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Mid October Update

October 13th, 2008 at 10:43 am

Well, we are almost half way through the first month of the forth quarter. So far so good. I just accomplished another goal. I have added $15,500 to my 401k this year. It is maxed.

I also decided to move goal number 2, saving $15,000, over to next year.

I have so far put $1,533 towards my son's medical bill this month. I would like to put another $4,000 towards it. Again, my focus for this forth quarter is to pay off the medical and not incur any new debt during the holidays.

I have also started road mapping my goals for 2009. To me, this means taking my yearly budgets and breaking them down to quarterly goals and monthly goals. Since the amount of weeks in a month change, the goals for each month are slightly different.

One of the things I am really debating is paying off the house mortgage. I am all for paying down my mortgage aggressively so that it is a 15 year mortgage. The issue I have is above that.

I understand both arguments and they both make sense to me. The argument focuses on leverage. Paying of the mortgage eliminates leverage and reduces risk. Hard to be foreclosed on without a mortgage. The other argument is that leverage is good. If you borrow at 5.5% (my current mortgage rate), I could invest that in a diversified portfolio and make about 8% a year.

So there are two driving factors in my life. One being to reduce risk, and this was way before the stock melt down. The other is to start investing in real estate. And both are pulling me at about the same force.

As a compromise, I am currently looking at aggressively reducing my mortgage from 30 years to 15. At that point, I think I'll reevaluate.

I would love to hear other people's thoughts.

9 Responses to “Mid October Update”

  1. My English Castle Says:

    We've been having the mortgage discussion in our house too. We started with a 15-year mortgage and we're about 5 1/2 years into it. It's pretty darn small--less than $55,000 with a nice 4.75% interest rate. But I hate that mortgage payment. Every time I see the statment I think, I could've/should've had that $200+ in my pocket that goes to interest.

    I think if you max everything else out, the mortgage maybe (oh no, I'm waffling) should go.

    And my diversified portfolio didn't do 8% this year!

  2. monkeymama Says:


  3. monkeymama Says:

    I kind of feel the same way and can flip a coin.

    Why not do both?

    We have decided when my spouse returns to work we will probably split his check 50/50 (above any working expenses which we will probably encounter). 50% mortgage paydown and 50% taxable investments. This is not even in the cards until all of our tax-deferred retirement investments are maxed out. (So if he does find a job with a 401k we will likely max that out instead). Will also consider HSAs, 529s, and whatever else Congress dreams up, first.

    I think taxable investments will be much more difficult to manage while the mortgage paydown is rather easy and safe. A lot of my thinking there.

    BUT I think it would be foolish not to leverage a bit (particularly considering how cheap our mortgage is and how much the payment will decrease over time, in regards to inflation). So my overall goal is to do both, and kind of re-evaluate from there. Start 50/50 and adjust it to where we feel comfortable.

    As long as I can tax-defer all my investments, I will focus much more heavily on investing. That is pretty much where I am at right now, on one-income. & why I have thought so much about how to best maximize our situation (considering our risk comfort level) when/if my spouse returns to substantial work.

  4. monkeymama Says:

    Where's the delete? What am I doing? Big Grin

  5. Ima saver Says:

    I paid my house off over 30 years ago and have not carried a mortgage since. I love it!

  6. scfr Says:

    It's a nice place to be in, isn't it? No debt except the mortgage and the 0% (son's medical) ... maxing out the tax-deferred savings ... and now wondering which to tackle, paying down the mortgage or making taxable investments? In my opinion, there is no wrong choice, and if you are torn there is nothing wrong with doing a bit of both.

    We chose to pay off our mortgage early and have not regretted it for a second. Of course, we would have just put any extra money in CDs or Treasuries or something similarly conservative, so our decision was easier.

    A couple questions tho:
    - If your wife is eligible to contribute to an IRA, are you already doing that?
    - Do you currently have no life insurance at all, or is it that you plan to review your coverage in 2009? If I had kids and a SAH spouse (which if memory is correct yours is), I would probably make that a priority over paying off the mortgage early or making taxable investments. How does your wife feel about it? I think we women tend to have a stronger emotional need to know that no matter what happens we will not lose our home.

  7. merch Says:

    Good Questions.

    We are not eligible for IRAs.

    I do have a $1.5 million insurance policy as well as disability insurance. I owe about $342k on $640k house. So the insurance should pay off the house and leave plenty of money left for college and taking care of the family until they are in school.

    My wife did mention she wanted to increase our emergency fund to 8 months rather then 6 months. (She has been watching Suzie Orman.)

    Women do tend to want the safety net. So, I'll be actually moving the emergency fund over to her broker account, so that she can see and feel it.

    Just to clarify, we have different bank, broker, and retirement accounts, but we don't hide anything. We both have access to all our accounts and we look at all the statements.

  8. scfr Says:

    I hope in no way my questions came across as implying I thought you hid anything from your wife ... From what I've read, that is NEVER the impression I got from you.

    I heard Suze say the same thing about increasing the EF to 8 months ... on Oprah yesterday. Smile
    Sounds like you have every contingency very well covered. The idea of letting your wife handle the EF (and perhaps increase it a bit) sounds great.

  9. merch Says:

    No, I knew you weren't implying anything. I was just clarifing in general. The comment wasn't meant to you but just in general.

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