many fingers we had left. It gave additional motivation when we really wanted to stop paying down on the house. Only 5, 4, 3, 2…more fingers!
This might sound cheesy, but hey, it worked! I remember when I was a kid and wanted to be a good shooter. I heard of people listening to audio of the ball swooshing in the net over and over again to build confidence before games. When it comes to any goal, it’s important to visualize the goal and see progress as you take action. This helps your mindset as you go.
Ultimately, this process worked well for us and we were able to pay the house off in less than 8 years! Use the amortization schedule to your advantage and I know it will spur you on to stay with it too!