Several weeks ago, we were talking about the difference in the monthly payments between a 15-year mortgage and a 30-year mortgage. The 15-year mortgage has a higher monthly payment than the 30-year mortgage payment, but it allows you to save a ton of money in interest payments. You may be wondering if getting a 30 year mortgage, which has a lower monthly payment, and then adding additional money each payment would accomplish the same thing. Plus paying extra on a 30 year mortgage gives you the option to make the lower payment when you just can’t come up with the extra cash.
And the answer is a big fat probably not.
Yes, you can get a lower monthly payment with a 30-year mortgage. Yes, you can make additional payments on a 30-year mortgage to pay it off in 15 years. Yes, paying off a 30-year mortgage in 15 years will save a significant amount of money in interest.
BUT . . . do you really have the discipline to make that happen? Planning to pay off a 30-year mortgage in 15 years is the easy part. Making it happen is much more difficult.
How many people have had that same plan and had the discipline to stick with the additional payments for 15 years? The answer isn’t 0%. But it’s a lot closer to 0% than it is to 100%! Self-discipline is hard. The mortgage payoff illustration is just one example of how easy it is to make a plan and how hard it is to actually execute the plan.
The keys to personal financial success are very simple. Keep track of your money. Spend less than you earn. Have an emergency fund. Find ways to economize. Save and invest on a regular basis.
Every other life change you may want to make is also very simple. Want to lose weight? Eat fewer calories than you burn. Want to get more organized? Clean up your junk. Want to get that college degree? Go back to school. Want a deeper faith life? Pray and receive the sacraments on a regular basis.
Planning what you want to do is the simple part. Actually having the discipline to act on that plan is a lot harder. Just because something is simple does not mean it is easy to achieve. This could be said about losing weight, finishing college, getting organized, deepening your faith life or getting your finances in order.
So how exactly do you make a change in your life that seems really simple but is actually really hard to put into practice?
The best way to start is to do one thing each day that moves you one step closer to your goal. If you are trying to get control of your finances, start tracking every penny you spend each day so you have an understanding of exactly what needs to change. If you don’t have any idea of where your money is going, how can you hope to define any changes you need to make?
It’s fun to dream about being debt free, but that won’t happen for a long time. It’s also fun to dream about a time when you will have your retirement funded. It won’t happen this week or this month or this year. But if you don’t start with a baby step today it won’t happen at all. Success is the sum of small efforts repeated day in and day out.
The only way you’re going to make any long term progress is to begin by making short term progress. What can you do today to move in a positive financial direction? If you succeed today you have taken one small step in the right direction. If you add today to all the todays that follow, one small step at a time, you will get to your destination.
Track your spending for 60 days and put it into categories. How much did you spend today on giving, housing, food, transportation, clothes, entertainment, etc.? Tracking 60 days’ worth of spending allows you to have facts and figures so you can decide how to cut or reallocate your spending. It’s called a spending plan (since nobody likes the word budget).
Tracking against a plan helps you stay focused on those things that are important to you. Is it important to save for the kid’s college education or to buy a fancy coffee on the way to work every day? In our case, tracking our spending has helped us totally eliminate debt and have a simple lifestyle we enjoy, because we are able to do the things that are most important to us.
Reviewing your budget on a monthly basis allows you to see how much progress you are making on controlling and allocating your money to the important things. Once you get your day-to-day spending under control, you can tackle bigger picture items like paying off all your debt, paying off the mortgage, or saving for college and retirement. Success begets success and controlling the monthly income and outgo helps you focus on more strategic money goals.
Is your debt lower this month than last month? Do you have more money in your emergency fund this month than last month? Did your net worth increase this year over last year? Is your giving more generous this month than last month?
One things that helps when you are trying to get your finances in order is to hang out with people who have the same goals you do. If you are trying to cut your spending, hang out with your friends who are naturally frugal and not the people who spend money like it’s water trickling through their fingers.
Surrounding yourself with people who want to achieve or who have achieved the same goals you have means you have a natural support system. Their actions will help bolster your actions. Over time, their spending and saving habits will seem more and more natural to you.
It is also important to celebrate your success. When you read Your Money Counts, you’ll see that we are big believers in celebrating success. In a small way. When you pay off that first credit card, celebrate. For your very next dinner do something special—like lighting a candle on your dinner table and thinking about how much money you are saving by eating at home!
When you accomplish your next financial goal—like paying off that 2nd credit card— celebrate again. Maybe you can have a sundae at the ice cream store. Once you get all of your credit cards paid off then you can go out to eat at any nice restaurant where you can each get a meal for less than $20!
Celebrating your short term successes and achievement of milestones is a fantastic way to feel great about how things are going, but that celebration should not undo the progress you’ve made. If you’re trying to improve your financial status, don’t celebrate your success by overspending.
Simple doesn’t mean easy. Creating a plan to fix your finances is simple. However, executing the plan is hard. The choices you have to make are hard and they go against the influence of our materialistic society.
Of course, the easy road is usually the one that puts you in a place where you don’t want to be. Perhaps it’s time to try the harder road … the road that Jesus outlined over 2000 years ago … you may just find that the harder road isn’t quite as hard as you thought.
1 John 2:17 we read, “Yet the world and its enticement are passing away. But whoever does the will of God remains forever.”
Question: What financial goal are you working on today?