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.

The final goals results have been calculated, and the result is that all “primary” goals ended the year “Green”, while none of the stretch goals were met (“Red”).  Below is a summary of the actual results:

Primary:

• Invest at least 40% of net income (not including 401(k) contributions).
  • Goal Amount: $31,163.84
  • Actual Amount: $31,338.78 (Goal Met)
• Contribute federal maximum into a Roth IRA account.
  • Goal Amount: $5,500
  • Actual Amount: $5,500 (Goal Met)
• End the year with an 8 month of emergency fund.
  • Goal Amount: $30,341.05
  • Actual Amount: $33,710.22 (Goal Met)

Stretch:

• Invest at least 45% of net income (not including 401(k) contributions).
  • Goal Amount: $35,059.32
  • Actual Amount: $31,338.78 (Goal Not Met)
• End the year with an 8 month emergency fund, plus an additional $15,000.
  • Goal Amount: $45,341.05
  • Actual Amount: $33,710.22 (Goal Not Met)