Financial ramblings about mortgages

As I mentioned in a post a few days ago I see 2011 as the year I my finances in order,  develop my comprehension of personal finances in general and a  get a sound understanding of the investment strategy options available to me.   A few years ago the very idea would have bored me to the bone, but having been forced to reassess my income vs outgoings with a fair amount of scrutiny and weigh up the true worth of any savings I have over the last couple of years due to state of world economics, I’ve had the kick up the butt I needed.

My first conundrum that I am wrestling with is that I am expecting to have a bit of extra cash come my way over and above my regular salary and I am trying to decide whether or not I should put some of it straight into my mortgage.  Putting it straight at my mortgage principal seems like straightforward way to reduce my overall debt and to actually own more of my house.

However there seems to be conflicting advice all over the internet.  Some people say that due to low interest rates you can make more from your money by investing rather than by using extra cash paying off your mortgage.  What I have found though is that these articles talk about that ‘low interest rate’ and concentrate on the interest charged only in the short term (as in over a year) where as the way I see it as I am at the start of my 25 year amortization period any money I can put in now will have huge implications further down the line. In doesn’t just save me money now, but it will continue to save me money every consecutive year here after.

As it stands each of my monthly mortgage payments has a portion going to interest and a portion going to paying off principal, the lower the principal the less interest I can be charged and the more of my monthly payment goes straight to paying off principal.

As I have had my mortgage less than a year, if I pay an extra months rent now in Year 1 I save the equivalent of 5 months worth of mortgage payments over the life of the mortgage.

A good website that helps to illustrate this is www.albertacreditunions.com you can put in all the relevant details and hey presto it gives you an idea as to how much money you could be saving. For example if I had a $100k mortgage at a rate of 4%  with an amortization period of 25 years and at the end of the 1st year I decide I can drop an extra $5k onto the principal the savings over the full length of the mortgage is a pretty staggering $7549.

It may not been money earned but its money saved at a return rate I wont get from any other investment, with zero risk.

 

Mind Mapping my way through 2011

Yesterday I mentioned that I was eyeing up a set of goals this year opposed to traditional resolutions. Some may argue that there is a thin line between setting a goal and setting a resolution, that really its all just about how you word it.  I say whatever floats your boat and gives you a sense of achievement is a winner.  Call it a flubabjub if it makes you feel any better.

But how do I come up with my goals?  Well I think about a few different areas of my life that are important (travel, money etc) and then I use a little piece of free software to have a brain splurge on a mind map.  I first used another mind map program at work, but you have to pay over $100 for it.  This other I one I found is FREE, and I think you’ll agree there is no better price.

The program in question is Xmind and can be downloaded for either Mac or PC here.    There is a paid version for $49 but unless you are planning on becoming a mind mapping Jedi the free one is probably enough.  I have some friends that don’t like the format of mind maps, they prefer a more linear set up of lists, and thats cool just like the resolution v goals which ever works for you is the best format. My preference for mind maps in this instance is that when coming up with a variety of thoughts on a few different areas that may interlink I like to have them all on one page rather than scrolling through a word-processing program.

So if you are goal setting for the fourth coming 12 months I recommend giving mind mapping a whirl.

2011; A New Year with no resolutions

That’s right, no resolutions, not one. Instead I have opted to concentrate on things I do want rather than things I don’t, goals and achievements that I would like to tick off as I journey through the year.

I have done similar things previous years and I find it a lot more gratifying to go through the year hitting each of these goals rather than concentrating on not doing something or concentrating on trying to do a specific thing to much.  So what kind of things am I talking about?  Well for a start I always approach each New Year with the desire to see a new city, the base line of travel goals for 2011.

Health? Well I know I need to drop a few pounds so that’s on the list, as is running a 10k this year.  The latter made the list last year, unfortunately the only one I did was on a treadmill in a gym and not a proper race, hopefully this year I’ll go one better.

I also have a couple of night courses on there, and I really want to be come fluent in a foreign language, due to the years spent studying it at school French is looking a likely choice, but then again I might surprise myself and go for something a little bit more uncommon.

2011′s goals though focus mainly around becoming more disciplined and educated when it comes to money. The last few years I’ve had my ups and downs like most people due to the roller coaster economy and yet I’m leaving 2010 financially sound (wellI think I am…). Despite it all I became a home owner for the first time in 2010 and there is nothing like a mortgage over your head to get you think about ways to minimize your monthly outgoings. 

While I’m not completely naive about economics and personal finance I’ve never had anything that you would call an investment strategy or really even any long term financial goals.  But this is the year all that changes.  I have already found a couple of blogs I’ll be pouring over in search of sound advice from those who are better at this than me:

• Youngandthrifty.ca a finance blog for generation Y with a particular insight into Canadian economics (perfect for me!)
• The quite brilliantly named punchdebtintheface.com which I’ll be honest I’ve not read as much of yet, but with a name like that its got to be awesome!

I may not be a millionaire by May, but if I’m a few dollars better of this time next year I’ll be heading in the right direction.

 

 

Nike + my way to 30k

Its the time of year when I should start making goals for 2011, but I have decided to go a little bit more short sighted than that.  Right now I need to kick start my running routine, which in turn should help kick start my whole fitness regime.  I unfortunately get stuck working miles away from home on a regular basis and it makes sticking to routines difficult, however it does seem like I will be in one spot for the next 30 days or so so I’m using this time to set a Nike + goal of 30km ran in 30 days. It should be easy enough, but I’ll be swapping in other exercise days in to my schedule to try and burn off some off the excess weight I have been piling on.

March plans; get fit, get rich, get organized

March is nearly here and I need to take stock and do a bit of planning.

My girlfriend is keen for the 2 of us to run a 10k this year, something I’ve not done since 2007 and at the moment I’m a long way off being fit enough to consider it.  Cue action point 1;

• Get fit(ter)

I had plans last year to get my finances sorted and make the step into becoming a home owner, something that I had sidestepped before as it just wasn’t suitable with the amount of moving about the globe I was doing.  Then when I was looking at houses with a view to buy I got made redundant.   When the cash flow stops, buying a house becomes a moot point. Action point 2;

• Get some kind of longer term budget together

Lastly and perhaps the most pertinent of the 3 is the fact that after being made redundant I decided to take a year away from my career, do a lot of snowboarding, watch the Olympics and take it easy.   That year is now about up the Olympics all but over and I have to decide whether or not I’m going to continue with the slackers lifestyle I have created for myself or get back in the throws of the corporate world.  And if the decision is yes, what I am going to do, and where am I going to do it?

It makes my head spin when I consider the possibilities, this time last year I had no idea I would be here, I have no clue where I will be next year but knowing where I want to be will be a start.   Time to put on the big boy pants and get my shit together. Action point 3;

• Get organized

Coffee, java, cup o’Joe, whatever you call it I need it

My name is thoughherder and I’ve been coffee free for 9 days.

There I put it out there.  But I’ll be honest I don’t like having to do it.

At New Years this year I decided that rather than think of something I was going to give up as a new years resolution I would come up with a selection of goals in various aspects of my life to aim for.  Kind of a what I can gain rather than give up idea, although it does involve giving stuff up its for select periods of time not life altering bans. Who likes a ban?

Travel, financial, education, health, fitness, social & random are the categories I chose and each task falls within one, it’s pretty easy when a category is entitled random to fit stuff in.  I decided that as part of it I would go 30 without drinking booze (health), the follow on from that was to think of other stuff I could give up for 30 days at a time and I decided on coffee.  Bad move. 

I have come to realize that I am too close to coffee and it all that is good about it. Some may argue that  this may be reason to move away from it and force some kind of abstinence but realistically I am never going to manage 30 days.  As I don’t drink bucket loads of the stuff, it’s not unhealthy so I am scratching that one out to being a really bad idea. 

Now pass the milk.