Thursday, December 28, 2006

A little extra pt. 2 (budgeting)

So here we are at the end of another month and the New Year rising fast to meet us. End of the month brings with it the ongoing cycle of bills. As I wrote in (part 1), several of my extra nickels and dimes get thrown as extra on my mortgage. It just rubs me to be in debt. Don’t get me wrong, I really like my house I just wish that ALL of it was my house. One day.

There was an interesting comment left on part 1. In short it wondered if I would not be better off to invest instead of paying extra on the house. Well I was pretty sure I knew the answer but after spending a morning with the calculator I found was wrong. It is far better, for me, to max out my ROTH than use that money as extra on the mortgage. The greatness comes in the tax free compounding. If I was putting that money somewhere that I had to pay taxes every year out of it then the benefits narrows.

It doesn’t really matter because I didn’t max out my ROTH this year. So here’s the bottom line starting in January I am shifting my primary focus to maxing my ROTH before sending extra to the house. (Mentally I am just going to have to adjust to seeing the mortgage drop slowly. I still hold out faith that I can get some extra on the house during the year. We’ll see.) I would like to take a minute and thank the person that left that comment. Your comment made me take a fresh look at the numbers; I appreciate your time in leaving the comment.

Do you max out your tax advantage accounts every year?

That’s it for today. Here’s to leaving interesting comments and to keeping an eye on your EveryDay Money.

part 1

part 3

1 comment:

Grant said...

Great post! I'm pondering the same thing, as a matter of fact. My goal for '06 was to max out both our Roth accounts (my wife and I) but I fell just short. (Actually I still have a couple months to max out the '06 funds).

My predicament is whether I should refinance or not... Are we going to stay in the house for a while, or move...