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Home > Moving from "mindless" to "mindful"

Moving from "mindless" to "mindful"

January 7th, 2011 at 03:31 pm

Today is payday! I paid my bills and had one thousand dollars to "save". So, rather mindlessly I just transferred that money into my savings account. Great! But it seemed kind of mindless, and easy, and safe. But..as I mentioned before I am not a risk taker at all with my money. So it makes sense that I would just plop it into savings.

My two main financial goals are to pay off my house in 5-6 years and to save for retirement. I want to do both of these things in the safest way possible, so I am trying to figure out the best way to maximize my money without risking it. Because I haven't quite figured it out yet, I am not ready to leap into something.

I am considering: Paying extra each month on my mortgage. I have a really low interest rate (4.25%).So is it best to put extra money on the payment each month, or just continue to save the money and when I have enough saved just pay the mortgage off in one lump sum? or, do some of both? I just like the sense of security I get knowing I have that money in the bank should I need it.

Decisions, Decisions!

Well, I am rambling...if you read all this thanks for sticking with it and have a great weekend!

Posted in Uncategorized | 7 Comments »

7 Responses to “Moving from "mindless" to "mindful"”

  1. Ima saver Says:
    January 7th, 2011 at 03:52 pm 1294415540
    1294415540

    I would do some of both.

  2. Petunia 100 Says:
    January 7th, 2011 at 04:40 pm 1294418416
    1294418416

    Saving up and paying in full in one lump sum is safest. Paying as much as you can each month will save the most interest.

    I suggest you pick a date whereby you want to have it paid in full. Then, use a payment calculator to see what you need to pay each month to make it happen. Pay that amount and save the rest.

  3. patientsaver Says:
    January 7th, 2011 at 04:43 pm 1294418581
    1294418581

    Bank savings accounts these days should be called "bank losing accounts," becus that's what they are: After taxes and accounting for inflation, you're actually losing money on bank savings accounts.

    Why wait til you have a lump sum? Becus in the interim, something else will invariably come up and give you a reason not to pay down that mortgage.

    If you already have adequate savings and if that mortgage is the only debt you have, by all means, prepay it!!

  4. patientsaver Says:
    January 7th, 2011 at 04:45 pm 1294418726
    1294418726

    If you wait to save it up so you can pay it off in one lump sum,there will be a hundred different things tempting you to spend on instead and that mortgage will wind up being there 5 years from now. A new car, various home improvements, vacation, etc. If the mortgage is the priority, don't just think about it, start paying it down now!

  5. ceejay74 Says:
    January 7th, 2011 at 05:08 pm 1294420139
    1294420139

    I agree w/patientsaver. If I understand things correctly, for you to be better off with the money in the bank vs. put toward mortgage, you'd need to be getting about 7% interest on your savings: 4.25% to account for the interest your mortgage is costing you and the rest to account for the value your money is losing during periods of inflation. I know the calculation is a bit more complicated than that, but this gives you a partial picture...

  6. momcents Says:
    January 7th, 2011 at 05:29 pm 1294421382
    1294421382


    My mantra is "slow and steady wins the race" and I've come to the conclusion that each small bit of money that I can throw some place (onto the mortgage, into the kids' savings account, increase retirement savings contributions by 1%) will eventually better us in the long run, rather than frittering small amounts away. I'd say throw what you can where you want, rather than waiting for a lump sum.

  7. Jerry Says:
    January 7th, 2011 at 08:01 pm 1294430470
    1294430470

    There is probably a different answer to this for each person, because we all have different personalities and spending styles that lead us to behave in varying ways. If you are supremely organized then it may be no big deal to save up and have the insurance of knocking it all out at once. If not, then the bit at a time may be best. It's really up to you to recognize what makes the most sense for your situation!
    Jerry

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