Debt to zero without changing anything vs liquid investments


This is just a heavy numbers post where I project out my next 6, 18 month and 5 years.

Current total debt stands at 320K today.

Projection for next 6 months, and 18 months.   Basically I’m cutting debt by about 15K every 6 months.  Paying extra mortgage 800 a month, while still saving over 20% of income.

I’m keeping Credit Card at it’s current amount.  We pay off every month, but it just fluctuates from about 4K-15K depending on where we are in the month.

6 Month 18 Month
Mortgage 290526 279814 257785
Lease 16643 12305 3629
CC 13500 13500 13500
320669 305619 274914
Reduction 15050 45755

15K every 6 months would be about 128 months (10 years 8 months) to 0 debt without accelerating any of your current pay off schemes.    This doesn’t count the likelihood of another car purchase or lease during the next 2 years.   It basically lines up with the mortgage being paid off ~10 years.

What about assets.  Taking my trailing 18 month 6 month average, we are looking at 37K average saving increase each 6 months (non-retirement).

Current liquid assets 305K.   6 Month projection, 342K, and 18 month projection 416K. Prime earning years definitely.   Here is the 6 month projection.   A 37K surplus, which is well ahead of my old projections, and on track with my most recent projections.

Months Debt Assets Difference
6 320000 305000 -15000
12 305000 342000 37000
18 290000 379000 89000
24 275000 416000 141000
30 260000 453000 193000
36 245000 490000 245000
42 230000 527000 297000
48 215000 564000 349000
54 200000 601000 401000
60 185000 638000 453000

On the assets there is about a max drop of 25% due to my investment risk profile, with an 18 month recovery (I’ve modeled this after the financial crisis of the previous decade… sure it could be worse, or not).

So that leads us to 638K vs 185K debt in June 2024.   I think that seems the likely time to pay off the mortgage if investments are not in that ’18 month recovery phase’.    That would put us at a 15 years on our 30 year mortgage (15 years and 2 months to be exact).

This would leave us with 453K invested in non-retirement accounts, which is a pretty nice place.   5 years… age 47.    This would be no gap in employment and continue on basic 2% raises and stock bonuses.   Prime earning years….   fingers crossed that I can keep this up.   Puts the family in a very good financial position.


Swing back up

Good performance over this last bit of market volatility.    Looking at our optimistic projection, we are on track to be almost 1 year ahead by the end of this year if the market continues on it’s current trajectory.

This is current vs some of the original, and a new EOY 2019 projection

Liquid Mortgage Diff
Current 6/11/2019 301,114.00 290,526.00 10,588.00
2019 Original Projection 272,866.00 279,808.00 -6,942.00
2019 New EOY projection 318,807.00 279,808.00 38,999.00
2020 Original Projection 308,943.00 257,571.00 51,372.00

The new EOY 2019 projection accounts for a couple of stock bonuses, and assuming 3% growth across invested accounts.   A 3% loss would leave us where we are today, but with mortgage down another 11K.   Either way, much closer to the 51K number then the negative -7K number at the end of the year.

So different subject.   I’ve been doing lots of portfolio backtesting, lots of risk analysis.  Spending more time on this than I probably should.   A few conclusions

  1.  Uncorrelated assets doesn’t mean that the assets always move in the opposite direction
  2.  Uncorrelated assets play an important role in managing risk
  3. The level of correlation changes over time, and is very hard to predict, so your risk is fluid but over the long haul seems to be handled well this way.
  4. I typically use TLT against stocks.   A little gold, and now some real estate (which seems to be the most correlated to market).
  5.  I probably need to start looking at currency pairs to find more uncorrelated assets.
  6. Having uncorrelated assets in my portfolio seems to smooth the curve (less volatility).  It’s less risky, but of course less returns too.


  1.  Do uncorrelated assets typically return to a mean?  Ie, TLT and SPY correlation coefficient is typically   -.3  (I’m totally making this up), then it goes to  .1.   Can I use that information to inform my asset allocation.
  2. Back to market timing models, or perhaps strategic allocation based on timing (adaptive allocation).  I’m trying to back test ‘stupid’ ideas, check this result
Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio US Mkt Correlation
1 $10,000 $22,446 6.73% 6.57% 13.37% -2.21% -13.69% 0.90 1.37 0.62
2 $10,000 $25,187 7.72% 6.92% 13.72% -3.16% -12.97% 0.99 1.60 0.67
3 $10,000 $43,468 12.56% 11.45% 34.85% -13.09% -25.26% 1.02 1.70 0.81


Portfolio #1 is my basic portfolio I described in previous posts.  Heavy bond portfolio, with some stock.

Portfolio #2, I swap out ITOT for QQQ, return is 1 point higher (which is somewhat meaningless, unless you believe Nasdaq will always out perform S&P…. so I would have to pick the right index).


Portfolio #3, I swap out QQQ for a leveraged Nasdaq stock fund (2x, QLD).   It’s riskier, and way more volatile.  But a 25% drawdown with 12% return per year.

Great, but what if I try something a bit dumber.   TLT – QLD Split 50 50.   I won’t show the numbers, but I get a 18% return with a 36% max draw down, vs a 100% QQQ which gives me 13% with a 50% drawdown.

So if you can somehow time your moves correctly to leverage up and down at the right times you might really have something.  Yes you can’t pick tops and bottoms, but if the market drops 30%, I think it probable that there will be a recovery at some point, and your down side risk shouldn’t be as much (so right now, I figure the market could lose 50%, but if it loses 30% now, I’m thinking maybe another 20% max).

So double up at 20% drop, triple up at 30% drop, quadruple up at 50% drop….  but only half your portfolio.   If things really go to shit, you’ve limited your risk somewhat as long as the uncorrelated asset TLT is moving somewhat in inverse (which I can think of scenarios where that wouldn’t be the case).

So trend followers would say stop betting against the down trend…  This would have to be a pretty long play, and I would have to see if this actually works in the past, but the returns over a longer run should be decent with a little less volatility then a pure stock market investment…

Hoping to have results on this via a few backtests in the next few weeks.