As the world grapples with Coronavirus or COVID -19, we wanted to share the story of Andy Hill, who paid off more than 195K mortgage in 4 years and increased his net worth by over 900K in 9 years. Andy is an award-winning blogger and podcaster behind Marriage Kids And Money.
Pay Off Mortgage
How does someone living a regular American family life and earning a monthly salary pay off a 195K mortgage in 4 years? When Andy and his wife got married, they wanted to move out of the bachelor pad Andy had and move into a regular house. They found a beautiful home in a nice neighborhood with good schools, but it came with a considerable price tag. Andy and Nicole made a compromise to pick up the mortgage but with a promise to pay it in less than five years. Until their mortgage was over, they decided only to spend 50% of their monthly income on regular expenses. So they got a 195K mortgage and agreed to explicitly sit down once a month for what they called a budget party. The ability to live on 50% of income enabled them to live like a regular family but still allowed them to pay off the 195K in four years.
A budget party is a term they coined for their monthly review of the home finances and to understand how they are spending their money, which they started around 2011. They plan out the goals ahead, including financial and family, as well as fun goals like vacations that they want to do in the future. So they take this opportunity to center themselves and their relationship and also plan other things, including what the kids are doing.
Changing the language of money
Andy discovered early on that he and his wife Nicole had a very different language when it came to money. Nicole is very excited about what money can do for you today, the fun and excitement it gives you, and enables you to have the things that you want. Andy has a very, very long-term view about money in it that he doesn't mind saving, and it makes him happy. But for them to be on the same page, Andy had to learn the language that Nicole could understand and reciprocate. So Andy had to learn to change his language from geek speak to the fun outcomes-based approach to be more in line with how Nicole thought about money, and when that happened, the monthly budget meetings went like a breeze.
Net worth realization and progress
When it comes to net worth, Andy describes, he never understood what the term net worth meant until he listened to Suze Orman. He assumed cos he and Nicole were earning close to 120K at that time; his net worth would be huge. But when Andy applied the calculations that Suze Orman mentioned, it dawned on him that his net worth was negative 50K. That was a big shock to him as that's when the realization hit that despite all that he owned, he wasn't rich; in fact, he was broke and owed 50K to others. From negative 50K to 850K where his net worth is now, he had an extended 9-year journey to get there and get there the right way. Using the budget party, saving 50% of his income, funneling any extra commissions which came in from his sales role into creating a permanent frugal lifestyle has enabled this success.
Andy and his family decreased their expenses one by one, starting with being on this track of paying off the mortgage in less than five years. Then Andy's wife Nicole went full-time stay-at-home mom. She was part-time with the first child, and when the second child came in, she went full-time stay at home, so they had a significant income hit. So they started small like shifting grocery shopping from Kroger to Aldi and were able to save about three hundred bucks a month. They then decided to cut out cable right around the time their second child was born as they were not watching that much TV anyway, saving 80 bucks a month. Then they had a re-assessment of their insurance needs and saved a nice amount of money. They moved to some high-deductible plans that which reduced monthly cost on their health insurance. They also saved by combining auto and our home with the same insurer. They were taking a little bit more the risk, so they were able to save a little bit more money.
Involving future generation
Getting their children (Zoe, who is seven and Calvin, who is five) involved in home finances, helped them inculcate saving habits and hard work requirements in them at a young age. Every Saturday morning, the kids do a chore program, so they come down after they wake up to make a little breakfast, and they have three essential yet kids size chores. The chores could include things like for Zoe to empty the silverware and put it in the drawer or for Calvin to help unload the mini garbage cans that are in the bathroom. The essential little things and they need to do anyway, so they want to show them that it's imperative to help around the house to help your family, but then also you get paid for it. They learn to correlate that when you help out people, you're going to get paid in the future, so we give them a dollar that's equivalent to their age, so Calvin gets five bucks, and Zoe gets seven bucks.
Message to the audience
The message Andy would like to give to the audience reading this blog is to be intentional with your saving habits. The things that you want to do in life write them down in a journal saying this is the life that I want to have and then look at what are the steps that you can take to get there. Also, please don't be pressured into thinking that you need to get it tomorrow. Andy mentions his story is a 10-year story, and after so many years, he can narrate his story as a success. You have to realize that there are so many steps that can happen under those big goals, and that's the fun part that's the journey. Don't think about the destination, don't think about mortgage freedom or the debt freedom believe in the process. It's going to take time to get there because not only are you educating yourself and making a lot of progress personally, but your kids are watching. So you are modeling some incredible behavior that they are going to then emulate in the future, so enjoy the journey, and that's the fun part.
To listen to my full interview with Andy Hill check it out here ANDY HILL INTERVIEW
If you would like to read more about Andy and his journey or listen to his podcast
Marriage Kids & Money, you can go to https://www.marriagekidsandmoney.com/.
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