Everyone does New Year’s posts. Set goals! Lose weight! Make the pie higher! The old ‘Year in Review’ trope gets nearly as big a workout around January first as all the newly-devoted exercise nuts hard on their way to Resolution burnout. But it seems to me that looking back on an old year completed wouldn’t be as interesting without also taking a look at the new year already in progress. With one twelfth of 2012 under our belts, it’s fun to see how what we learned and accomplished in 2011 – beyond just checking off tally scores – is dramatically shaping 2012.
2011 was a very good year, to paraphrase Old Blue Eyes. It was our first full year as a married couple, and it was also the year we got out of debt. We made big strides on our home payoff goal, but also our savings and careers. If those seem like largely financial accomplishments, think how much these types of goals dramatically affect your personal life, relationships, family, happiness and peace.
- Doesn’t debt add stress to your relationships and undercut your personal outlook?
- Doesn’t saving money make you feel like you’re taking steps toward a real future, and add a sense of peace and security?
- Doesn’t making strides in your career give you pride, hope, and a sense of accomplishment (yeah, I’m talking to you too, Nurse Ryan!) when all is said and done?
So it holds then that financial goals, beyond their intrinsic dollar values, lead us where we want our lives to go.
The End of an (Indebted) Era: I’ll be writing in an upcoming post about the specifics of our (and by ‘our’ I really mean ‘my’) saga with debt, but to put a bow on it in brief – 2012 has the distinction of being our first year begun together with absolutely no consumer or personal debt. I paid off my car and student loans in 2010, but as of February first last year, we were still paying off personal loans of a few thousand dollars from our home purchase. (I realize that I referenced being debt-free last year; for some reason, those little loans didn’t register on my radar). Those debts were put to rest in August of 2011. Having them gone definitely let me release a mental breath I hadn’t realized I was holding. You truly do breathe easier with no debt! Plus, those payments added more power to our monthly cash flow.
But what to do with that money…
Saving and Spending…and Saving: Though it pained us greatly, we had to spend some money last year. I needed several thousand dollars worth of dental surgery to repair bone loss resulting from my chemotherapy treatments in 2007-2008 – it’s not an uncommon side effect, the chemo drugs had deteriorated the bone density and soft tissue in many areas, the jaw being one of them, and continued even after treatments stopped. We blew through my insurance coverage and paid about $4,500 out of pocket. The dentist generously let us pay ¼ at a time for four months (no debt!) and we were able to cash flow it 100% without touching savings. That came at a time when we were furiously striving to pay off the small personal loans, and by cutting into the budget a little more, we were able to do both. But the combination of dentist and debt made us realize that we wanted a little extra cushion in our cash savings. As we finished off those big payments, we dialed back on the mortgage a bit (gasp!) to up deposits into our savings. Fortunately, without those two large payments, we were able to pile it on like crazy and as of the end of January 2012, we have over 1.5 years of expenses in cash savings.
With that done, we turned our attention back to our mortgage…
Raising the Roof: Anyone who’s read us before knows our biggest (and most radical) financial goal is paying off our mortgage early. As I wrote this past summer, we’ve been making big strides on this front since we bought our home in June 2010. After the slowdown in the second half of last year for our savings push (see above), I’m delighted to say that as of the Feb 1, 2012 payment we are back in full attack mode, posting our first SEXTUPLE payment (six times our required monthly principle and interest payment). With that, we have cut a full ten years off our 30 year mortgage. The power is in getting above your minimum payment by any amount. Once you hit that for a month, every extra dollar has a dramatic effect. For example, that sextuple payment I mentioned – tho technically equal to six months of interest and principle – actually shaved ten months off our mortgage in one shot. I’m not up on the exact math but it works something like this: Our standard payment is only about 30% principle. Every payment above that ignores interest and puts 100% of that same amount fully to principle. So each extra month’s payment after the first cuts somewhere around two months off. It has the added benefit of reducing the next interest calculation as well. I get a gleefully evil grin watching the bank’s amortization calculator writhe in my grasp!
- The Takeaway – Apply this idea to the extent you are able, it is hugely powerful! Even $100 extra each month onto the principle of a standard 30 year mortgage will knock 5 to 9 years off the length of your loan, and tens of thousands (or more!) off the interest paid.
Be the Change: Many of you have seen Courtney’s posts about her GOOT business, as she creates beautiful clothes, gifts and accessories from repurposed materials (Valentine’s Day gifts on sale now!). What many of you don’t know is that she started a second business in 2011; her own music therapy practice called Music Speaks. She left the agency she had been with for three years, and was surprised that her first clients were set and ready for her, smiles on faces and ducks (and lawyers) in rows. It wasn’t the result of high-powered connections or deft networking, it was simply a matter of good work truly being its own reward. By focusing on the kids, teachers, and families she served instead of the bottom line, the work was waiting for her and the bottom line almost took care of itself. At the end of this first twelfth of the new year, she is working hand in hand with her students and their families and teachers in a way she thought might not be possible. She is able to do what she loves on her own terms, which has lifted a huge amount of stress from her life (and therefore mine). As for me…I’ll write about me later, this is already getting long. Don’t worry, I’m good.
So Feb 1, 2012 – the end of our first twelfth of 2012 – finds us in good spirits with our goals for our life and finances firmly on track. We’re happy and always grateful for our family, friends, health and home (and each other). It’s good to keep that gratitude in mind, wherever you are in your first twelfth. No matter what goals or resolutions you’ve set or how they’re doing (anyone got a new gym membership already gathering dust?), be happy that you’re here to set them – and the opportunity for an amazing next 11 twelfths is yours for the taking.