Creating a Long Term Financial Plan

As part of refinancing our house to a 15 year loan, I went through the process of reworking our budget with the new house payment involved.  By having a detailed budget for every month, I knew exactly where we were spending our money.  I looked at how much we typically budget per month and compared it to where we actually spent our money within each category over the past year.

Using our new house payment, I created a new template for our monthly budget starting point (no month is ever really the same, but I like to have a starting point as a guide), making sure that we can still pay off debt quicker than the minimum payments.  I found out that we still have some extra to put toward debt, but it will be about half of what we were currently allocating to debt reduction.

I wanted to know when we’d be out of debt (except for the house), so I plugged the monthly additional payment into my adjusted debt snowball spreadsheet I got from a user in the YNAB forums (I don’t remember their name, as it was years ago, but Thank You!), and found out that we can still be out of debt within 4 years instead of 2.  Within this spreadsheet, you can put how much extra you plan on paying each and every month.  I put the number I came up with from our new budget in for most months, but then added most of an extra paycheck I would receive within a month twice a year.  That’s the benefit of budgeting on a monthly basis; you essentially get a bonus paycheck every 6 months (assuming you get paid every two weeks).

I cut back the extra we’d be paying once we get out of non-house debt, but we’d still snowball our original debt payment into the house payment, and be paid off within 12 years instead of the 15 years on the note.  I’ve gone back to this spreadsheet several times in the past few years to see how different scenarios would affect us.  Here’s a graphical representation of the timeline of when we plan on paying off our non-house debt (available in the second tab of the spreadsheet):Once I got all the numbers figured out, I ran it by my wife.  She is on board, so we have a goal of how much to put toward debt with the new budget every month.  Don’t skip out on this step; it’s very important to get your spouse’s buy in on all your financial plans.

Want to run the numbers for yourself?  Get the template of the debt snowball spreadsheet I used here.  Just change the blue cells to fit your situation.  Leave a comment to see how this spreadsheet helps with your debt reduction.


Refinancing Our House

When we purchased our house a year ago with an unbelievably low 4.5% interest rate on a 30 year loan, I never thought I’d end up refinancing it.  But that’s exactly what we are doing.  Our plan was to pay down all our debt, then start attacking the house until it’s paid off.  I wanted to pay it off in 15 years, but liked the option of a lower forced payment in case something happened to where we lost one income.

But then I saw how low rates have gotten over the past month or so, and I started running some numbers.  If we refinanced to a 15 year loan, we’d pay a few hundred more per month, but end up saving almost $23,000 over the 15 years.  That made me change my mind.  So we are refinancing to a 15 year mortgage with an interest rate of 3.25%.  This means we’ll be in non-house debt mode for a couple more years than I planned, but it will end up saving us a ton of money in the long run.  It’ll just take us 4 years to pay off our non-house debt instead of 2.

So if you currently have a 30 year loan, now is the time to refinance it to 15 years.  You’ll be happy you did once those 15 years are up and your house is 100% paid off.  Now I really feel confident saying we won’t ever refinance our house with the rate we are getting now.

New Year’s Goals – Progress Update – Nine Months

Having a baby is really affecting my workout routine (or lack thereof) for my New Year’s Goals.  Enough to where I don’t think I’ll hit any of them.  It’s hard to get anything normal done around the house, let alone any personal goals I’d like to do.  At least the crying every night isn’t happening anymore.  It’s still tough though…

  1. Sell old house.
    Goal canceled.  Found renters instead.
  2. Reduce non-house debt by 47.57%.
    We just had a little extra to put toward debt this month, since I had an unpaid week off to stay home with Brooke.  Reduced by 27.12% so far, where we should be more like 35.68%.  We are above the revised goal (25.02%) though.
    Here’s a graph of how we’re doing.

  3. Be able to jog 5 miles without walking.
    Realistically, I probably won’t be able to hit this goal anymore.  I want to start running again, but it’s difficult to add items like this into my daily routine with a newborn at home requiring my attention during my peak running times.
  4. Do 100 push ups in 3 minutes.
    See jogging.
  5. Do 200 sit-ups in 3 minutes.
    See the push ups.

I’m really disappointed in myself on these goals.  I think I just made too many goals to stick with all of them.  I think I’ll just make one next year, and try to hit it.