With rates at record lows, it may be time to refinance your mortgage – even if you recently closed on a new mortgage or just refinanced. I bought my house in 2012 when I thought rates “couldn’t get any lower”, little did I know a pandemic would hit the world and rates would fall off a cliff.

Though a local credit union I’m able to lock in a 15 year fixed rate of 2.65%, saving over 1% from my current 3.875% fixed rate.

This means:

• The cost of refinancing ($455) is paid for in about 3 months of the new mortgage in interest savings
• The monthly payment is a little less than I’m paying now
• I’ll save about $25,000 in interest over the 18 years left on my original mortgage if I didn’t refinance

What’s the catch?

I need to put about $6,000 in extra principal during the refinancing process to make these numbers work. But…

• It reduces the interest expense by about $1,275 between now and year-end with the new loan
• There’s no risk to my emergency fund by taking out the extra cash

For me, the pros outweigh the only con of dropping $6k in principal. And technically that just further reduces the debt and is not an actual “expense” on the financial statement.

In this post I will go into more details behind my income and expenses to show one of the contributing factors to the growth of my net worth every month. Hint: it’s not ONLY because of how the stock market performs!

To start, I make a pretty high salary (about $115,000 / year) which means after taxes I net about $6620 per month. Here’s my expense breakdown:

As you can see, on an average month after all my basic expenses, insurance, lifestyle costs, etc. I have about $4,100 remaining. Everything from this point adds to net worth because the remaining money either goes to bank accounts or gets invested. (Note: when I say I “net” $6,620 I’m not including 401K contributions, even though technically I never see the money hit the bank account.)

Here’s the breakdown of where the money gets invested:

If the stock market was flat for an entire month, my net worth would grow about $4,100 because my expenses are less than half of my net income (about 40%).

This is one of the reasons attention should be paid to not spending everything you make, since the remainder adds to your net worth, and ultimately your financial freedom.