After looking at the mortgage 🏡 I realized I have not made any traction in the four years that I've had this loan. This was my ah-ha moment.
In December I decided to make one extra mortgage payment 💰 a year. Today I decided that every month, I'm going to round down my mortgage, so today I paid $75 towards the principal and my new balance is $114,600.
I'm 48 and I've set an aggressive goal to have this loan paid off by my 55th birthday 🎉.
I know Dave says you can't save and pay down debt, well time is not on my side so I chose not to listen to him. I add to my IRA since I'm self-employed, working on my student loans and mortgage at the same time, I'm just more aggressive with the student loan. I also save money for a rainy day. Yes, I'm making good money 💵 right now; however, either one of my clients can say, hey we're done. Makes no sense to only have $1k saved. With my total savings, I can pay one year's worth of expenses.
I just realized that I'm back to blogging. I hope this site stays up and running
January 22nd, 2022 at 02:53 pm 1642863195
January 22nd, 2022 at 09:06 pm 1642885572
You should be (IMO) contributing as much as you can, to a traditional, tax deferred IRA. Depending on your tax bracket, every dollar you contribute is automatically worth $1.12, maybe as much as $1.25. That is before there is any growth from the investment - it is simply the tax benefit.
There is a yearly limit to how much you can save. If you don’t use it one year, you can’t make it up in another year. It’s gone.
Your mortgage is pretty new, and I don’t know the rate, but I bet it’s less than 4%. The dollar you put towards the preicipal saves you 4 cents. So putting a dollar towards your mortgage instead of in your IRA costs you between 8 and 21 cents. Plus you lose the investment gain, say 5%, or another 5 cents of that dollar.
When you get your student loans paid off, you can take that money, fully fund your IRAs and send all the rest to the mortgage. Your ability to prepay your mortgage never goes away. The mortgage, I hope, is not like the student loans. You pay an annoyingly small amount to principal each month, right? If that isn’t true, you need to refinance the mortgage ASAP.
I say this carefully - I am very good with money, and I want you to be too.
Please run the numbers and look at this financially not emotionally.
You want to have your mortgage paid off before retirement to eliminate that expense then, but pre retirement, you want to build up your retirement funds so you have the money for everything else!
January 23rd, 2022 at 12:29 am 1642897792
@Lots of Ideas, I'll be maxing out my IRA Marc, I believe that amount is $6000 or $6500, I can't remember. I'm thinking of contributing to the HSA once I do this, what are your thoughts?
I'm now self-employed so I don't have a 401(k) to contribute to.
January 23rd, 2022 at 12:31 am 1642897907
January 23rd, 2022 at 02:46 am 1642905987
I would max your HSA too. It gives the same tax advantage and the money you don’t use just stays. I don’t invest my HSA balance because I think of it more like medical/ emergency fund money than retirement money. I want it there if I need it. If you have a medical sinking fund, you can redirect that to your HSA to start out with. Same dollars from you, but the tax boost makes them worth more. Some people use their HSA as a savings vehicle and pay medical out of pocket, but in your case, I think you want to run medical expenses through the HSA and keep throwing extra at student loans, then mortgage.
Good luck…you are doing so great!
January 27th, 2022 at 05:21 pm 1643304088
January 30th, 2022 at 07:21 pm 1643570517