Progress to Date

  • Original Loan Amount: $204,000.00
  • Balance at Beginning of 5-year Goal (1/1/08): $188,983.82 @ 6.00%
  • Balance at Refinance in February 2009: $148,000.00 @ 4.625%
  • Outstanding Balance: $0.00 (PAID IN FULL!!!)
  • Latest Payment Date: April 2011
  • Latest Additional Principal Amount: $17,623.22
  • Amount Ahead of Schedule (since refinance): $121,462
  • Time Ahead of Schedule (since refinance): 7 years 10 months
  • Interest Saved Last Month: $23,972.48
  • Total Interest Saved: $28,435.55 ($1,037.74 on original mortgage; $27,397.81 on current mortgage)
  • Months Remaining in 5-year Goal: 20
  • Average Monthly Principal Needed to Meet Goal: N/A (Goal achieved)
  • Progress List Explained

Thursday, July 31, 2008

Monthly Summary: July 2008

***Update September 1, 2008***
The $1,500 principal payment we sent to our lender in early August 2008 was credited against our July balance, and therefore the numbers I originally listed for July turned out to be wrong. Here is a quick snapshot of the corrections:

Additional Principal Amount: $1,500
Total Principal Payment: $2,388.58
Amount Ahead of Schedule: $19,588
Interest Saved in July / To Date: $89.99 / $287.89 (no change)
Average Principal Payment Required to Meet Goal: $3,097.90 (slight increase from June)
Outstanding Balance at End of July: $164,188.51
***End
Update; Original Entry Follows Below ***

July marks the first month since my wife and I began this project in which we did not make an additional principal payment. There are three primary reasons for this:

  1. Since my wife was paid in advance for some work at the beginning of the summer, we already made a large payment to principal during June. I could argue that we've already made our extra payment for July (but I won't).
  2. We paid most of the cost of our vacation during July. This expense reduced the extra cash we had to contribute toward the mortgage this month.
  3. My wife isn't going to be paid for her July contract work until August due to the mysterious nature of her employer's payroll calendar. I expect we will be able to make a slightly-larger-than-normal additional principal payment next month.
When it became clear to me that we wouldn't be receiving my wife's paycheck in time to put it toward an extra payment during July, I reluctantly made our standard (aka minimum) payment a few days ago. This is how we paid our mortgage during the first 19 months we lived in this house, but it felt odd not to be adding something additional this time around. I guess I've already shifted my expectations so that extra payments are the the rule, not the exception.

And so, our July payment was the 27th of 180 scheduled payments on the 15-year loan, and the seventh since we set our goal to rid ourselves of the debt within five years.

The balance at the beginning of July was $166,577.09. As previously mentioned, we did not make an additional principal payment, so our standard payment reduced the overall balance to $165,688.51 at month's end.

Despite skipping the extra principal contribution this month, we are still about $18,088 ahead of schedule on our payments. And because of our prior efforts to date, we still saved $89.99 in interest this month, bringing our total interest savings to $287.89 so far.

The average principal payment we need to make monthly to meet our goal rose to $3,126.20.

If we receive my wife's paycheck before the 15th of August, I'll go ahead and send it to the lender in hope that they will apply it toward July's balance, since that would fall within the grace period. I'm not clear how our lender handles additional principal contributions received during that window, so it will be an interesting experiment (interesting to me, at least).

The sunset on the last evening of July is beautiful here in New Hampshire. Here's to a wonderful August.

Friday, July 18, 2008

Extra Scratch

My wife just returned from a week-long business trip. She's taken on additional work this summer to bring in some extra income and explore the possibility of a future career change. Later this month she is committed to another week-long stint with the second job. She has to file an expense report before getting paid for her recent work. Because of that, I am not sure whether we will be able to make an additional principal payment on the mortgage in July, or if (due to the time associated with processing her check) we will have to wait and make a more sizeable contribution in August. My hope is that the check comes in while we still have time to pay in July, so we can save one more month of interest on the principal reduction.

When attacking a fixed-rate mortgage, it's best to make payments as early as possible to maximize the compounding of interest saved over time. For example, every $1,000 of the loan at a fixed interest rate of 6 percent will accrue $5 in interest charges each month the balance remains unpaid (0.06 divided by 12 months, multiplied by $1,000). Over five years, a principal reduction of $1,000 will result in $300 total interest savings if the debt is paid off in month 1, versus only $60 in savings if the debt is paid off at the beginning of year four (month 49).

My wife is exploring her options with the second job right now. I haven't yet included her projected summer income in our budget for the rest of the year. Once the checks do finally arrive, I expect her to take some personal fun money off the top since she made the extra effort to earn it. She told me that whatever remains will be directed toward the mortgage. I look forward to seeing the outstanding balance continue to drop during the coming months. I'm also thrilled to have a partner who is fully committed to aggressively eliminating our last remaining debt.

Wednesday, July 16, 2008

Not This Year

Today in the mail we received the annual automobile registration renewal form from our town. This bill was for the car we sold back in May. Most of the financial benefits that come from living the one-car lifestyle are easy to overlook (fewer repair bills, less routine maintenance, fewer trips to the gas station), so it's nice to get such a direct reminder that we are, in fact, spending less on car ownership now than we had in the past.

That's $175 that we can use for something else in 2008! Any guesses as to where I plan to direct the surplus?

Sunday, July 13, 2008

Royale (with Cheese)

My wife and I recently returned from our big vacation trip of 2008. We packed up our little car and drove from New Hampshire to Grand Portage, Minnesota, where we caught a ferry to Isle Royale National Park, which is located in the middle of Lake Superior. On the way to Minnesota we stopped in Chicago to visit with some friends for a day. Our goals for the trip were to have relatively low-cost (or free) experiences, to see a new part of the country, and to enjoy ourselves. We accomplished all three.

There were three main expenses associated with the trip: the cost of driving to and from northern Minnesota, the cost of taking a ferry to and from Isle Royale, and the cost to have someone watch over our dogs in our absence. Our main activities while on the island were backpacking (hiking and camping). Since both of us like to do this on a regular basis, we didn't need to buy much in the way of new gear, though we did spend some money to purchase a few key items (a new backpacking stove and a new water filter). We also replaced my wife's old sleeping bag and backpack, but we partially offset the expense of the new equipment by selling her old stuff.

Here is the expense report for the trip:

  • Round-trip ferry fee (two adults, paid in February): $248
  • Park user fee ($4 per person per day, paid in February): $56
  • Gasoline: $341
  • Highway tolls: $48
  • Vehicle maintenance: $229
  • Lodging (Grand Portage, MN): $43
  • Meals (including treating our Chicago hosts to dinner): $114
  • Entertainment: $14
  • Gear (net cost): $204
  • Pet care: $358
The total above comes to $1,655, or about $828 per person. Our trip lasted 11 days, so the cost per person per day was about $75. Since we paid for the ferry and park fees back in February, we were able to spread some of the cost over several months. Because our car was due for a tune-up anyway, I was unsure whether or not to include the vehicle maintenance cost in the overall trip expense list; but given that we drove over 3,200 miles round-trip, we put enough additional wear on the car that we'll be taking it in for regular service again soon. Therefore, that expense stays on the list.

Given the experience we had, I'm satisfied with the cost of the trip. Of course, we could have stayed home the entire time and potentially had around $1600 more to put toward the mortgage, but we both feel it's important to treat our vacation as part of the yearly cost of living, and we've been budgeting and saving for this trip for months. While on the island, away from the stresses and pressures that make up our daily lives at home, we were able to make lasting memories, catch a glimpse of the natural world unspoiled by human exploitation, and simplify our day-to-day thought processes (our most complicated daily decisions were which campground to hike to and which meal to cook for dinner). The rewards we received from taking the trip were definitely worth more to us than the potential benefit of a $1,600 reduction in our outstanding mortgage balance.

For those with a love of the outdoors, an interest in seeing wilderness for miles in any direction, an appreciation for peace, solitude, and simple living, and a desire to challenge yourself physically, Isle Royale is a great place to spend a week (or more). I highly recommend it. It's a shame that there aren't many truly wild places left in the world, but this island is about as close as you can get to an unspoiled landscape in the lower 48 states.