Debt Free Kiwi #15

How much debt have you paid off?: $380,000

What was it for?: Upgrading our home and purchasing a rental property.

From deciding to become debt free to making the last payment, how long did it take you?: 16 years.

What age did you take on your first debt, and how old are you now?: 32. I am 64 now. There were a couple of years in that period before buying the rental property that we were debt free.

Did you do it alone or as a family?: As a family.

Did you pay off debt from your regular income, take on extra work, or change jobs to speed it up?: Both my wife and I worked. The rental income from the rental property assisted in paying off the debt.

Did you sell anything or receive cash gifts to contribute towards your debt payoff?: An inheritance of $35,000 went directly to debt reduction.

What people, books, websites, podcasts, budgeting tools, debt trackers and resources helped you?: The Barefeet Investor.

Did you keep an emergency fund while you paid off debt? If so, how much?: Yes, we built up an emergency fund of $30,000 before doing extra one-off loan repayments.

Did you have any setbacks along the way, and how did you overcome them?: We had to repaint our house costing $13,000, and soon after replacing the roof, $24,000. As one of the three mortgages we had got paid off before the outgoings, our emergency fund plus the increased savings happening due to one mortgage payment ceasing, we coped with the unexpected payments.

What tips/hacks could you share?: Once the emergency fund was established, we aimed to do extra principal repayments twice a year. These payments were either $5,000 or $10,000, depending on the amount we could save. Sacrifices were made to make these payments, including not going on overseas holidays and not upgrading vehicles as regularly as we would have liked.

Was there a structure to your debt payoff? i.e. paying smallest to largest, or highest interest rate to lowest?: Paid off the 5% off the loan balances (we had all three mortgages on fixed interest rates) or as much as we could each year.

How did you stay motivated, and what was the most challenging part of paying off your debt?: The decision was made to make debt reduction a priority, and aside from when unexpected outgoings occurred, we stuck to our plan. We did not beat ourselves up those few times that additional debt repayments could not be made. We worked towards making the next lump sum payment as soon as we could.

How did you celebrate making your final payment?: We cleared the last $30,000 owing by one payment. We did not think of any appropriate celebration. The good feeling of having achieved the goal was a sufficient celebration.

Was getting out of debt worth it, and what have you learned about yourself?: The increase in interest rates commenced soon after we paid off the last mortgage. It is so good to be immune to the increase in debt servicing costs. The amounts that were being paid out in mortgage payments are now being accumulated so that the bulk of the savings can be invested in index funds, and useful additions can be made to our travel fund. It has definitely been worthwhile paying down debt quickly for the options that open up, as there is no requirement to work to earn income from which to repay debt. With no debt, income from a single rental house and useful KiwiSaver account balances and index funds, we can look forward to an enjoyable retirement.

Will you ever go back into debt again?: NO.

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