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Goals Review - July

August 5th, 2009 at 09:50 am

I am still getting use to the new mortgage. I am not use to seeing the large principal amounts that are being paid. This month, $1,382 went to principal. That's about 3 times the principal I was paying before.

Since I am paying more in interest then principal, it feels like I jumped to the back nine of a golf course. I can more easily see the end. It's still in the distance, but I am halfway there.

Next month, I'll top of the 401(k). I'll have some extra money to go towards some of my other goals. But, truthfully, all of it will probably be going to the new furniture and house stuff. But it does mean no new debt.

Not much of an update. Still on the straight and narrow. I have a few things to play catch up on like the 529s and maybe add a few more months to the emergency fund. Other then that, I'll me looking forward to 2010 where 529s and 401(k) investing will be on cruise control, I'll probably start putting money aside for a nice vacation, and start adding more principal to my mortgage payment. When I do that, I will probably add pay off date to my sidebar. I think it might be fund to see the date moving closer and closer.

Mid July Update

July 17th, 2009 at 07:32 am

What a month. We have started buying new furniture for the house and some small renovations (crown molding, lights, paint, etc.). It has been pricier then I thought, but we are not going into credit card debt or taking out a home equity loan. We are basically just cash flowing it. All the spare money in the budget that went to car payments, credit cards, and medical bills is going towards the house.

Hopefully in January of next year, I'll be back up to a full work week. This will allow me to have some extra money to pay down the mortgage or invest. So I think I'll just write out my thought process.

From a mathematical side, my payments are set in stone for the next 15 years and I am being charged 4.5% interest. There is no risk of my payments going up. If I were to invest in a risk free invest like cds or money markets, I might get 2% now.

Why am I only looking at cds and money markets? I am basically looking at riskless investments that are highly liquid. Why? My reasoning is that the mortgage is riskless liability. There is no risk of FNMA or the bank calling the loan and the payments are set in the contract, so I am attempting to compare apples to apples.

So, right now I believe I would be better off taking the extra money come January and paying off the mortgage. Now, if I look at the mass amount of debt the Fed is incurring and the monetizing of the debt, I do believe that the future inflation will be higher and the fed will need to raise rates.

If cds rise above 4.5%, I would be better off putting money in cds. Yes, I am not looking at taxes. I believe at the end of the day that taxes would negate themselves. I would save taxes on the mortgage interest but pay of the CD interest.

So, if interest rates on cds climbed to over 4.5%, I would probably switch to investing in cds.

With that said, there is another element of this. Not having a house payment will free up a large amount of cash flow on a monthly basis. And just getting rid of that nut is rather appealing.

So I would probably add a premium to my above statement. In other words, I would probably invest in cds if the interest rate was 5% or higher. Logically, it may not make sense, but I believe that I would have to earn a higher return to justify the higher financial stress I would feel with the mortgage.

Those are my thoughts at this time.

Goals Review - June

July 1st, 2009 at 07:51 am

So I made my first payment on my new mortgage. I was used to putting $480 to principle a month. This month I put $1,376 towards principle. It was actually $50 more then the interest payment. Just think that I am now paying more principle then interest. What a great feeling.

I estimate that 9/2010 I will have caught up with my old amortization schedule, where the principal on the mortgage would be about $330k. So under the old 30 year, I would pay about $9k off the mortgage over 14 months. In the new mortgage, I will be paying off over $21k.

It just nice to see this pay down accelerating, feeling that I am making progress.

As for my other goals. I plan on completing my 401(k) contributions in August. I have about $4,000 in contributions left.

I am getting a little anxious to finally start contributing and setting up 529 plans for my sons. Granted, they are young (4 and 1), but these really need to get started. $18k may be a little too much to bite off this year. But, it's good to have goals that you need to stretch for.

So, if you are following the Dave Ramsey plan, I would be on step 4 planning on attacking step 5.

As for step 6, paying off the mortgage, I keep going back and forth. If I had a 6% 30 year mortgage, I would probably try paying that off quicker. But a 15 year at 4.5%.... I'll have the house paid off by the time the kids hit college, and 4.5% is really more like a 3% loan because the tax write off with the interest. It is getting to the point where you could argue that you could outperform the mortgage for very little risk.

On the other hand, getting rid of that monthly nut does reduce a lot of stress (not that I have a lot of financial stress) and frees up a lot of cash flow. It would allow me to start looking into opportunities that really interest me without regard to income.

Right now, I am kind of stuck where I may not be in my dream job but it does pay some hefty bills. So, when I look for jobs, income is first enjoyment is second.

But for that reason, I am leaning towards paying off the house early. Of course, I still have time. I don't plan on coming to a decision until the 529s are fully funded. Just mulling it over in the old mind.

Don't forget, we are half way through the year. Are you still on top of your goals for 2009? What are you planning to accomplish in the next 6 months?

Goals Review - May

May 29th, 2009 at 06:57 am

What a month!! The big thing I accomplished this month was the refi. The net of the refi is that I will pay it off 11 years early, I will be putting $1,000 more towards principal a month, and it costs me less then $700. If you have a good credit score, equity in the house, and a job; I would look at refinancing.

I also noticed that I have contributed $10,600 to the 401(k) already his year. Looks like I'll max the 401(k) in August or September. Just in time for preschool bills and holidays. Maybe I can also start paying down the principal on the mortgage. We'll have to see how the year shapes up.

Speaking of that, I'm still only working 4 days a week. We haven't had any more layoffs since March and we have had a new hire. I think in a quarter or two I'll be able to work 5 days a week. But, it's just a feeling. In the meantime, I'll work 4 days a week and enjoy the family.

This brings me to another interesting thing I noticed over the past month. I have become more content. It wasn't like a switch, I think it was more a gradual thing. It's kind of like that story about the grasshopper and the ant. The ant works all summer and has food to last the winter and the grasshopper just wastes the summer away.

Last year, I had the nose to the grindstone reducing debt. This year I saved a 3 month emergency fund. I still budget and live below my means. I am just sitting on my pile of dirt enjoying the sunset while everyone around me is feeling all this financial stress and uncertainty. It really is surreal.

I think what has really started to click is that it's not what you make but what you save. I can't stress that enough.

And remember, get you will done and get life insurance, if you haven't already.

A budget is different every month

January 5th, 2009 at 12:32 pm

I was thinking about this the other day. And I was thinking "is this really true?" So, I started going through my old budgets.

My big fixed costs were the same from month to month (mortgage and health insurance). Even my variable costs were similar (like food).

But the biggest difference was seasonal costs: Paying for preschool for Sept ‚Äď May, paying for swimming lessons and camp in the summer, birthday presents in late spring, holidays in November and December., utility costs (I don't use heat in the summer), etc.

Also since I am hourly paid, my paychecks fluctuate in the number of hours I work. Over the last 2 weeks I have worked 70% of the hours I normally work. Also, the last paycheck included FICA, 401 (k) contributions, and deductions for health insurance (last year I paid my own from month to month).

In April, I'll get money back for taxes or pay more. This will also have an affect on my income along with any vacations or holidays.

The answer for me is pretty obvious. Since expenses and income can change from month to month, the budget is in constant flux. Sure, there are parameters. I mean my budget isn't moving $10k a month but it could move a couple of thousand, especially a month with an extra paycheck.

I usually budget on a weekly basis. It's easier for me because I get paid weekly and divide my pay into envelopes. I used to have to put 33% of my take home into the mortgage and healthcare envelopes, 33% into debt reduction, and use the other 33% for household expenses. This was pretty much set for the last quarter.

January is a new year. I am still doing the weekly budget and of course change in the budget is constant. It might take me a little time to adjust to the budget again and then it will stabilize for a few months. But in the end, the goal is to live below what I take home and not have any of my envelopes in the red.

So far, so good.

Mid August Update

August 19th, 2008 at 06:07 am

We are half way through the third quarter. So far this has been a tough quarter. I paid of $4,500 in wife medical, paid life insurance policy of $920, paid for my wife's birthday party of $1,500, and need to save $500 for a vacation in September. The vacation house is paid for the week in Chatham down on the Cape. All I need to do is my some groceries (read beer and wine), probably a dinner out, and entertainment (read mini golf and ice cream). So, $500 should be enough maybe I should save $750, now that I am thinking out load.

Anyway, before that last tangent, that's over $7,400 in expenses that I paid out that didn't go to reducing debt. At first glance, I look at my debt and *sigh* thinking of how much more I could have paid down. But you know, I don't feel that bad. At the end of day, I am talking about probably $2,000 I could have put towards the debt.

Needless to say, I am back on track. I am looking at paying of my wife's braces this month and then attacking my son's medical. Also, looking at getting over the $3,000 mark for debt payment in September.

So, this quarter was all about rolling with the punches and being flexible in the budget. The most important thing Ė NO NEW DEBT!!!!

I also started posting my 2009 goals on the left and added a new page with retired debt. Just trying to declutter the webpage a little.

Mid June Update

June 16th, 2008 at 07:30 am

A few posts I was comparing my journey to the Boston Marathon. I had just past the halfway point at Wellesley College and the cute coeds were cheering me on.

I had found my pace and was just cruising along and was about to hit a downhill stretch. That was May. And it was easy. I had to use different muscles but still not to bad. I was setting up June to pay off 2 debts and then BAM.

Right in front of me for the next 5 miles. Sit 4 long uphills. With Heartbreak Hill being the last.

Well June starts and I receive an email from a Hospital with about $7,000 bill. Eeek. I got the final bill over the weekend (Happy Fatherís Day!!!) for about $3,400.

Well no one said running a marathon would be easy. So, Iíll probably reduce the car fund and then pay off this bill. It basically throws my debt snowball off a month.

So, time to take a quick drink of water, make sure my laces are tight, and attack this hill.

I canít wait to get over these hills and then see the final 5 miles where a few nasty hills (my wifeís birthday party about $2k and a week off in September where I donít get paid) will test my resolve. After this hill, I just need to grind it out to the finish line.

As an aside, if this happened last year, this would have been more then an inconvenience. This would have completely deflated me and put me in one foul mood.

Mid-May Update

May 15th, 2008 at 09:05 am

That's great, it starts with an earthquake, birds and snakes, an aeroplane -
Lenny Bruce is not afraid. Eye of a hurricane, listen to yourself churn -
world serves its own needs, regardless of your own needs. Feed it up a knock,
speed, grunt no, strength no. Ladder structure clatter with fear of height,
down height. Wire in a fire, represent the seven games in a government for
hire and a combat site. Left her, wasn't coming in a hurry with the furies
breathing down your neck. Team by team reporters baffled, trump, tethered
crop. Look at that low plane! Fine then. Uh oh, overflow, population,
common group, but it'll do. Save yourself, serve yourself. World serves its
own needs, listen to your heart bleed. Tell me with the rapture and the
reverent in the right - right. You vitriolic, patriotic, slam, fight, bright
light, feeling pretty psyched.

It's the end of the world as we know it.
It's the end of the world as we know it.
It's the end of the world as we know it and I feel fine.

Thatís right. I feel fine.

Yep. My wake up to date started with an earthquake of 25k in medical debt last August. Then, I was listening to my inner voice just churn with self-doubt. Then, the fear of the height of my debt crept in. Then, I saved myself and served myself and it was the end of my old world as I knew it, but I feel fine.

During the first quarter of this year, mid month was always the apex of the stress for the month. Then last month, something happened. There wasnít any stress. This month, no stress.

Why? I had a plan at the being of the year. Itís basically the same plan I have this month. Itís because I have full faith in the plan. As they say ďPlan the work and work the plan.Ē

So now, I donít have to devote my mental energy to worry about the whether the plan will work or not. I can now start mapping out my next steps. My plan, which encompasses my goals, is pretty much mapped out for the rest of the year. I work the plan and I should get there.

This leaves me to start looking at what I want to do in 2009. What direction do I really want to go? And what are the main variables?

So whatís on the table for 2009?

Definite:
1) $15,500 to 401(k)
2) Contribute to 529s Ė total of $4,000
3) Max. 2008 IRA contributions

Now comes the harder goals. I need to explore if it is better for me to be a 1099 consultant or a W-2 consultant.

But the real big question is whether to stock up cash for real estate investment purchases or to pay down the mortgage. My thought process is that I am probably 2-3 years from purchasing my first investment property. I have a child that is 9 months and one that is 3.5 years old. At this juncture in my life, I really donít want to take time away from them. Also, I want to do tremendous research into the market and formulate a business plan. I also want to enter the market from a position of strength (good down payment, strong cash reserve, and time to devote to it).

I also would love to get my 30 year mortgage down to a 15 year.

So those are the three things rolling through my head right now. But I have time to think before 2009 gets here. Time at the moment is on my side.

Goals Review - April

April 28th, 2008 at 05:42 am

A third of the year is almost gone already and I am doing great on my goals so far. Paid off another debt this month and made a substantial debt in another.

So, letís jump into things, shall we?
My goals for 2008 are:

1) Pay off debt (except mortgage) by October 1st
. a) Pay off CC by April 1st
. b) Pay off Car 1 by June 1st
. c) Pay off Car 2 by Aug 1st
. d) Pay off wifeís braces by June 1st
. e) Pay off sonís medical by October 1st
2) Invest $10,000 by year end
3) Invest $15,500 in 401(k)
4) Review and reallocate retirement funds by end of Q1
5) Will by end of Q2
6) Life Insurance by end of Q2

1) Pay off all debt but the mortgage by October 1st

Total Debt
04/30/2008 - $23,057 ($15,059 paid)

Car 1 (4% interest rate)
04/01/2008 - $0 ($4,264 paid)

Car 2 (3.9% interest rate)
04/30/2008 - $5,029 ($10,139 paid)

Wife's braces (0% interest rate)
04/30/2008 - $2,028 ($156 paid)

Son's medical (0% interest rate)
04/30/2008 - $16,000 ($500 paid)

True, I did have a huge tax refund of $13 k and I put about $11.3 k towards the debt but I also but in an additional $3.7 k. That means I put more then $15 k towards my debt.
We received the title for the first car, which just got my wife a little jazzed up. I only owe $5 k on my second car and I am hoping to have most of that paid of in May. May has 5 pay weeks for me, so I am hoping on putting a majority of that last paycheck towards the debt.
I am still on track on having car 2 and the wifeís braces paid off in June. That will leave me with only my sonís medical, which is looking at earlier September, if I can keep the pace up.

2) Invest $10,000 by yearend

Looks like we will start hitting this in September. If my calculations are correct, I can surpass this goal and throw $4 k total into my sons 529 plans. That would be sweet. And, Iíll have very close to a fully funded emergency fund (about 6 months).
So I am currently looking at making upping this goal to $15,000 and adding another goal of a 529 savings of $4 k. I have to run a few numbers and scenarios and should have it done for my mid month update.

3) Invest $15,500 in 401(k)

Invest $15,500 in 401(k)
04/25/2008 - $6,547 invested

I am 42% through this goal so I am still planning on this being hit by end of October. Then I plan to use this money towards Christmas, New Years, and Thanksgiving. A lot of wine and presents need to be bought and I also host a little family get together. Hoping not to have debt after the season and it looks like it shouldnít be a problem.
Thatís right. Iím already planning for Christmas.

4) Review and reallocate retirement funds by end of Q1

DONE

5) Will by end of Q2
6) Life Insurance by end of Q2


Yep, I still got to get on this and still plan on getting it done this quarter.

Summary

I am pretty happy as debt still continues to drop off. Now is the point in the race where I have to remain focused and it is getting harder. I feel myself starting to want to stray a little bit, which I think is odd. In other words, I feel myself saying look at how far you have come, loosen up the reins and enjoy life.

I have to stop and look at myself in the mirror and say, thatís great but we have a lot of work to do this year and debt is only the first goal of 6.


Ceejay - Debt Sheets

April 24th, 2008 at 06:44 am

This post is mainly for Ceejay. Of course, if you feel inclined, please read on.

We all probably have a spreadsheet showing our debts and the like. Well, Iím no different. I have one sheet showing all my debts, the current amount I owe, and how much I have paid on a monthly basis.

I donít just use this sheet to record my payments to the debt, but I also use the sheet kind of as a scenario analysis tool. For instance, in March, I was coming up with different ways of using my tax refund and how that would change pay off dates. I also look at it to see if I am keeping around the same pace.

I usually play with this sheet every couple of days so I am very aware of how slight changes effect my overall goals. A little nerdy? A little anal? Maybe.



The next ones are the executive reports for the boss. As we all know, bosses donít have time for the details. They just want to now the bottomline and how we are progressing month to month. These big picture thinkers donít want to know how I swept the residual from an envelope on the 8th to add $28 to a car payment.

So the first report shows where we are now (it ties into my other sheet). And the following two show the monthly progression.

I have organized the reports to show Dave Ramseyís baby steps. It just gives a nice way to categorize the different goals.







So those are my sheets. (Notice how the executive ones are pretty, bosses like that.)

April Update: Chilliní like a Villain

April 14th, 2008 at 06:09 am

Itís the halfway point of the month and Iím chilliní like a villain. I canít believe tomorrow is April 15th.

As I said before, the 15th is usually my stress time when all my big bills are due. This month was no different. I looked at my watch last night and it was the 13th and I just logged onto my bank account and paid them. No muss, no fuss.

Great feeling.

As you can see from my sidebar, I have paid of $12,803 just this month. Most of it was due to a large tax return but I plan on adding another $2,200 to payments this month (see if I can crack $15,000). So, now car 1 is paid off and am working on car 2. I have $7,129 left to pay off on it. The current schedule is to have it paid off in June with the wifeís braces.

Since I paid off the CC and car 1, I can start feeling the snowball gaining strength. I also feel some breathing room. Rather then treading water keeping my head up, I am starting to swim to the shore.

In fact, I have started dreaming, dare I say, of a debt free existence. Yes, I have calculated the time needed to pay of my mortgage, fully fund my emergency fund, fully fund my retirement accounts, and fund my kids college funds. It may be 5-8 years away, but I can almost taste it. I can almost see it. Dare I dream?

Yes, but now is the time to keep the head down and focus. No time to pat ourselves on our back. We got a lot of work to do before we get to these sweet dreams. A lot of workÖ

Bottom line: I have paid off $24,129 or 48.8% of debt to date.

I ainít no April fool

April 1st, 2008 at 07:08 am

I was hoping to post this over the weekend or Monday to close out the quarter on a great note but whatever.

So, I got my refund from the fed on Saturday for $12,922. Most of it was due to my taxes being screwed up when I switched jobs. Bottom line, this is one time refund that I will not see again. The check cleared today and so I have already allocated the money.

So, what did I spend all this new found wealth on? A new boat? A first class vacation? Invest it in BAís pyramid scheme?

They all sound so tempting, but alas I just decided to reduce my debt (and pay for TrueGreen or ChemLawn to take care of the lawn). The breakdown was Car1 paid off and $7,195 towards Car2.

I was hemming and hawing about whether to pay off the braces or Car2. Truthfully, in the end, it wonít matter. One way, I pay the braces off now and Car2 at the end of June. This way I pay the car off in mid June and the braces at the end of June. Since the braces are a 0% loan, it really doesnít matter. So, I decided letís due it this way and have both of these paid off in June.

So there you go. I started the year with $49,422 in debt and now I am down to $26,657, paying off 22,785 in just over a quarter.

Yes half of it was my tax refund, but Murrphy and his family are getting pretty nervous as an eviction is coming in Q3.