PAYING OFF DEBT

The quickest way to pay off your home (don't we ALL desire to own a home and property free and clear?) is to pay extra Principal payments.

Take your Amortization Schedule.....if you do not have an amortization schedule contact your mortgage company or bank and request one......

I am going to list just a few lines of an amoritzation for demonstration purposes:

Due Date Principal Interest Balance
04/01/09 $284.52 $106.80 $19,432.49
05/01/09 286.06 105.26 19,146.43
06/01/09 287.61 103.71 18,858.82
07/01/09 289.17 102.15 18,569.65

(Sorry Blogger won't let me line up these figures. Hopefully you can follow the idea.)

When you make the April 1 payment include the next principal amount. This would make your payment $677.38 instead of $391.32 BUT you would save $105.26 in interest. Then on May 1 do the same thing: add $289.17 to the $391.32 - making a payment of $680.49 BUT you would save $102.15 and your accumulated savings on interest is now $207.41 AND you have cut two months off the term of your mortgage.

Granted this is easier to do at the beginning of a mortgage. For instance:

A 30 year loan for $100,000 @ 6% interest would have a payment of $599.56. The first interest would be only $99.56. In fact it would take you to the 222 payment (8 1/2years!! ) before you would be at an equal principal and interest of $299.77 & $299.79.

If you cannot do this each and every month just do it at often as you can. Even if you just make 2 or 3 extra principal payments a year. On a 30 year loan you have cut your mortgage from 30 years to 25 years and saved thousands of dollars of interest.

Another suggestion: if the added principal payments are too much for you to handle just add a set amount to each payment; i.e. $50 extra dollars a month. You will cut both the length of time to pay off the mortgage and the amount of interest you will pay greatly.

This technic can be used on any type of loan which has been written for a set rate, at a set amount of time, such as a car loan.

I have done this on every home we have ever bought. We have owned 7 homes during our 50 years of marriage. We assumed a loan on our current home in Coweta that had 25 years and 8 months left on the loan and would have been paid out on January 1, 2024. If I only pay the monthly payment and no extra going forward it will be paid in full on December 1, 2011. In other words I will have cut 13 years and 1 month off the mortgage and you can imagine the $'s we've saved in interest. Although it is more difficult for us to make extra principal payments now that we are both retired, I am able to do so from time to time and I hope to have it paid for in less time than the 2 years & 8 months remaining!!!!

As to any credit card debt you might have. You absolutely MUST make more than the minimum required amount or you will NEVER clear the debt. Just paying the minimum payment hardly touches the principal at all. That is what the credit card companies want you to do, but please don't fall for that trick.

MONEY SAVING TIPS

Here are two money saving tips.

We all want, and need, to save every possible way we can.

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AARP sponsors a Driver Safety Program. While it use to be just for people over 55 years of age, people of any age are now eligible to take the course.

SOME insurance companies will give you a discount for taking this course. Ours allows us a 10% discount on our car insurance policy, which in our case covers 3 vehicles and our 5th wheel. It was definitely cost effective and worth it to us to spent 8 hours getting this Safe Driving designation.

Be sure and check with your insurance company to see if you can reduce your auto insurance cost by taking this course.

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The Forever Stamp

In April of last year, just before the U.S. Post Office was going to raise the cost of a first class stamp from 41 cents to 42 cents, I bought a large supply of these Forever Stamps at the 41 cent cost. So while everyone is currently paying 42 cents to mail a letter mine are only costing me 41 cents.

The U.S. Post Office is once again raising the cost of the first class stamp. This price increase will be from 42 cents to 44 cents. The 44 cent stamp will be required beginning May 11, 2009. Anytime prior to May 11th you can purchase as many of the Forever Stamps for 42 cents a piece as you desire.

I will be able to continue using the current supply of stamps that I purchased for 41 cents each, even at the 44 cent rate. I will also be buying another large supply of the Forever Stamps at the now current price of 42 cents.