Dear Friends and Family,
We're fortunate enough to not live paycheck to paycheck.
Which leads to the age old question of what to do with the extra money. We've done the obvious - fully fund the 401k, fully fund the IRA, save up a decent rainy day fund (should be completed this year), and put aside for our taxes.
Then, we send over a scary amount each month to our financial planner. That's called starting late and trying to catch up on building up our retirement nest egg. And, it's a good thing.
And, that leaves us with just enough left to wonder what to do with the extra. Should be enjoy ourselves and lead a lusher lifestyle? Should we save even more for retirement? Should we donate it to a worthy cause? Should we pay down the house?
Our planner would say we should save it. It's a better return than paying down the mortgage, has more flexibility, and will make retirement come sooner rather than later.
We could just spend more - on ourselves or on a charity. But, I'm not there yet.
What I want to do is pay down the house. Call it irrational because it is. But, there's something about owning your home free and clear. No mortgage, no rent, only taxes and our monthly assessment. That would be wonderful.
But, in times like these, with work uncertain and everything, it's hard to send an extra amount each month. What if in October I want the money and it's locked away and I can only tap into it with a home equity loan? Well, that would blow.
After some careful math this weekend, here's what we ultimately decided to do. Instead of paying extra each month, we're going to put that extra in a money market account - auto transfer to keep ourselves honest. And, then, at the end of the year we're going to send a big check and do the whole loan modification option again. Then, 2009, our mortgage payment shrinks yet again. And, we do the same thing over again in December 2009 with another chunk of saved up money.
It costs $250 to modify the loan, and there's the hassle of paperwork. But, ultimately, you save about $2K each year in interest and the paperwork is worth the yearly flexibility.
So, that's our plan. We'll see how it works this year.
Cheers!
mouse
We're fortunate enough to not live paycheck to paycheck.
Which leads to the age old question of what to do with the extra money. We've done the obvious - fully fund the 401k, fully fund the IRA, save up a decent rainy day fund (should be completed this year), and put aside for our taxes.
Then, we send over a scary amount each month to our financial planner. That's called starting late and trying to catch up on building up our retirement nest egg. And, it's a good thing.
And, that leaves us with just enough left to wonder what to do with the extra. Should be enjoy ourselves and lead a lusher lifestyle? Should we save even more for retirement? Should we donate it to a worthy cause? Should we pay down the house?
Our planner would say we should save it. It's a better return than paying down the mortgage, has more flexibility, and will make retirement come sooner rather than later.
We could just spend more - on ourselves or on a charity. But, I'm not there yet.
What I want to do is pay down the house. Call it irrational because it is. But, there's something about owning your home free and clear. No mortgage, no rent, only taxes and our monthly assessment. That would be wonderful.
But, in times like these, with work uncertain and everything, it's hard to send an extra amount each month. What if in October I want the money and it's locked away and I can only tap into it with a home equity loan? Well, that would blow.
After some careful math this weekend, here's what we ultimately decided to do. Instead of paying extra each month, we're going to put that extra in a money market account - auto transfer to keep ourselves honest. And, then, at the end of the year we're going to send a big check and do the whole loan modification option again. Then, 2009, our mortgage payment shrinks yet again. And, we do the same thing over again in December 2009 with another chunk of saved up money.
It costs $250 to modify the loan, and there's the hassle of paperwork. But, ultimately, you save about $2K each year in interest and the paperwork is worth the yearly flexibility.
So, that's our plan. We'll see how it works this year.
Cheers!
mouse
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