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.
Mid October Update
October 13th, 2008 at 05:43 pm
October 13th, 2008 at 05:49 pm 1223920143
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!
October 13th, 2008 at 07:00 pm 1223924437
October 13th, 2008 at 07:02 pm 1223924531
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.
October 13th, 2008 at 07:02 pm 1223924549
October 13th, 2008 at 08:57 pm 1223931471
October 14th, 2008 at 02:20 pm 1223994023
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.
October 14th, 2008 at 03:05 pm 1223996736
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.
October 14th, 2008 at 06:01 pm 1224007260
I heard Suze say the same thing about increasing the EF to 8 months ... on Oprah yesterday.
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.
October 14th, 2008 at 06:51 pm 1224010299