When we say that we are developing a homestead and building a home debt-free, we don’t mean that we have zero debt in our lives. What we mean to say is that we’re trying to develop our property with cash as we have the funds rather than going into debt to have everything now, or even buying an overpriced done-for-you home with a mortgage. For us, we still have some personal debt to tackle which we’re doing so one step at a time, but momentum train has left the station and is picking up steam!
In this post, we want to share that today we paid off a large expense we financed with 0% interest for the purpose of getting started with our homestead journey. Paying off this particular stream of debt put $350 back into our pockets monthly!
Back in April of 2015, we knew we wanted to buy land in Idaho but we couldn’t find property that would work for us. However, we did know that we needed to upgrade our office and work equipment before we went insane.
Jesse and I back in 2013 started the transition of earning our income online rather than at a J-O-B or in a physical, location-dependent business. To do this, we needed top-notch technology as our multiple desktop and laptop computers were holding us back severely, so we splurged on two MacBook Pros and two Thunderbolt displays, plus a few accessories, totaling $6,000.
Since we couldn’t find land, and had no idea if we would in Idaho in a reasonable amount of time, we were prepared to buy this cash when we discovered that we could purchase everything on credit with a 0% interest rate for 18 months. We were sold.
We are sharing this story for a couple of reasons that are important to our lifestyle of becoming completely debt-free and building our home with cash.
Using Debt Strategically Helped Us Get Where We Were Going
While we are advocates of living a debt-free life for more reasons than we can cover in this blog post, we also acknowledge that debt can be a strategic financial tool.
The year 2015 was busy and eventful for us to say the least. Back in April, we knew we had the funds to buy our office equipment cash, but we also knew that we were looking hard for land and that we were hoping to find property that year, so we also knew that it wouldn’t be wise to kiss all of our cash goodbye when we had the option to open up a line of credit with a 0% interest rate.
We never enjoy taking on additional payments, especially payments that are $350/month when we are trying to lower our monthly expenses rather than increase them, but we’re happy we did in this case.
It turns out, months later we found the perfect property and the owner was willing to carry the contract with $5,000 down. Because we didn’t blow all of this on our new technology, we could cover the down payment with ease, and figure out the rest later once we had our land secured.
We do not suggest this strategy to everyone… we keep careful track of our expenses and know where our money is at all times, even when we have multiple irons in the fire at once. Using debt and 0% financing can be risky for someone who is bad at managing their finances as the penalties for NOT paying it off in time can be severe.
We also used this same approach when buying our Honda generator… 0% financing was available and we took it. We bought a $2,200 generator for $0 down, and paid $200/month (over the minimum payment) until we could pay it off in full which we did a few months back.
Debt Paid Down = More Money in Your Pocket Monthly
The other reason we want to share the experience paying off our office equipment is the idea that we’ve put money back into our pockets monthly and lowered our monthly financial needs.
There are two ways to get more money… to make more, or to need less, and we always aim to need less money. More info on our financial strategy here.
It’s hard mentally to pay off debt because on one hand, you say goodbye to your hard-earned money yet you don’t get anything tangible for it because you got it when you signed the agreement! It can be far more rewarding to some to buy a new tool or something physical that you can use or see.
On the other hand, if you keep a spreadsheet of your expenses, it feels really great to see the monthly overhead decrease! Any time we pay off any debt, the first thing we do is give each other a high five, and then we update our monthly expense spreadsheet together and watch our bottom line decrease. Then we crack open a hard rootbeer to give ourselves a pat on the back that we’re moving the right direction.
Since we moved to our land in September of 2016, almost 10 months ago, we have lowered our monthly overhead by $550. Not only that, but in another month we should put another $50/month in our pocket since our internet installation will be paid off (decided to pay that over six months rather than upfront), and we’re also putting an additional $83/month back into our pocket since we’ve installed a small solar power setup.
Paying Off Debt & Climbing Out Of The Hole Snowballs
If you’re an American, chances are you have debt. You have a mortgage payment, a new car or two, student debt, credit card debt and who knows what else. The good news is that paying it off starts a snowball effect at some point.
To be honest, we have been pretty cash-strapped since starting this journey back in September. Even though Jesse sold his business and I sold my brand new car, you will see in our expense reports that we’ve been spending money non-stop!
If you live in a city and have never tried to build a home, it may be hard for you to understand that the expenses come at you like a fire hydrant for a while which has been happening for us. Whether it’s installing a septic system, buying tools and materials off of Craigslist, or trying to build a simple structure to survive the winter, everything seems to cost money. The thing to remember is that this type of journey is not about trying to save money over a month or even over a year, but over a lifetime.
Believe it or not, despite spending loads of money since we arrived on our property and even before such as purchasing our pickup truck and travel trailer, we’ve been slowly grooming ourselves to be in the position to rapidly pay off all debt while actually building our home debt-free. Today, freeing up an extra $350/month helped us to give the snowball quite a push.
Becoming or Staying Debt-Free While Building a Home is a Chess Game
The last thing we want to share is that managing finances, especially while building a home which requires spending tens of thousands of dollars, is not unlike a game of chess. It requires understanding the pieces you have in the game to use if you need to, having a strategy, understanding what all is happening on the board, predicting the future, knowing your vulnerabilities and then moving your pieces in a way that will help you to accomplish your goals.
We like to think that we’re doing a pretty good job in our chess game and we know that sooner rather than later, we will get to tell the last of our debt “Checkmate.” Bring it on, and let’s all celebrate our small successes together!
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