Boston Gal's Open Wallet

Congrats!!

I think it is the correct decision - you already have an emergency fund, paying down debt seems appropriate.

I've done the same - about 1/3 of my savings are to retirement, 1/3 to college savings for kids, and 1/3 to paying down debt ... if the stars and the markets align, all will be paid off/up in about 12 years ;-)

 

My net worth is on the decline too, but having my home paid for is very reassuring, so I approve of your decision to work on paying down principal. It is not a bad decision.

I know there is great emphasis on show love by spending money around the holidays, but it's a losing game, and not all that fun anyway. I would encourage you to not go crazy spending and enjoy the holiday for what it is, and enjoy the time you spend with loved ones. The memories aren't usually about gifts, but about the experiences.

 

Discouraging, yes, but I bet you feel better than a year ago, LoL....

 

Hi Boston,

Stay away from the stock market. Realize your loses and leave the market at this point. Or do not invest in index funds or individual stocks. Try ETF's, they low cost with hight liquidity. Take a look at what is in bubble now? Interest rates maybe? FED fund rate is 0 for the last 1 year. Guess, how long they can keep this zero rate policy and how you can make money when they need to increase rates?

 

Last summer ('08) when the market was down a touch I put $5200 into S&P 500 mutual fund, and I'm down about $450 today.
Last October ('08) I invested $15,000 in an small oil producer, and have yet to see $1 in return on my principal!
Right now paying down the mortgage sounds genius.

 

I have nothing intelligent to say, but I do love that $98,000 cash position you have there.

 

It's hard to beat the 'bang for the buck' that you're getting by reducing your mortgage and for you, a sure thing seems important. Keep in mind that buying stocks at a low price will have results in the long term. There are stocks out there with growth potential.

Keep up the good work at living within your means.

 

I am with you on reducing principal...we send an extra $400 a month and we've made a nice little dent over the last few years on our principal by doing so. And I am with James Messick, this is definitely the year to scale way back on gifting. I *know* you are crafty, and in my opinion, personalized crafty gifts are the most memorable and treasured!

 

Congrats, BG! I agree that this is a wise decision in your case and will bring considerable peace of mind.

Are you following some specific plan for the additional amount to throw at the mortgage, or are you just going to play it by ear each month?

For those of you who want to keep this option open and penalty-free, and have yet to take on a mortgage, please be sure to read that 2-inch-thick stack of paperwork you are sent before closing. I was not supposed to have any prepayment penalty. But when I read the paperwork, the lender had checked the prepayment penalty box. I was told it was a clerical mistake. Yeah, right. So one little checkbox buried in the fine print can really throw a wrench in your plans if you are not vigilant.

 

So far I am not targeting a specific amount per month to pre-pay the mortgage principal. Basically I am just sweeping the excess to the mortgage company at the end of the month.

That may change after I see how this goes for the first few months.

 

Regarding paying down the mortgage, I once heard someone suggest thinking of it this way: look at what you are paying off in principal with your normal payment, and add that amount to your payment. This reduces your payment time by one month! Of course, the further and further you go, more goes to principal each month. But at the beginning, you can think of knocking off "this many months" at a time.

 

Your decision to make additional payments may not be the most fiscally prudent one. When making this decision, we have to take into consideration that the home asset is an investment vehicle - even though we live in this investment. Considering the rate of 30 year loans is at lows of 5% and below, your money may be better spent invested in a group of well diversified mutual funds. Even through this recession, a modest 8% return on investment can be had assuming you are willing to keep these funds in the market for as long a period as plan to make additional principal interest payments.

 

Boston - dont understand your reaction to this post - looking at your assets breakdown you could easily pull 200k cash together to give you an income of 10k, i think your real issue here is that you would not/could not live off 10k??

tell me if im wrong?

 

Hi Tom,

I certainly can't live on $10,000 per year given my current mortgage. Even with a paid-off mortgage living on just $10,000 in income per year in Boston would be very difficult.

But $10,000 in yearly income just from cash savings (not retirement accounts) plus the income I receive from the rentals - that might make early semi-retirement possible for me. But I would still need to be 100% debt free. Paying off my mortgage plus adding more to my cash savings - that all takes time. So I would disagree that I could now have enough to generate $10,000 a year in income.