If you are new to the blog, Velocity Banking is the strategy I am using to pay off my home in 7 years or less. I started off with a new house and a mortgage of $282,000 due January 1st, 2019. Using Velocity Banking, I paid off over $115,000 and saved over $60,000 in interest payments in just 3 years. Now I owe $165,000. You can follow my velocity banking journey on this page.
Increasing Costs
With the rising costs of inflation, we are starting to fall behind our velocity banking schedule. By the end of this month, I was supposed to chunk another $15,000 towards our mortgage using our HELOC. However, I still owe $3,000 on my HELOC. In addition to the HELOC debt, I had many unexpected medical bills and travel plans occur within the past few months, with more on the way. To add fuel to the fire, I just received a bill for my daughter’s tuition for the 2022-2023 school year. With all of this going on at once, I have been forced to pull money from my emergency savings.
About Our Emergency Savings
As I have recommended on my blog before, you should have at least 6 months of emergency savings in a high yield online savings account. We are down to 2 months of savings in our emergency account. Betterment’s Cash Reserve is offering 1.60% yield as of the post date of this blog. That is where I am choosing to stash my cash because of the high interest earnings. That is higher than what most online banks offer. Ally Bank and Yotta Savings are great high yield alternatives that offer savings buckets and high interest yields. Sign up with Yotta using code HyderFT and get lottery tickets for a chance to win a Tesla or $10 million. Many who follow the Velocity Banking strategy would argue that I should use my HELOC as an emergency bank account. There is some level of risk with this and I do not recommend doing this. HELOC’s are not guaranteed. While very rare, a bank can demand that you pay back your HELOC in full at anytime.
The Current Market
With the car & real estate bubble getting ready to pop at any moment, many are already getting their cars repossessed or their homes foreclosed on. In the past few years, many people quit their jobs to start their own business. Unsurprisingly, many have failed. Inflation is causing more prices to rise and we are officially in a recession. While you may be performing well with your employer and your employer may be doing well in business, this does not guarantee that your job is safe.
Conclusion
Now that we are in a recession and my savings has fallen down to 2 months of expenses, it’s time to put a stop to Velocity Banking my mortgage so I can get my emergency fund back up to the safe level of 6-8 months of expenses. After all, I am lucky to have a mortgage rate of 2.5% locked in. I don’t know when I will continue Velocity Banking my mortgage, but I hope to restart by May of next year. Subscribe below to follow our journey.
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