The benefits of paying extra on your mortgage

Our single biggest financial focus is to pay off the house before we retire.  We have a lofty goal of reducing our 30 year mortgage to just under 9 years.  We bought the Casual Shack in the summer of 2009 taking advantage of a short sale. To date we have made 41 monthly payments and have reduced our mortgage term by 71 months.   That means if we only make minimum mortgage payments from here on out we will pay it off almost 6 years early and have already saved close to $58,000 in future interest payments.  $58,000!!

The purchase price of our house was $200,000.  If we didn’t pay extra over the life of the loan our house would have cost $405,000. At this point, with no further additional principal payments the Casual Shack will cost $347,000.  That’s still too much.  If we reach our 9 year payoff goal our house will cost us $261,000 which is close to market value for this area, saving us $144,000 in interest payments. We can live with that. 

In order to do this we have sent an additional payment every month since the first payment.  Sometimes a lot, sometimes a little, dependent upon our extra income and unexpected expenditures.

You don’t need to add thousands of dollars to your monthly payment to make a difference.  Had we only added $100 per month, every month consistently we would still have saved $42,000 over the life of the loan and reduced the payment term by 64 payments.  That’s $42,000 that can stay in your pocket and over 5 years early!  These figures are based on our loan and its interest rate so the numbers will vary.  Here's a link to an Amortization calculator to see how much you can save by adding that little bit extra. 

I don’t know if we’ll reach our goal of owning our house by May 2018.  I do know that we have already deprived the big bank of $58,000 of our hard earned money.

When your credit card puts money in your pocket

Several years ago I realized that carrying a balance on my credit cards was detrimental to my financial health.   Over the course of two years I paid off over $20,000 in credit card and auto loan debt.  Since then I have not carried a balance on a credit card.  I cut up most of those credit cards believing that cash was the only way to go.   I worked out a budget and a spending/savings plan and attempted to make the transition to a cash only lifestyle.  This didn’t work out so well for me.  You see, if I have money in my wallet, I’ll spend it.  It’s a mind game for me, if I don’t see it, I don’t have it to spend, simple as that.  So in order for me to stick to a budget I needed a credit card because I knew that I had to pay it off each month and I could be disciplined enough to not go over my set spending limit.  If you are the opposite of me, and are more disciplined using cash, then please do not attempt this.

My favorite credit card is Blue from American Express.  There are many cash rewards out there, go to a site such as bankrate.com to find one that has reward levels suited to your spending.  Look for a card that has no annual fee and gives a percentage of cash back for all purchases.  Some cards require that you register for that quarters’ deals.  I tried one of those and invariably would forget to re-register each quarter.

We use this card for all of our budgeted monthly purchases and pay the balance in full each month.  Our electric, water, cell phone and television services are all automatically billed to this card.  We use it at the grocery store, gas station, pharmacy and even put Doctor and Veterinarian visits on it. The important thing to remember is if it’s not in the budget, it doesn’t go on the card.

By using the credit card in this way we have been able to redeem cash rewards which we can apply to our current savings goals.

 

If you want to be rewarded remember these three points:

1.        Get a card with NO ANNUAL FEE

2.       Use the card ONLY FOR BUDGETED PURCHASES

3.       Pay in full each month, NEVER CARRY A BALANCE

 

Pets and Prescriptions

Two furballs live at the Casual Shack.  While they both provide endless love and amusement they also bring a multitude of added expenses.  

Princess

and Zip

Two dogs with a combined weight of 155 pounds eat a lot of food.  Caring for these two fur factories doesn't stop at food, sometimes pets get sick, in our case really sick.  

A few years ago Princess got an infection known as Pyometra, which means her uterus got infected.  While preparing her for a hysterectomy a bladder stone the size of a quarter was found.  The poor thing was a mess.  Because of the bladder stone she will require medication to control her PH balance for the rest of her life.  Fast forward to this year.  During her routine annual check up we learned that our little girl has Lymphoma.  We had two choices.  Choice #1 Surgery to remove her tumor infested spleen followed by Chemotherapy or #2 Put her down.  We opted for #1, take a look at her again, could you end her life?  We couldn't.

Chemotherapy is expensive, not as expensive as people Chemo but it's a huge chunk of change which would challenge anyone's budget.  Here's where the money saving tip comes in.  

Just because your Vet prescribes a medication for your pet does not mean you have to buy it from them.  You have options.  Pets take antibiotics, people take antibiotics, there's no difference in the drugs other than the word Canine on the label which means you can go to any pharmacy with a free antibiotic program to get them.  In our case it's our grocery store.  We do not pay for antibiotics for our dogs when we ask the Vet to call the prescription into our local grocery store.  The vet charged us $1.67 for 1.5 Ciprofloxacin pills, Publix gave me 21 pills for free.  That's a savings of $23.31.

Your second option is purchasing online.  Due to the Chemo we can expect Princess to stop eating due to nausea within 36 hours.  To prevent this we give her Metoclopramide.  Metoclopramide at Walgreen's cost us 11.99 for 24 pills.  That's close to .50 each pill.  By ordering through 1800Petmeds I was able to reduce that cost to .29 per pill.  A simple internet search will yield many other online pet supply stores.

Don't be afraid to tell your Vet that you want to explore less expensive options when it comes to prescriptions for your pet.  Princess' doctor was not aware that the first anti nausea drug she prescribed cost 69.83 for 12 pills, just a 3 day supply. When I asked for a less expensive alternative she suggested the Metoclopramide which works for our dog.  

This advice applies to Heartworm medication, pill pockets, specialty foods and any other item your Veterinarian may be selling in their office.

$23 here, .21 a pill there may not seem like much but in our case it's the small change that adds up to the big reward.  At the Casual Shack the reward is a happy, bouncy, tail wagging dog in remission as she nears her last treatment next month.

Magazines and Coca Cola

There's a reason they sell magazine racks that hook on the back of the toilet, most people like to read in there and I'm no exception.  What I don't like is paying for reading material so I found a way to stock my bathroom with a little light reading for free. 

Brad and I both work outside in neighborhoods whose inhabitants have yet to master the trashcan jumpshot.  Lots of trash hits the ground providing us with the means to get free magazines. 

Coca Cola has a program called MyCokeRewards.  In a nutshell, each bottle of a Coca Cola product has a code inside the plastic cap, that code can be entered at MyCokeRewards, codes can then be redeemed for various items.  The plastic caps are worth 3 points, the 12 pack carton is worth 10.  Up to 130 points can be entered at their site each week. 

So when I see a discarded coke product I pick it up, screw off the cap and throw the bottle in the trash can.  This accomplishes two things.  I've helped to clean up the neighborhood which makes where I work a more pleasant environment and I've gotten a free 3 point code. 

 One year of Popular Mechanics is 200 points, which works out to 67 3 point caps or 20 12 pack codes.  By getting it free I've saved $12.00 per year.

You're not limited to magazines, Rewards come in many forms.  There are baseball caps, coupons for food products, movie passes, household items, electronics and even gift cards.  If you don't want to profit from the codes you can also donate them to a charitable cause.

It can also be used as a money maker.  We redeem codes each year for Coca Cola branded baseball caps.  We easily get $5 for each one during our annual Trash to Cash yard sale. 

Now get out there and clean up the neighborhood, it's a win/win situation!

Here's a link to MyCokeRewards http://www.mycokerewards.com/howItWorks.do?WT.ac=mnuHIW_PO

Need versus Want

Today I'd like to talk about Need versus Want.  Understanding the difference is, in my opinion, the most basic step in any endeavor to save money.

Very simply put, Need is a requirement, Want is a desire.  Learning to distinguish a Need from a Want will enable you to make decisions that will keep more of your hard earned money in your pocket. 

We would probably all agree that Food, Shelter, Clothing and Transportation would be classified as Needs but would you also agree that they can also be Wants? 

For example, we all need to eat.  There is no exception to this rule, if we didn't eat we would die.  Food is without a doubt a need, going to a 5 star restaurant for that food is a Want.

We all Need Shelter. It is when we expand on the basic 4 walls and a roof that it becomes a Want. 

It is the same for clothing.  We could run around naked all day long inside our 4 walls but when we interact with the outside world we have the issue of modesty, not to mention it's illegal most everywhere to run around with your junk hanging out.  You might look fabulous in a pair of Gucci sneakers that cost $105 but wouldn't a pair of $35 Converse also cover your feet?

Are you seeing a pattern here?  If we can distinguish Need from Want we will immediately have the power to save money.  What are your financial goals?  Are you saving for your kid's college education or perhaps to buy your first home?  Maybe you just need to stretch your dollars further to keep up with rising costs.  Every purchase we make affects our ability, or inability, to reach those goals. 

This is not about Wants being a bad thing, I believe everyone should indulge in the things that bring them joy.   It is when we overindulge that our financial health suffers.  There is much truth in the phrase "too much of a good thing". 

Next time you are faced with a purchasing decision consider whether it is a Need or Want and how it will affect your financial goals.  Shifting your spending focus away from the Wants and concentrating on the Needs is an easy first step in reaching your goals.