Refinancing Our Home

Our mortgage company sent us another offer to refinance. They claim because there was a recent government policy which allows people who have paid their mortgage on time each month, but owe more than their home is worth to refinance their home without cost. So according to the letter we received in the mail, there would be no cost for us and no appraisal. After a quick discussion with my husband, we decided to go for it. Up until recently, I had thought I wanted a 15 year mortgage with a slightly higher payment. However, it is also nice to at least have the option to only be obligated to pay a lower amount in case our finances ever take a turn for the worse. We can still pay extra on it in order to pay it off early. I think we could have gotten a lower interest rate at 15 years, but in this particular offer they only gave us 2 options: 30 years or 25 years. Both options were 4.5% which honestly isn't great considering I've seen some offers below 4, but it's better than the 5.75% we are paying now. We decided on the 25 year mortgage (which would actually take off almost a year off our current since we are just over 4 years into it). Here is math to show how this should benefit us:

Current mortgage: $1,133.01 for 25 years 11 months (311 months)
Proposed: $1,017.59 for 25 years (300 months)

Total payments of our current mortgage vs. the proposed new mortgage:
Current: $1,133.01 x 311 = 352,366.11 total payment
Proposed: $1,017.59 x 300 = 305,277.00 total payment

Savings: $47,089.11 (or approximately 20 months of my income - before tax!)

So now we are just waiting for them to get back to us in order to take the next step. Hopefully we don't get our hopes up like last time.

Year in review and replacements

I just wanted to take a moment to reflect on the last 12 months. I was about a year ago when I started this blog. When looking at my first post that I made on December 7, 2010, I see I've improved my financial life quite a bit. A year ago we owed $210,000 on our house, we now owe around $183,000. I fully funded my Roth IRA for 2011. And I still managed to do make these improvements despite having some of the worst luck this year.

I would love to pay down our house even more this year and fully fund my Roth IRA again. However, I'm on the fence about doing so. Don't get me wrong, I'd love to those things, however our stuff is getting old. By "stuff" I mean both of our vehicles have over 100,000 miles on them, we need to replace most of the carpet in our house and my husband would really like to replace our siding and windows on the house soon. So since I can see that these things will need replacing in the next 3 years or so, I will need to keep a lot of cash on hand in order to not go into debt. It just wouldn't make sense to pay down our mortgage which has a tax-deductable interest rate of 5.75% and have little savings and then one of the cars dies and we have to take out a car loan. I also have a feeling I'm going to get pressured to get the windows and siding done next summer, and since I don't want to take out a loan to do so, I better start saving now. It's driving me crazy that a new year is beginning and I'm not rushing to get money in my Roth IRA. But since I have all year, I feel the best financial decision is to wait and save up as much money as we can and maybe next fall re-evaluate if I still can put money into the IRA or pay down the mortgage.

When I think about how much money we will need just to replace what we already have, it's depressing. Here are some rough numbers.

Amount needed to replace 2 vehicles: $30,000 to $35,000
(We'll get reliable cars that are a couple years old around for around $15K to $17K each)
Amount needed to replace siding and windows on our house: $15,000 to $25,000
(This is just a guess since we have not got an estimate yet)
Amount needed to replace carpet: $2,000 to $5,000
(Depending on how many rooms we replace)

Cash needed in the next few years: $47,000 - $65,000

Ignoring my emergency fund, I have about $4,500 saved up, so even if we spend closer to the low end of the estimates, I still have less than 10% saved. The sad thing is my income is so low, and after taxes, I probably only take home $20,000 a year if I don't work any overtime. So it'll take another two years to raise the money to replace this stuff and that's if we're lucky and can find deals.

Christmas Challenge - November Results

Lately I've been feeling a bit overwhelmed with everything. I just feel like I don't have any time lately. It must be the holidays. The dishes and laundry are piling up and I have lots of errands to run. Maybe I need to start cutting into my sleep to get things done. Since the weekend of Thanksgiving through next weekend, I've had to go to family events out of town 3 of the 4 weekends in a row. If I leave right after work on Friday and we don't get back until late afternoon on Sunday, then the whole weekend is lost. So, this is the only weekend in a 4 week span I don't have to go somewhere. However, I was finally offered some overtime at work this weekend, and I also had a holiday party last night so I didn't have a lot of time this weekend either. Then the weekend after next is Christmas weekend, and the plan is to stay in town, but we'll still be busy. So with my busy schedule, some things have slipped through the cracks. Another thing that was put on the back burner was this blog. I don't know if anyone really reads this on a regular basis, but if you care, I finally got around to it and here are the results for my Christmas Challenge for the month of November.

Part time job: $42.11
Blog advertising: $149.80
Amazon affiliate: $4.77

Total for November: $196.78
Total made since start of the challenge: $1,282.08


Last month I said my goal was to make more than I did the previous month. I did not accomplish this goal. I made $246.26 last month, and this month I only made $196.78. I'm a little disappointed in myself for that. I guess I was a little lazy, I'm running out of stuff to sell, and some of it is just based on luck. But as I mentioned above, I'm just too darn busy with everything else.

This is the last month of the Christmas Challenge. I'm not sure what I'm going to do starting next month. I could start working towards paying for Christmas of 2012, but I don't know how much I'll be motivated by that in March.

How I keep track of my bills

About four or five years ago my husband decided to purchase a new (rather expensive) TV, so we took out store financing to pay for it. I've been in charge of the bills, so I paid it every month. We didn't pay this bill online, so we received a bill in the mail every month. Just a couple months in to it, we didn't receive our bill in the mail. Because I wasn't used to paying that bill, I didn't notice we didn't get a bill and it didn't get paid that month.  Of course when we received the next bill we had some late charges. The sad thing is we had the money in the bank to pay it off. So I paid it off in full and learned two lessons: Pay for purchases in cash and avoid financing, and also keep better track of our monthly bills. So ever since then I created a spread sheet to keep track of our monthly bills. I edited out the names of the companies, but you get the idea.

(Click on image to view larger version)

Note: the "due" date is the date I like to pay for it to make sure it has plenty of time to process.  So it might look like I'm late on some of these, but often the "due" date is around the time we receive the bill or when the billing cycle starts over.

If I pay a bill manually, I'll mark it in green and enter the date I submitted it. Once it shows up in our bank account, I'll change the date to the date it was withdrawn from our checking account and mark the cell in purple. So as you can see, once it is marked in purple the bill is paid for and I don't have to worry about it again this month.  I also make sure I have a note for the occasional bills like property tax and our license plate renewals. I have the upcoming license plate renewal months marked in pink to remind me they will be due, so not only can I make sure we have money in the budget for them, but if we never receive the bill, I can look into it before it is over due.

I do most of my bill paying online either through our bank's website or the website of the company we owe. I think the only thing that really gets sent through snail mail is an occasional medical bill that can't be paid online and our property taxes.  Paying the majority of our bills online saves a lot of stamps and trips to the mail box. I also try to have the bills automatically withdrawn whenever possible.  However, you have to double check those as well. Last month, my cable bill was not withdrawn on time.  It usually is withdrawn around the last day of the month, so after not seeing a withdrawl by October 5, I looked into it. The cable company never informed me there was a problem with the automatic withdrawal.  Turns out our credit card company issued a new card to us a few months ago, and they had a period that the old number still worked as well.  I guess that old number finally stopped working so the cable company charge did not go through. It's a good thing I noticed it didn't get withdrawn within its normal time period so I avoided any late charges.  Thankfully the bill wasn't actually due until mid-month, but since I had it set to withdraw a few weeks before the bill is due, I had plenty of time to still get it paid on time.

Christmas Challenge: October's Results

Here are the results for my Christmas Challenge for the month of October.

Part time job: $79.26
Blog advertising: $137.63
Amazon affiliate: $5.20
Ebay (minus fees and shipping costs): $24.17

Total for October: $246.26 (-$88.28 less than last month)
Total made so far: $1085.30
Total left to make (goal=$1,000): DONE!!

I did it! I reached $1,000 made outside of my regular job since July. I'm going to keep going because extra money is always a good thing. If it wasn't for hitting the $1,000 mark overall, I'd be a little disappointed in this month's results. I was making slightly more each month, so this is the first time I actually made less than the previous month. So my goal for this month is to make more than I did for October.

Net worth update: 4th Quarter of 2011

Here is a check up of my net worth for the 4th quarter of 2011. I decided to just check in once every quarter on this for now on, so the next time I'll update this will be mid-January. The numbers look better than last month. The house value has rebounded a bit using Zillow, but eppraisal is still saying our house is only worth $165,161. So the net worth could be $18,139 less. I am reading a book by Robert Koisaki and he says a house is not actually an asset. So I don't know if I should even include it since it is the biggest question mark. So anyway, here's a look at the numbers:

Assets:
Approximate value of house*: $183,300 (up $2,400)
Roth IRA: $20,927 (Up $14)
Simple IRA: $4,098 (Down $661 since June 30 statement)
Savings: $6,887 (up $1,371)

Liabilities:
Mortgage: $182,972 (Down $255)

Total net worth: $32,240
Difference from last month: $3,380

*Value from Zillow.com so probably not 100% accurate.

Christmas Challenge: September Results

Here are the numbers for September's Christmas Challenge. My goal was to make $875 outside of my regular job before the end of the year. With 3 months left to so, I am only $35.95 away! Since $875 is an odd number, I might just push it up to an even $1,000. At the rate I'm going, that goal is completely possible and I will hopefully reach $1,000 by the end of the October.

Here are September's numbers:

Part time job: $22.30
Blog advertising: $164.81
Amazon affiliate: $44.13
Ebay (minus fees and shipping costs): $43.30
Craig's List: $30
Babysitting: $30

Total for September: $334.54

Last month: $258.98
Total made so far: $839.04
Total left to make (goal=$1,000): $160.96

How accurate are Eppraisal and Zillow?

I was really surprised to find out our house value may be even lower than I had thought. So I wondered if my neighbors were in a similar situation. Turns out Eppraisal and Zillow vary quite a bit, but it's not always Eppraisal that comes in lower like it did in our case. Here are some samples:

Next door neighbor 1:

Next door neighbor 2:

Directly across the street:

Next door to across the street 1:

Next door to across the street 2:

Behind our house:

So only one of these looks similar to our house. The rest actually have optimistic numbers for Eppraisal compared to Zillow.

So I don't know who to believe. The best thing to do would be to have an appraisal done, but last time we did that it was $500. We had the appraisal done in order to refinance in Fall of last year. We were not qualified because we owed over 105% of the house's value at that time. I think the value was appraised at $200,000 at the time and we owed about $210,000. Now we have the mortgage paid down to a little over $183,000, and the interest rates are even better than the were last year, however it appears our house value has slipped even lower and we still owe more on our house than it is worth. I'd love to try to refinance at the great rates available these days, but don't want spend $500 for another appraisal only to be rejected again.

Anyway, here is one more example of how these could be completely inaccurate.  My parents live in a different part of town, so I put their address in and difference between Eppraisal and Zillow was huge!  $85,485 difference!  And Eppraisal had the higher value!

So, I don't think I will be including the house value in my net worth updates in the future because I don't have an accurate number. Even the mutual fund prices change so much, I might only do updates once every quarter for now on.

You think our house is worth what?!?!

Does anyone know how accurate eppraisal.com is? According to them, the value of our house is only about $165,000! 

That's almost $16,000 less than the already too low (in my opinion) Zillow estimate. I really hope this isn't true because I want to re-finance next year before interest rates go up and if this is accurate, we will owe much more on our current mortgage than our house is worth.

Net Worth Update - September 2011

It's about mid-month again, so it's time to check in on my net worth numbers. Once again, the house value dropped! When is this going to stop? The gap between how much we owe on our house and how much it's worth is getting wider each month. I'd really like to refinance before the interest rates go back up because our mortgage is currently at a 5.75% interest rate. But, you can't refinance if you owe more on the house than it is worth in today's marketplace. It's making me start to think if I should try to pay down the mortgage a bit?

Anyway, here are this month's numbers:

Assets:
Approximate value of house*: $180,900 (Down 1,100)
Roth IRA: $20,913 (Up $1,618, but invested $2,000 since last month, so it lost money)
Simple IRA: $4,759 (June 30 statement)
Savings: $5,516 (not including money set aside for property taxes)

Liabilities:
Mortgage: $183,228

Total net worth: $28,860
Difference from last month: $210

*Value from Zillow.com so probably not 100% accurate.

At least the overall net worth has gone up a tiny bit since last month.  I'd love to see an even bigger improvement next month and have the house value recover some value by next month.

IRA Asset Allocation and Balance: September

My Roth IRA is now officially fully funded for 2011! Here a screen shot of my current balance.

Despite the fact I invested $2,000 this month, it's only $348.85 higher than it was on August 1st due to the not so great stock market. Oh well, I just have to remember my balance would be a lot lower if I didn't invest at all.

I did take Dave Ramsey's advice to increase my "growth" stock as well.  I was at 17% in June and now I'm up to 26%.

Christmas Challenge: August Results

This is formerly known as the "pay the taxes challenge", but now that I have decided to have extra money withheld from my paychecks, I shouldn't need to save for income taxes anymore. However, I still want to challenge myself to make extra money. Last month my goal was to make $875 outside of my full time job in the last 6 months of 2011. I was thinking since this challenge is to raise the money for the rest of 2011, I'll re-name this "Christmas Challenge". I figure between gifts and all the events during the holiday season, $875 is a good goal.

Here are the numbers for August:

Part time job: $12.39
Blog advertising: $143.24
Amazon affiliate: 14.52
Ebay (minus fees and shipping costs): $23.83
Craig's List: $65

Total: $258.98

Last month: $245.52
Total made so far: $504.50
Total left to make: $370.50

So I made pretty close to the same as last month, except I was better at diversifying my income by selling some stuff on Ebay and Craigslist. As expected, the blog income has gone down since interest in the topic is dwindling.

I'm happy to see I'm over half way to my goal! If I do as good the next two months, I'll hit the goal by the end of October!

Financial Wish List

I have saved the remaining $2,000 for my Roth IRA contribution and I'm anxiously awaiting the September 1st withdrawal so my IRA investments for 2011 will be officially done. I also have saved enough for the carpet cleaning bill that we put on our credit card. So now I think I'm finally ready to save money again. The only problem is I don't know what to save for first. I have so many things I want to save for, but my income is not big enough to do them all, or at least do them all as fast as I would like. I'm a little stuck on which one to do first. In Dave Ramsey's baby steps, he says to go smallest to largest, but when saving, it's tougher to decide which thing to save for first since some are more important than others or we may need the money sooner. Here are the things I want to save for and how much each would cost:

New carpet for our basement: $3,000
It makes me so mad that we just replaced this carpet less than a year ago, and now we have to do it again. It's livable with the carpet and pad removed in part of the basement, but it would really be nice to not be embarrassed about our ugly basement.


New used vehicle or 2: $16,000 to $32,000
We have 2 vehicles with over 100,000 miles on them, so unfortunately we'll need to be replacing one or both of them some time in the next few years. I hope it's not next year, but am determined not to go into debt to get a new car, so I want to have enough money to pay for it in cash. Unfortunately one of them could die suddenly and we'll need to replace it fast, so the sooner I have the money for a replacement, the better. I came up with a replacement cost of $16,000 each because that's what a two year old version of the same make and model as we have now would cost. This is just a number I picked, so we could maybe get a slightly older car that is not as expensive.


2012 IRA Contribution: $5,000
I'm not even officially done with this year's yet but, since I am behind on my retirement savings for my age, I need to make this a non-negotiable investment next year.


Trip to Japan: $10,000
I know it's extravagant, but it's still on the wish list. We had the money set aside this year and reservations booked. But, after the earthquake there this spring, we cancelled the trip and I ended up putting that money towards paying off our second mortgage.

One disappointing thing is only the IRA contribution will really contribute positively towards our net worth. I guess technically a new vehicle is an asset, but in 6 or 7 years it'll be worth no more than the cars we currently have. We are currently about $2,000 under water on our house too, so I'm tempted to put some extra money toward the mortgage to improve our overall net worth. Another thing I should mention is I was thinking we'd need to increase our emergency fund. We currently have 1 months of expenses plus a $1,000 rainy day account for smaller "emergencies" such as a car repair etc. Because I plan on saving the cash before we actually purchase the items listed above, the cash I'm saving could double as more emergency funds if there was a true emergency. So, for right now I plan on just keeping the EF at $1,000 plus one month's expenses.

What do you think? What would you save for first if you were in my situation?

Could you be charged penalties and interest by the IRS even if you file by April 15?

I've found out that no good deed goes unpunished. Besides fully funding my Roth IRA (as of September 1), I have done two other significant things this year to improve our finances. One is paying off our second mortgage and the other is making some extra money outside of my regular job. Although they will both benefit us, the tax consequences make the benefits smaller. Because I paid off that second mortgage, we won't be able to deduct as much interest and the self-employment money does not have taxes taken out when I receive the money, but I'll owe close to 50% in taxes on that money when we file our tax return.

I have never been one to really pay close attention to tax law before. Every year since I started working I have received a refund when I filed my tax return. My assumption was that if I ever got to a point where I under paid my taxes on any given year, I'd just have to send them a check for the difference and be done with it. I didn't realize if you owe the IRS more than $1,000 that not only do you owe that money, but you will also have to by penalties and interest because you under withheld or didn't pay estimated taxes throughout the year.

I was doing some more research on paying more taxes on my Adsense and Amazon affiliate income as I earn it so I won't have a huge tax bill at the end of the year. If I'm in debt to anyone I want to get rid of that debt ASAP. Anyway, unfortunately it looks like they don't offer the option of paying the taxes as you go. However, it was suggested you pay quarterly estimated taxes on that money. While doing my research, I found that not only is paying some of that tax by submitting quarterly estimated taxes as I go along a good idea, it might actually be required. Since I don't make a lot of money on those 2 things yet, I think there is a way to avoid filing estimated taxes and the hassle of trying to figure out that paperwork (which I dread almost as much as sending them money... I hate confusing paperwork!). Please correct me if I'm wrong about this, but from what I understand, it's only an issue if your self-employment causes you to owe $1,000 or more when you file your taxes for the year (that's just considering your Federal return).  After crunching some numbers and guessing how much I'll make in the last 4 months of 2011, I determined that it is likely we will owe over $1,000 in federal income tax. But, from what I understand, the "loophole" to not have to deal with quarterly estimated taxes is to have extra money withheld from my regular job's wages so that the taxes owed at the end of the year will be less than $1,000. The sad thing is I changed my withholding just a couple weeks ago. Now I have to ask to change my W4 again and have even more taxes withheld.  Because I hate being in debt to anyone and don't want to risk getting too close to that $1,000 I think I'm going to have them withhold all the taxes that I think will be due for the whole year.  Since I already know we'll owe the state too, I will also set it up to withhold extra for them as well. The really disappointing thing is it is going to decrease my paychecks by almost $100 every week for the rest of 2011!  I thought the government was already getting enough of our money! But, on the bright side I at least caught this now and I have 4 months to fix it.  It's just going to be a bummer seeing small checks for the rest of the year once I update my W4.

Ouch! Will I have to pay 48.3% in tax on my Adsense and Amazon income?

As I mentioned in my last post, I decided to change the withholding on my paychecks so I spread some of my tax burden throughout the year.  I thought maybe I should look into getting taxes withheld from my side income.  While doing that research, I discovered some more bad news.  If you make more than $400 from "self-employment" such as Adsense or Amazon, you not only have to pay your tax rate, but you also have to pay an additional 15.3% for Social Security and Medicare because they consider this self-employment. I had thought if I set aside 25% of any income I made I should have my taxes covered. Then I also remembered that there has not been any state taxes withheld either, and that tax rate is 8%. So I added up all these taxes and came up with 48.3%...

Federal tax: 25%
State tax: 8%
Self employment tax: 15.3%
Total: 48.3%

I know tax brackets are set up that you pay 10% on your first $17,000 (for married filing jointly) and 15% on income up to $69,000 and then 25% is the rest.  So I don't know if they consider extra income the first part of your income or the last.  But, I'm assuming because there was no taxes taken out at all, then it would get taxed at the highest rate which in our case is 25%.  The state tax is set up in a similar way - you pay a smaller percentage on your income to a certain point. So maybe it won't be 48.3%, but I'm worried it really could be this bad.  It kind of makes me think it's not worth it if almost half of the extra money I make has to be given back in the form of taxes.

Do any other bloggers who make money from their blogs know the answer to this?

Are you faced with a big tax bill next April?

Now that we are not paying as much in mortgage interest we will not be able to deduct as much interest on our taxes. I'm also making some extra income that I'm not currently withholding tax on, so I'm getting concerned about just how bad our tax bill will be.  I decided to spread some of that pain out and change my tax allowances on my income from my full time job.  I admit, I don't know a lot of about taxes, so when I filled out my W4 when I first started my job, I didn't know if a higher the number meant more or less taxes are taken out.  After some research I found out that the higher the number, the less tax they will take out of your paycheck.  Mine was set at "1", which was fine for last year, but this year they are not taking enough out. So, I just had it changed to "0" so more taxes will be taken out of my paychecks, but we won't have to pay as much when we file next year.  I just got my first paycheck since this change and it was $12.99 less than normal.  So with about 19 weeks left of the year, our tax burden should be $246.81 less.

So, if you think you're going to be paying in next spring, talk to your employer about changing your W4 and change your allowances to a lower number.  If you get a huge refund every year, and want some extra cash before the holidays, then a way to get more money now is to change your allowances to a higher number.

Net Worth Update - August 2011

Here is a look at my net worth this month:

Assets:
Approximate value of house*: $182,000 (Down 1,600)
Roth IRA: $19,295 (Down $815, but invested $1,600 since last month, so more like down $2,415)
Simple IRA: $4,759 (June 30 statement - it's probably a lot lower now...)
Savings: $6,078 (not including money set aside for property taxes)

Liabilities:
Mortgage: $183,482

Total net worth: $28,650
Difference from last month: -$2,123

*Value from Zillow.com so probably not 100% accurate.

So as expected, the stock market hurt my net worth this month. Hopefully it will bounce back next month (after I make my investments of course!).  I don't want to dwell on all the money lost and the fact that our house value is at an all-time low, so I guess I'll just post this and hope for better numbers next month.

Now what do I do?

My original plan was to fully fund my Roth IRA by October 1st, but being anixious to accomplish my goals even faster, I was starting to think I could even have it fully funded by September 1st. I really never gave much thought to how the markets were going to be doing at that time. But, current events have changed that. I've contributed $3,000 so far this year, and have lost almost all of it already. I'm trying to decide if I should add the remaining $2,000 on September 1st.  Obviously, I want to buy when the market is at its lowest, but I just don't know when that will be.  Will the stock market bottom out soon? I'd hate to put my remaining $2,000 in on September 1st and then the markets are even lower later this year and I've already fully funded the IRA for the year. But, I also really want to accomplish my goal of fully funding my IRA ASAP. I wish I knew how much more the stock market was going to drop and what date it will bottom out. What do you think?

How to have a positive mindset when it comes to money

I have a couple friends on Facebook who sometimes annoy me because they are always complaining! One of the friends is always posting updates about how she will never find a man or how miserable she is because she doesn't have a boyfriend.  A couple others will gripe about anything and everything. So I know how annoying it can be to see someone always complain about things. 

And I see it in myself when I read this blog. My last post is the perfect example of my excessive complaining. Probably half the posts are about how this and that has negatively influences our finances.  I have to admit, this has been a particularly tough year with the unexpected and uncontrollable expenses.  The rapid depreciation of our assets like our home and retirement accounts does not help either.  However, to look on the positive side, it's projected that we will make more this year than we ever have in previous years. We have also accomplished some financial goals like paying off a small mortgage which will help us save a bit every month and that will potentially help us build wealth in the future.

So I started thinking of how can I look at our finances in a more positive way?

Since I'm a glass is half empty type of person, I had to do some research on this.  Here are some ideas:

Be thankful whenever money comes to you. 
So whenever you get your paycheck, you get a rebate, earn a couple bucks of interest on your savings account, or even find a penny on the ground, take a moment to acknowledge it and feel gratitude for it.

Imagine what it would be like to be wealthy. 
Take 20 minutes of time without interruptions and imagine the house you would like to live in, or the car you would like to drive, what kind of vacation you would like to take.  You can imagine yourself checking your bank accounts - how much money is in there?  Allow yourself to feel as if these images are reality.

Create a vision board. 
I know that is stolen from "The Secret" and a little bit cliché.  But it may help you with the above suggestion of imagining what life would be like if you had abundance.

Give. 
I admit I struggle with this one. Don't get me wrong, I would love to give.  But, at this time I think, "I'll give to charity once we have a better control on our finances". However I have read time and time again how money flows back to you when you give.  So give giving a try!

Think wealthy thoughts.  
Say affirmations like "money comes to me easily" or "my net worth is always increasing" or "I always earn more money than what I spend". However, stay away from affirmations that are so much of a stretch that you won't believe them.

Read success stories.
Read the "rags to riches" stories out there.  Often you'll find people that started off in a worse position than you and were able to become wealthy.  Learning their stories can give you confidence that you can do it too.

Positive Wealth and Money Links:

What Is The Right Attitude Towards Money?

How to Develop a Positive Money Mindset

Affirmations for Attracting Money

Positive Personal Finance

Top 10 Rags to Riches Stories

Don't Look

When I heard about the stock market having it's worst day in three years, I knew I shouldn't look my IRA balance. I kept telling myself don't look because this is money I don't plan on touching for at least 30 years. But, I couldn't resist and prepared myself for disappointment. Here are the results.

Just 2 days ago is was $1,437.34 more. That is nearly all the money ($1,600) I JUST put in three days ago. I wish I would have invested today and got the better mutual fund prices.

I just can't seem to win when it comes to money.  Speaking of bad news - I found out yesterday that our insurance won't cover out sump pump incident, so I don't know how bad that is going to hurt us. Apparently if your sump pump malfunctions and overflows from the sump pump basin they'll cover it, but if the sump pump malfunctions and doesn't do it's job - i.e. get rid of excess water under our house, then they don't cover that water damage. Stupid technicalities!

IRA Asset Allocation and Balance: August

It's time once again for a report on my Roth IRA balance and asset allocation. Stock values have decreased a bit over the last couple weeks, so my account was back below $20K for the last couple weeks, but after my contribution this month it is currently at $20,954.97. Even though I added $1,600, it is only up $813.55 since last month.

I only contributed $1,600 instead of the $1,800 I had planned because life got in the way again. Last Monday was a pretty bad day. It started off with my husband finding out his uncle died and then the end of the day us having to call our insurance company because our sump pump stopped working and we had enough water in our basement to ruin the carpet and pad we just bought last November. Between that and the problems we had with the cats I guess it just wasn't meant to be for us to have nice carpet. If only we would have just waited a year to replace the old carpet. I wouldn't be as bummed out if it ruined the carpet we had wanted to replace anyway.

So getting back to the IRA. A new sump pump cost $200, so I decreased my contribution by $200 at the last minute in order to pay for that. Unfortunately the expenses are not done. We have a $1,000 deductible on our insurance policy, so we'll probably have to spend another $800 out of pocket. So at this time, I don't know if I'll be able to finish my IRA contributions by September 1st or not. I'll need to put in $2,000 to do so, and I don't know if that will happen. Hopefully we can cover the carpet cleaning/pad replacement out of my husband's income, but I doubt it.

Pay the Taxes Challenge: July Results

It's time to check in with the pay the taxes challenge. I did better than expected even though I didn't make money in all the income categories I could have. In the month of July I made $245.52 outside of my regular job. That's 35% of the way to my initial goal of $700! However, when I made that goal, I forgot I should also take into consideration that most of these earnings will also be taxed, so I should probably add another 25% to that $700. So I really need to raise $875 total to pay the $700 in taxes. Darn taxes! I feel like I'm getting taxed on top of the tax!  So, I'm pretty much starting over again this month with $629.48 left to earn to reach my goal of making $875 before taxes outside of my full time job by the end of the year.

Here are the numbers broken down:

Part time job: $52.01
Blog advertising: $178.27
Amazon affiliate: $15.24
Babysitting: $0
Ebay (minus fees and shipping costs): $0
Craig's List: $0

Total: $245.52
Total left to raise: $629.48

My part-time job was about what I expected.  I didn't try to sell anything on Ebay or Craig's List this month. I finally got around to posting some Ebay auctions today, but they won't end for a week, so anything I make there will go towards next month's total. I was asked to babysit once, but had other plans, so unfortunately I didn't make any money babysitting this month either. As you can see my biggest source of income was advertising. I had started another blog about three years ago and pretty much just report on news stories about a certain topic and that's where I make about 99% of my blog ad revenue. Sadly I expect the interest in this topic to die down a bit next month and then really cool down this fall. But, I still did better than expected for this month!

The importance of financial goals

When I first started this blog, I had a difficult time coming up with a name. I probably tried 15 different names but they were all taken. But I finally found one that wasn't taken: wealthgoals.blogspot.com. I can't even remember what other names I tried, but in the end, I'm very happy with the name of my blog. I think it sums up the blog nicely and it has actually motivated me to achieve my wealth goals.

Goals are very important when planning for your financial future. Having a goal is like playing a game with yourself. You want to "win" the game and therefore you'll try harder than ever to reach those goals.

Here are some of the things I have learned about having financial goals:

Concentrate on one goal at a time if you can.
I feel better if my goals are not scattered all over the place. If I'm trying to reach too many goals at once I feel like none of them are getting done fast enough. When I was paying off the second mortgage, I also wanted to save (at the time it was for a vacation we ended up not taking), but once I decided I'm just going to knock out that second mortgage, it got paid off quickly. If I would have just stuck with my original plan of paying just $1,000 extra per month, while it would have helped, I'd still have that mortgage payment today. Right now I'm currently pouring all my extra income into my 2011 Roth IRA contribution. At the beginning of the year I was putting in $200 per month, so I have only contributed $1,400 this year so far. But now that my current goal is funding the IRA, I'm being aggressive and planning on having the full $5,000 limit contributed by September 1st. Then once that goal is complete, I will feel a sense of accomplishment.


Make achievable goals, but then try to do even better.
At the beginning of the year I had set a goal to pay down an additional $10,000 in principal on our second mortgage. Since then I've paid off almost $22,000 additional principal and got rid of the second mortgage completely. While I would have been proud of reaching the original goal, surpassing a goal makes you feel even more accomplished.


Review your goals frequently.
I have re-read my blog a few times, each time I feel a sense of accomplishment when I see how far I've come. Reviewing your goals refreshes your memory about what you're working to accomplish and re-energizes you to do everything possible to reach your goal. For example, having a goal in mind made me more motivated to work overtime (when it was offered) and that extra money actually helped reach those goals faster.

So what can you do today to help reach your financial goals? Write down one goal you want to accomplish and by what time. Maybe you determine you could pay off your car by next March, so write down how much it would take to do so and figure out how much extra you could pay each month based on your current income and expenses. Then if you can make more income or are frugal enough to save some money, you can add that money to your goal and maybe get it done even faster. By the way, if you are working on paying down debt, look in to learning how to create a debt snowball.

Leave a comment below and share what your next wealth goal is!

What is my net worth?

I feel like I've been working on My IRA contribution goal for a long time. Because I am getting anxious to get this goal accomplished, I just changed my contribution for August to $1,800 instead of $1,200 so I can get this goal done faster.  My plan is to invest another $1,800 on September 1st, which bring my contributions to $5,000 for the year. 

Since I post at the beginning of each month to report on the pay the taxes challenge and my IRA asset allocation and balance,  I was thinking I should have something to report on mid-month. I've seen other websites report on their net worth, so I thought I'd give it a try.

I had created a spreadsheet with my estimated net worth back on March 1st (I didn't post it here), and this is what that looked like:

Assets:
Approximate value of house: $196,000
Roth IRA: $18,853
Simple IRA: $4,000 (estimation)
Savings: $11,500 (estimation)

Liabilities:
Mortgage(s): $204,278

Total net worth: $26,075

Here are the numbers today:

Assets:
Approximate value of house: $183,600
Roth IRA: $20,110
Simple IRA: $4,759 (June 30 statement)
Savings: $6,038 (not including money set aside for property taxes)

Liabilities:
Mortgage: $183,734

Total net worth: $30,773

Difference from March 1: $4,698

I thought I'd see a significant improvement, but it's the value of our house that really messed it up.  If the house value would have just stayed the same, it would have been an improvement of  $17,098.  So I should be able to be proud of myself for that.

I didn't include my husband's retirement savings (I only get updates on that every quarter anyway). So to make this easier to calculate, I'll leave it out for now.  I'll post my numbers because it'll keep me motivated to continuously improve the number!  Maybe I'll leave off the house value in the future because it's right around break even and just concentrate on the value of my savings and investments. I don't know.  What is the proper way to calculate net worth?

Where did all the money go?

In a previous post I came up with what I think our budget is.  Here is a look at the actual numbers for the last 2 months:

May's Actual Budget:
Income: $3,992

Regular bills:
Mortgage: -$1133.01
Property Taxes: -$200
Insurance (home, auto and life): -$258.24
Trash: -$23.30
Gym (with rebates factored in): -$129.57
Internet/Cable: -$107.20
Cell Phone: -$82.32

Somewhat Consistent Bills:
Gas/Electric: -$108.47
Water and Sewer: -$28.19

Other Expenses:
Grocery: -$238.94
Gas: -$471.79
Misc supplies (Stuff like Wal-Mart, Home Depot etc): -$557.41
Oil Changes: -$26.73
Gifts: Not sure on amount because it was mixed in misc supplies
Eating Out -$123.53
Entertainment -$77.62

Irregular expenses:
Medical: -$788.54
Postage: -$15.63
Liquor: -$14.78
Repair for lawn mower: -$37.50

Left over -$430.77

June's Actual Budget:
Income: $3,992

Regular bills:
Mortgage: -$1,133.01
Property Taxes: -$200
Insurance (home, auto and life): -$258.24
Trash: -$23.30
Gym (with rebates factored in): -$129.57
Internet/Cable: -$107.20
Cell Phone: -$82.32

Somewhat Consistent Bills:
Gas/Electric: -$108.47
Water and Sewer: -$28.19

Other Expenses:
Grocery: -$311.58
Gas: -$356.39
Misc supplies (Stuff like Wal-Mart, Home Depot etc) -$488.66
Oil Changes: $0
Gifts: Not sure on amount because it was mixed in the retail store
Eating Out: -$98.48
Entertainment: -$9.97

Irregular expenses:
iPad: -$821.65
Medical: -$137.81
Carpet Replacement Patches: -$350.17
Vet: -$106
Postage: -$24.92

Left over: -$783.93

Few notes: I did not include the gutters or the payoff of the mortgage. I didn't want to list things I expected to use my income on. Our credit card statement does not align perfectly with the month, so May included charges from approximately May 7 to June 6 and June included charges from June 7 to July 6.

OK, now onto my analysis. Over all I give myself an "F" on my budget estimation. I thought I should have $713 left over at the end of the month and both of these months not only did we not have any money left over, but we were negative! I was off by nearly $1,500 in June and $1,143.77 for May.

Some budget busters come as no surprise - the iPad and the medical bills set us back quite a bit. Thankfully the iPad is done (although the majority of the "entertainment" category is from iTunes). I also expect the medical bills to peter out by the end of August, so hopefully we will have better control over that aspect of our budget by then.

What really surprised me was the "misc supplies" category. Wow! I guess when I put the budget together I wasn't thinking of what my husband was spending. I figured I went to a store like Target or Wal-Mart about once a month to buy basic things like toothpaste, dish detergent and cat litter and only spent $75 on average. Well it looks like my husband goes shopping at stores like those too and is also spending money there. I forgot to include clothing in my budget, so some of that is clothing purchases. Perhaps the biggest expense in the "misc supplies" are charges from home improvement stores. I even made the carpet replacement charge a separate category, but we still spent over $200 on home improvement stores alone in the month of June and in May it was nearly $400! My husband's favorite home improvement store is only a couple miles away - probably too convenient! He goes there about once a week and it's not unusual for him to go there more than once in one day. He always has these little projects going (it's been a month since we have parked in our garage due to the cabinets and TV stands he has been working on). I usually think it's less expensive for him to do the projects himself, but after seeing how much we are spending, I'm starting to wonder if that's true.

Everything in the "Regular bills" and the "Somewhat Consistent Bills" was pretty much on track with what I thought. We recently changed Internet and cable provider and they promised our bill including tax would be under $100, and it's at $107.20 so I should look into that. The electric isn't that high because it was charges for usage in April and May and we don't need as much heating or air conditioning as we do in other months. I don't even want to know our bill for July usage will be. Our air conditioning has been running non-stop for several days due to a heat wave we've been having.

I have come in under budget for groceries. That's why it's frustrating because I'm already doing good, but because I do 99% of the grocery shopping I can control it. So I want to do even better.

Gasoline was a little high in May, but we came in under budget for June. It helped that we car pooled to work a few times in June.

So, I think once the medical bills go away we'll come closer to meeting the budget. Now if I could just figure out a way to keep my husband out of all stores, we'd really have a handle on the budget.

Taking a look at our budget

I came up what I think our monthly budget is. I want to live off of just my husband's income and according to the budget I have created, we should be able to do so, and have $700 left over at the end of the month, but we never do. We live paycheck to paycheck and usually have to use some my income to cover our expenses. Here is the budget I came up with:

Income: $3,992

Regular bills:
Mortgage: -$1,133
Property Taxes: -$200
Insurance (home, auto and life): -$259
Trash: -$24
Gym: -$130
Internet/Cable: -$100
Cell Phone: -$83

Somewhat Variable Bills:
Gas/Electric: -$150
Water and Sewer: -$35

Other Expenses:
Grocery: -$400
Gas: -$400
Misc supplies: -$75
Oil Changes (average per month): -$30
Gifts (average per month): -$80
Eating out: -$100
Entertainment -$80
Left over: $713

So where is this extra $713?  I know some of this has gone towards big purchases (like the iPad), and frustrating expenses beyond our control (such as doctor bills), but still I don't know what is happening to the rest of the money we should have at the end of the month.  I'll be back later with an analysis of where our money is going.

Links to financial articles

Here are some financial articles I have bookmarked recently and I thought I'd share them here:

Wise Bread: Are Your Finances Fragile?
Some good tips to protect yourself financially beyond just having an emergency fund

Financial Highway: 7 Ways to Earn Extra Cash With Little Effort
I've been trying to come up with some ideas to make extra money. I don't know if I can use any of these, but maybe they'll work for someone else.

All Business: Will You Be Able to Retire on $1 Million?
Article that talks about how we'll need more than a $1 million to retire (I found out we'll probably need closer to $3 million... maybe we can do it on less if we have no mortgage by then).

Budgets Are Sexy: Why Smart People Make Bad Spending Decisions
An article that reminds us all money is the same and why we sometimes make bad decisions when the scale is greater (you wouldn't spend $10 on milk, but have no problem spending $10 extra on a big ticket item like a TV).

My Pretty Pennies: Life is like a game of Chutes & Ladders
After reading this, I don't feel like the only person who has bad financial luck.

Financial Literacy Month: Your 30-step path to financial wellness
This covers pretty much everything from organizing your paperwork to creating your financial team

Are we saving enough for retirement?

Prior to this year, I had not thought much about saving for retirement because we just didn't have the extra money. I believe my husband is contributing 6% of his income to his 401k, and I was putting in a little in my IRA whenever I could. But other than that, we had been too busy putting out our current financial fires to really think much about our future. Now that my latest wealth goal includes fully funding my Roth IRA, I have been wondering if we are saving enough for retirement. My husband recently celebrated his 34th birthday and now retirement is only 31 short years away! I plugged our current numbers into MSN's retirement calculator. I believe my husband's 401k balance is somewhere around $60K, and I have $20K in my IRA, and $4K in an old 401k. So our current retirement balance is $84,000. Assuming I continue to contribute $5,000 a year into my IRA and my husband contributes 6% of his income into his 401k, the inflation rate is no higher than 3%, the return on the investments is 8%, and we only would live on 75% of our salary, we'd run out of money by age 78.

According to the projections, we need to save almost $6,000 more per year to make it to age 85. If I change the figures to age 90, we need to save $10,290 per year before tax or $858 a month. I wonder if I could convince my husband to open an IRA next year and if he contributes $5,000 per year, we'd at least get closer to making it to age 85. Another shocking thing is we need to have almost $3 Million in just 31 years to retire comfortably! Wowzers! It makes my $13/hour wage seem like nothing!

Throwing Away Junk and Finding Money

Last year I got this book "The Courage to be Rich" by Suze Orman at a garage sale, and I'm just now getting around to reading it. In the chapter I just finished she encourages the reader to throw away of 25 things.  This is to make room for more abundance to come into your life.  I have to admit I'm a bit of a pack rat. Once in a while I watch that TV "Hoarders" to make myself feel better.  I'm not that bad, but I'm always worried about throwing things out in case I'll need them some day.  So in the past half hour I looked around to find things I was willing to part with.  Here's what I found:

• Several pairs of socks (either they didn't have a match, they had a hole or I just never wear them)
• Used zip lock bags I thought I'd re-use
• Ring box
• Lollipop from my niece's birthday party
• Yellow highlighter (we have 3, so I got rid of the oldest one)
• Glass jar with a chipped cover
• Pack of gum with only 1 stick left
• Expired debit card
• Employee discount card from an old job
• Jokers from a card deck
• Pile of old receipts
• Old box (I thought I would use for a gift or something)
• Nail file a cat chewed on (why do they love those things?)
• Part of packaging that came with my humidifier.  (I store it in the box it came in during the summer, but of course everything doesn't fit in the box as well as the manufacturer put it in)

The next thing you're supposed to do is look for money you have laying around the house, and then put into a "jar of abundance".

I didn't go through the whole house, but I'm actually fairly good at not leaving money around, but I still managed to find 78 cents (most of which was at the bottom of my purse). I had already been putting my spare change into a jar, but my jar is pretty small and already full, so I may have to look for a larger jar because it may be physically and psychologically preventing me from accumulating more.

Wage Envy

I overheard a co-worker say he makes $2,500 take home every week. I don't even make that much in a month - even when I was working a lot of overtime. It's very frustrating to go to work for the same amount of time as he does but he makes about six times as much as I do. And no, I don't believe he works harder than I do. If anything I think I work harder. I'd say over 50% of the time I walk by his desk he is reading his personal email or surfing the Internet on non work related websites. His job title, has "engineer" in it, but he doesn't spend his time in a lab or doing complicated calculations. I'm not even sure what he really contributes.

Me on the other hand, I've struggled to get past the $30,000 a year mark. I just barely reached the $30,000 mark one year, and that was way back in 2002 when I had a decent job. Unfortunately I moved away in late 2003 and have struggled the make any decent money since then.  My wage earning ability has been absolutely pitiful. I found a part time low paying job in 2004, then found a full time job in 2006, but it still didn't pay that well. Then we moved again in 2007 and I struggled to find anything other than temporary jobs.  I can't find my most recent SS statement, but as you can see my income has been embarrassing:

I made more money in 1995 while I was still in high school than I did in 2008.  It's no wonder we are still struggling financially.  I'm almost thinking it is a mental thing that I can't make over $30,000. If my job still offered overtime, I most likely would have surpassed the $30K mark this year, but since they no longer offer overtime, I probably just miss the $30K milestone. It's mid year and if I work 40 hours for 26 more weeks, I'll make $13,520 before taxes for the rest of the year. I made $15,397.37 in the first 6 months, but was offered overtime for the first 4 of those. So as of right now I'm projected to make $28,917.37. So once again, still below $30K. Maybe a new wealth goal for next year is to make well over $30K. The sad thing is my slacker coworker will make $30K in about 2 months.

IRA Asset Allocation and Balance: July 2

If there is anything more volatile than the constantly changing home values, it's value of mutual fund investments. This time it was actually good news. Just 2 weeks ago, my IRA balance was $18,653.13 and as of this morning with only an additional $600 invested the balance has skyrocketed to $20,141.42!

I knew that I'd see a good number after seeing the news about the value of stocks rising this week, but I didn't expect to surpass the $20K mark. I was actually a little disappointed earlier this week when I heard the Dow was doing so well because I knew that meant I'd be buying my shares at a higher price. Now I wish I would have purchased some shares last month when they were a little cheaper. Oh well, at this point the only thing that matters is that I get some money invested and actually contribute the maximum since I don't have a 401K.

My asset allocation is pretty much the same as 2 weeks ago, but starting next month, I plan to increase my growth stock percentage.

Pay the taxes challenge

Now that my job is currently not offering overtime, I've been trying to think of ways to make extra money. But then I realized I'm actually making some extra money already, but it's just not that much. I want to start a challenge to myself for the second half of the year starting July 1st: pay for our income taxes without using money from our "day jobs". My estimation of our taxes is $700.

Here are some of my other sources of income. This income varies a lot each month and some months I don't earn anything from them.

(Very) Part-time job:
A former employer has me do some work for them on an as-needed basis from home. It usually ranges between 0 and 2 hours a week (usually closer to 0 than 2) and they pay me $10.50/hr. It seems they are the busiest during the Spring, and the second half of the year is usually a little slower than the first half.

Babysitting:
My sister needs someone to babysit her daughter every once in a while. She pays me $5/hr. However, she recently moved about an hour's drive away, so she probably will not ask me to babysit nearly as often.

Blogging:
I have something like 6 or 7 blogs that I recently monetized with advertising and affiliate links to products from Amazon (I get paid a percentage of the money spent when people buy using my referral link). However, I'm really only making money on one of the blogs. It's not this one in case you're wondering, it's one that's been around for over 3 years. The rest of my blogs are all less than a year old and account for maybe 0.5% of the money I've made blogging.

Ebay:
Once in a while I sell items on Ebay. It's garage sale season, so I might be able to find some items for cheap that I could sell for a profit on Ebay.

So it will be a challenge to make $700 with just these.  I would like to find new ways to making money and while increasing the money I make on my current sources of income as well.

IRA Asset Allocation and Balance

My husband is doing better after having surgery on Monday and will probably be back to work full time next week (thankfully it's a desk job). Of course I still don't know how this will affect us financially, so for now I'm going continue my financial plans as I had planned. Since part of my plan is to stock pile cash, that should hopefully be enough to cover any medical expenses we can't cash flow.

For some reason I don't feel that same drive to put money in my IRA as I did with paying down the second mortgage. So I want to start measuring my progress. Here is my starting point:

It was over $19,000 not too long ago, but with the Dow Jones decreasing so much lately, it's not a big surprise it's in the $18,000's. It seems like I'm always saying "Dave Ramsey says" in this blog, but Dave Ramsey says to invest in a good Growth stock. As you can see only 17% of my IRA is in growth stock right now. So I will probably work towards increasing that percentage as I add more money into it.

When it rains it pours

As if my financial situation didn't look bleak as it is, I have even more bad news. My husband was complaining about back and stomach pains on Sunday night, so he went to the hospital to get it checked out and found out he has gallstones and will need to have his gallbladder removed. He went in for surgery yesterday afternoon, but the doctor was running behind and it didn't get started until 6:30PM. Usually it's an outpatient surgery, but because the surgery was so late in the day and my husband has sleep apnea they decided to have him spend the night in the hospital. I've heard horror stories that overnight hospital stays are more expensive than the nicest 5 star hotels. I really hope we have good insurance coverage! So sadly yet again, Murphy came and messed with my financial goals. I know we got through the payoff the second mortgage faster than planned despite all the unexpected expenses that we went through in the past six months, but this time we don't have as much savings, money set aside for vacation, or opportunities for overtime pay. As a matter of fact, I should be at work right now, but instead it looks like I'll be taking an unpaid day off while I wait for my husband to be discharged. The bad news is it'll take a couple months for the medial bills to arrive so I don't know how bad this will be for awhile. But the good news is it'll take a couple months for the medial bills to arrive because I don't have much cash yet since I just cleaned out most of it paying off the mortgage.

Back underwater

I almost wish I had not taken a look at my financial situation today because I found out that we will owe about $700 in taxes next year when we are used to getting a refund and I also found out our house is worth almost $8,000 less than I thought it was. I'm trying to remain optimistic, knowing Zillow is not official and it could bounce back as fast as it dropped. However, I'm still in a bad financial mood.

One thing that makes me feel a little better is to take a look back at how far we have come in 6 months. Just a little over 6 months ago, we owed $208,786.14 on our house and as of today we owe $183,985.87. So we have paid the mortgage down $24,800.27 in six months! Even though we used some savings, vacation money, and a work bonus my husband received, we still did a good job paying that down. Six months ago I had said I wanted to have the mortgage paid down to $200,000 by September 2011 - well I more than surpassed that goal!

One of my initial reactions to finding out about the house value was I should immediately start paying extra on our main mortgage. However, values change so much it could bounce back fairly quickly, and right now it's a small enough amount if we needed to sell, we could cover the extra still owed. It's not super likely we will be moving anytime soon, but my husband has been casually looking for a new job. Most of the jobs he has applied for have been in the same area we live now, but he has not ruled out looking for a job in another state (to be closer to his family). So right now I just plan on continuing everything as planned. The mortgage principal is decreasing by $250 every month as well, so every 4 months it'll be $1,000 less. I'm hoping it just works itself out.

To refinance or not to refinance... Ugh! Nevermind

Dave Ramsey says now is a great time to refinance. Trying to refinance last year was what first alerted me to the fact that we owed more on the house than it was worth. We signed the paperwork and everything, but then found out they couldn't do a mortgage because the mortgage would be over 105% of the house's value. We ended up losing $500 by trying to refinance last year because the appraisal was non-refundable. So I have to admit, I'm a little gun shy about trying again. I want to know for sure that we owe significantly less than it's worth before we make the same mistake again. Last time I checked the house was worth about $190,000 and we owe $184,000, so we should be ok.

Another issue are the fees associated with refinancing. Last year my husband was in charge of trying to refinance. He mentioned a few times that it would cost us "points". I didn't really understand what he meant by that. So I did some research on it and realized one "point" is 1% of the loan. Most of the re-financing options I've seen cost one point. Right now we owe about $184,000, so I would assume re-financing that mortgage would cost us $1,840 in fees.

Here is a video explaining points on a mortgage:



The next question is should we get a 15 or 30 year mortgage? If we got a 15 year mortgage, we could get it at a 3.75% interest rate. We are currently paying 5.75%, so it would drop by 2%. If we got a 30 year, it would be 4.625%. For the 15 year, the monthly payment would be $1,338.09. For the 30 year it would only be $946.02 per month. So that would be an extra $392.07 every month extra to pay it off in 15 years rather than 30.

We currently pay $1,133.01, so if we did a 15 year, we'd owe $205.08 more than we currently do. If we did a 30 year, we would pay $186.99 less than we currently do, but we'd also have to start over at 30 years. We are already 3.5 years into our current mortgage.

If we did the 15 year option, we would pay only about $10 more than we were used to paying when we had 2 mortgages. But we would have it paid off in 15 years rather than 26 and a half years. I kind of like that idea, but here are my concerns:

Not only was I so intent on paying down the second mortgage to get us to the point where we owed less than our house was worth, but I also wanted to owe less every month. My job in temporary, so some day I will not be employed at the place I'm working at now. Also, it's still a possibility that we will have kids. If I'm only making $13 an hour, it probably wouldn't be worth it to have the child go to day care. So if I stay at home, then we need to be able to make it on just my husband's salary. If we only had a $946.02 house payment (or $1,133.01 if we didn't do anything), it would be a lot easier to get by than if we had a $1,338.09 house payment.

Another concern is if we will be in this house long enough to justify refinancing the mortgage. I don't know how long we'll be living at our current home since my husband may find a job in a different city. If we are going to pay $1,840 that we'll never see again, we have to make sure that is worth it as well.

... And nevermind. I just typed all this out and thought I'd get an up-to-date quote from zillow for the numbers in the first paragraph and now it's only appraised at $182,300 so we now still owe more than our house is worth again!  I guess I'll have to finish this post another day :(

I used to look forward to tax time

One "negative" thing, if you can call it that, when paying off a mortgage is the tax consequences. I've already had to reassure myself it was a good idea to pay the second mortgage off despite the tax deduction on the interest paid. But I thought I better take a closer look at how it is going to effect us next February when we file taxes (we always file early). Last year we got back around $700 on our Federal taxes, but had to pay the state $400. However, before we entered our energy efficient tax credit for a new patio door we had purchased in 2010, we were only going to get about $200 back on our Federal taxes. So we are already going to owe about $500 more this year. Even if everything else stayed the same, it looks like we would owe approximately $200 in taxes (we'd have to pay the state $400, but we'd get $200 of that back from Federal). But because I paid off the small mortgage, we will not be able to deduct as much interest on our taxes this year. Last year's tax records show we paid $2,131.21 in interest on the second mortgage. This year we only paid $295.23. I'm not an accountant, so I don't know the exact calculations to figure out how much more tax we'll owe, but here is my guestimation:

We paid $1,836.98 more interest last year than this year. So if we pay about 25% on our income taxes, I estimate we lowered our taxes by $459.25 last year by paying the interest (25% of $1,836.98). Again, not sure how accurate this is, so if you know, leave a comment below!

So if we assume we would owe $200 if everything else was the same as last year, but now we'll owe an additional $459.25 because we didn't pay as much interest, then I should be planning on a $659.25 tax bill in early 2012. I'll round that up to $700 because we'll also be paying a little less interest on the main mortgage as we slowly pay that down with just our regular payments. So I guess I better start another goal of saving up $700 so at least we're prepared for it. This will be the first year we'll ever have to pay in over all. I used to look forward to tax time because it meant getting money back.

Next weatlh goal: To have $5,000 invested in my Roth IRA

I figured I should do a more specific plan for the rest of 2011 with dates and numbers. Of course things could happen like extra expenses, but as far as I can see things today, by the end of the year I could have $6,000 liquid cash in the bank and a fully funded IRA! Now that the second mortgage is paid, and it looks like the medical bills have slowed down, I'm hoping all our expenses can be paid with just my husband's income so all my income can be used for saving and investing. I want to fund the Roth IRA ASAP, but I also want to re-build our cash reserves.  So I'm kind of splitting my income between the two for the next four months.

My plan for fully funding my Roth IRA for 2011 looks like this:

$800 already invested
$600 on July 1
$1200 on August 1
$1200 on September 1
$1200 on October 1
Total: $5,000

Now that the mortgage and this month's large credit card is paid off, I started right about $0 in liquid cash savings at the beginning of June. I still have the $3,500 in CD's that I ended up not using to pay off the mortgage - I just couldn't bring myself to be that risky! But my plan is to never touch those unless it's a true emergency.  So as far as liquid cash that I can take out at any time, I'm starting from scratch. I make around $1,772 a month, I'll round down to $1,700 to account for a little bit of spending money. In the next four months will be investing the majority of my income in my IRA. So, here is the projected left over cash to start pre-funding the credit card and for the $1,000 rainy day fund.


July 1: $1100 ($1700 - $600)
August 1: $500 ($1700 - $1200) = $1600 total
September 1: $500 ($1700 - $1200) = $2100 total
October 1: $500 ($1700 - $1200) = $2600 total
November 1: $1700 = $4,300 total
December 1: $1700 = $6,000 total

Total cash savings I should have as of December 1: $6,000.