Friday, May 5, 2017

Big Hairy Audacious Goal (BHAG)

I’ve actually written down a new goal that I’ve thought about for a while, and finally decided to tackle.  The only thing we still owe is our mortgage, which is now at below half of our home value.  While that’s great news, we are ready to attack the BHAG.  It seems overwhelming, and we “could” sell our investments, pay taxes (of course) on the gains, and pay off the mortgage today.  That would create less risk in our lives, but I don’t feel that’s the best way for us to do it.

It’s important to prioritize financial decisions.  Start investing early, with the goal of investing 15% of your income.  Somewhere along the way, we bought a home.  The payments should be less than 25% of your take home pay.   California has it a bit tougher, and we Californians have been known to stretch our payment to 1/3 of our take home pay, but that’s riskier to keep up with the bills and investments.  Once you start making more income, keep up with the 15% retirement investment, and start adding extra funds to pay down the mortgage principal. 

With the proposed tax reform, mortgage interest is not going to be as attractive as a write-off, since the standard deduction will most likely be the best bet for most Americans.  Interest rates are likely to go up this year, so refinancing will not be as appealing, either. 

If we add $700 a month to our payment, we could have the house paid off in seven years.  That would save us thousands of dollars.  My plan is to take any extra income and any savings earned to pay towards the principal.  So far in May, I’ve already saved $143 by catching a medical billing error on my co-payment, negotiating with my Internet Service Provider to not charge us equipment rental, and coupons I used.  It’s early in the month, and now that I’ve written down the goal, my actions will bring in more results.

Is anyone brave enough to make the same challenge?  What ways do you think you can engage to bring in more funds to pay down the principal?  How would it feel to not have a house payment anymore?