Category Archives: Goals

2nd Mortgage Payment Plan

One of our big goals is to buy a house in 5 years and hopefully keep our condo as an investment property.

Currently, our monthly condo expenses (mortgages, taxes, HOA fees, and insurance) total $2,697, Unfortunately, that is way more that we can rent our condo for. Therefore, we have decided to focus on paying off our 2nd mortgage ($52,755.81 balance) to help bridge the gap.

Of that $2,697 in total monthly expenses, our 2nd mortgage payment represents $411.33. The interest rate is 8.55%, so only $36 is currently hitting principle each month.

Here’s the plan:

We will use what we consider “extra” money each year to knock down the principle:

$2,000/year from my wife’s two extra paychecks
$3,761.40/year from my two extra paychecks
$1,219.11/year from cashing in 6 days of my vacation
$5,000/year from my wife’s commissions

This would result in $11,980.51 in extra principle payments per year, or $47,922.04 in 4 years, allowing us to pay off the 2nd mortgage by 2011. We may be able to pay it off even sooner because $5,000 is a very conservative number for my wife’s annual commission and we will likely receive annual pay raises.

Once the 2nd is paid off, we will focus on increasing our savings for a house down payment and create a reserve fund for maintenace of both properties. In addition to the $411.33/month we will save after paying off the 2nd, my wife’s car will be paid off in April of 2012, allowing us to bank an extra $450/month. My car will be paid off in June of 2013, helping with our cash flow once we buy a house.

Our condo is next to a major UC school, providing large pool of renters. We hope to be able to rent the unit for $1,800/month. We’d be taking a loss each month initially, but a combination of paying off the 2nd mortgage and tax deductions should help us get within a couple hundred dollars of our rent target.

If we are sucessful in our plan to pay off the 2nd, but find the numbers don’t work out for renting the unit, we will sell the condo and buy a house. In the very least, we will have increased our equity in the condo and saved ourselves a lot of interest.

Steady progress III

As of today, our liquid assets total $30,433.46, an increase of $7,403.42 in just one month. A combination of company profit sharing, Roth IRA contributions (here, here, and here), and additional deposits into our saving accounts this month have made this possible.

To provide some consistency, I’ve decided to post Steady Progress updates to our liquid assets in $10,000 intervals. God willing, I’ll be able to post Steady Progress IV ($40K in liquid assets) sometime in mid to late 2008.

Net Worth Milestone In September?

Although we’re only one week into it, September is already shaping up to be an excellent month. In addition to our average monthly decrease in liabilities of ~$1,000, we just contributed $200 to my Wife’s Roth IRA and deposited $1,300 into our savings account.

God willing, we should surpass the $20,000 net worth milestone this month. This would put us at just over 90% of our 2007 net worth goal of $22,000, and on schedule to hit our 2007 goal in October (2 months early!). After that point, anything extra we were able to add to our net worth in 2007 would help us begin making ground on our 2008 net worth goal of $47,800.

What A Difference A Couple Of Years Make

Over the weekend, I was looking at an old copy of our financial spreadsheet from 2 years ago. It brought me back to a time of financial struggle and uncertainty.

At the time, we were renting an apartment, in a lot of debt (my fault), and had little in the way of assets. Comparing the numbers from 2005 with 2007 reminds me how greatly we have been blessed. Here is a brief breakdown of where we were financially in August 2005 and were we are today:

August 2005

Liquid Assets
$5,157.00 401(k)
$1,547.00 Cash & Savings Accts
$759.00 Taxable accounts
$7,454.00 Total

Credit Card Debt
$10,630.56 (9.99%- 15.49% interest rate)

Net Pay Every 2 Weeks
$1,390.00 (Husband)
$1,180.00 (Wife)
$2,570.00 Total

August 2007

Liquid Assets
$12,805.68 401(k)
$3,326.97 Cash & Savings Accts
$6,278.41 Roth IRA’s
$838.79 Taxable accounts
$23,249.85 Total

Credit Card Debt
$1,249.49 (0% interest rate)

Net Pay Every 2 Weeks
$1,880.70 (Husband)
$1,200.00 plus bonuses and commissions (Wife)
$3,080.70 Total plus Wife’s bonuses and commissions

Steady Progress

Although I only post our net worth in this blog once a month, I check our progress almost daily. Well this morning, we broke $20,000 ($20,235.09 to be precise) in liquid assets (Pre-tax Retirement Accounts, Roth IRAs, Taxable Accounts, Cash & Savings Accounts). Unfortunately, our net worth is well below this amount because we have liabilities that pull it down (0% interest credit card debt, student loan balance, and a mortgage that is slightly higher than what our condo is worth).

The details of this increase in our liquid assets will be noted in our new worth update post at the end of the month.

Good Net Worth Progress

We have made good, consistent progress on our net worth and should reach a net worth milestone of $10,000 next month. In fact, if all goes as planned, our net worth in June will be roughly $11,000, half way to our 2007 goal of $22,000.

As we pay off debt and increase our investments, I’m beginning to feel how getting your money to work for you is a powerful thing. I’m sure there will be hiccups along the way but so far, we’re right on track.

Net Worth Milestones

To achieve our net worth goal of $1.5M in 20 years, we need a plan. Below are our net worth goals for each year (click on spreadsheet to enlarge). This plan assumes an average annual return of 8%, and our ability to increase our investments as our careers develop.

As you can see, if we are able to hit our targets, we are still almost $300K short of our $1.5M goal. I guess that’s why they call them “stretch” goals.

Target Retirement Date

Our ideal target retirement date is 2027, twenty years from now, when I am 52 and my wife is 43. Realistically, this goal is going to be a stretch, but we have a long enough time frame that I think it is possible under favorable conditions.

If we believe that we can live on $60,000/year when we retire, then using a 4% Safe Withdrawal Rate (SWR), our nest egg goal is $1.5M. However, with inflation averaging 3.43% annually, our nest egg may need to be substantially larger.

We will refine and better define our plans/goal as time goes on. Some other challenges in reaching our goal include being able to purchase (and pay off) a home and finding affordable long term health care. Our desire to have children will also affect our saving/investing rate, but won’t stop us from having them.

I guess if I have to work until 53, I could live with that.

Short Term Financial Goals

Below are some of our short term financial goals (1-5 years). I have checked off the items we have completed.

a Pay off 401K loan

a Pay off credit card debt with rate interest over 0%

a Save up 2 weeks worth of vacation (in case of job loss / unable to work)

Pay off 0% interest rate credit card debt

Open and fully fund Roth IRA for wife

Open and fully fund Roth IRA for husband

Sell Car 1

Pay off Car 2

10% (of gross income) contribution to 401(k)

Build emergency fund to $12,000

We’ll be selling Car 1 and funding Roth IRA’s for my wife and I in the coming months, so more checkmarks will be added soon.