D€bt & Cupcake$


Why We Are Skipping Baby Step 6!

Dave Ramsey was pivotal in my life.  His book “The Total Money Makeover” changed the way I thought about personal finance, and it sparked our debt-free journey.  He has helped MILLIONS of people!  I’m not here to say I’m more intelligent than him, I’m not.

I’m here to explain why I’m dumping Baby Step 6.

We purchased our home in 2016 at the price of $335,000 with a 4.25% interest rate and I put down 5% ($16,750).  I know… I probably SHOULD have put down more.  We were in a rush to relocate for work and made a bit of an emotional decision to purchase this place.  It was a HUGE dream of mine to own a farm and we found one we both fell in love with.  I give the decision a C+.  The payment (including taxes and insurance) comes about to about 23% of our take home pay.  Could be better, could be worse…

In late April we achieved our goal and became (consumer) debt-free!  $109,000, gone!  It took us about 4 years in total, with the last 12 months being the most intense ($59,403.26).  It was awesome, we ordered a giant meal of sushi and celebrated.  After we rose from our gluttonous state, we had to decide what to do with our money now.  We figured we could save up our 6 month emergency fund ($22,000) in about 4 months.  After that… it became confusing.

We are able to save roughly $5,100 a month now.  If I were to take $5,000 (leaving a $100 buffer) and add it to the mortgage principle, our loan would be paid in full by November 2022.  I would be able to begin these payments on September 1st, 2018.  So, that’s 50 months’ worth of extra payments.  Not too shabby…

Our goal is to reach financial independence as early as possible.  That is important to remember because the thought of paying off the mortgage is exciting.  It gives me an emotional rush and a charge of excitement!  Will it help us reach financial independence early?  I’m not so sure…  After months of reviewing amortization tables and deliberating, we decided to NOT pay off our mortgage in 50 months.

Here’s why:

The S&P 500 has averaged an annual return of 9.8% for 90 years.  That will be the basis for my math.

If we pay our home off in 50 months, we would begin investing in December of 2022.  That would leave 23 years to invest $6,500 ($5,000 + Mortgage Principal) a month, before I turn 60 (worse case retirement scenario). That will produce a balance of $6,038,827.16That’s pretty damn good!!

Now, what happens if we begin to invest that $5000 a month in September or 2018?  That same $5000 a month invested for 28 years would produce a balance of $7,778,310.28!!! 


Do I want to work until I’m 60?  Abso-freaking-lutely NOT!  So, let’s shorten it to say… 10 years?

  • Investing $6500 a month beginning December 2022 would produce a balance of $598,787.31
  • Investing $5000 a month for 10 years would produce a balance of $947,122.95.
  • Even if I would then pay off our mortgage balance ($233,875.40) I would be left with $713,247.55!

I’m sure I will get some hate from the DR community.  I’m 100% ok with that because I’m happy to see anyone passionate about personal finance.  Listen, I’m not trying to say I’m right or I’m wrong.  This feels right to us and we believe it will help us reach our goal of financial independence early and THAT is exciting!!


I really, really like the Mortgage X website!  I used their calculator to calculate my amortization with extra payments.  Check it out here:  http://mortgage-x.com/calculators/extra_payments.asp

I’ve tried many compound interest calculators but, the one at Investor.gov seems to be the best.  Find it here:  https://www.investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator


  1. This was very interesting to read. We have been going back and forth about the same things. We are paying off our mortgage because it works for our financial situation but the math doesn’t add up the same for every situation. Also don’t feel bad about the hate from the DR community. LoL It’s not their money! Good Luck friend!

  2. debtandcupcakes

    August 18, 2018 at 9:17 pm

    Thanks for the comment!! I agree, every situation is different. I hope to pay the house off once we reach a financial independence point. We shall see!! Good luck!

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