Passive Family Income

How We Plan to Pay Our Mortgage Off Early – Feb (2012)

John S. — Fri, 03 Feb 2012 11:39:32 +0000

Good debt… Bad Debt… – It really doesn’t matter to me when it comes to taking on new debt. This includes our fixed rate mortgage my wife and I took out on our home. Since we didn’t have an extra $200,000 sitting around and didn’t want to rent, we took out a mortgage to buy our home almost four years ago.

We could have settled for a smaller house when we purchased several years ago to save some money. But we decided to buy enough home for our growing family. Then, just over a year ago, we decided to refinance our home and take advantage of the awesome interest rates. With our home refinanced and a much lower monthly payment, we made it a priority to start paying down our principal. This will eventually allow us to own our home much sooner and save over $100,000 in the meantime!

Since I don’t like debt and we owe a bunch on our home, one of my family’s most important financial goals is to pay it off as soon as possible. Even though we are paying low interest (4.375%) on a 30 year mortgage, the thought of paying hundreds of thousands of dollars extra in interest on that loan is disturbing. In order to reduce the amount we will pay to own our home, we have decided to pay our mortgage off early.

Just recently, I started highlighting our journey of paying down our home each month.

Steps to Pay Our Mortgage Off Early

Paying off our home early requires sacrifice. It requires that we commit extra funds each month from our budget to be allocated to the principal of our loan. In addition, in order to maximize our pay off plan, we refinanced our home over a year ago to lower our required monthly payment.

Since the time of our refinance, we have made the following additional principal payments on our loan. Here is the breakdown for the past 2 months in 2012.

February – $300.00
January – $300.00

During 2011, we also paid an additional $2,854.86 in principal on our mortgage. In 13 months, we managed to pay an extra $3,454.86 on the principal – which averages out to $265.76 per month.

One of the ways we are able to afford to pay extra principal each month is from refinancing our home. We were able to take advantage of historically low interest rates. Instead of paying off our home with a 30 year fixed rate loan at 5.625%, we refinanced to another 30 year fixed rate loan at 4.375%. The end result is a savings of $221.79 per month, which goes directly to paying off the principal on our loan. Then as our budget allows, we add $20, $50, or even $100 more dollars each month to accelerate our payoff.

Paying extra principal each month is a crucial part in working towards paying off our home early.

February 2012 Update

Each month I will provide specific details on our progress for paying off our home early. This data not only proves to my readers the power of paying down the principal of a loan early, it gives my family motivation to stick with our plan. Here are the latest details of paying off our mortgage early.

Mortgage Loan Principal

Remaining Principal – $208,556.77
Change from November – ($615.64)

We knocked off another $600+ in mortgage loan principle this month by continuing to pay extra on our monthly payment ($300). The other portion of the decrease can be attributed to the monthly mortgage principal payment.

Mortgage Term

Contractual Remaining Term – 28 years, 11 months
Actual Remaining Term – 27 years, 11 months

Over a year has gone by since we refinanced our mortgage, so our contractual remaining term is 28 years, 11 month. However, by paying extra principal each month, we are set to pay off our home in 27 years, 11 months. Last month, we were at 28 years, 0 months – so you can see the positive effects of paying extra on your monthly payment! By paying extra on our mortgage this month, we knocked another full month off our loan.

Target Payoff Date

New Payoff Date – December, 2039
Change from January – Knocked 1 month off the Loan

In January, we were on track to pay off our home in January, 2040. By paying an extra $300 this month in principal, we knocked another month off the term. We are on pace to own our home in December, 2039. This number will continue to decline each month we decide to pay extra on our payment.

Each month as I continue to analyze this data, I am more encouraged and motivated to pay down our mortgage – one month at a time. As you can see from the numbers above, there are huge benefits to paying down your mortgage early.

Do you make extra payments on your monthly mortgage? Have you seen the positive effects?

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Setting Finance Resolutions That You Will Keep – Part 2

Ashley Eneriz (Staff Writer) — Thu, 02 Feb 2012 11:20:40 +0000

In part one of this post, I talked about two ways to set and keep your financial resolutions. They were to make detailed goals and to make an action plan. You can read it here if you missed it.

3. Put a Motivating and Realistic Deadline to It: Look back at your track record of setting goals and keeping them. How many goals have you actually accomplished. In my own life, I can say that I have not accomplished very many. Why? It is simple. Even if I make my goal detailed and set up a feasible action plan, if there is no deadline behind it, then there is no motivation to complete the goal.

When setting up a deadline, two points are essential. Deadlines need to be realistic and they need to be motivating. Make your deadline realistic by giving yourself enough time to accomplish the goal. For example, don’t set the goal, save $10K in 3 months if you only make $1000 a month. However, the goal still needs to be motivating and some what of a challenge. Setting the goal of save $10K by January 2013 may seem impossible with a limited budget, but it still can be done with a little creativity and sacrifice.

The point is that you should set your deadline for your financial goals so that they aim high, but aren’t discouraging to the point where you will quit. If you aim high and still fall short, you will have achieved much more than if you aimed low and hit your goal.

4. Be Accountable for Your Actions: The best way to stay on track with any goal is to be accountable to someone. You can do this several ways by finding a friend who would like to accomplish the same thing, joining and posting on online message boards, sharing with your Facebook friends, or even blogging about it. Not only will making your goals public keep you accountable, but it will open your life up for helpful advice and encouragement. Can you imagine finishing your goal with no one to pat you on the back but yourself? How much more rewarding is it to receive several comments of encouragement from friends and family once you have reached your goal!

The main thing to resolve to when being accountable to someone or many people is to be honest through the good times and bad. Admitting failure does not mean you are a failure overall. Instead, it means that you are responsible for your actions and that you are aware of the change that needs to happen. When finding accountability partners, make sure at least one will be tough on you. You don’t need a, “It’s okay that you failed this month; I am sure you will do better next time” speech if you do fail. You need someone to be real with you and dish out the truth. Someone to say, “Yes, you failed. It’s not the end of the world, but if you don’t get your butt in gear and stop making excuses, you will end up in a financial pit that will put your family in financial harm”.

Make this year different by setting and keeping your financial resolutions. Write them down and be detailed. Break down your goal into an action plan. Give yourself a deadline and possibly a consequence or reward, and keep yourself accountable to people who will be real with you. If you follow these steps, I know you will accomplish your goal or at least come a lot father than you have ever come before.

This post was written by staff writer Ashley Eneriz.

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Healthy Lifestyle Change #1 – Eliminating Soft Drinks

John S. — Wed, 01 Feb 2012 11:32:04 +0000

I have decided to make a conscious effort this year to start living a healthier lifestyle. For starters, my family has decided to phase out as many processed foods from our diet as we can. We are consuming more natural and whole foods like fruits, grains, vegetables (i.e. kale), and beans.

Over the course of this next year, I plan to make plenty of healthy lifestyle changes. The combination of all these changes should help me stay fit and healthy as I approach 40 years of age. I am very concerned about rising medical costs, which is why I am really starting to pay attention to my family’s health.

The first healthy lifestyle change I decided to make was eliminating soft drinks from my diet. There were plenty of days over the past couple of years when I would drink 3 or more diet soft drinks per day!

Healthy Lifestyle Change #1 – Eliminating Soft Drinks

One of the first things I cut out of my diet this year was soda, or “pop” as I called it growing up. As we learn more and more about the impacts that processed foods can have on our body, I am more inclined to eat foods that have not been altered by human hands.

After officially giving up pop at the beginning of this year, I decided to take a closer look at some of the ingredients found in my favorite diet soft drink. I am very glad that I did. Here is a list of some ingredients found in this product. I also did a quick internet search on each ingredient to see exactly what it was and gave a short comment about each..

Carbonated Water – probably not too bad for me
Caramel Color – sounds harmless at first, but government studies have now linked this ingredient to certain cancers
Aspartame – artificial sweetener (I am completely done with artificial sweeteners)
Phosphoric Acid – can help rot my teeth (nice)
Potassium Benzoate – food preservative
Natural Flavors – who knows what this is?
Citric Acid – natural preservative
Caffeine – too much caffeine is not a good thing

I am convinced that any product that is used as a preservative (i.e. potassium benzoate & citric acid) cannot be too good for my body. Artificial sweeteners (i.e. aspartame) have long been linked to cancer – I just didn’t care too much when I was younger. When I read that consuming a certain ingredient can rot my teeth – that does not give me a warm feeling. When it comes down to it, there is zero benefit of drinking soft drinks.

After scanning this list of ingredients, I have decided that if I don’t know what something is or can’t pronounce it – it is probably not good for me. It may take a little time getting use to this lifestyle change, but it is one that will benefit me and my family for many years.

I firmly believe that living a healthier lifestyle will have a positive impact on my family’s finances in the future as well as provide a better quality of life.

Are you concerned about eating too many processed foods? What steps have you taken to remove them from your diet?

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A Review of Food.com – Your Online Cooking Resource

Melissa (Staff Writer) — Tue, 31 Jan 2012 10:54:34 +0000

Cooking often seems to be a lost art. My friend claims she doesn’t know how to cook; she limits her cooking to banana and zucchini bread and goes out to eat for lunch and dinner. She does go to low cost restaurants such as a sub shop or Chinese for lunch, and she splits her dinner in half so she will have leftovers for another night. However, she is trying to save money, and one obvious place is her food budget. Rather than investing money in cookbooks and cooking magazines, I suggested she start with Food.com, a free recipe website that truly has something for everyone.

Main Features of Food.com

Food.com has over 400,000 recipes that users have uploaded. The site is free to use, and you don’t even have to register. Simply type in a search term such as “chicken and spinach” and you will get hundreds of recipes.

Many recipes have been rated by registered users; I generally try to choose recipes that have a minimum of four stars (out of five).

Reading the raters’ comments is often helpful. If a recipe turned out dry, for instance, a rater might have suggested in the comments what he did to eliminate the dryness. Then other raters often comment on the change and whether it improved the recipe or not. Basically, reading through the comments takes all of the guess work out of making the recipe, which is perfect for my friend who doesn’t have much experience cooking.

In addition, Food.com offers many specialty features. The majority of my family cannot consume dairy, so I use Food.com’s filters to choose only recipes that are lactose free. To use the filter, once you have chosen an ingredient and see a list of recipes, simple click on “narrow search”. From there, you can narrow your search by type of meal (appetizer, main meal, etc.) as well as dietary exclusions, cuisines, and occasion.

I have found some excellent recipes for freezer cooking using the search term, OAMC (once a month cooking). Several of these recipes are “dump” recipes where you put a meat, such as chicken breast, in a freezer bag, dump in a sauce, and freeze. When you are ready to have the meal, simply put it in your slow cooker to cook while you are busy during the day.

Benefits of Joining Food.com

While anyone can use Food.com, it is free to join. Joining gives you several benefits including the ability to rate and review recipes, save your favorite recipes, and create your own cookbooks. You can save even more time with the ability to create your own weekly or monthly meal plans in Food.com. There are also 50 forums that you can join as a member.

Whether you are a seasoned cook or a novice like my friend, Food.com has something for everyone. There is no need to have cookbooks littering your book shelves when there is a resource like Food.com available. I use it nearly every week to plan my family’s meals, and my friend has found it a great resource. Cooking at home saves money, and a site like Food.com makes it easier to put delicious, healthy food on the table.

This post was written by staff writer Melissa.

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What is the Best Investment Option – CD’s or Dividend Stocks?

John S. — Mon, 30 Jan 2012 11:20:06 +0000

What is the best investment option to earn passive income? A certificate of deposit or dividend stock? My wife and I have money invested in both. Here is a breakdown of the pros and cons of each and a explanation of where we are moving our money in this low interest rate environment.

Investing in a Certificate of Deposit

Investing in a certificate of deposit (CD) offers plenty of advantages to an investor, including the following list -

FDIC Insured – Investing in a FDIC insured CD will guarantee the protection of your money up to a certain limit.
Fixed Return – Investors will always earn interest off their investment, although it may not be very much.
Passive Income – There is no better source of passive income than a certificate of deposit. Once your money is invested, you can simply sit around and wait for it to expire.

There are certainly plenty of reasons why investors may want to choose a CD to invest their money. However, there are also a couple disadvantages which include -

Poor Return – CD rates are horrible right now, making them unattractive to most investors. The thought of earning less than 1% on my investment makes me sick.
Locked in Term – Regardless the term, investing in a CD locks your money up. Pulling your money out before the deposit account expires will cost you a penalty.

Investing in Dividend Paying Stocks

Another option for investing your money are dividend paying stocks, which can provide a steady income stream. Here are a few advantages -

High Yields – Investing in dividend paying stocks can produce much higher yields compared to a CD or savings account. Even when interest rates are high, a good dividend stock can still probably return a higher rate.
Capital Gains – If you own shares of stock that pay dividends, there are two ways to build wealth. Besides earning dividend income as a shareholder, investors have the potential to earn capital gains when the stock price goes up.
Liquid Investment – In most cases, the money invested in the stock market is liquid. This means you can sell your shares at any time without paying a penalty.

With the good, there is always some bad. Even though dividend stocks may offer better returns than other high yield investments, there are some disadvantages to consider.

No Guaranteed Return – Unlike a CD, you are not guaranteed any return on your money when investing in the stock market. In fact, you are not even guaranteed to get your initial investment back.
Highest Dividend Paying Stocks – It may be tempting to chase a double digit yielding stock. There are companies that actually have double digit yields which may be a tempting option. In almost every case, these stocks are actually risky investments and should be avoided.
Commissions and Fees – If you plan to buy stock, then you will probably have to pay a commission to your broker. Depending on the amount you invest, the commissions charged can make up a big percentage of your total investment.

My Best Investment Option

I have always preferred to invest most of my savings into CD’s because of the security they offer. However, as interest rates remain low, I have started moving money out of our CD Ladder investments and into dividend paying stocks as we work to build our dividend stock portfolio.

Many of the CD’s that my wife and I opened up in the past had been earning over 3%. Now that they are beginning to expire, the rates are below 1% – which is not good enough. Because of these low rates, we have started moving our money into the stock market. Our first move was this week when we transferred $1,200 from an expired CD into the market.

For more information on how we are building a low risk investment portfolio of stocks, check out my other site called BuyStocksOnlineInfo.com.

Where are you investing your money today? What is your best investment option in today’s economy?

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