It’s time to spell out my financial goals, both short- and long-term… I am a firm believer that we must clarify our goals before we can meet them.
After paying the essentials, we have about $200 each month left over.
Goal 1: Build our retirement fund
We’ve got time on our side. We plan to retire in about 40 years, depending on the circumstances such as health, finances, the existence of Social Security, ect. as that time approaches. We are NOT depending on Social Security as we plan for retirement.
We will add $50 a month to the IRA for now until our incomes increase. If we earn an average of 6% over the next 40 years, we should have almost $425,000. (We’re starting with a modest nest egg.)
As our incomes increase, we hope to add a few dollars more each month. But the important thing is that we’re starting now, while time and compound interest can really work for us.
Goal 2: Pay down the 30 year mortgage in 15-20 years
Paying bi-weekly will knock 7 years off the mortgage, to 23 years.
In addition, we also want to pad the mortgage payment a bit each month, with at least $100. With an extra $100 each month, we should pay off the mortgage in 19 years.
Goal 3: Pay down student loans
This is our least-urgent goal. My student loan interest is much lower than the mortgage. The interest is also tax deductable, without having to itemize.
We’re adding an extra $50 each month, and should have this paid off in 6 years. As our income increases, we might add more each month to this as well.
Why do you guys want to pay off your mortgage early?
I’ve read both sides of the arguements, so I’m just curious.
Do you have any debt that has a higher interest rate than your mortgage?
No, our mortgage has the highest rate, at 6.75%.
Our only other debt is student loans. My loans are at 5.25% and 0%. (I really love that 0% loan! It’s through the alumnae association.)
So far in our young lives, we’ve avoided any credit card debt. My husband and I have always been against debt, and pro-savings. We both worked nearly full time since high school and saved like maniacs for the house down payment.
On a side note, we pay “just enough” mortgage interest and property taxes to make tax itemizing worthwhile. It won’t be a huge loss when we lose this deduction in a few years – we’ll just take the standard deduction, and pay less interest to the mortgage company! 🙂