I May Have Commitment Issues (or What's the Deal with 30 Year Mortgages)?

 

So maybe I have commitment issues (anyone else out there?!) but....30 years is a lot of time. It's a lot of time to think about being in the same place for instance. Having lived in my current home now for 3 years, I can honestly say it's the longest I have lived in one place since childhood. College dorm life leaves you feeling a bit nomadic- moving in and out every year, followed by a series of apartments after college and into graduate school. Having finally taken the plunge and purchased our current abode I am finding myself a huge convert to home ownership at a time when renting single family homes is on the rise. Those who are renting cite the flexibility of being able to move neighborhoods and cities with an ease that is not typical of homeowners.

I get the not-buying movement. Not only do you avoid the commitment, but there is also the benefit of not having 6 figure debts to pay down. Let's be real- buying a home is one of the biggest financial decisions a person will make during their lifetime. It's a huge purchase. While banks and mortgage lenders want you to have 20% down, most folks don't have that initially. If you don't have that up front you can end up paying a high amount of mortgage insurance just to get your rates down (PMI, it's called). It can be a LOT to take in and it's not a surprise that more people are shying away from it. Also who wants to be paying on the same gosh-darn mortgage bill for the next 30 years anyway??!

 

 

The Argument for Holding Off on Paying Off Your Home

There is advice out there indicating that it's bad financial planning to pay off your home early. Not to sound like a conspiracy theorist, but many of the articles I saw were completed by financial advisory companies, banks and mortgage securities firms- people who benefit directly from long mortgages to increase their profits. There were however, some good arguments from sites/advisors that I trust, to hold on to your mortgage. The common wisdom held is that if you are paying all of your extra funds into your mortgage, you are not saving adequately for retirement.  I recently met a couple in their 40's with no retirement savings. Their home was almost paid off, but with no 401K or Roth accounts, they were missing out not only on tax breaks, but on all that compounding interest and revenue generation over time. If you funnel all of your money to pay off your home, chances are you will be spending the later years of your working life, trying to catch up on your retirement contributions and than because TIME is a major factor on the growth of your investments you will be out of luck as far as reaching the retirement number you need.

The other argument is that your money, IF invested wisely, and IF the economy remains good and the stock market continues to rise, you could make more money overtime on returns from your investments in stocks than you could on your home. 2 reasonable points- that I am willing to toss completely out the window of my Frugal Rock home.

Why I am Planning to Pay Off Our Home Early

1. We are on track for our retirement goals

If you are not currently saving for retirement or are not on track to meet your retirement goals, I would not recommend spending exclusively on debt, mortgage or otherwise. Even while you are paying off your student loans, you should still be making contributions to your retirement accounts- the earlier you start the easier it is! Frugal Rock is pretty lucky in that we had the ability to pay down our other debts in the past few years and since early 2015 have been car loan and student loan free. While luck has been part of it (finding good jobs, not having a lot of unexpected expenses), a solid plan to pay over and above the minimum also helped us pay those off early. It's felt so good, that we have no plans of taking out car loans in the future. As mentioned in an earlier post we are putting about 20% of our income towards retirement and are saving additionally on top of that- with an ultimate goal of early retirement (though hashing out that age is still uncertain).

2. Increased Financial Independence

I am a dream-big, kind of person. This has it's upside and it's downside. The upside is, that I often take on projects or goals that no one else wanted and feel a huge sense of accomplishment in making an idea, a reality. On the downside, I often have the grass is always greener mentality and romanticize the future, way more than is practical. That being said the idea of being completely debt free, seems to conjure up all sorts of ideas for me- like giving us a high level of freedom/flexibility. Idealistic? Maybe. But here's my thinking...currently our mortgage is a single, largest expense. With that taken care of, I imagine that we would be able to explore other options for our future- like working less, or if not working less, saving more towards retirement...in the hope that we could retire early. The great thing about the future, is you never know what it's going to bring! With minimal debt, including our mortgage, I believe strongly that this will give us the ability to take advantage of opportunities, as they come our way!

3. What do those numbers look like anyway??

Currently, we owe a balance of $133,785.33 on our mortgage. Including taxes our monthly payments towards our mortgage are a relatively low $863 a month. This is about $150 lower than when we rented- again in large part due to purchasing a smaller home than we could have afforded and being willing to do cosmetic upgrades ourselves! We have set aside a fund reserved for paying off the house early and already have about $20,000 put away- mainly from additional income/savings from 2015. In order to pay off our home in the next 5 years, we would need to save an additional $18,600 towards our mortgage each year ($1,550 a month). To pay it off in the next 7 years, we would need to save an additional $13,286 a year ($1,107 a month). Our current goal is to pay it off in 5 years, which is a major 'reach' goal. While we have cut some of our expenses to save more- there goes gym memberships and massages...we haven't cut out travel completely (though are being more frugal about it) and haven't given up other amenities (Netflix and Spotify subscription rank the highest on our list of extras, followed by Symphony Tickets...). When debt is over 6 figures though, it can be tough to get moving on it. How many of us looked at those student loan payments and thought- yep, that'll never get paid off... 

 

With a large debt amount, the main thing is to stay motivated on tackling the amount. Don't let yourself be discouraged by the numbers in front of you...even taking down a little bit of that debt over time makes a big difference. Give yourself little goals to stay motivated- I can't wait until my mortgage hits 5 figures. And more important, chipping away at it feels way more doable than the whole amount. What are your secrets to staying on track when your debt seems too high?? How do you stay focused and positive? Are you going strong?

Home UpGraddes (With 2 D's For a Double Dose of Frugality)

One of my New Year's Resolutions found in this recent post was embrace my love of travel, but find a way to do it, frugal rock style! If you're new to this blog, you may not know quite what that means yet, but in summary it's embracing a low spending/high saving lifestyle. While this may sound like in proportion to our spending less/saving more our fun would go down- decreased spending, decreased fun. Not true!

Last week, Mr. Frugal Rock and I were kicking it old school- road tripping across the country. We were gone for a week, visiting friends and family along the way. I hope to gather my top frugal road trip ideas for you for an upcoming post- so far the frugal highlights have been a well stocked cooler with prepared snacks and meals so we could avoid the fast food pitfalls (also saving $$) and make good time since we can eat on the road. A close second was all the books on CD we checked out from the local library. I would highly recommend 'What If?' by Ronald Munroe for your road trip pleasure...It's not my usual read but it's perfect for car rides as Munroe spends 10 minutes exploring a question in detail before moving on to the next one! Ever wanted to learn if sticking a nuke in a hurricane could stop the weather event? How about the statistical probability of finding your 1 soul mate? Or my personal favorite- how fast would a steak need to fall through the atmosphere so that it was cooked when it landed on the earth's surface? While these three questions were not on my personal 'need to know' list- the answers were entertaining!

But anyway...in the meantime, here is a new article on easy upgrades to your home or apartment that can make a big difference- while also helping to save you green!!

When I was first looking for housing we toured a lot of homes- I actually made Mr. Frugal Rock and I clipboards with checklists of home features we were interested in and we took a lot of notes on the houses we liked. Without fail, the ones that stood out had nice upgrades that set it apart. Some were expensive upgrades that the owners probably never made their money back on selling the house, but others were easy ones that when we bought our home - we made sure to do right away. To save you the trouble of touring a whole mess of homes, here are my top 3 upgrades that you can do now! 

Keyless Schlage Deadbolt Locks

1. Upgrade to Keyless Locks

Never need to carry around keys again? Why yes please! Keyless entry pretty much rocked my world, and has led to me not carrying house keys 99.99% of the time. Keyless entry is very simple, you install the locking mechanism very much like you would install a normal door handle or deadbolt. The lock is battery powered so no electrical expertise is necessary. A major plus for me! At the Frugal Rock home, we have installed the keyless deadbolts on our front and back doors and use this exclusively for locking/unlocking. Since installing two years ago, our batteries are still running strong, since they are only engaged when you hit the keypad, very little power is drawn. Being a little bit of a nervous homeowner (did you hear that noise?), I did wonder about what would happen when the battery went out, but the operating manual assured us that it would annoyingly beep at us when it was time to change the battery.

The second plus is you can change the code at any time or even have a code that only works during certain timeframes. For example, if you have someone who comes to your house during the day- babysitter, dog-walker etc. you can have a different code that they use that wouldn't work on a night or weekend. A one time code, is an option for some models, works well if you have workmen or movers coming to the home. It's also very easy to re-set so if for some reason you want to change the code, it can be done in minutes. It's made things easy for us if we have someone stopping by the house to just give them the code, as opposed to getting keys made.

The cost isn't outrageous either- you can purchase on Amazon or at your local hardware store. The Frugal Rock home uses the Schlage keyless deadbolt, which retails for about $85 bucks. Other models may be over $100, but I've found our model does just fine. Now if you are moving into a new home and want to re-key the locks without spending $50+ you can try a re-key kit ($12.99 at Home Depot) or replace your locks for about $30 a piece, however the lack of hassle of going keyless has been great and it's an easy and cheap upgrade.
　
* On a side note- as I mentioned we were recently traveling, which is always an adventure. We had planned to stay at least one night at a friend's home who was out of town. We had a key in hand, and upon arriving couldn't get the key to work. After trying it in every exterior door (probably looking like we were 'casing' the joint) we surmised either the key had been made wrong or we had been given the wrong key- not hard to do by any stretch of the imagination. Keyless locks would have solved the problem, as we could have just called and gotten the code. Just a thought for you Air BNB folks out there!

2. Ditch the Dated Light Fixtures

Is there anything worse than a ceiling fan with faux wood blades?? How about the 90's trend of gilded light fixtures? Have great light fixtures- you probably hardly notice them, but bad lighting, and it's guaranteed to be the first thing everyone walking into your home notices. 

Replacing a light fixture is a homeowner must- as I learned shortly after we moved in...our bathroom light fixtures, and our bedroom ceiling fan were huge busts. Our bedroom ceiling fan was MASSIVE, way to big for the room, and the faux wood blades and gold needed to go! You can find great looking light fixtures without breaking the bank by checking out your local hardware or big box store- here Home Depot or Menards reign supreme. So Mr. Frugal Rock and I spent some time perusing both places before settling on the fixtures we wanted.

When touring homes, a simple feature we saw again and again was remote lighting in the master bedroom. Getting out of bed to turn out your overhead lights, is soooo 2008. We recently upgraded our bedroom with a ceiling fan that allows you to control the light and fan speeds by remote.

While ceiling fans or new light fixtures are often an under $100 upgrade, if replacing completely is out of budget, try upgrading your fixtures with a few tricks. Depending on the light fixture, you may be able to get away with replacing the bulbs to give the fixture a new effect- think replacing vanity lighting with a frosted bulb for a more elegant esthetic. If that doesn't work, don't underestimate the use of paint (yes, even on light fixtures) to make a big difference. You can paint metal light fixtures or old fan blades. If you are thinking of replacing them anyway, why not take a risk and see if you can salvage for just a fraction of the price of a new one?


3. Add Built-ins to Maximize Space

Small built-in's can really take a room from being ordinary to standing out. When we were house hunting and touring homes, I distinctly remember a home, that had a tiny kitchen but amazing, narrow, cabinetry in each corner that was built in. This increased function as well as created a key focal point, you hardly noticed the small area, because the space was so maximized.

I have fallen hard for built-ins in the past two years. Lucky for me, I have a few skilled trades folk in my family and Mr. Frugal Rock is pretty adventurous with power tools (also why we have a first aid kit always on hand). In our home, we added a large ceiling to floor built in bookshelf, that also acts as our TV cabinet, as well as built-in benches forming a banquette seating area (yep, that's the actual name for that type of seating- look it up!). The bookshelves and the benches were hand-crafted for about the same price as purchasing a removable option (think several bookshelves, or benches) but instead really makes the room look special. The benches also do a great job hiding all the junk that we store in them... they have taken on extra serving ware we rarely use and a plethora of other objects as well!

 If you have ever contacted a custom furniture company, you know that it can get really expensive quickly, but there are some key ways to save major $$ on the project. The first (and most obvious) is to DIY it. Now, I know a bunch of you are ready to leave this page thinking..."DIY...ugh, the trend that never dies..."! Give yourself some credit- while you may not be able to jump right in and build something massive, most tutorials have easy to follow instructions that break down every step along the way. Lack of power tools holding you back? Home Depot will often times let you rent the tools you need for a low price, which may be worth it if you can crank your project out in a few short days. Don't be afraid to ask around either, we've saved money in the past by borrowing specific tools from family and friends- and have shared what we have as well. If you are going to venture into the unknown, I'm a fan of http://www.instructables.com/, where DIY fans can upload instructions from the relevant to the insane. Prepare to do some digging, but it makes you appreciate all the creativity out there!

Mirrors in small spaces can help
the area seem brighter!

The other option is to purchase a ready-made item that can be made to look custom. When I began searching for a way to add a built-in wardrobe to our bedroom, I could not find anything more space efficient, low in price or as perfect for storage, as the Ikea Pax Wardrobe System. I kept mine 'as is' but there are plenty of examples online (check out this feature on Apartment Therapy), of more adventuresome design bloggers who have turned the wardrobes into expensive looking pieces of furniture. But isn't cheaper furniture well...cheap? I've been surprised with my wardrobe- the doors and shelving are heavy-duty and after two years show no sign of wear and tear. Having also purchased more expensive furniture that hasn't held up, I can attest to the fact that more expensive does not always equate to better when you are talking furniture!

If you definitely can't do it yourself, try utilizing independent contractors or a handy-person as opposed to a custom building company. Many construction jobs have 'off-seasons' when individuals may be looking for odd cash jobs.

Are you working on any home upgrades? What are ways that you have updated your home or apartment? Any secrets you have to save money on home improvements?

PS. If the title of this post leaves you wondering- check out the movie Idiocracy...you won't regret it.

Resolution Failure...(Or Why I'm Giving Resolutions 1 More Chance)

Having often made fun of 'New Years Resolutions' put me in a bit of a conundrum when starting this post. First, I am all about goals and setting benchmarks. Benchmarks help you to evaluate how you are doing, as you progress. However, as a long-tim gym member, I will admit to rolling my eyes, groaning and avoiding peak hours the first 2 weeks of January as people who made a new year's resolution to 'get healthy' in the New Year ambled around my gym using all the prime exercise equipment only to vanish a few weeks later (a bit judgy of me, I know!). I give people credit for trying, but calling something a "New Year's Resolution' almost makes it synonymous in my mind with a goal that isn't going to be followed through on. Like, if you are so serious about this goal- why did you wait until January 1st to kick it off anyway?? Probably not fair of me (sorry... not sorry).

In the spirit though of a fresh start, I'm going to give New Year's Resolutions 1 more shot. This is the last time though- if this time doesn't work, we are going to go our separate ways for good! With launching this blog a few weeks back, the timing is great to roll out what our financial goals are for the next year. But first, why have financial goals in the first place? I have found that while really important, managing your finances (especially long-term finances like retirement) get pushed to the backburner when other important life events distract us or get in the way. Having a tangible plan has been demonstrated to have more results. For example, 'save more money' likely won't have the same impact on your future spending, as setting a goal to save $200 each paycheck towards a fund for emergencies. Accountability is also huge, whenever you are starting a new goal, whether it be for finances or for getting in shape. I plan to check back in 3-4 months with a resolution update and let you know how things are sitting!

So with no further ado, the Frugal Rock Financial Resolutions for 2016:

- Do something with old 401k accounts. So this is a biggie. I have one retirement account from a previous job that I was at for about a year. The account only has a few grand in it, and it's been passively managed since that time. While I'm not 'losing' money, the current retirement account charges me a pretty high expense ratio (meaning they take a pretty large cut when money is made, thus cutting into my profits) and the actual investment options aren't great. My goal is to rollover the funds into another one of my other retirement accounts, so I have more control and also can avoid those high fees.

Time Commitment: LOW

Results: IMMEDIATE

-Find a way to reduce my commute by biking at least one day a week (or 52x in 1 year). I talked about my struggles with my commute in 2 recent posts (here & here) where I wanted to reduce both the time spent in my car and the expense/carbon footprint of my driving habits. In order to make this happen, I need to work on increasing my cycling fitness to enable me to be able to bike 30 miles in one day (my roundtrip commute) and have recently begun doing some research on electric bikes as a possible alternative to assist me in commuting this way more consistently.

**Update: I have fallen in love with an ebike at a local bike shop. After dragging Mr. Frugal Rock to check it out, I'm thinking we may be adding an electric to our bike arsenal in the near future- after watching for the price to drop post-holiday**

Time Commitment: HIGH- all that biking/training time adds up. If I do decide to purchase an ebike there will also be a financial commitment as well. I'm hoping that the amount I spend will be easily be countered by the amount I will save with reducing my driving commute/gas/car maintenance, etc. I'm also counting of the long-term health benefits of biking daily!

Results: SLOW- it may take me a bit to reach this goal- I currently am very comfortable biking half the distance, about 15 miles, but will need to work on getting closer to that 30 mile mark. In other words, after 15 miles I'm a sweaty mess (overshare!) so need to work on my stamina or install a shower in my office at work...

- Aggressively save to pay off our mortgage early. For me, debt is debt- while there are some good reasons to hold a mortgage, 30 years seems like craziness to me. If it takes 30 years to pay off a property, it makes me wonder if it was actually more than the person could afford. While that may be controversial, too many people become slaves to their housing payments (mortgage or rental) and aren't able to do the many other things they want to do because they are so locked in to that high payment amount.

That's why the Frugal Rock Household has a plan to be mortgage free. It's contingent on quite a few things- both of us maintaining our same day-job income, and our 'side' jobs continuing to help fund additional income for us. My hope is that if our home is paid off in less than 10 years, that it will give us increased ability to explore new career paths and investments, while also allowing us to sock away additional funds towards our dreams of 'early' retirement.

Time Commitment: MINIMIAL- now that a plan is in place. Each month both of us have automatic withdrawals from our checking account into our savings account. At the end of the year, we take the funds and decide where to place them for maximum reward/safest return (since we want to be able to access them in a few short years).

Results: SLOW

- Continue to explore 'side jobs', or as I keep seeing it identified as online, 'the side hustle'. Side jobs are a great way to increase income in a 'fun' capacity. It can literally pay to do what you enjoy, if not full-time, at least on a part-time basis. Some ways we did this last year was doing some contract work on the side (training for Ms. Frugal Rock, and machining contracts for Mr. Frugal Rock). Other side projects for revenue in 2015, included selling repaired items on Craigslist, like a snow blower we got for free from the neighbors that Mr. Frugal Rock, fixed and sold for a profit.

For 2016, we both hope to continue doing those side projects, while also looking at other ways to get our products out there. We've discussed starting our own Etsy page and also looking for ways for writing to be more than a hobby and possibly generate more of a side income by doing some free-lance work on the side...This one is more of a pipe dream right now, but it's good to have a 'reach' goal!

Time Commitment: EXTENSIVE

Results: Unknown and No Guarantee

-Embrace budget travel. I love to go to exotic places BUT have realized there are many great places within a days drive that we have never traveled to. This next year we have decided to embrace our love of camping/hiking and are limiting our travel to more budget options, staying with friends/family when traveling or hiking/backpacking. We've reserved a few places already for 2016, including a road trip to FL in January and our own private beach campsite looking over Lake Michigan in the summer. I feel calm just thinking about it!

Time Commitment: LOW

Results: HUGE (for our mental health ;) but easy to go overboard with spending, so we will have to be careful with this one!

What about you? Are you making News Year's Resolutions this year? Do you have any financial goals you want to make for 2016 (paying off your student loans, or car payments? starting that retirement fund?)?