My High-Interest Debts Are Paid Off: Here Are the Milestones I’m Looking Forward to Celebrating Next
By: Finding Pith
Tags: Goals, Financial Independence, Passive Income, Debt, Motivation

My High-Interest Debts Are Paid Off: Here Are the Milestones I’m Looking Forward to Celebrating Next Finding Pith Aug 25·5 min read

Source: WikiMedia Creative Commons Attribution 2.0; Eden, Janine, and Jim from New York City

The middle of FIRE is a confusing place. The beginning and end are clear- You start by prioritizing payments on high-interest debt and try to reduce your spending footprint. At the end, you have few debts and a pool of money or source of passive income that meets your needs as enough to live on. You are FREE!

But the middle? It’s a bit murkier, a bit more individual, and there’s not nearly as much guidance on how to get through it.

This is partially because it’s kind of boring in the middle. If your journey is anything like mine, this is where it becomes sluggish. The tricks to lower your costs have been played. Your highest-interest, most satisfying debts are probably gone. You have some money in the bank. But it’s not enough to be comfortable yet. You’re probably saying “no” to a lot of fun events that cost more than your budget, too. And if you’re like me, austerity still doesn’t always feel great.

So I started a list of things to be excited about along the way.

Savings and Motivation: Hacking My Own Psychology for Financial Gain

Up until a few years ago, I was a spender. And this spending tied directly into my emotions.

· If I felt bad about myself, I’d buy something that made me feel better: new clothes, new exercise equipment, a self-help book, etc.

· If I was bored, I’d buy something to help change my life for the better- an expensive vacation, some starter kit for the new me, or a series of classes.

Along the way, and mixed in with some bad financial luck with home and health, we accrued some debt that we have been pretty successful in paying off.

Part of why it worked is that it’s infinitely satisfying to pay money off. Also, it felt amazing to fill my emergency funds so that I don’t have to worry about a large bill from a predictable source.

And yet, we still have debt from four mortgages on our four properties and two large, low-rate equity loans. This won’t take 6 months or even a couple years to pay off. Like many people, we have to strategically pay off these debts from highest interest to lowest and add money to our investment kitty at the same time.

And this is boring. And slow.

As I stated above, my instincts when I’m bored can definitely ruin our progress. But my instincts to meet goals make a great counter to this. So I created a list of things to aim for as our family begins to pay down these bigger, slower debts.

It is my hope that this is exciting enough for me to make it less tempting to sabotage our journey so far.

The Milestones

So here is where we currently are at the time of writing:

· We own four properties. All four have low-interest mortgages, and two also have low-interest equity loans from remodels that we performed.

· We live in one property, and the other three provide us rental income.

· We also have an investment account where we are putting monthly money and contribute to a 401K through my full-time job.

· I have side income from writing and web editing, which varies by month.

· We have emergency funds for our common money needs and no credit card debt, though we do use cashback cards for regular monthly expenses.

· We still use the avalanche method for paying down debt.

I’ve characterized these milestones by category. We may not hit all of them on our way to self-sufficiency, but they are more about motivation and less of a recipe book.

Debt-Related Milestones:

This is related to our six related debts. It’s the easiest one to describe, but it may be some of the last milestones that I meet.

· Paying off each remaining debt: This is one of the ultimate goals, but at the current rate, it will take some time.

· Having enough in my investment account to pay off a debt (even if I don’t use it)

· Having enough in my emergency fund to pay off a debt (even if I don’t use it)

· Having enough in my investment/emergency accounts to pay off all remaining debts

· Actually paying off all remaining debts

Savings/Investment-Related Milestones:

This is about the cash in my savings/investment/emergency accounts and how they relate to my debts and long-term financial goals.

· Having more investment money than my smallest debt

· Having more investment money than my largest debt

· Having more investment money than the sum of all my debts

· Having enough investment money to replace the income from one of our income sources at a 4% withdrawal rate

· Having enough investment money to replace the income from all of our income sources at a 4% withdrawal rate

Passive Income/Side Job Goals

This is about all our non-investment sources of “passive” income. It includes writing royalties (but not “pay per job” writing jobs that pay out once) and rental income.

· Enough money from all combined sources to replace either my or my husband’s full-time income

· Enough money from all passive sources to replace both our full-time incomes

· Enough money from passive sources to pay off debt within a short time span (e.g. one year)

Celebrating Milestones

I am much more about the carrot than the stick. While self-satisfaction is sometimes enough, I also redirect any unspent money in my monthly allowance account to a “reward” account. If I’m feeling a bit deprived in the austere world of financial independence, I can use a bit for a reward.

It’s also important to note here that I’m not sure if I’ll reach all these goals or if I’ll reach them in any particular order. The point is to try.

Milestones met are a good time to reconsider goals. For example, as we pay off each remaining debt, we will re-evaluate the amount directed toward investing versus debt payoff. If a passive income source does very well, we may re-evaluate our main jobs. It all depends on the milestone and how it changes our financial landscape.

How do you cope with the middle of FIRE? Do you have your own motivational tips? Please leave your comments below.