Finance Gym

How To Pay Off a Mortgage When You’re Poor

It is ok to struggle with your money, and it’s ok to talk about it. But most of us don’t talk; most of us struggle in solitary silence. This is a story about my friend Anne who struggled for years, and then she started talking about it. Next she started doing something about it.
Anne is having a parade, socially-distanced, on her 55th birthday this summer. Friends, family and colleagues are walking with her to Wells Fargo to make her final payment on a mortgage she took out in her 20’s; a mortgage she could barely afford.

Paying off a mortgage when you’re financially comfortable is celebration-worthy, and 55-year-old Anne is financially comfortable. But paying off a mortgage when you’re poor? That is parade-worthy. The parade isn’t just a celebration of her last payment; it’s also a celebration of a younger Anne who struggled through years of barely being able to make ends meet. Years of beans and rice, driving old cars, and do-it-yourself home projects because that’s all she could afford.

When 20-something Anne first bought her home, she was making mid-$30,000’s. It was a tight stretch to make her mortgage payment. Two years later it became even tighter when she shifted her career to urban forestry, choosing a job she had passion for, but at a nonprofit that paid significantly less than her former job. Suddenly, her $35,000/year struggle was a $23,000/year struggle. It was a career shift that aligned with the impact she wanted to have on the world, but it came at a steep price. Maintaining a mortgage and home maintenance on a $20,000, or even a $30,000 or $40,000, annual salary is draining.

I met Anne about a dozen years into her home ownership struggle. She loved her home, but she did not love the struggle. We spoke about it a lot because she was trying to figure out how to stop struggling, and because I talk about money a lot. I talk about money a lot because I’m an accountant, but more so because I had my own period of life where I struggled rather spectacularly. For me, that struggle turned my accountant-background into a passion for financial coaching, and eventually led to publishing a creative workbook on personal finance.

So it’s through that lens that I tell Anne’s story of how she stopped struggling, stopped living paycheck to paycheck, became financially comfortable and paid off her mortgage six years early.
Most people think that if they could figure out how to spend less, pay off their credit cards, or some other magic balancing of their financial picture, then everything would be ok. All too often the people I’ve worked with aren’t focused on the one thing that would make the most difference: earn more. If Anne was to stop struggling, she needed to make more money.

When you ask Anne how she accomplished paying off her mortgage, she’ll say that my book gave her the roadmap she needed. I appreciate her testimonial. Indeed, the book was written for people just like her: people living paycheck to paycheck; people that are ready to make a change. In a way, Anne helped me write it - much of the book came from evenings sitting on the porch drinking a bottle of wine and talking about money, the struggle, the dreams and the goals.

However, it is rarely just one thing that changes our finances. Rather, it’s a synergy of intention, tenacity, consistency and a dedication to oneself and one’s future. She’ll say it’s the book, but I’ll tell you that before the book, there were other milestones that prepared her for the guidance in the book:

• She began a habit of selecting annual personal and professional goals, a suggestion from a few life coaching sessions. She shared them with those close to her.
• She continued to gather certifications that would make her more valuable in the workplace.
• She courageously joined a financial mastermind group – a small group of peers that met monthly to deeply discuss the challenges they were having and make commitments to tackle those challenges.
• She began a habit of investing - small amounts, but it was the habit that mattered.
• She began a habit of philanthropy. Again, small amounts, but habit matters.
• She made another career shift, still doing the urban forestry work that matters so much to her, but this time, earning more, not less.

By the time she began reading my workbook her financial world had already improved. However, this is where many slack off. Once they get beyond the struggle, they don’t have the same urgency to focus on their money. They don’t take advantage of their newfound extra money. They don’t spend as much time working on their money. They don’t use their newfound extra money with focused intention.

Not Anne. Anne is intentional, tenacious, consistent, and dedicated to herself and the world around her. Now that she had more money, she focused more than ever. She paid off a second mortgage and she began in earnest building her emergency reserves and retirement (though she’s still playing catch up for her many years of working without a robust retirement program.) She’s also traveled more and started driving a car that cost more than $200.

Then she set her sights on the prize: her mortgage. She set a goal to make her final mortgage payment on her 55th birthday and have a parade to celebrate. I’m so proud of her; she has met her goal.

I asked her what she’s going to do with her extra money. Her answer shouldn’t be a surprise to those that know her: “Two things – philanthropy and retirement savings. When I was young, I always wondered who those people were whose names were on donor walls. As a lifetime community volunteer and small-dollar contributor, it means a lot to me that I can now make a difference financially. Sacramento’s LGBT Center’s capital campaign will be getting a chunk of my former mortgage payment for the next few years.”

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Anne Fenkner is an ISA Certified Arborist/Municipal Specialist making a difference in our world through urban forestry.

Stacey Powell is founder of Finance Gym and Creating Answers, a CFO and financial coaching firm, and author of The Finance Gym Action Plan for a Better Life with Money.

To all of my friends and Finance Gym followers. I wrote this for you. For me. For us.

It's a long overdue check in. An amends. A "hey, I've really been thinking about all of you as this Pandemic has unfolded." How ARE you???

I haven’t been writing. I love writing, and I aspire to do it more when I retire, or that elusive day when I find the balance between being an external CFO at Creating Answers vs. being a financial teacher/trainer/writer/inspirer at Finance Gym.

Frankly, I never even announced when, in late 2018, I’d returned to Creating Answers. At the time, it felt like a defeat. A moment of truth that I couldn’t monetize Finance Gym. That I needed to draw a line and not become a “cobbler whose kids have no shoes.” My return was partly because of that. But it was also the truth that I missed working with Shawna. She missed working with me (mostly.) I missed the purposefulness of working with nonprofits and their messy, complicated, frustrating, challenging and engaging financials, and financial issues. No time has that been truer than now. I’m devastated for so many of my clients. But there’s also a purposefulness in trying to help them - that lightens me some.

I now call my Finance Gym pivot, and pivot back to Creating Answers “my 5-year sabbatical to write a book.” Ending my sabbatical was the right thing to do for so many reasons. Some of you know spring 2019 was a personally devastating and heartbreaking time for my immediate family, and separately for those close to me at Creating Answers. I stopped writing. I stopped posting financial inspiration, guidance, engagement. I just took care of my family and my clients. I had nothing more to give. Things got better throughout the year, but I never did return to writing or engaging my Team Do Better money group, or making finance videos, or finish painting my new video room for online classes. The kind of creativity that inspires me to write felt lost. (Thank God the kind of creativity it takes to build an amazing spreadsheet, or restructure an accounting system, remained.)

As with many, this Pandemic, this need, this devastation, this isolation has brought back my intense desire to write. I want to write about so many things I’m seeing, hearing, feeling.

There are so many things to write about. What the PPP really is. Who it really helps and who it doesn’t. Why it might be the right thing to let your lower wage staff get furloughed, or perhaps laid off. Why the PPP won’t be much of a grant for businesses that have had to close doors and don’t have the ability to pivot. It’s a low interest loan, for sure, but with a 2-year payback. Not ideal terms when you don’t know what your business will look like over the next 2 years.

Oh, and then there’s reserves. I want to write about reserves. How much reserves. Personal reserves and biz reserves too. Finance bloggers are talking amongst ourselves “is it the right time to be blogging about reserves?” Well, no, it’s a horrible time to blog about reserves. Except how do you NOT write about reserves right now. Right now the difference between having some reserves and having none is a difference that changes each of our daily experience of the Pandemic.

My experience.

Yesterday I called my housecleaner to ask for her address so I could send her money. I don’t really know her, we rarely cross paths. She cleans my home and Lial’s too. She asked in her always-uplifting high-pitched voice, still with a Mexican accent though she’s been here since the year I was born “why are you going to pay me?” “Because it’s the right thing to do. And, because I can, and so can Lial.”

If you’ve read my book, you know that 20 years ago I wouldn’t have been able to make that call. I would have wanted to, but I wouldn’t have had the money. 20 years ago, I had days I had to borrow $5 to put gas in my car. (Tina Reynolds, thanks again for the $5’s). I know, a bit, what it must feel like right now for so many who have zero in their checking account and don’t know how their going to pay their bills, or what’s the right thing to pay, and the right one to let go. It’s scary, exhausting, and often shame-inducing.

I say that I know, “a bit how it must feel” because I also recognize how privileged I am. It was my choice to struggle. I could have called my parents, but I didn’t want to. I wanted to figure it out on my own. That is privilege. I’m a white woman with a college degree in accounting - accountants are never without work. (Well, if you’re good.) At any time I could have given up the new-biz-owner struggle and taken a J.O.B. as an accountant and not worried about $5 of gas. That is privilege.

I do not know what it feels like for the restaurant workers, taxi drivers, hairstylists who had work and now don’t. Had money and now don’t. Some are privileged in the way I am – have parents or friends they can call. It’s devastating for them, but not in that “I have no idea how I’m going to buy groceries this week” way that it is for those that don’t have family or friends with a little extra money.

This blog was going to be about reserves. I will eventually write about reserves. I have so much to say.

But I guess this is really about a call to action for those of us privileged enough, and/or disciplined enough to have been able to build reserves and not have suffered an immediate financial blow.

Now is the time to pay your housecleaner, hairstylist, yoga instructor, favorite bartender, restaurateur, and on and on. If it was in your spending plan, spend it if you can.

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Wishing you all a very Happy New Year!

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