Who would of thought that making smaller more frequent payments could save you so much money? Fortunately we were turned on to bi-weekly mortgage payments almost immediately after closing on our home and have been hooked ever since.
Here’s how it works:
Traditionally most home owners pay their mortgage once per month. We will use an example of $1200/month.
Twelve full payments per year comes to a total of $14,400.
Instead of paying $1200 once a month (12 full payments), if you pay $600 every two weeks (bi-weekly) you are making 26 half payments.
26 divided by two equals 13 full payments ($15,600). At the end of the year you’ve made an entire extra mortgage payment ($1200) to go directly to the principal on your loan. You should definitely specify to whoever you pay your mortgage that you want it to go towards principal!
Just by doing this my wife and I will cut our mortgage down from 30 years to 25.1 years. That’s 5 years worth of interest payments we no longer have to make! Depending on the cost of your home that can be tens of thousands of dollars in savings! Combine this payment method with additional principal each payment and before you know if you’ve cut your mortgage down to 20 years or less and are saving 100k in interest!
FYI- this payment method can be applied to anything you are making monthly payments on! Cars and credit cards especially!
In the world of personal finance there appears to be two different mindsets when it comes to the use of credit cards. They’re either going to ruin your life with irreparable debt or they’ll reward you with hundreds of dollars worth of airline miles, cash back or points that can be redeemed for cool free stuff. I agree there are two sides to the coin but with good discipline, and a few simple rules, you can always have it land on heads.
#1. Never buy something with a credit card that you don’t already have the means to pay for.
(planning to pay the card off when you get your next paycheck doesn’t count.)
#2. Treat your credit card like it’s cash.
(meaning every time you swipe it money is draining from your checking account.)
-I know that years ago, before I had a credit card, it was very difficult for me to spend hard earned cash. I always preferred to keep it and watch it grow. Treat credit cards the same way. If you’re tight with your money then be tight with your credit card. If you’re willy nilly with your money then you probably shouldn’t have one in the first place.
#3. Never carry a balance from month to month or make minimum payments.
(sometimes I pay off my card the same day I use it.)
#4. Read the fine print.
(balance transfer fees, intro APR vs regular APR, stipulations redeeming points etc. etc.)
-Credit card companies want to pass out as many cards to as many people as possible hoping that eventually we will slip up and get stuck paying their fees. Normally, paying everything off a few times a month will eliminate your chances of being charged anything BUT there can be red tape when it comes to redeeming points. Also make sure you are aware of any annual fees to use the card. Know what you’re signing up for and planning on keeping it a while because ditching a card you don’t like after a year can ding your credit score.
At the end of the day, I think everybody should be taking advantage of what the credit cards companies are offering us. I know paying for things with cash feels good, but throwing away money doesn’t. That’s exactly what you’re doing by not using a rewards card of some sort.
Today I got home from work and felt it was time to update my wife and I’s monthly budget/balance sheet. It had been a few months and I knew that we had picked up some extra expenses since the last time we sat down and looked it over. I would encourage everybody to do this more often than not because it seems to always uncover some shocking results ( I like budget template #5 from this article: http://christianpf.com/10-free-household-budget-spreadsheets/ ). For instance, my wife and I found that we spent almost 20% of our income on groceries and eating out. That’s waaaaay more than we thought it was and for reference Dave Ramsey recommends 5-15%.
On a positive note, we also found that we have 18% of our income leftover for whatever we see fit. However, neither of us know where the money is currently going. We both feel like at the end of the month there might be a hundred bucks left. Our checking account doesn’t feel like it’s growing the way it should with all of those leftovers and I’ve come to the conclusion that it’s because we aren’t paying ourselves first. The Richest Man in Babylon tells us: “A part of all you earn is yours to keep”. Our problem is that, outside of our retirement funds, all of our income goes to our joint checking account and we pay all of our bills from that. We assumed that it would grow each month because we were bringing in more than we were required to take out for bills….wrong. It seems that this method encourages thoughtless spending which has led to us falling short of our savings potential.
We decided today that we are going to start having a percentage auto-transferred to our savings accounts each paycheck. When the money for savings comes out first you don’t miss it because you never saw it in the first place. Neither of us feel the money being deducted for our retirement accounts and we get to see our balances steadily grow each month. I know it will be exactly the same for our savings. Make saving and investing automatic so you don’t miss the money and spending on frivolous items with the leftovers won’t make you feel so guilty.
As I sit down and begin to type, I have hundreds of ideas and topics racing through my head. I guess it doesn’t matter where I begin as long as when I leave I mark my place, right? I came up with the name “billfolders” because the majority of the posts on this blog will be financially related, hence “billfold”. We can consider “billfolders” people that aren’t stupid with their money. I don’t mean stupid like can’t make change for a twenty. I mean stupid like living with your parents to save money for a house but going downtown every weekend and blowing hundreds of dollars. I mean stupid like upgrading to the newest phone twice a year but struggling to pay the bill or data plan. You get the point. Some people don’t understand what they are doing wrong or why they are struggling with their finances, “billfolders” get it. This blog will be my attempt to help, educate, entertain and rant to the readers about all sorts of topics, many will be money-related. All feedback is appreciated……..here we go.