Monthly Archives: March 2010

First Extra Principal Payment Has Been Sent

A few days ago, I made my very first mortgage payment.  It felt so good, today, when I logged on to our mortgage company’s website and saw that the payment has posted.  It felt not-so-good to see just how much of our payment was applied to interest – and how little was applied to principal.

If I continue to make our mortgage payment, as scheduled, we’ll own our home in 15 years.  Each month, as we slowly chip away, a little more will be applied to principal and a little less will be go towards interest.  My goal?  To speed up that process – so that I can pay off the mortgage in less than 15 years.  Every extra dollar that I send will go directly towards the principal balance, build equity, and reduce total interest paid.

Towards that end, today I sent my first extra principal payment.  When making extra payments towards any loan, I always like to write “apply to principal” in the memo-section of the check.  In this case, I used online bill pay and instructed my bank to do the same.

The amount wasn’t much, but if I make an equal extra principal payment just once a year for the next 15 years, I will reduce the term of the loan by 5 months – and save over $2000 in interest!  Not bad – and that’s if I only made one extra payment per year.  Imagine the power of making an extra payment – each month!  Debt reduction rocks!

Here’s a neat little mortgage payoff calculator from the folks over at Dinkytown.  It’s simple, easy to use, and provides instant motivation.  Check it out.

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Automated And It Feels So Good

I’ve always resisted fully automating our finances.  Recently, however, I’ve had a change of heart.  Now, not only are most of our monthly bills paid online, but I’ve also automated deposits for savings, and payments towards our mortgage.

We have a power bill, a telephone bill, a satellite bill, and a cellphone bill.  Each of these is delivered electronically, via email.  The only “paper” bill that we receive is the one from our local water department.  With online and instant access to our accounts, it’s extremely easy to pay bills, check current balances, and keep things organized.  As the bills arrive in my inbox, I look them over, make sure that everything looks to be in order, and make payments via online bill pay.

Our bank allows us to not only pay bills via bill pay, but to receive them as well.  I recently used this service to automate the payment of our various automobile and life insurance payments.  Using this e-bill service, I never have to worry about stamps, envelopes, late fees, or due dates.  The bill arrives and it gets paid.  I also have the option to delay payment for a few days, so that I can review a particular invoice or bill.

I’ve even automated, through the bank’s bill pay feature, weekly payments for various services, like child care and kids’ gymnastics.  The checks are mailed directly and I never have to worry about remembering the checkbook.

Our cash reserves, somewhat depleted by the recent home purchase, are being rebuilt, one automated weekly deposit at a time.  Each week, a fixed amount is withdrawn from our primary checking and deposited, automatically, into our online savings account.  This “set it – and forget it” system really is a great way to rebuild savings.

The payments and deposits are all controlled by me, via online banking.  In other words, I haven’t given “pull” authority to any of the companies with which I do business.  My payments aren’t automatically deducted – but they are automatically sent.  I can cancel them, review them, or change them, any time I want.  I am in control.

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Are You “Over” Spending?

Have you gotten to the point where you are “over” spending – as in -you just don’t feel like buying “stuff” anymore?

There was a time when I wanted “stuff” – a nicer car, a bigger television, a newer computer, but now I’m “over” that stage in my life.  Seriously.  I just want to enjoy the “stuff” I already have, hang out with my family, and live life.

It’s funny how, over-time, our priorities change.  Even with our new home, we bought a few things – some new furniture for the den and some decorative items for around the house – but we didn’t go crazy.  In fact, one of our goals was to minimize the clutter.  We sold, gave away, or disposed of anything that didn’t fit with our new less-is-more approach to living, and we are really enjoying the outcome.

I get the feeling that a lot of people – perhaps due to the recent recession or perhaps due to the over-commercialization of our culture – have simply decided that they have “enough” and that their priorities have changed.  My fellow blogger Clever Dude, in a recent article titled “I’m Tired Of Buying And Spending” writes –

…it’s not that I don’t want “stuff”, but when I begin to consider actually buying something I desire or even need, a feeling just washes over me and I lose the urge. I can’t even explain the feeling other than “ugh”…

I can very much identify with Clever Dude.  What was once a very strong impulse – the desire to buy – has gone away, and been replaced with an anti-impulse – the desire to not-deal-with-the-hassle-of-buying.  Does that make sense?  I just no longer have the desire to go out and spend money, even on things that I like.

There is one caveat.  I still enjoy spending money – on others.  I like to buy nice things for my wife, my kids, and friends.  Christmas, as I’ve mentioned before, is my favorite day of the year.  It’s also fun to buy things for our home, things that my wife, the kids, and I can all use.

I would love to chalk this new “frugality” up to maturity – and that might be a small part of it – but most of it, to be honest, is just apathy.  I don’t really want / need / like / “stuff” anymore.  Whatever it was that once drove me to own the newest, the latest, and the greatest – it’s just gone.

What about you?  Have you gotten to the point where you are “over” spending?  I’d love to read your thoughts in the comments below.

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The Plan Of Attack – How I Plan To Pay Off My Mortgage Early

My wife and recently purchased our first home.  Here is my plan to pay off our 15 year mortgage in 10 years – or less!

Opening Fire – We will us online bill pay to make our regular, monthly mortgage payments.  I have already scheduled for our monthly payment to be sent from our bank to our mortgage company on the 15th of each month, the day after I receive my monthly paycheck.  The mortgage account number is listed in the memo section of each payment check.  Even is we do nothing else, we can be confident that our monthly payment will be made early, and on-time.

Steady Assault – I have scheduled an additional monthly payment, designed to reduce mortgage principal, to be sent on the 20th of each month.  I included the 5 day buffer, just to keep things nice-and-neat.  This additional payment is above-and-beyond the regular monthly mortgage payment and is a fixed monthly-amount.

Sniper Attack – I am a big fan of micro-payments – those small, irregular payments that can be made throughout the month.  Just as I did when I was reducing my consumer and credit card debt, I plan to use micro-payments, this time to reduce my mortgage principal.  Throughout the month, if I see that I am spending less in a particular budget category than I had originally planned, I will use this leftover money to make a micro-payment.  The first types of payments, the regularly scheduled monthly payment and the regularly scheduled extra payment, are hands-off.  Once they’re set, they pretty much work on their own.  These micro-payments, however, keep my head-in-the-game and really create a sense of accomplishment.

Secret Weapon - I make a little money from my blogging activities.  Over the past few years, this money has gone towards “extras” for around the house.  From now on, any money earned from blogging (or other side jobs) will go directly towards mortgage principal reduction.  The more I make from blogging – the faster we own our home!

There you have it – our plan of attack!  We are super-excited about our new house and ready to start paying it off.  With three kids and modest income, it’s not going to be easy, but we are determined and we have a plan.  Rock on!

Image by - Danny Fowler
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