Of course, my longer-term goal is to pay off my mortgage completely, but this is mini-goal on the road to completing that longer-term goal. I find it very helpful to establish mini-goals along the way to achieve a long-term goal.
Last summer this goal was within reach and I thought I would be there by the end 08, but the market crash pushed me back a few months.
I've been reaching for this goal for 12 years, ever since graduating from college. During that time there have been a lot of expenses, most notably college loans, houses, cars and kids. It is very exciting to reach this goal for me and it brings me one step closer to reaching a zero debt threshold (including my mortgage).
I now have a total of cash and investments that are greater than what I current own on my mortgage, which is the only debt that I have left. I probably won’t pay off my mortgage at this time, because interest rates is so low and cashing out all my investments could cost me some money in the process. I also don’t want to be cash poor at this time, because I may need some money to help someone or take advantage of an opportunity.
Some personal finance bloggers use their net worth as a means to measure the progress of their personal finance each month, which is a great tool to measure progress. But, they usually include the value of their home to put them is the green – showing a positive net worth.
I don’t want to do that because housing prices are in a free fall and cannot be counted on until they are sold. Besides, if I were to sell, I would just buy another house. So, for this reason I don’t like to think of my personal house as an asset – it’s more of a liability than anything because it costs me money every month to maintain, heat and cool.
A better comparison is if I look at my parent’s personal financing. At 35 years old, I am 15 years ahead of them because they didn't reach this goal until they were 50. The last 20 years of prosperity in America has created a lot more opportunities to gain (and spend) wealth than my parents had.
The biggest challenge now is keeping this wealth with defensive positions against inflation and dropping asset prices that are bound to consume a good portion of the wealth of America during this massive recession that is just getting started. The stock market is down to a 12-year low and real estate is down at least 8-10 years. Being 15 years ahead of my parents financially could quickly evaporate if not careful.
In fact, there are several good arguments suggesting that the perceived wealth of America is not really wealth when you consider the phony economy that pushed up asset prices. The real financial collapse could still be coming when the value of the dollar collapses. The wealth that we thought we had may not really be wealth at all.
Real wealth comes from savings and production, which America has not been increasing over the last 15 years as China and India have become the producers of the world. That is about to start changing, when the dollar does drop in value, our production industry will be given legs.
How I Got Here
A good question is how I reached this goal? I intend to continue writing about my story of financial freedom on this blog, so if you are interesting stay tuned. In short, there are no quick answers. To get to this financial position was nothing short of hard work, living below my income and a continued investment in my financial education to make wise investments that proved to be prudent in increasing my wealth.
It’s a step-by-step process that starts with a mind set and a willingness to change your financial situation. You first have to want it bad enough to do what it takes to get the job done.