Two years ago my wife and I purchased our very first home.

We have a conventional, fixed-rate 15-year mortgage.  Our goal is to pay it off our mortgage in less than ten years.

As of January 13, 2011, we have made 22 regular monthly mortgage payments.  We have also made several additional principal-only payments.

Our mortgage payment is drafted from our primary checking on the first day of each month.  Additional principal-only payments are made throughout each month, as we earn additional income and find ways to decrease budgeted-for expenses.

Here is our most recent chart -

The chart shows two percentages.

The blue percentage is how much I still owe – the balance.

The red percentage is how much I have reduced – the paid.

Each month, a little bit more of our regular monthly payment goes towards principal and a little less goes towards interest.  Right now, the split is roughly 55/45.  Seeing 45% of our payment going towards interest really stinks.  That’s why we are so committed to sending extra, principal-only micro-payments.  Our mortgage is reduced, dollar-for-dollar.

This chart does not represent how much of my house I actually own. It simply reflects how much of our mortgage balance we have paid.  We actually “own” much more than 10.38% of the house, based on appraised value and initial down payment.

We have made 22 regular payments and have lived in the house for almost two years.  Our contractual remaining term is 13 years and 2 months, but our actual remaining term is 12 years and 10 months.  We have reduced the length of our mortgage by 4 months!

Now that I have a new job, we’re still ironing out the wrinkles in our monthly budget.  We’re unsure as to the exact amount we’ll have, each month, for debt reduction.  We know that we can’t be as aggressive this year as we were last year, but we are still focused on our goal.  Our steps may be smaller, but we’re still headed in the same direction.

View all post related to our mortgage payoff progress.

When all is said and done, it is the done that counts.

Lots of folks spend their time talking about their problems, especially their financial problems.  Only a select few ever commit to the task of fixing those problems.  The talking is important, but only if it actually leads to real changes.  Decisions must be made, goals must be created, and plans must be implemented.  Real progress demands real work.

Establish Big Goals -

Here’s a brief paragraph, outlining the financial future that I want -

I want to live my life without borrowing money.  I want to be able to send my children to college and retire when my wife is finished with her work as an educator.  I want to own my own home.  I want to be able to give generously and enjoy time with my family.  I want to write for the rest of my life – and I want to be able to write full-time.

Using the above paragraph, I extracted the following financial goals -

Live Debt Free

Pay Off Mortgage

Save For Kids’ College

Save For Retirement

Increase Writing Income

Establish A Plan To Achieve Each Goal

You can see where this is headed.  I have my goals, but that’s not enough.  I then create a specific plan for each specific goal.  Some plans, like the plan to pay off the mortgage, are rather easy to create.  I have a beginning and ending date, a specific balance to deal with, and knowable payment amounts to be made.  Some of the other plans, like plans to save for kids’ college or increase writing income, those plans are a little more complicated, a little more open-ended.  Nevertheless, plans must be made!

Act on the Plans

This is where most folks get stuck.  They have goals (some well-defined, some less so).  They may even have plans.  The key, however, is actually implementing the created plans, so as to achieve the desired goals.

I can list, quickly, the four reasons that I have for acting on my plans.  They are – my wife, our oldest daughter, our son, and our little girl.  They are my motivation.  Period.  I want to provide for them and bless them.  So, I don’t just sit around and think about what it would be like to be financially free.  I’m actually taking steps to become financially free.  Do I make mistakes?  You bet.  I spend more than I should.  I fail to save as much as I should.  I write less than I want to.  I am very, very, very human – but I press on.  I act.  I don’t just talk, or dream, or think, or imagine.  I act.

Start Over

I almost left this paragraph out, but it might be the most important one in this article.  If you get stuck, if you get fired, if you get tired, if you get frustrated, if you get confused, if you get exhausted – take a break – and start over.  Also, remember that numbers in a bank account do not define who we are, as people.  We are defined by what we believe, what we give, and what we know.  Even the smartest financial minds get things wrong.  So, just start over.  Rewrite your paragraph.  Reestablish your goals.  Reconfigure your plans.  Then, act.

No Credit Needed is an independently-operated, single-author, personal finance blog.  You can help to grow the visibility of this site by sharing this article.  Simply click on the sharing buttons below – and show your support for the site.  Rock on.

According to this recent L.A. Times report -

Consumer borrowing increased at an annual rate of 10% in November,the largest jump in a decade… 

Outstanding credit card debt increased 8.5% in November… (emphasis, mine)

It appears that folks are using credit cards more than ever – and outstanding balances are increasing.

For more than seven years, here’s how I have reduced (and almost eliminated) my use of a credit card:

I live on a budget.

If we eliminate unplanned-for spending, we can eliminate unplanned-for borrowing.  At the beginning of the month, I know how much money I am going to spend and I know where I am going to spend it.  Some portion of credit card use results from poor planning.  Eliminate the poor planning, and we eliminate this type of credit card use.  I use a zero-based budget to manage our household finances and an irregular income budget to manage business finances.

I use online banking to pay monthly bills.

Instead of charging my bills to a credit card, I simply pay (the majority of) my bills from my online bank account.

I pay cash for everyday purchases.

I have mentioned it before, but it bears repeating.  I use the envelope system to manage my cash.  It works and is simple to use.  Again, if the goal is to reduce credit card use, the envelope system is a great tool.

I use a credit card only for reservations, not for payment.

I have used a credit card, on many occasions, to reserve a hotel room.  At the end of my stay, I pay with either cash or debit card.

I still write paper checks.

Yes, I know that I am a Luddite, but I will occasionally write a real, old fashioned, paper check.  I will do this when I give offering at church or when I need proof-of-payment for daycare or some other service.

I use a debit card when necessary.

There are some purchases (think online shopping) that really do call for either a debit or credit card.  Rather than worry about identity theft, and the loss of all of the money in my checking account, I have a dedicated secondary checking account, attached to my debit card, and I use that account for all online purchases.  When I create my budget, I allocate necessary funds to the secondary checking account and use the debit card for online purchases.  It’s not much of a hassle, and it eliminates the unnecessary temptation to use my credit card.

If I had to use a credit card -

I would only use a credit card to pay for budgeted items.

I would pay a credit card off – each month – in full.

I would refuse to use the card, simply to get a discount, points, or a reward.

I would consider the potential long-term impact of my short-term decisions.

When I combine the use of online bill pay, a debit card for online purchases, and cash for everyday purchases, there’s not a whole lot of room left for the use of a credit card.  Instead, things are simple to manage and I don’t have to add to any increase in those statistics.

Credit cards aren’t evil.  They’re neither good nor bad.  They do, however, provide an ease-of-use that can quickly wreck a budget.  I stick to my system, keep things simple, and rock on.

One side note:  I am glad to see that certain credit cards are beginning to offer longer-term zero-percent interest deals.  We used one of these deals when paying off our debt, and it significantly reduced our overall interest charges.

One final note: I do have a couple of credit cards, but I rarely use them.  Once every few months, I’ll charge a tank of gas or buy some groceries, and then pay the thing off.  I do this simply to have some limited activity on the cards.  I have monitored my credit score for several years and everything looks just fine.  There was a time when I was staunchly anti-use-of-credit card (and, I still think the world would be just fine without them), but now I’m more anti-over-use-of-credit card.  I’ve mellowed a bit in my old age.  The key is to be informed and responsible.  Rock on!

With so many of us focusing on improving our finances in 2012 – I thought it might be beneficial to link to a few of my favorite personal finance-related resources:

Free Printable Grocery Store Price Book - I created this printable price book to track fluctuations in the prices of grocery store items.  Download the price book and print several pages.  You can track prices for multiple stores and multiple items.

Free Printable Coupons – You can click the link and print your coupons from right here at No Credit Needed.  You can also click the link at the top of No Credit Needed.  Printing directly from No Credit Needed helps to support the site.  (You rock!)

I use both the price book and coupons – and we manage to save quite a bit on groceries.  I find that most stores cycle through their prices every 12 to 16 weeks.  Stock up when prices are at or near rock bottom.  The price book helps you keep track, so that you will know exactly when to make your purchases.

Free Get Out of Debt eBook – I like to keep things simple, especially when it comes to debt reduction.  This free eBook is just 8 pages long and is available in the popular PDF format.

Envelope System Video – This is one of my all-time-favorite posts.  I created this video, explaining how the envelope system works.  You should watch it for two reasons.  One, you get to hear about the awesome envelope system.  Two, you get to hear my awesome southern drawl.

I like resources that are user-friendly.  My approach (to almost everything) is a bit old-school, but it works for me.

No Credit Needed is an independently-operated, single-author, personal finance blog.  You can help to grow the visibility of this site by sharing this article.  Simply click on the sharing buttons below – and show your support for the site.  Rock on.

Savings.  Rainy-day Fund.  Cash Reserves.

The Emergency Fund.  It goes by many names, and whatever you want to call it, ours helped us to get out of debt.

Why we established an emergency fund before attacking our debt -

When we first decided to start paying off our consumer debt, we were pumped.  It would have been very easy for us to have used every extra dollar to reduce our debts.  However, we were concerned about emergencies – those unplanned-for expenses with which we must all deal.

So, even before we began to attack our debt, we funded an emergency fund.  Having a small amount of cash reserves removed the necessity of using a credit card and proved invaluable to our debt reduction process.

Where we kept our emergency fund -

We have been using an online savings account with Ing Direct for more than a decade. We simply initiated transfers from our primary checking to our online savings – and quickly built our emergency fund. (A good friend of mine recently opened an account with Ally Bank and he has been very pleased with their interface and customer service.)

For us, it was important to keep the money in our emergency fund accessible.  A checking account or saving account at a local bank would have sufficed, but we wanted the slightly higher interest that our online bank offered.

How we determined how much to keep in our emergency fund -

When we first started, we simply went with the basic $1000 emergency fund.  Over time, we modified our emergency fund, based on some real numbers.  We calculated the deductible for one minor car accident, plus the cost of replacing one appliance, plus the cost of three trips to the kids’ doctor.  Calculations will be different for every individual or family.

There was (and is, really,) no way to know exactly what might happen in any given month.  We wanted to be prepared, should our dryer have gone on the fritz, and one of our kids gotten sick, and had I hit a deer with my truck.  Honestly, if all three of those things were to have happened, in the same month, we would have had to use our credit card for any other emergency.  Thankfully, we made it through our debt reduction process, and only had to dip into our emergency fund a couple of times.

The goal isn’t to plan for every eventuality.  The goal is to plan for reasonable eventualities.

How we found the money to fund our emergency fund -

We worked very hard to reduce our monthly spending.  We cancelled unused services, we scaled back on others, and we started to live on a zero-based budget.  We sold things we did not need and we cut back in nearly every area of our lives.  We made saving our money a top priority.

Why we increased our emergency fund balance after we got out of debt -

One of our goals, indeed the mission of No Credit Needed, is to live without needing credit.  If we are going to avoid the use of credit cards, we need cash reserves.  At present, we are working to rebuild our emergency fund, so that we have enough cash to cover our basic living expenses for twelve months.  I recently changed jobs, at a reduced salary, so building savings (while paying off our mortgage) is challenging.  We keep pressing forward.

Every paycheck is an opportunity to exercise wisdom.  We believe that increasing our savings is a wise thing to do.

No Credit Needed is an independently-operated, single-author, personal finance blog.  You can help to grow the visibility of this site by sharing this article.  Simply click on the sharing buttons below – and show your support for the site.  Rock on!