Educating the Wheelers

Looking ahead, these are my goals for 2006:

* Give birth at home to a healthy boy end of April/early May.
* Settle on a name for said boy with Andrew
* Read and exercise every day with Audrey
* Relax and enjoy parenting/my kids

* Drop our mortgage principle by at least an extra 10k
* Up our automatic monthly emergency fund contributions an additional 25%
* Continue maxxing out our 401k and Roths.
* Straighten out our life insurance/will situation.

I think I’m sandbagging a bit, so I might have to update these later. Heh.

Our house cost about 225k, our mortgage was for about 185k. [We actually refinanced our mortgage within a couple of months of buying the house, but the story of why on Earth we did that may make its own post some day. Heh.]

We’ve now had this mortgage for about two and a half years, and we’ve whittled the principal down to about 146k, as of this month. That’s pretty aggressive, and my goal is to have it paid off in less than 10 years. Even if we run into any financial trouble between now and then, I still hope to have it paid off before Audrey enters college — we have a good 15+ years for that.

I have friends who think it is foolish to pay down your mortgage early. Some because they think the mortgage deduction is so wonderful [though I don’t see why paying a dollar so you can get about 30 cents back is so great], and some because your mortgage loan is the cheapest money you can get. Then there’s the “put it somewhere else where you’ll get more return!” crowd. Well, we don’t have any other debt whatsoever, so that sort of wipes out #2. And #1 is kind of silly on its face. As far as #3 goes, we already max out our 401k and our IRAs, plus put an extra chunk every two weeks into Emigrant to bolster our emergency fund, so we’ve got all of our basics covered already. Plus we have another chunk just “in the market” that’s non-retirement. I guess what I’m saying is that we’re not exactly skimping on our other investments. And paying down the mortgage has a few add bonuses: First, the return is guaranteed. Second, the psychological advantage of having zero debt whatsoever is worth quite a bit to me. Third, the cash flow issue — that’s a pretty large check that I’m looking forward to no longer having to write every month.

I’ve been feeling kind of discouraged lately on the finance front. And then I realized that the program that I use to track net worth is missing a few accounts that I’ve been moving stuff around into. And then I realized that many of the personal finance blogs that I read count the value of their house into their net worth, and we don’t do that — so that makes a huge difference in the number, too.

I’m feeling a little better about it all now. Heh.

Besides being a crappy blogger, I am also pretty crappy at the whole personal finance game, though I am getting much, much better. My biggest handicap is that I am chronically disorganized and thus can’t hack a budget. Before I had my financial act together, I used to balance my checkbook by the “rhythm method” — I knew that at certain times of the month I had more money than others, and spent by “feel.” My only saving grace was that I made pretty good money.

But now that I’m married and quit my job to stay home with kids, that all had to stop. So we’ve instituted the “pay yourself first” model. Before our paycheck even makes it to our checking account, our maxxed out 401k has been taken out, a large chunk gets sent to Vanguard to hit our yearly maxes for our Roths, a chunk is taken out and sent to Emigrant for our emergency fund, and a chunk is taken out for our medical savings account. [We’ve got a midwife to pay in April!] Additionally, I earmark an extra chunk to go towards our mortgage’s principal every month. [More about that another time.]

Our mortgage is only about 30% of what’s leftover after all of that [and taxes!], so we are able to still play pretty loosey-goosey without a budget. But that only works because we’re not big spenders in the first place. We’re fairly introverted homebodies with a small handful of friends, so we don’t have to keep up with the Joneses. We both have little hobbies — for me, books; for Andrew, little gadgets — but we keep that in check so it’s not too expensive.