This is officially the longest title in Maxwell Family history. Hooray!

I was reading Chief Family Officer this morning and stumbled on her post about starting an Infrequent Bills Account. We started a similar process earlier this year. I took all of our infrequent, non-monthly, bills (car insurance, life insurance, newspaper subscription, etc…) and figured their monthly payment. Then, I added up the amount we would need to set aside each month, and set up an automatic transfer from our checking account into our high yield online savings account. We’ve been budgeting this amount on paper for years, but now the money is physically moved. I also added a formula to subtract this amount from our weekly worth calculation. Now, we have a more realistic number for our worth calculation, and a better idea of how well we’re sticking to our budget each month. When a bill comes due, we pay it out of checking, and then transfer the same amount from the High Yield savings account into the checking. Or, better yet, we leave the amount in the High Yield account to continue earning interest, and treat it like savings. That way we’re paying our infrequent bills, and also saving the same amount each month. 

In addition to starting an Infrequent Bills payment system, this year we also decided to switch to a yearly mortgage pre-payment. Since we began our mortgage a few years ago we’ve always been able to make extra payments each month towards the principle. Earlier this year (during a pregnancy-induced researching spree) I discovered an article that described how combining these monthly payments into one yearly payment could reduce the span of our mortgage (can’t find the article right now, sorry). It doesn’t reduce the lifespan by a whole lot, but we will be able to pay off the mortgage a couple of months sooner this way. Plus, we generally prefer to pay a lump sum rather than monthly payments. To see if yearly rather than monthly prepayments would benefit you, check out this Mortgage Calculator.

Also, I have to mention that many financial gurus DON’T recommend prepaying your mortgage if you are locked in at a low rate (below 9ish percent). This is because you could probably generate more money by investing rather than paying off your mortgage early. However, a few of these finance experts understand that the mental benefit to paying off a mortgage far outweighs the loss of these investments. As Suze Orman says, “You cannot live in a tax return. You cannot live in a stock certificate. You live in your home.”

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