Motivation

We have been thinking more and more about putting more effort into paying down the mortgage on our primary home.

First if we pay off our mortgage we will have killed our biggest and last remaining personal debt (mortgages on our investment properties are business debt). Second, if we pay off our mortgage we will have flexibility regarding hazard and wind storm insurance which are extra expensive here in South Florida. Third, paying off our mortgage gives us a known return vs. an unknown return in our investments which with the market being so sporadic has certain advantages.

I am not planning to abandon our current 2010 spending and savings plan, but just thinking more about how we can put extra money, beyond our savings plan, towards our mortgage principal. I am also thinking more about our 2011 savings plan and other options for paying down our mortgage at a faster rate (extra payments, bi-weekly payments, mortgage debt snowball). I have also been looking at accelerator loans after hearing about them recently on NPR, but I really am not a fan of taking on a loan to pay off a loan.

How about you, have you paid off your mortgage at a faster rate? If so, how have you accomplished this task?

Two Down

Two down, four to go.

As of today, we have maxed out our IRAs for 2010. So, we have completed two of our six 2010 savings goals.

Our remaining goals, max out our 401k (51%), our baby savings (47%) and our mortgage prepayment (58%) are all on track to be completed by year end.

So lots of good news, the only goal that is lagging is our emergency fund. Our goal is to have $32,000 by year end and so far we have only accomplished 10% of that savings goal. Accordingly, this will be the next goal I will focus on since the other three are on track, via automatic payroll or automatic savings to be completed by the end of the year.

How are you doing with your 2010 goals?

July Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $15,486 (47%) (goal is $33,000)
(2) - $9500 (95%) (goal is $10,000)
(3) - $700 (58%) (goal is $1200)
(4) - $1500 (43%) ($7861 in our baby fund, goal is $10,000)
(5) - $665 (10%) ($26,665 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $30,990 (53%)

Just about where we should be for July. Almost done with Mr. Sam's IRA funding.

Another Idea

Here is another idea for prioritizing which debt to pay off first: pay the most hated debt first.

Step # 2

Picking up with step # 2 of our debt plan.

After we gathered up all of our bills and figured out the total amount we owed, the next step for us was to document our debt. We created an Excel chart, but any kind of chart or document will do, that included the following information:

• Name of creditor (i.e. Citibank)


• Amount of debt


• Interest rate (including any details regarding short term interest rate deals, i.e. 0% expiring on X date)


• Minimum payment


• Monthly payment due date

Then we determined the method of debt repayment. You've got a few choices here, you can go with paying highest interest rate debt first (which will likely save you money in the long run) or go with the debt snowball method (pay off the smallest debts first). After some debate, we went with the snowball method. Pick which ever method you think is going to work for you.

Read about Step 1 here.

June Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $11,832 (36%) (goal is $33,000)
(2) - $8500 (85%) (goal is $10,000)
(3) - $500 (42%) (goal is $1200)
(4) - $1500 (43%) ($7861 in our baby fund, goal is $10,000)
(5) - $-800 (-11%) ($25,839 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $24,532 (43%)

Added more to Mr. Sam's IRA with the market down again this week.

Debt-Free Vacation

I just returned from my annual girls Memorial Day trip/vacation and want to share a bit about how to plan a debt-free vacation.

(1) I have an automated transfer into a vacation/travel fund in the amount of $50.00 per pay-period or $100 a month. Obviously, this is not enough money to fund a full vacation, but it is generally enough to pay for a flight. While we don't normally use credit cards, I do use them when I book a flight, a hotel and a rental car. So I book a flight and pay for it using my credit card, but I normally have more than enough to pay for the flight in our ING travel/vacation account.
(2) I book the hotel, again I use my credit card, but I also find out if there is a charge to the card or whether or not I can pay for the hotel upon check out. I add the cost of the hotel to my travel spending plan.
(3) I think about what I'll be doing on my travels: spa, tour and entry fees, shows, etc. And I sketch out a spending plan for expenses I'm pretty sure I'm going to incur (these are planned expenses).
(4) I also think about daily expenses: dining, shopping and misc. expenses like tips, cab and bus fares. I normally plan for a $100 a day in food, dining, cocktails, shopping and misc. for just me ($200 a day when I travel with Mr. Sam). These are what I call unplanned expenses.
(5) I add up the flight, hotel, planned and unplanned expenses for my total. I deduct the amount already in the travel fund and come up with my unfunded travel/vacation amount. Then I take my unfunded amount and fund it by setting up an auto transfer to my travel fund for the weeks between when I plan my travel and when I leave. Since I normally plan travel at least a few months in advance this works pretty well for me.
(6) Finally, at the end of my travel I either leave the expenses like hotel and rental car on my credit card and immediately pay from my travel fund or I pay for the hotel and rental car upon check out/return using my Visa debit card. During my travel, depending on where I am, access to bank ATMs, safety issues, I use a combination of cash and Visa debit.

While I use a spending plan for my vacation/travel (what some would call a budget), I don't normally skimp when I travel, I like to stay at very nice hotels (and did so on this last trip), and I normally partake of fine wine and great dining, etc. But, I plan out those expenses and allocate funds before I depart. End result, a stress free and basically pre-paid vacation.

Net Worth Obession Question Part 2

I found you on the NYTimes article. Ready for more fame? So I am doing what you do, but I have trouble getting my husband on board. He has student debt, but he earns more and has a stressful job, so he feels like he can treat himself to lunches out, cabs home, etc. To some degree if you work 120 hours a week you really cannot bring lunch, but some of it is just disregarding my goals. Did you go through anything similar? I read all the financial books and motivational materials, and just don't know how to get him on board.

This is a great question. I find this topic fascinating.

In my marriage, I am the spender and Mr. Sam is the frugal one (although he was not much of a saver and most of the debt that we had was "his" debt). I also earn more than Mr. Sam, so my situation is a little different than the situation presented by the above question.

After we got married, I decided that we should live a debt free life and I talked to Mr. Sam about my ideas here and there. I didn't force it on him all at once. I tried to get him to read the Total Money Makeover, but he is not much of a reader and only read a couple of chapters. He was all for paying off all our non-mortgage debt, but he thought I was crazy and he couldn't see how it was possible. Mr. Sam wasn't really on board until I presented him with a written plan that demonstrated that it was possible to pay off our debt in a year (a very focused, somewhat painful year). Thereafter, I went about setting up systems that enabled us to reach our goal (which I will write about soon, Steps 3 and 4).

So, you know your husband, how does he learn and process information, can you present a fully fleshed out plan to him in a form that will get him excited.

Regarding the eating out and cabs, we went with an allowance system (Steps 3 and 4) which each gave us a set amount of money to spend on discretionary items. Perhaps you could consider such a system and he would still have a certain amount to spend on these convenience items.

I don't think the fact that he earns more means that he gets to spend more. If you are married the money that comes into the household, in most States, is a marital asset. I'm sure there are folks that will disagree with me on this point but that is my opinion.