We Paid $52K in Debt Last Year

In the last financial year, we paid down $46,800 of debt. Plus, my partner paid off her entire student loan- seven years after graduating. That is another $4,800.   I’m proud of that number! I’m not here to brag about it, just to share how we did it.  

First, of, we have been fortunate in that we don’t have any other debts.  

$52k of debt in one year?

How did we pay $52,000 of debt in one year? We paid ourselves first. All our debt payments are automatically scheduled and synced to our paychecks. We never see the money in our account.  

Wages come in, debt payments go out. There is no way that we can get our hand on that cash.  

And we have to make do with the money left over after we pay our debt obligations.  

In the next financial year, we will pay down $52,000 of debt on the mortgage. $1000 per week going to our mortgage. It’s an eye-watering amount of money. But paying down now will save us thousands in the long run.  

Once my partner’s student loan had been paid off, we directed all the extra money to pay down the mortgage faster. Saving $11,000 and 1.25 years on the term of our loan  

You can do it to

Your debt paying schedule is not going to be the same as ours. But you need to pay yourself first.

Automatically schedule your debt payments and you can pay down extraordinary amounts on your debt. Our mortgage payment goes out the same day our wages come in. There is no time for us to get our hands on the money! This is the same method that you should use for investing. An automated payment into my investment account. You should do the same! Pay yourself first!

Schedule your automatic payments now!

That’s one of the rules of succeeding at personal finance, check out the other 9 rules of personal finance.


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9 thoughts on “We Paid $52K in Debt Last Year”

      • I would need to know more about your situation before I could advise one way or another. Your tolerance for risk, how soon you want to retire, your goals etc. But I can give you some general thoughts. I wish I started investing earlier. I paid off my mortgage as quick as I could, but because I didn’t start investing earlier I miss out on valuable years of compound interest. Investment interest is compounding, whereas mortgage interest doesn’t compound when you pay that.

        I often see people close to retirement as well with a nice paid off house but not much savings. That is not ideal. In retirement cashflow is key, and you can’t get cash from your house that you live in. If you want to retire early it is essential you have savings that you can access. If you focus solely on the mortgage, this will slow down these savings that you will need.

        Mortgage interest rates are key. And the benefit of paying off the mortgage is it is a guaranteed return. It also sounds like you get great satisfaction from seeing the mortgage balance reduce.

        I would probably go for a combination of both. Just come up with a ratio that you are comfortable with, using the risk free mortgage interest rate as a benchmark. For example, at a mortgage interest rate you could do something like 90% extra towards investments and 10% extra towards the mortgage. This is because 4% is easily beatable over the long run. At 5% mortgage rate you could do 75% towards investments and 25% towards mortgage. At 6% 60% investments and 40% mortgage. 7% 50/50 and so on. Whatever suits you.

        You need to be able to make decisions that maximise your returns but you also need to be able to sleep at night comfortable with the risk you are taking on.

  1. That is super impressive! Paying yourself first is a much simpler way to save in my opinion. How did you come to the decision to pay off your mortgage rather than invest more?

    Reply
    • Paying yourself first it the best way to save! To be honest- paying the mortgage just seemed more pressing as you can see how much you owe. I am coming around in my thinking that it may be better to have a more balanced approach, paying the mortgage while simultaneously investing.

      Reply
  2. Great work on that 52k. Being mortgage free isn’t the most efficient use of your income, but it feels great, I was doing the same when I was a job, and before I started heavily investing. I actually had a huge chunk of it on revolving credit and the rest was fixed and interest only. The limit on the revolving credit let me remain agile and flexible if opportunities arose. If a good investment opportunity came up, I was able to take it. Mortgage free now though(except the rentals, of course). Kiwi here too, btw.

    Reply
    • Thanks for the comment. You’re right- it is a good feeling, you maybe true that it is not the most efficient use of income. I’m going through a review of my plan at the moment and will do some calculations to see what the best method will be.

      Reply
  3. Hi Rohan! As someone currently with a sizeable student loan, I’m just wondering why you guys decided to pay off student loan first and if I should do the same.

    Was the student loan a 0% interest deal with Studylink?

    If it was, was there a reason you went for the first before the mortgage or investments?

    Reply
    • Hi Ben, we paid off the student loan at the rate currently set by studylink/IRD. 12% of salary I believe. You are right, there is not insensitive to pay off your student loan any faster than is necessary. Keep paying the minimum, and inflation will help decrease the true value of your loan over time. It just happened to pay itself off after 9 years of working.

      Reply

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