Checking/Savings - Every Last Penny To Mortgage?

[heydude]

I am at the point where I can now push every last extra penny each month in to paying off my mortgage early.

But I am really confused as to how to best push every last penny in to the mortgage.

For instance, once I get paid,
I have set monthly expenses that I know I need to account for. And so, ideally, after subtracting those, I'd like to make a payment right then and there on payday to my mortgage as extra payoff.

But, there are expenses that are like yearly, say a $500 yearly expense, or something else unplanned, that may come up.

I have a set amount for emergency fund.

So, do I just simply increase the emergency fund / high yield savings a little to account for the extra expenses?
But, that means I'm witholding a certain amount that could go to pay off the mortgage.

The thing is, every single penny COUNTS on paying off that mortgage. To have some extra just sitting somewhere, be it checking or savings, is just so wrong to me.

How do you get every last penny in to mortgage without messing with your set emergency or any other expenses that you do not know about totally.
????

[cattledog]

My DH and I leave a float of about $1K in our checking account to handle those unexpected things (car parts, emergency dental bills, etc.). This float is separate from our emergency fund. I subtract what we will need to purchase for each month from that month's paycheck. Whatever is left is what I put in our investment account. If you're single, you may not need as much money in your float. If we dip into the float, I will try to make it up in other areas the following month to bring it back up to $1K.

I realize that an investment account is not the same as throwing it into your house, but the same kind of principle applies. It works for us anyway. It helps that neither of us are frivolous spenders, so that money isn't burning a hole in our pockets.

[lmerullo]

I would say that a good budget should also allow for a yearly expense... take that hypothetical $500 you mentioned. That $500 would be divided into 12ths and added to the monthly budget amount - in this case: $41.66 monthly is set aside for the expense. It is not an "emergency" - it is a true budgetary item.

Therefore, I would say that you should have an emergency fund of $1000.

THEN, over and above that, a fund equal to three - six months of expenses. If your health and employment are stable, go with three. If not, go for six.

AND THEN, send all your surplus funds to the mortgage. It sounds as if you have an emergency fund, but not the extra "cushion" fund of expense money, yes?

At least, that's how I would do it.

[Kat]

This is a really timely post as we are getting ready to do a big mortgage push, too. We have sort of done what lmerullo and cattledog do; we save monthly for yearly expenses that we know about and have some general savings for the rest. We also have an emergency fund that we don't touch unless we absolutely have to. I know it kind of stinks to have that money just sitting there, but personally, I would rather set that aside at the start than have to break the momentum later to pay unexpected bills.

Maybe you can post here about your mortgage payoff progress and we can support each other. Everyone in real like thinks DH and I are insane. ;-)

[Zoebird]

This is what we did when we had the mortgage: payment at the end of the month.

Pay day was first and middle of month.

After student loans were paid off (DH's) his first pay check was for expenses -- even though we had them split between first and middle of the month. We would do house, HOA, car at the first, and then for the middle, power, water, phone/internet. For each check, a certain amount was available for food, entertainment (very small budget, btw), and gas. After this, we had a savings amount that we put into the emergency fund AND the regular savings. Regular savings would be used for emergencies if we needed it -- usually we didn't. Emergency fund was for 3-6 months expenses saved up. Once we had 6 months expenses saved up, we extended that to 9, then to 12, and felt confident there. We then were just putting into savings.

Anything that was left over was pushed into a "suffix" account (which were free at our credit union -- and needn't hold a balance). on the last day of the month, DH would make a payment.

Because our mortgage was held by our credit union (we asked them to refinance it for us, which was great, because then we could pay online very easily -- and we got a great rate, etc), he would simply transfer the funds on the last day of the month -- and that would go to the principal.

Some months it was low, some months it was high, but it worked well for us. Because then we knew how much was going in every month and we knew that everything else was covered.

I don't know if your bank/credit union or whatever has those suffixes, but it was really great for us.

It's how we manage my student loan business now. I have the automatic payment from account X, which is attached to the savings that holds the monthly payments in a large sum (and collects a greater interest) with overdraft protection, and we move over each month the payment into the auto-payment account, and they take the payment. That account sits at the minimum balance most of the month ($5) which keeps us from paying a fee.

Any money that I want to save up to put into the CD when it rolls over i keep in a suffix account to the savings. This suffix account is essentially the savings account, but i'm keeping that money set aside so that when the CD rolls over, I know exactly how much I can transfer into that CD. When the CD has enough money in it and comes due, I"ll then go and approach the credit company to pay off the debt in full.

It's going ok so far. The last 3 years I haven't added much to it, and it makes me very frustrated and sad. But, we are doing well enough to support ourselves here AND the business is self sufficient, and it's only a matter of time before i'm growing that suffix again.

Our credit union is our favorite thing, I think. I love that credit union.

[heydude]

Thanks for all the ideas!

I have decided to push every last penny in to mortgage. If an added expense comes up, I will move a certain amount from the emergency fund (not that much) and simply replenish it once I get paid my extra paycheck which happens twice a year. (Two months out of the year, I get paid 3x in a month).

This will work for me because #1, I'll never have any extra in my checking account which will maximize my mortgage pay off and minimize my spending (you can't spend money when you don't have it there sitting for you). and #2, it will decrease my spending of extra things because I do not want to borrow from my emergency fund. It will have to be dire in order to get me to do it.

SWEET!