Thursday, December 6, 2012

The 2013 budget

All of the nitty gritty budget information is coming up, but first I just want to say that I . . . feel so good! I've been working on my Christmas giving (the donations that I want to make with the remainder of our holiday budget) & I've been loving it! I picked three names off of the giving tree at work, & tried to choose kids who were similar in age to my boys. The boys & I went shopping last night to purchase the items - a pillow pet & a beyblade. I loved their enthusiasm & excitement to help someone else. And, a friend posted on Facebook last night about a family in need, so I mailed a check. It was small, but it just made me feel so dang good inside. Sometimes I need these reminders of how lucky we are as a family, & how important it is to help others this time of year. The rest of the money will be sent to the local food bank!

As you might remember, I had all kinds of fabulous plans for the 2013 budget. Then, we had to come up with $16,000 in two weeks, and I was sent back to the drawing board.

Picture me here with a super grouchy look on my face.

After an appropriate period of feeling sad that my beautiful plan was blown to bits, I went back to work. The best part of setting the budget this year is that I dutifully tracked all of our expenses in 2012, & actually know how we spend money. This is a huge change from prior years, where I kept a rough list of what I wanted to spend in each category, but never actually tracked it. And, I'll let you in on a little secret - - there was a big difference between the two. :-)

2012 was a fabulous year, but it was also very expensive. We're buckling down in 2013, & have lots of areas for cutbacks. By bringing our monthly expenses inline with our ACTUAL monthly income (vs relying on bonuses & stock vests), we obviously are being more fiscally responsible, but when those bonuses/stock vests come, we can take those sizable chunks & use them to make big progress on our other priorities: mortgage pay downs, college funds, travel, & remodeling our house. It will definitely be a challenge, but worth it.

Rather than dumping the entire budget categorization into one post (there are 22), which I'm thinking will bore you silly, I thought it would be more fun (ha, budget fun :-)) to cover one topic per day in December, & cut to the chase today. If we follow the plan I'll be outlining for 2013 stick to our budget numbers, we'll be cutting just over $2000/month off of our standard expenses, not counting any potential changes to our refinances.

And, without further ado, here's the first budget category topic:

Home mortgage/interest rates:

We are hoping to make substantial cuts in our interest payments (via our mortgages) by refinancing. Rates are crazy low, & I think it will payoff, but we're working with a broker & running the numbers. Given our extensive investments in real estate, even a small rate change can make a huge difference over the life of the loan. Although this is not counted in the aforementioned $2K/month in cuts, we're hoping to be able to shave $700 or $800 off of our interest payments per month.

And, a little analysis of the "why" we're making changes to this budget category:
This one is easy. Who wants to spend extra money at the bank? Other categories will be infinitely more interesting & up for discussion. Our incentive - if we are able to secure lower rates across both properties, it's much more likely we can keep our vacation house.

Who wouldn't want to keep a house where this is right outside your door?

How is your 2013 budget planning coming? Are you ready? What areas are you planning on cutting or increasing?


  1. Hehe, you're gonna kill us with suspense. Perhaps if you put at the end or beginning of the post which ones you've talked about, so we know what's been covered, or give us a list of all 22 so we know. I know I'm quite likely to lose track. I only have 5 categories at best, so this should be interesting! I'm increasing my food budget by a whole $10 (go me!), and planning to save more from my pt job, with the good faith hope of saving for a car... maybe not for 2013, but definitely by end of 2014.

    1. Ha ha, so true! I would totally lose track. Yes, I'll definitely link up to the others & recap. :-)

      Yeah for an increase in the food budget!

  2. I just went to the bank to get all the information for us to refinance. It took forever!
    We are at 5.125% now and could lock in at 3.65% for a 30 yr loan. If we went to a 15 yr loan, we could get 3%.
    Bless my FIL, he is a CPA and really helped me with it. The problem is we have been making anywhere from 2-5 extra payments a year. Well it isn't a problem but it makes it more confusing.
    In the end, we aren't going to refinance. Because of the extra payments, we are at the point of paying off more principle not interest. It would take us almost 4 years to get back to knocking so much off. In four years time, we will be close to paying it off. Well with in 5 years of having it paid off.
    We will actually save money even though we are paying more in interest if we leave it alone.
    Ok now that I have bored you with my details, we can talk about how awesome it is that you are tracking everything and cutting back. I did an unemployment budget a few years back. And it wasn't pretty when we started. But we did find a way that we could keep the house and live on it. Over the years, I have changed our real budget to mirror the unemployment budget.
    OK I'll shut up now! I'm just so proud of you. Once you get started and see results, it is so much FUN! I really need a life.

    1. It's super helpful to hear how other people approach a refinance. We're one year in on a 15 yr (vacation house) & about 7 years in on a 30 yr (primary), so there are definite savings on both. In your case, totally can see how it wouldn't make sense.

      Also, our mortgage tax deduction has been phased out (one of the draws of buying the second house) & I want to be prepared for additional cuts - the faster we can reduce our overall interest payments, the better we'll be. How nice will it be to pay interest on nothing? :-) We don't have a car loan, credit cards, or student loans, so the mortgages are all that's left!

    2. I was really shocked when the women at our bank even wondered if it was a good idea to refinance. And because they were so honest-we will never go anywhere else!
      We don't have credit card debt(well we charged the appliances at 0%, we have the cash to pay them off but I like "using" the credit card company!) and no car payments or student loans. We do have one in college though. We will be living the high life when we are done with that. Everyone that I know that has gotten their kids through college and are done paying for them says that it is like hitting the lotto. It will definitely free up some cash. I can tell how much it effects the monthly bills with just having one gone.

    3. That is awesome (about the lack of debt) & we reached a similar "lotto like" phase when we stopped having to pay for full time day care. Savings? Over $2K/month. Yeah, baby! We turned around & put it into real estate (a vacation house). We're those people that do really well with structured expenses, & less well with a large monthly cash flow. We're trying to be better, but we knew buying the vacation house would ensure the money was being invested in something (real estate) vs being spent on random monthly expenses. We've been moderately successful. :-)

  3. Hawaii, I'm in this line of work so I would love to see a separate post on the specific numbers for refinancing. Given what mortgage rates were a year ago for a 15 year fixed mortgage, I don't see how they've dropped enough to make refinancing worthwhile. A year ago, rates were around 3.25 to 3.375% for a 15 with good credit (even for a vacation house). They are now around 2.5% to 2.625%. I don't see how dropping 3/4 of a point would be beneficial given the closing costs. Given that you are 7 years into a 30 year mortgage, I would think your rate would be around 5-6%. You could probably drop to a 15 year for close to the same payment if you are around 6%.

    Please post for us the interest rates you're looking at, the breakdown of closing costs (estimated), and your credit scores. Maybe I'm the only one interested but I can't understand how some people are quoted way higher rates. Also, if you're doing 2 properties, make them lower the origination/processing fees. They will do it to get 2 deals for the same people. zz