Our Challenge: Turn $2 into $1,000
My challenge is simple: make the world of finance understandable to everybody.
- Music teacher. Student. Artist. Business owner. Engineer. Realtor.
- You shouldn’t need an MBA to understand how your money works.
1 = 5 teaches us about TIME.
- The longer you borrow money, the more interest costs accumulate. The sooner you reduce your debt, the more future interest you will avoid.
2 = 1,000 takes the next step: DILIGENCE
- Instead of making one large prepayment, what happens when you consistently make a small prepayment every month?
Let’s look again at an example home mortgage.
Once again, every mortgage payment is made up of principal and interest. If you make only the required payment every month, you’ll follow the original amortization schedule and pay the interest associated with that schedule.
But remember what we learned from 1 = 5. A single $10,000 prepayment in year 2 saves Shawn nearly $50,000 in future interest and eliminates more than three years of mortgage payments.
That’s mathematical beauty.
But there’s a problem:
Most people don’t have an extra $10,000 sitting around. In fact, most people don’t have an extra $1,000 just sitting around.
So, what if we made the goal smaller?
Instead of finding $10,000, what if you could find $200 per month?
Let’s look at what happens when Shawn adds $200 to his mortgage payment every month.
$200 PER MONTH
= ~$100,000 IN FUTURE INTEREST SAVINGS
…in this mortgage. For your mortgage, your savings could be less. Or they could be more!
So, where does 2 = 1,000 come from?
The idea is simple.
Small, consistent prepayments can create surprisingly large results over time.
We don’t need $200.
Let’s make the goal very small.
What happens if Shawn prepays an extra $2 per month?
In this mortgage example:
$2 extra per month → ~$1,000 in future interest savings
$20 extra per month → ~$10,000
$200 extra per month → ~$100,000
Why does such a small payment matter?
Every extra dollar you put toward principal reduces the amount on which future interest is calculated.
And when you do it every month, that reduction happens again and again.
One small decision becomes hundreds of small decisions.
And time does the rest.
Small. Consistent. Powerful.
That’s 2 = 1,000.
And that’s Homes in Order.
Can you afford an extra $200 per month?
If not, can you find $20?
What about $2?
What would $2, $20, or $200 a month do for YOUR mortgage?
Your answer depends on your loan balance, interest rate, remaining term, and when you make the payments.
Calculate your 2 = 1,000.