Trim the Fat Tuesday: The New Year's Resolution

December 31, 2013

What is Trim the Fat Tuesday, you ask?

It's a new series for the new year, and it springs from my New Year's resolution to make one relatively painless tweak to our finances every week for the whole year. Each change should help us save a tangible amount of money per month — money that we can then either add to our savings or use to pay down our mortgage.

I know this doesn't have much to do at all with our garden or our food or the types of things I usually write about — at first glance, anyway. But a lot of what we do (or strive to do) is to live by our own hands, whether that is growing, preserving, and making our own food, renovating our old house, sewing our own clothes (ok, fine, our own costumes — so far), etc., etc. And if we really had our own way, we'd be living pioneer-style on a farm and not working at a job job at all. Or at least very much.

So it seems high time to start paying as close attention to the retirement cash-flow situation as we do to the seeds we start in their little cups on a dark January windowsill. Eventually they grow into something big and useful (and freeing), and I hear tell that money's kind of like that too.

I mostly sort of really hate money, by the way. I find thinking about it and talking about it mostly distasteful, actually. I'd rather be talking about books and theatre, and I'd rather be bartering than buying in that imaginary pioneer life, but that's not going to happen.

So the money thing here is not at all about amassing more money to buy stupid crap like cars and clothes and crackers with high fructose corn syrup in them. It's about about living more simply and frugally, seeing what we can do without and how we can save what we have — kind of like the way we garden and eat, but with the bank account. Because I want to stop trading my time for money eventually, and do what I want to do. And do it with as light a footprint as possible.

But if all that's a little vague and idealistic for you, then consider this. Last spring we refinanced our mortgage (yet again) to snag a 3.25% interest rate. The downside is that it's a 30 year loan, and that means I'll be 67 when the house is paid off. I want to retire when I'm 57, which is the age when I reach my maximum pension payout (thanks, Massachusetts Teacher Retirement System! — to which I am required by law to contribute 11% of my gross pay, so don't get in some Scott Walker-esque huff and hate me now).

The house really needs to be free and clear in 20 years, not 30.

A quick running of some scenarios on a mortgage calculator shows that if we increase our principal payments by $600 a month, we can lop 10 years off our our mortgage (and save $86,000 to boot).

If we put that $600 in our savings account every month for the next 30 years, we'd make about $243,000, assuming the .75% interest rate our ING account is currently pulling. (I know, I know, we could do better than that, but I am risk averse and really hate investing, at least so far. Baby steps.)

But if we plow the $3,350 a month we used to pay on the mortgage (the original amount plus the extra $600 a month) for the ten years of freedom we bought ourselves by using that $600 a month to pay it off early, we'll end up with almost $419,000 by age 57, (still assuming our .75% interest rate). If you are a math nerd or just kind of numbers-obsessed, you can lose a whole afternoon on an investment calculator, so approach it with respect.

Thus, the ultimate goal of my New Year's resolution: trim $600 worth of fat per month to pay down the mortgage by age 57.

That's a lot of numbers. So if you hate math and are not interested in this series, I won't mind if you skip the Tuesday posts in 2014. Feel free to stick with the chicken pictures and recipes. But if you are interested, maybe you want to give it a try along with us? And if you have an idea for trimming some budgetary fat, please share! I'm sure we'll need some fresh ideas and moral support along the way.