A year and a half ago we decided to begin our debt free journey. A year and a half later, we’ve paid off everything except the mortgage of our primary residence. The journey is far from over because we want to be completely debt free and there are other things that we need to work on before we can focus on the mortgage. It’s time to take a look at where we are now and next steps in our financial journey.
1. Refinance The Mortgage
We applied for a refinance months ago through our current mortgage lender and the process has been…annoying. It has taken several months of back and forth questions and one off document requests, but we have finally closed and now pending the loan to be funded.
We went back and forth on this a bit because we started to question whether it made sense to refinance considering we are aiming to pay the mortgage off quickly. The closing costs take the loan right back to where we started and that felt like a punch to the gut.
But after much consideration we decided to move forward because, well, we can’t predict life. Although we have the best intentions to pay off the mortgage within the next few years, if life throws us a curveball, at least we have the benefit of a lower interest rate.
2. Build Full Emergency Fund
We started adding to our emergency fund (EF) soon after paying off the last non-primary mortgage debt. Our goal is to save 6 months worth of our bare minimum expenses and we are approaching this with the same gazelle intensity we used to pay off debt. Well, close to the same intensity.
It’s important and necessary to have an EF. Otherwise, every emergency will put us at risk for debt. So this is priority number one.
3. Increase Retirement Contributions
Once the EF is fully funded, it’s time to ramp up the retirement contributions which we decreased to the bare minimum just to get the company match. We now have to decide what retirement contributions look like and what vessels we will use but whatever that is, our total retirement contributions must total 15% of our income moving forward.
4. Contribute to Roth IRAs
We each have a Roth IRA that we haven’t contributed to in years. This will be included in the 15% of total income invested. It’s time to get these Roths working for us so that we can forge forward to retirement.
5. Pay Ahead On Mortgage
The goal is to get a few months ahead on our mortgage. We are 2 months ahead now and when the refinance is final, we’ll aim to get a couple of months ahead again. We like the peace of mind in knowing that if anything comes up, we have a few months of cushion. If necessary, we could stop paying the mortgage for a couple of months and redirect those funds without becoming delinquent.
Where We Are Now And Next Steps In Our Financial Journey
That’s the list of the next steps in our financial journey for now. There are more short term and long term goals, but these are the heavy hitters. In order to stay focused and not get overwhelmed, we will target the above 5 goals over the coming months and adjust as needed.
What financial goals are you planning for 2022? Do we have anything in common with you?
With Intention,
Sean and Simone
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