Debt Reduction

Round Up To Reduce Debt

When making our monthly mortgage payment, I always round up.

I use a zero-based budget to manage our household finances.

When calculating the allocation for the mortgage payment category – I round up to the nearest 100’s place.

I do this, because I like easy-to-do math.  This works in our situation, because our payment ends with 60.12.  So, rounding up adds approximately $40 to our monthly payment.  If our payment ended with, say, 98.16, I’d round past the nearest 100’s place, and add an amount that felt comfortable within our budget.  And, if our payment ended with, say, 11.92, I might round up to the nearest fifty, and not go all the way to the next 100.  Clear as mud?  Basically, I’m adding an amount to my mortgage payment, each month, consistently.

I make my monthly mortgage payment and I write a check for the allocated amount.  When the payment is processed by the mortgage company, the regular, scheduled monthly payment is credited to my account – and any additional amount is applied directly towards principal.

This reduces our principal balance, which reduces interest charges, which reduces the length of our mortgage.  Rock on!

In some cases, it might be advantageous to send 2 checks – one clearly noted “apply to principal”.  Our current mortgage provider does a good job of correctly applying any additional amount directly to principal reduction, so only 1 check is necessary, for us.

For my situation, rounding up results in an almost-automatic $40 principal-only payment, each month.  Obviously, this is in many ways just a random number.  I picked an amount that worked well with our budget.

Here’s the kicker – I don’t stop there.  Throughout the month, I’m looking for ways to save or earn additional money.  So, at the end of the month, I’ll often send another check to our mortgage company – this one clearly marked “apply to principal”.  Or, I’ll tack this additional amount on to our regular payment, depending on how soon the payment is due.

Over the course of 4 years, I have chopped several months off of the length of our 15-year, conventional mortgage.  Slowly and steadily, we are paying off our mortgage – and rounding up makes the process relatively painless.  Because the amount is already in our budget – and we are still making allocations for savings and spending and giving – we never miss the money.

The real key is – attacking the principal.  Little tricks like rounding up, really help me to keep my head in the game and stay focused.  The ultimate goal is to own our home, debt-free.  We are less than 10 years from that goal – and if we keep making progress – we may make it sooner!

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