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Hey everyone! Welcome back to another episode of Budget Friday. This is seriously my favorite part about personal finance, the chance to help others get on a budget, get out of debt and reach their financial goals. I love showing the power of a well-thought out budget plan, and the long term results they can have.Today’s budget is an anonymous submission. We’ll call him Harold and Marge.
Background: Harold and Marge have done well. They are5 5 years of age and have just finished putting their youngest through college, debt free! They are now looking at retirement and want to retire with a nice giant chunk o’ change saved up. Let’s check out some numbers:
Assets:
- Home – $375,000
- Retirement Fund Savings (401k and Roth IRA) – $650,000
- Emergency Fund Savings – $6,000
Debts (Balances):
- Home Mortgage – $127,000 (15-year fixed, 3.25%)
Goals:
- Pay Off Mortgage
- Save $2,000,000 then retire!
Priorities:
- Family
- Get that $2,000,000 BABY, YEAH!!!
Here is their budget:
| OLD | NEW | Comments | |
| Starting Balance | $ – | $ – | |
| Total Income | $ 6,600.00 | $ 6,600.00 | Well done on the post-tax, post medical, post-investment income! |
| Total Expenses | $ 4,025.00 | $ 6,600.00 | |
| Projected Ending Balance | $ 2,575.00 | $ – | |
| Income | |||
| Monthly Income | $ 6,600.00 | $ 6,600.00 | |
| Total Income | $ 6,600.00 | $ 6,600.00 | |
| Bills | |||
| Mortgage | $ 1,300.00 | $ 4,000.00 | Based on your goals, throwing all your extra money at the mortgage will get you there the quickest. You’ll be debt free in no time! |
| Electric | $ 120.00 | $ 120.00 | |
| Natural Gas | $ 400.00 | $ 400.00 | $400 seems a bit high, but as we discussed, it’s better to estimate high, and if you come in under, throw it at the mortgage! |
| Water/Sewer | $ 50.00 | $ 50.00 | |
| Phone | $ 105.00 | $ 105.00 | |
| Car Insurance | $ 100.00 | $ 100.00 | |
| Total Bills | $ 2,075.00 | $ 4,775.00 | |
| Necessities | |||
| Food | $ 1,100.00 | $ 650.00 | This is the one area I know you can improve. You stated that your son is living at home, so I think $650 a month is a realistic number. A solid meal plan will help you win in this category, which is why we use eMeals (affiliate link) for our food budget. I suggest signing up for the 3 – 6 person plan and have them do all the planning for you. Plus, it’ll save you a ton and help you lower this category. |
| Gas | $ 600.00 | $ 600.00 | Brutal commute, but hey, just know that when you retire, this expenses is going to go WAY down 🙂 |
| Date | $ – | $ 70.00 | I always build in a date budget. I say never stop dating your spouse, and putting aside money solely for this purpose is one of the best investments you can make with your money. |
| Spending Cash | $ – | $ 60.00 | I also believe that you can save money on miscellaneous spending by budgeting in spending cash. Having a set amount for your disposable cash keeps you from spending too much of it. Trust me on this one 🙂 |
| Clothing | $ 50.00 | $ 50.00 | |
| Entertainment | $ 100.00 | $ 100.00 | |
| Misc | $ 100.00 | $ 100.00 | |
| Total Necessities | $ 1,950.00 | $ 1,630.00 | |
| Savings Buckets | |||
| Christmas | $ – | $ 50.00 | Savings buckets are my way of saving toward irregular expenses. I figure you’re going to throw money at these anyway, might as well have the money in place beforehand. Plus, it makes it so you don’t have to decrease your mortgage payoff or investments when these expenses come up. |
| Birthdays | $ – | $ 20.00 | See above |
| Anniversary | $ – | $ 25.00 | See above |
| Vacation | $ – | $ 100.00 | See above. You’ve got a 10-year+ plan here. Might as well get away and have a little fun during it 🙂 |
| Total Other | $ – | $ 195.00 | |
| Total Expenses | $ 4,025.00 | $ 6,600.00 |
Wow, I totally wish this was my budget right about now! Way to rock it! With $4,000 a month toward the mortgage, their debt will be killed in no time and then it’s heads down and net worth up trucking toward their $2M goal. Let’s see how they’ll get there:
Debt Snowball
First things first: Harold expressed his interest in rebuilding his emergency fund to $10,000 before annihilating the mortgage. So I say put the extra $2,700 that was going toward the mortgage into the EF for the first two months. Then it’s mortgage killing time!
Using a handy dandy mortgage calculator, based on their payments, current balance and interest rate, if they throw the $4,000 a month toward their mortgage, it will be PAID OFF IN JUST UNDER 3 YEARS! HOW SICK IS THAT?! (sick = cool). What’s even cooler, they’ll technically be millionaires once the house is paid off!!!!! Now it’s time to laser-focus on the investments to reach their retirement goal.
Goals
1. Pay off mortgage – DONE!
2. Retire with a cool $2 Million in the bank!
Now that you are debt free, just put your extra $4,000 a month toward your retirement investing. This, on top of the $1,200 a month you’re already sending off to replicate puts you at $5,200 a month of investment capital! With that amount, here’s how I’d break it down, based on current contribution limits:
i. Up your 401k contribution to $23,000 a year
ii. Up your Roth IRA contributions to $6,500 a year for both = $11,000 total
iii. Put the additional $26,400 in a taxable investment account.
As always, consult your financial planner and tax advisor to review your options on these.
With the tax advantages, you may be able to put a little more away, getting you to your goal even quicker. I threw these numbers into an investment calculator, and you’re looking at hitting your goal of $2 Million IN JUST 9 YEARS! Man, if I had $2 million, 12 years from now…! It’s pretty ridiculously sweet to think about getting there in just over a decade!
Now, I know that you mentioned retiring a little early, and I did notice that this plan puts your retirement age at 67 years old. If you wanted to remove a few years from your retirement edge, there are a few options here. First, obviously, you can just save a little bit less (say, $1.5M instead of 2) and enjoy retirement 3 years sooner. Another option is to look into other investments, namely rental real estate. Now, fair warning, I have never owned an investment property, but it’s seems like a great time to get into it if possible.
If you could get a great deal on a home, rent it out for some positive cash flow and have someone else manage it, it could work out nicely. Not only would someone else be paying the mortgage and giving you a few hundred per month of passive income, but you’d be building equity toward your retirement. You could sell if off when you decide to retire, or keep it, pay off the mortgage and enjoy some extra passive income on top of your investment income. Just a thought I had, and might not be worth the hassle at this point, but I’d check around and see if you can find someone who knows how to make this happen. (Readers: If you have experience doing this, let me know if this is a good idea)
Final Thoughts
As we’ve emailed back and forth, I’ve gotten to know a bit about your background, your family and how awesome of a family man you are, Harold. I know we didn’t discuss this, but I wanted to give you my honest opinion here. I love your goal to shoot for $2M in retirement. Heck, that’s about the number I’m shooting for as well! But you know what, if you don’t hit it, you are going to be just fine. Looking at a retirement income calculator, you can live well on a $1.5M nest egg , just as well as you are living now, or better. It’s only money, and don’t be discouraged if things come up that slow down your mortgage payoff or investing. You’re already in a great spot, and I have no doubts that you’re going to retire and live very, very well! I hope this budget can help you reach your goals and enjoy a nice long retirement 🙂
Comments: So, what do you think? Is there anything you would have changed about my proposed budget? I’d love to get some reader feedback on what you would do. Harold and Marge have already built a great legacy and saved well, I’m excited to see them ramp it up a few notches and kick the savings into high gear! When I look at this, it’s where I’d love to be at that age as well. Well done, you two! 🙂
Jake,
Thanks so much for doing this – really love all the time, energy and thought you put into it. We will try your suggestions – but really? reduce our food budget by that much? Ouch! Son who is back living at home literally eats 2x as much as spouse and I do together (and there’s not an ounce of fat on him). Plus, spouse is a total foodie who loves to cook and I love to eat. Just can’t see going the whole e-foods thing. But, since you put your heart and soul into this, we’ll try it.
Again,
Thanks so much. Very nicely done – you’ve got a knack for this. Keep it up and may it bring you and yours lots of prosperity!
Sincerely,
Harold & Marge
Harold,
I am with you on being a foodie and being really wary about going with a prescribed meal plan from some random website, but let me tell you, I have tried things I would have NEVER tried on this plan! Things I would not have thought of cooking have become some of my favorites. I would suggest the Whole Foods plan, it’s been my favorite so far and I’ve been on that one and the Paleo and just switched to Clean Eating to see how that one is 🙂 Good luck!
Michelle
Whoa, you know this post is a BIG DEAL when my wife shows up 🙂
GO MRS. IHB, GO, GO GO!!!! (WOOP WOOP!)
Michelle,
Thanks for the insight into the emeals plan. Coming from a fellow foodie – it carries some weight. I’ll look into that.
Thanks Harold & Marge. Glad I could help 🙂
Others have WAY better suggestions on the food so far, so I’ll let them take it from here. But for reference, we have a 1-year-old, we eat all organic, use eMeals for dinners and our budget is about $400 a month. And that includes toiletries.
And I hear you, my wife LOVES cooking from scratch, and I LOVE to eat 🙂 Thanks for being willing to give it a shot. At worst, you can lower some other items and increase the food budget a bit if you want, but I say give it at least 3 months of trying and see if you can get it down 🙂
Looks like they’ve done awesome! I don’t know that I’d really change a whole lot other than their E-Fund. Although, I’ve not had my coffee yet :), so I may have missed it. I would encourage trying to build up the E-Fund to 6-12 months (after they get the mortgage paid off). Having that will be a nice cushion to have as they head towards retirement. That said, I’d love to be in this position when I am their age.
Yea, their E-Fund will be at $10,000, and once the mortgage is gone, that IS 6 months of expenses or more 🙂
I always enjoy spying on other people’s budgets! I am at a very different point in life though so it is hard for me to relate to.some of the priorities.
Lance,
WTF? How can it possibly be hard for you to relate to “some of our priorities”? Really? Family and education? – Future generations??? WOW -totally don’t get that. I guarantee you we’ve been wherever you’re at. Nobody EVER gave us a dime – we earned every bit of it ourselves – and lived below the poverty level while in school with a little one. Meanwhile, we busted our asses to save for our children’s education – yeah try paying off undergrad and grad loans while putting $ into a 529 plan for your kids.
Spy on our budget all you want. Maybe you’ll learn a thing or two – but lose the attitude – as if! As if we ever had a single dime handed to us!
Lance,
Please see the private email I sent you apologizing for being an ass and snapping at you. Sorry.
It’s great that one of the kids is still at home…but is he working? If so, maybe he should pay rent or some of that giant food budget! We had to stay with my mom and it was the four of us. We bought our own groceries and paid $300/month. We were struggling, but that small contribution was helpful to her and still allowed us the ability to get back on our feet…just a thought.
Thanks for the input. Loving getting these “objective” insights.
Really? Is our food budget that big? Maybe it is and maybe we need to take a much closer look at that – but spouse does love to cook and son and I do love to eat.
And yes, he is working – but we’re not going to have him “contribute” to our household expenses ’cause he’s saving every dime he makes for law school – which he’ll be starting in about 8 months. No – we’re not paying for that part of his education (altho we will help him out a tad). And yes, we do know how god-awfully expensive it’s going to be – ugh!!!! But that does appear to be what he is destined to be (another UGH!)
And yes, he has applied for and gotten scholarships – merit-based – not an easy thing for a white male to do in this time and age.
Cool to hear he’s gotten scholarships, that’s quite a feat! Well done!
Your son obviously has good work ethic! I didn’t have all that knowledge on his future plans so that makes sense on why he does not contirbute financially.
We are a family of 4, husband can EAT and our oldest daughter has food allergies so eats a lot of specialty foods. Our monthly budget including toiletries is $500. We meal plan and buy a lot of our groceries (except for meats) at Walmart, use coupons and follow sales. This is my most challenging category to stay within budget…it’s not like you don’t have the room for it! Cutting a little at a time can help move toward those other goals…
Mom of 2 precious girls,
Thx for the input – curious re: why you don’t buy meat at walmart. Thx.
Harold – who loves baby back ribs – smoked, slowly – and really trying to cut that food budget down – ha!
Great job Jake, I can see you getting there.
Robby
Man, I hope so! Thanks Robby!
They’ve done very well for their age, congrats. Like you I’d want to kill the mortgage as fast as possible. If he wants to bank up an ES fund first then kill it then go for it. Whatever helps make them sleep better at night. I agree with you on the grocery budget, they should be able to make some cool savings there by lowering that. Great job Jake! Mr.CBB
Ok, Mr. Canadian guy, we’ll take a serious look at our grocery budget – but this really is killing me ’cause spouse does so love to cook (she actually sings and dances while she does that) and son and I love to eat – ha!
Can we at least put our “date night” $ into the grocery bill ’cause we like that more than going out anywhere????
Seriously, people – help me out here – I can already smell the smoked baby back ribs and smoked turkey – 🙁
Does your wife put together a meal plan for the things she likes to cook or is it more on a whim? If there is no set meal plan, I would suggest doing that first before you go and slash the food budget the first month. I think there will be a big difference. I know that if I don’t plan my meals, we spend way more at the grocery store. When I plan, we eat even better and I’m more focused at the store. Snacks and beverages is another killer, so that’s something to look at. If pop and adult beverages are a large part of your guys’ diet maybe just save those for weekends and stick with water for the week night, that will save in the budget (not to mention be healthier 🙂 ) I know you can still eat well while cutting your food budget back! 🙂
Michelle,
I can absolutely confirm that wife not only makes out meal plans (on her own, i.e. she doesn’t pay somebody to do that for her), but also goes shopping with a list – and she doesn’t vary from it (try being me trying to get a bag of cookies – ha!). She grew up in a household of 10 kids (one income) and learned to shop, plan and cook with her very frugal mother. So, no – none of our groceries are bought on a whim, but damn I do so love her cooking – anyone else here ever been raised in the mid-west?
Haha. Mr. CBB is THE EXPERT on keeping a bare minimum grocery budget. Him and his wife only spend $190 a month on groceries! 🙂
MMMMmmmmm….baby back ribbbbbsssss……
Congrats on putting a son through college! I have two going next year. If you wouldn’t mind delaying the retirement a little, would you pay their way, too? 😉 Ha!
On a serious note, the only piece of advice that I see Jake giving that is ultra-conservative (definitely not wrong, but conservative) is throwing that extra money toward the mortgage vs. putting it into investments. If your mortgage is still tax deductible, that really isn’t a 3 1/4% rate…it’s closer to 2.5% after the tax break. That number is easily beatable with conservative investments during your time frame.
It is possible to buy property as you suggest, Jake, and even put it in your IRA (though there are restrictions here that should be carefully weighed before doing that). That might actually make it easier, because it looks like that’s where much of the nestegg is.) The big problem with this approach is that it eats up a lot of capital, limiting your ability to stay diversified. As retirement gets closer, you want to keep diversified so you don’t get caught the next time the market dumps on you. Adding real estate in the form of a publicly traded REIT can give you the income you’re looking for, allow for a smaller investment amount, and also free you from the hassle of caring for a property or finding a manager who’s worth two cents….).
If you do pay off the mortgage quickly, that means Jake is certainly right: your need for $2M might be reduced because of this payment disappearing.
That said, I do like making other moves to pay down the mortgage early (love Jake’s utility advice, for example). Some of the new thermostats can help with this. I think one’s called The Nest. I’m actually looking at it to save on utilities in my own home.
On the food? I’ve a balance kind of guy….I like my good food today and finding other ways to take care of the mission. You said baby back ribs, and baby! do I like baby back ribs.
Thanks for sharing this with us, Harold & Marge! Great job, as usual, Jake.
Joe, you are the expert, so I defer to you on this. Since his #1 was to kill the mortgage ASAP, I followed suit with the plan, but you’re right, the mortgage rate is RIDICULOUSLY AWESOME, and with some good investments could probably beat that with earnings. I guess it’s up to Harold and Marge on what their risk tolerance is and what helps them sleep at night 🙂
And thanks for the rental advice, good to know. Again, I defer to FAMOUS PEOPLE first, and you win. 😉
You’re too, too funny. I can’t believe I missed the “pay off the mortgage” goal (how come you didn’t bold and underline that for me?).
Sorry. I’ll write it in big, bold crayon next time 😉
Adding proprerty as a publicly traded reit? pls explain – not familiar with that. Thanks for everyones input.
Average Joe, we wouldn’t mind one bit working a couple of more years to get your kids thru colloge debt free – just as soon as you explain to us how my parents put 10 kids thru college one a single income. Serioursly, there’s got to be a majic gimmick to this, right?
I can totally relate to this couple. We are young (relatively speaking 31 vs 55) so we don’t have anything close to what they have but I can understand their priorities. We want our kids to start their life debt free and would gladly pay for it. And I like to cook, as I don’t see any other extra discretionary expenses, if it were me, I won’t cut it to almost half. It will make my life boring and the savings a chore. You did a great job with the budget, this is just my opinion and how “I” would feel it it were my budget. Another thing I disagree with is killing the mortgage. If they would really like to do that first, it makes sense to go for it. But if it is a way to maximize their networth, I would space the mortgage payment out for 10 yrs (the time frame they want to retire) and shove as much money as possible in investments. A few reasons
(1) Their mortgage rate is not high. Any investment will not beat that rate (unless they plan to invest all in a CD)
(2) The money has more time to grow.
(3) The stock market is on sale right now. It will come up, it always is a cycle. So now is a great time to buy as much as possible.
With that said, I do not know their priorities and their tolerance to debt. There are lot of variables, so it might not make sense in their case.
I hear you, and yes, killing the mortgage first was one of their 2 goals. But I do see that there could be some money left on the table and paying it off less aggressively and investing more could help them reach $2M quicker. Though my brain hurts thinking about the calculations right now, maybe I’ll do them later.
I would also say that you can eat like a flippin’ KING (or QUEEN) on $650 a month with some proper planning. Heck, we eat pretty amazing on $400 a month 🙂 But like my wife suggested, maybe just keeping the food budget the same for the first month and working on meal planning first.
Suba,
math-wise I have no doubt you’re right – the money may well be better spent in investments, but we got burned bad twice in the stock market and now we just want that mortgage dead. hence, we’re taking a more emotional approach than an intellectual approach. Who knows – maybe we’ll lose some $ with this approach, but we’re so excited to have that mortgage paid off that I just don’t think we’d use the same discipline in investing as we will in paying off the mortgage. We’ve made ourselves a litlle “kill the mortgage” chart that we’re currently using. thanks for the input tho – it’s definitely something to think about.
Have Harold and Maude talked about why they want to get rid of their mortgage? We have 14 more years at 3.25%, and we plan on riding that out as long as possible since we’re pretty sure our returns will be better than that elsewhere.
Maybe more risk averse? Like others have said, could make them some money in the long run, but maybe having a paid-for home is a higher priority? I’ll have to defer to Harold on that one.
Mrs PoP.
We opted to kill the mortgage rather than spend that $ investing ’cause we got burned BAD twice already in the market. The mortgage is a sure thing and the market isn’t. I know – it’s probably not the best financial decision, based on $ alone, but we’re kind of old and tired and really want that house paid in full before we hit 60. So, for us, I think it’s the best decsion – all things considered. thanks much for your input.
Great work! I agree with some of the ideas about stretching the mortgage out just a bit–maybe even 5 years instead of 3. Only because of the potential gains from other investments because the mortgage is locked at such a great rate!
Do you think the potential gains are that significant? Just wondering, as I don’t have time to run the numbers right now, but me personally, I like the idea of a paid-for house for myself, so I don’t see an issue with them going the same route, especially if it’s paid off in 3 years’ time.
There’s no doubt that eliminating the mortgage is a good idea. The interest savings can go toward the retirement fund, getting them to $2M faster. I do wonder why the $2 million, though. Lots of travel? Early retirement?
Daisy, why the $2m? Not a lot of travelling – just soe. Mostly tho it’s ’cause our parents/grandparents all lived well into their 90’s. My dad was doing great, even with parkinson’s until he fell and hit his head 4 x (in one incideent). it would have been merciful had he simply died from the resulting brain bleed – but he didn’t – he lingered, agonzinly for moths (and at great expense) while my mom (also in her 90’s struggles with alzhiemr’s. We do’t want to be a burdenon our children, the taxpayers or anyone else so we think we’re going to need $2M to avoid being a problem for anyone. Health care costs/nursing homes etc are out of this world expensive. My parents spend way more every month just taking care of the medical needs than we hever did raising 2 kids (including when we put them thru college debt-free.
The income property is an interesting idea, but I wonder if it would really be the right fit for this situation. Many retirees want to travel and downsize their lifestyle upon retirement, and it seems to me like dealing with tenants and maintenance on a 2nd property might be a problem. Or maybe it’s just me – I hate dealing with tenants! lol
Yea, it depends on the property, but I think you might be right. Retirement doesn’t seems like the time to take on more responsibility. I just wonder how passive you can make it, like 80% or 90% hands off? Or more?
Talk about set! That couple deserves a pat on the back, good for them. I’m sure they’ll reach their goal in no time!
Totally. It’s cool to see what financial discipline can truly accomplish!
Love reading these budget makeover posts. I’d say that this couple is doing amazing. I can’t imagine a food budget that big, but they’ve done so well saving and paying down the mortgage, I’m certainly not judging (and hope I’m in a similar position when I’m there age). I’ve heard a lot of good things about e-meals and am going to have to check it out. I’d definitely purchase an investment property if I were them, but I know a lot of folks don’t want the hassle. Either way, well done!
KK,
I’ll let you in on a litle secret – that whole food budget thing – it doesn’t just feed us. We use it to donate a lot to food banks and we also take $ from that fund to send care packages to our soldiers, etc.
This actually is against our beliefs to speak of this publicly, but I don’t want anyone mislead, plus there really are a lot of realy hard working folk who need that food at the food bank and PLEASE don’t even get me started about how badly our troops need support packages – OMG – if you only knew – yep,our guys, young, strong, brave and unbelivably selfless.
I think Harold and Marge have done extremely well. I would certainly want to pay off the mortgage just for piece of mind, even if you might be able to get a better return somewhere else. You also might not, so that would be my first priority as well. I can also swear by the budgeting cash for misc expenses. It saves so much by having that stash of cash to look at. Often you don’t even want to buy anything because you don’t want to spend it. When I used my debit card for everything, I spent much more.
Cash envelopes are a great way to guarantee you don’t overspend. We did those for years before switching to rewards cards.
Thanks to everyone for all their insights and suggetions. Really appreciate it, but I’m cocerned about the # of comments re: how well Harold and Marge have done. Sure there’s been some discipline in getting and staying debt-free, but I don’t think they’re anywhere close to being set for retirement yet. Maybe this audience is too young to be that focused on retirement. Hmmm….. seems to me, one of these “repliers” posted in another blog that they have almost $1.5M saved for retirement. That sounds like a much more comfortable position to be in.
Or – maybe I’m just being pessimistic ’cause I’ve been dealting with my parents’ situation for so long – both in nursing homes and needing extensive medical care – for years! I honestly don’t know how they’ve paid for all of that and it scares the crap out of me to think we’ll be facing the same things. Sure don’t want to be a burden on anyone.
Saving enough to prepare for every possible outcome is a noble task, and I think you are just being commended for how “not normal” that is these days. It’s inspiring to those of us who are younger with a small net worth to see how you can grow wealth over time, and you guys are on the right track to build a nest egg that should support you for the rest of your lives and beyond.
For me personally, it’s just inspiring to see how being diligent and frugal over a long period of time really does pay off. I mean, I’ve only got like $20k put away in retirement because I didn’t start learning how to deal with money until a few years back. But I know if I save well for the next 40 years, I can really build something self-sustainable. Knowing a few different people your age, I don’t know if ANYONE who has saved even close to where you’re at, so it really is out of the norm.
I think the fear of rising healthcare costs is real, and you’ve got the right mind to save up enough to buffer against that. And it sounds like you’re learned from some tough circumstances. I think all of that combined, you’re going to be in a REALLY comfortable and great financial situation in 10 years.
Jake,
We’ll check back with you in 10 years and let you know how this all works out – assuming we don’t have parkinson’s or alzhiermer’s by then – ha! (sort of)
But I will say this, if we continue down this road for another decade and then one of us gets hit by a mack truck and dies before we retire, I am going to be seriously p/o!
Hah, I look forward to it! And don’t worry about the Mac truck, it’ll be all flying cars in 10 years anyways 😉
Jake,
Just wanted to say thanks for your words of wisdom. We are now 1/4 of the first of 3 years into our “kill the mortgage in 3 years” journey. In spite of my fil’s death (and the costs that involved) and in spite of son’s having to go visit a couple of long distance law schools (and the costs that involved) – along with having to make rent deposits and “seat” deposits for him, and get him a replacement vehicle, we have magically managed to put $4000/month towards our mortgage – for 3 consecutive months and going on month 4. We did have to tap our savings for some of these expenses, but our monthly budget has also been adjusted to make it all possible. And YES we did reduce our food budget down from $1100/month (which included donations to food banks and support packages for our troops that we, regretfully, have had to suspend temporarily) to $550/month. Now, grilling season is just around the corner, so I may not be able to say that in a month or two – but for now we’ve done it. THANK YOU (and all your readers) for your input. You gave us just the insight and encouragement we needed. Sure wish we were as smart as you guys are when we were your age.
Sincerely,
Harold & Marge
p.s. if you ever need a “letter of recommendation” – let us know. we’ll be more than happy to oblige!
Harold,
I am so happy to have helped. Amazing progress on the food budget, I know it takes a bit of work! As for a “letter”, I’ll hit you up if/when I need it 😉 Thanks again for participating!
Jake,
Anytime you need/want a letter of recommendation – let us know.
Spouse can write – and she’s more than happy to oblige. And I’ll throw my 2 cents worth in too.
Thanks much.
Noted! And thanks!
Just wanted to send our heartfelt congrats to you and your wife on your soon to be born baby daughter! Wow! Too much fun! No doubt her older brother will take great care of her. Good luck sleeping for the next 2 decades – ha! All well worth it.
We, too, have one of each. We’re launching our youngest off to law school in 5 days. Good Lord, I thought he’d be off our payroll by now – again – ha! But, we got that mortgage down to under $100,000 – a b-day gift to my wife whose b-day is in a couple of weeks. We are going to have this mortgage killed in 2-3 years, depending on what life brings us and then, well, we’re going to retire – at least she is.
We’re going to buy an rv and travel for a year to wherever we want to go and think back on how hard we worked while we were raising kids, paying for school (ours and theirs) and enjoying every minute of every day.
Thanks so much for your help. You really helped kick start us into this and we are truly grateful for your insight/wisdom.
I’m seeing nothing but love, fun and happiness for you and yours. Congrats again! And thank you.
Thank you Jim!
And wow, well done on operation: destroy mortgage! I LOVE the idea of traveling for a year, enjoying this country on the road, and just getting out of the day-to-day. I want to do that as well someday!
I’m glad I could be of some help, and excited to see you charging toward your goals. You WILL get there, it’s so near I can taste it (and it tastes like a good cut of tenderloin, 😉 )
Thank you for the well wishes, Jim, much appreciated!
Jake and family,
Happy New Year! Just wanted to let you know that our goal of paying $4K/mo on the mortgage has been realized – yay! Still not quite sure how we did that since the minute we started to implement that plan we got hit with one thing after another for months on end – but we did. I just tallied it all up and we actually paid $51K on the mortgage in 2013. No idea how we passed that $48k goal. Thank you for your inspiration and your insights. I know when you’re young and have little ones it seems impossible to think you’ll actually get to the $1M mark (or more), but we are living proof that it can be done. I never could have imagined we could do this – not after living below the poverty level while in undergrad and grad school. But it can be done and I have no doubt you and your family are well on your way to doing way better than what we’ve done. Congrats, thanks and happy new year!
Jim, thank you so much for the follow up and continuing motivation for our family as well. As our family grows, it definitely does seem to look more and more tough to get to financial independence, but you’re living proof that it can happen, even with all of the financial help you have passed down through the generations. You’re an inspiration to us.
And nice work on the 51k. That’s VERY impressive, and is another huge leap to get you to a LONG, enjoyable retirement. Happy new year to you and yours, hope to hear from you soon!
-Jake and family
Jake,
Ok – we are now 1/2 way thru our “kill the mortgage” journey and quite frankly, we’re hitting a wall. We’re kind of sick and tired of doing this and budgeting every last frickin dime we have. BUT, our mortgage is down to the $60K’ish mark and if we keep this up for another couple of years, it’ll be dead – no later than Dec, 2016 (and preferably much sooner than that).
Here’s the deal – spouse has $120K in a pos 457 account. Once our mortgage is down to $48K, (about at the end of this year) she wants to take a LOAN (NOT a withdrawal) from her 457 acct and pay the mortgage in full. Then we’d be paying off her loan (and thereby paying ourselves 3.75% on that loan). Meanwhile our house will be safe. We’re pretty sure we could have that loan paid off in 1 year.
My gut is telling me NO, but her gut is telling her YES. If we did do this, we would still continue to contribute to our retirement funds and even if the worst case scenario came up (she lost her job and the loan became payable within 90 days) we’d still have over $800K in 401 and Roth accounts, so we could pay that 457 loan off with no penalty. She wants the peace of mind. I do too, but I am trying to look more long-term and trying to ensure that our retirement account is adequate. Thoughts?
Thanks.
Jim
p.s. please send us your street address again and we will pay you for your advice. I’m going to tell you again, YOU have got a knack for this and I have no doubt it will bring you and yours financial security/independence!
Jim, awesome to hear from you again! Well done so far, can’t believe you’re already halfway through! Your gumption and consistency is what will get you there, I have no doubt!
As for the 457 Loan, I won’t say no or yes, but I would like to know why? Why is there such a sense of urgency to pay this off right now? I understand the feeling of freedom that comes with paying off a huge chunk of debt, but you already have enough money to pay this thing off, why do you want a loan to do it? You’re just transferring your debt from one place to another, it’s not actually going away. I personally would rather have my loan tied to a home that my retirement account.
Now, if you’re after the savings, that’s all fine and good, but only if you DON’T have to pay any interest on the loan.
Again, you two have KILLED IT and have enough money to do whatever you want at this point, but just make sure you talk through the ‘why’ before going ahead and make sure you BOTH agree on the decision made. Otherwise you might resent the other for “forcing” you to do one thing when you weren’t fully on board.
And Jim, you are too kind. Thank you again for the offer, but I truly just enjoy helping, no need for payment 🙂
Jacob,
Do you remember when “Harold & Marge” went on a pay the mortgage off in 3 years, beginning in January, 2013? I’ve just GOT to tell you that once the 2 of us were both on board on that project (even though neither of us really believed that we could throw $4K at the mortgage for 3 years) – we actually have done it! We’re sending our last mortgage payment in in 10 days. And let me tell you – we’ve done it in spite of all the b.s. things that have been thrown at us. Things like kid in a serious car accident, grandchild with a serious disability, aging parents, and on and on and ON. Well, we’re almost finished with this whole mortgage thing (10 days and counting). We never would have gotten there without your inspiration. If you ever need/want an endorsement from your parent’s generation – just let us know. We will endorse you like crazy and maybe give you some street cred from our generation! Hope ALL is going well for you and yours. Can’t imagine how cute your kids are now. Best to all. If there’s ever anything we can do to help you out – please don’t hesitate to ask. Thanks for everything – and the countdown begins – 10. 9. 8. …..
p.s. when you’ve put your kids through college and they STILL need financial help from you – just trust that all you’ve taught them is coming thru. I know it’s tough, initially, but they’ll come around – just about the time you’re actually telling your spouse that “that kid is yours, ’cause no kid of mine would be that stupid” – ha! Enjoy. Life’s a journey!
This is the most wonderful news! You two are incredible, and I’m happy to have been part of your journey. How does it feel? I can’t imagine the day when I write that final check for my last mortgage payment, that has got to be exhilarating!
As for timing, this is a very timely comment, I would love to reach out over email as I have a few questions for you, and of course, would love your endorsement. I’ll shoot you an email if you don’t mind.
Again, incredible work you two, and I hope this truly inspires those who see their financial mountain as impossible. It can be done, and you proved it (even through ALL that life has thrown at you).
CONGRATULATIONS!
Jake,
I just read your last comment a minute ago. Sorry for the delay. Of COURSE you have our unequivocal endorsement and we are happy to help you in ANY way we can. Email us anytime at jtarkm@aol.com and ask away. We have no pride and will share with you anything you want to know. As for how does it feel to finally have the mortgage paid off – JOYOUS!!!!! and exhausting (seriously, we’re tired ’cause of this marathon) and exhilarating – all at the same time. Guess we’re kind of schizophrenic – ha!
Ask away – the endorsement is a given. Thanks again so very, very much!
Teresa & Jim
Jake,
We really want to pay you back for all the wisdom/inspiration you gave us. Email us @ jtarkm@aol.com and we’ll do whatever we can for you and yours.
Jim & Teresa
Email sent! 🙂
Jake,
Harold and Marge here – just wanted to give you a piece of advice since you were so gracious as to give us your insight/wisdom when we were trying to kill our mortgage. For 3 years we lived off my income while throwing Marge’s entire net income at our mortgage. It sucked at the beginning, but we were so excited at the prospect of killing that mortgage our excitement got us thru – initially. However, after having done that for a year or 18 months we were both ready to throw in the towel and live for the day – carpe diem and all that. Nonetheless, thru sheer grit and determination we got thru it and not only is our mortgage paid off (as are all child-related expenses (including another wedding) and other debts we could actually retire now if we wanted to. Health care costs would be a concern, but doable. Interestingly, now that we can retire we’re not so eager to do it. Because we’re no longer so interested in retiring, please resend me your street address. We’d like very much to pay you for the wisdom and encouragement you gave us at the exact time we needed it. Different generations have different gifts to offer each other. We are very grateful for the gift you gave us and we’d like to reciprocate. Thanks so much,
Harold and Marge
p.s. you should really get back into doing this blog – you’re a natural!
Jake,
Harold and Marge here – just wanted to give you a piece of advice since you were so gracious as to give us your insight/wisdom when we were trying to kill our mortgage. For 3 years we lived off my income while throwing Marge’s entire net income at our mortgage. It sucked at the beginning, but we were so excited at the prospect of killing that mortgage our excitement got us thru – initially. However, after having done that for a year or 18 months we were both ready to throw in the towel and live for the day – carpe diem and all that. Nonetheless, thru sheer grit and determination we got thru it and not only is our mortgage paid off (as are all child-related expenses (including another wedding) and other debts we could actually retire now if we wanted to. Health care costs would be a concern, but doable. Interestingly, now that we can retire we’re not so eager to do it. Because we’re no longer so interested in retiring, please resend me your street address. We’d like very much to pay you for the wisdom and encouragement you gave us at the exact time we needed it. Different generations have different gifts to offer each other. We are very grateful for the gift you gave us and we’d like to reciprocate. Get your kids’ college funds started then pay that mortgage off – it’s heavenly!!!!
Thanks so much,
Harold and Marge