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Enough is Enough: " The beginning of 30K Saturday"

I’ve decided to go all stop on contributing to retirement savings, paying extra towards the principal on my home, and purchasing things that I don’t need — until I reach a goal to have $30,000 liquid in savings.

The impetus is the fact that although I am proud that I contribute heavily to retirement, and pay extra towards my home so that I can pay it off much earlier than its maturity date, unfortunately neither of these leaves me anywhere in terms “being liquid.”

What brought this on was an attempt at refinancing my home this past weekend.  There is no secret that the housing market has slumped and that interest rates are at historical lows. Giving this fact, I wanted to drop my current interest rate from 6.5% on a 30 year mortgage, a product for which I will never endorse again, to the extremely low rate of 3.875% on a 15 year mortgage. So what happened?

In order to make this deal happen, I would need bring at least 20% of my home’s current market value to closing just to even be considered for the refinance. In terms of dollars, I would need about $35,000 in cash just to take advantage of the refinance rate.  This is $35,000 that I unfortunately don’t have — liquid that is.

Had I actually been living in my home, as opposed to renting it out, no-money-down options (which I will endorse on a 15 year mortgage) would have been available such as the VA home loan, but unfortunately the home needs to be my primary residence. So in other words, and in a more colloquial term, “I’m screwed!”

This got me to thinking.  What if another opportunity came along that required $35,000? What about $25,000? Would I be prepared to take advantage of it without taking out a signature loan that charges 12 – 18% interest, or pulling from my retirement account, or from the extra principal that I have been putting on the home that apparently has still not accumulated any equity?  Would I pull from my emergency savings account? None of these are viable options for me so my only other choice is to funnel as much as I can into a savings account until accumulate enough money to be able to take advantage of any future opportunities.

I’m not naive.  There are some implications of such a choice.  One being that every month that I use to save towards this new goal will be a month that I can’t save for retirement.  Another is every month that I use to not pay towards the principal of my mortgage will be a month that is used to calculate total interest owed.

Now $30,000 is a completely arbitrary number that I’ve chosen, but it’ll make me feel better. I just have to make sure that I do it quickly enough to still be able to contribute the maximum amount to my Roth IRA for 2011.

So, now until my goal, I will list everything that I purchased during the week that I didn’t actual need — anything that could have added to my $30,000 goal.  I suppose I’ll do this on Saturday and dub the day, “30K Saturday”.

Readers: Join me in the challenge.  Do you think that you can possibly restrict yourself from spending so that you can have a hefty savings balance a year from now? Whether it is $5000 or $50,000, you should give it a try.


  1. Anonymous says:

    I had a similar realization last year when I tried to capitalize on the down turn in the housing market. I was surprised to find out that the bank wanted such a hefty down payment for an investment property. Regulations have tighted, understandably so. I didn't have the cash so I found a comfortable seat on the sidelines to watch others prosper from the recovery.

  2. Yep, but in the end, I only blame myself. Had I mortgaged for only 15 years instead of 30, I would have had enough available equity to take advantage of today's extremely low rates and re-finance my home. The difference in monthly payments between the two mortgages was only about $250. I don't know what I was thinking at the time, but I'm sure whatever excuse I had to not get the 15 year mortgage wasn't very valid. Thanks for posting.

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