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Life lessons on a 22 minute 11 second #mtnbike ride up Battlecreek

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There is a lot you can learn about goals, about discipline, and about life on a bicycle. Battlecreek Canyon

Several weeks ago, I programmed a segment called “Tarzan Pond” on Strava that is a category 3 climb starting from my driveway and going 1.5 miles up Battlecreek Canyon, climbing 650 feet with an average 8.2% grade.  I live in a pretty cool place.  I figured that I would be King of the Mountain on my own segment.  But I forgot to designate it “private,” so Strava churned through its database and found one other rider who had ridden the segment previously: Josh Nelson.

He was King of the Mountain on my segment!

And his ride up to Tarzan Pond had occurred over a year ago.  Josh is a good friend who used to live down the street until he left on a 2 year Mormon mission 9 months ago.  And not only was he KOM, but he was KOM by a couple of minutes.  He had blown me away.  (Disclaimer:  He was 18.)

Goals

I have cycling goals because I am trying to improve myself and get into better shape, but for Tarzan Pond, I had ulterior motives.  I couldn’t let Josh keep his KOM status, and so I rode the ride again.  And again.  And again.  But couldn’t seem to beat him.  He was still 90 seconds faster than me.  It wasn’t even close.

This morning I only had 30 minutes.  I had nowhere better to ride.  So, I set a mini-goal for myself.  I wanted to give Tarzan Pond my best effort.  Catching Josh was probably not in the cards, but I wanted to beat my own best time and go for a PR (Personal Record).

Discouragement, Adversity

Battlecreek Canyon

In the first part of the climb, I started looking at my watch.  I really did have to get back or I’d be in trouble.  And I seemed to be laboring harder than normal on this ride.  It was cold.  The ride was steep.  I was cutting it close for getting back for work.  Excuses were plentiful.  But I pushed through.  I kept pedaling.

I hit the first steep part of the climb about 1/2 of the way into the ride and really wasn’t confident.  I looked at my watch.  I had already made a pretty good climb and had good excuses to get home for work.  Or I could change course and traverse the mountain and  just take an easier route instead of climbing the canyon.

Determination

But then I made the decision.  I was going to give it a shot.  So I stood up on my pedals and pushed it. The final dirt portion of the ride has sections well over 20% grade.  I pushed through.  There is a white tree that hangs over the creek that marks the final corner.  I focused on it and pushed through.  I finally arrived at my goal and as I didn’t have time to celebrate, I immediately turned around to get back for work.

Homeward Bound

The return trip is great.  Destination achieved, you can fly home, perched on the pedals like eagle’s wings.  And if you’re young and crazy, and if you lay off the brakes (this is the first time on the ride you’ll touch the brakes), gravity helps you get some serious 30, 40 mph+ speed.  I had no idea what my time would be on this climb.  But I had the adrenaline rush and felt good.

I had given it my best shot.

Results/Accomplishment

I pulled into the driveway, clicked “finish” on Strava, parked my bike, and went into the house.  Then I looked at the results.  I had just 1 single Strava achievement for my ride, but I had a good idea of what it was.  I quickly scrolled through the screens and found this: 2013-10-09 21.49.01  Not only had I achieved my PR, but I had conquered my mountain.  I had shaved almost 90 seconds off my previous best time.  15:47.  And I beat Josh.  By 2 seconds.   I was KOM.

Total ride stats:  22:11, 3.6 miles, 674 feet climbed.

Preparation

Normally you’d put preparation at the front of a story like this.  But I think the bottom of the story is an appropriate place.  It’s the foundation.  2 years ago, I couldn’t have made it up 1/2 of this climb without stopping and gasping for air.  But gradually, gradually, I’ve gotten stronger and better.  It’s riding again and again, pushing through time after time, and conquering my own worst enemy:  myself, and my good excuses.

Tomorrow

That same old mountain is going to be there tomorrow!  Will I go conquer it again?  And now that I’ve posted this, other young studs out there will probably try to knock me off my mountain.  But today — I’m King of the Mountain!

Life

That’s life, isn’t it?  Setting goals, getting knocked down, discouragement, work, pushing through, and euphoria with small daily accomplishments! Until I publish this post, only I know what really happened today.  I conquered my mountain.  I conquered myself.

You can learn a lot riding a bike.

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How much should I save for my mortgage down payment?

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Your down payment will significantly affect your monthly finances for the life of your mortgage.  How much do I need down?  That depends on the type of mortgage you will be getting and your credit.  Traditional down payments are 20% of the price of the home.  20% down is rare in today’s mortgage world.  Typical down is usually 3% – 5%, though an array of mortgage options are available.  Here is a great article that answers the question.

How much down should you have?  Dave Ramsey has said that his favorite loan program is the 100% down program.  I fully agree.  As much as you can put down, the better.  As most of us don’t have $250,000 sitting around and need the mortgage to get us into a home, let’s look at a couple of mortgage scenarios on the Homes in Order Mortgage Calculator.

#1.  0% Down

250K, 5, 30

#2.  3% Down

242,500, 5, 30

#3.  5% Down

237500, 5, 30

So, as you can see, the more down payment you have, the lower your monthly payments will be.  Now, let’s play with the calculator and see what would happen in different scenarios.  Let’s say you go for a 0% down loan, but make a 5% prepayment up front.  How much would you save?

#4.  5% Prepayment up front

5p prepayment

Interesting.  You’d save over $38,900 in interest, and you’d save over 3.2 years.  In all scenarios, you would be repaying the principal.  But let’s look at the interest obligation.  When you look at interest, this would be the best option!  Why?  Well, notice that the monthly payment is higher, so you’d be paying more each month.  Total interest in #3 is $221,482.49.  Total interest in #4 is 194,229.86.  You would save $27,252.63 in interest by making the prepayment up front.

Cool stuff!  Every mortgage is unique, and every mortgagee has unique needs.  But keep this in mind — the faster you can pay it off, the more you will save.

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The mortgage budget: simplify it

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Budget.  Many cringe at the sound of the word.  But most recognize that a budget is crucial in achieving financial independence.  Most budgets look at necessary expenditures versus optional expenditures.  Mortgage?  Necessary.  Utilities?  Necessary.  Fast food meals?  Optional, if you can plan a more financially efficient alternative.  While most recognize the mortgage as an essential part of the budget, few realize the power that the mortgage holds.  The mortgage is typically the 1st consideration in the budget.  If you manage the budget first, everything else will fall into line.

Default monthly mortgage payment budget

For the typical homeowner, the mortgage is probably the single biggest element of your monthly budget.  Typical homeowners factor the mortgage into their monthly budget, then add all other monthly expenses:  utilities, car payments, credit card payments, etc.  What is left over is then typically consumed by optional spending and saving.  In that order.

Typcial monthly budget:

Mortgage payment → Utilities  → Insurance  → Car payments  → Credit Cards  → Food  → Clothing  → Entertainment  → Saving  → Investing.

That is all good!  You’re taking care of the most important things first.  However, look at what gets left to the very end:  Saving & Investing.

The automatic mortgage budget

Let’s look at the psychology of the previous model.  After all necessary expenses are met, you can spend or save or invest what is left over.  Now apply what you know about paying off your mortgage early into your monthly budget.  If you were to add $100 to your monthly mortgage payment, then everything else falls into line.  You might have less for some of the options at the end of the spending chain, but you are also taking care of first things first.

Action:  Set up automatic payments including a prepayment for an extra $100/month.

Result:  You will have $100/month less to spend, but that $100/month is automatically investing itself into paying off your mortgage.  This family would save over $33,000 in interest, and they would save over 4 years of mortgage payments.  Your total savings (P&I) would be over $64,000.  Wow.

Conclusion:  $100/month will affect your spending ability this month, by it will save you a ton.

Calc Today TotalSo

 

 

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Existing home sales up 6.5%, mortgage rates 4.125-4.625%

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Existing Home Sales rise 6.5% in July from June to 5.39M units annualized and above the 5.10M expected.

Sold HomeReuters reports that 75% of the nearly 1 million people hired this year are only part time workers.  Additionally, many of the jobs are low-paid. Staffing and payroll firms say concerns on the new health care laws could drive up business costs possibly stalling the economy further.

The Jackson Hole Symposium kicks off today.  The meeting focuses on important economic issues here in the states and abroad and is a gathering of influential central bankers and finance ministers as well as academic luminaries and leading market players from around the globe. Somehow, I did not get invited.  I don’t feel too bad though because Mr. Bernanke will not be attending this year either, confirming in most minds that he is retiring in January.  I should be so lucky.

MBS trending sideways, keeping 30 year rates in the 4.125-4.625% range.  (8.21.13)

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10 good reasons to start paying off your mortgage early

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Should I pay off my mortgage?  Many homeowners ask themselves this question, but few know the actual benefits of doing it.  The answer is different for everyone, but I feel that if people knew how much they could save, people would be more diligent about paying it off.  Homes in Order the eBook will show you in detail how compound interest works and how you can save money by putting your money to work for you.  As you learn in the book, it’s not a big secret.  As Benjamin Franklin says, “Small strokes fell great oaks.”  So, start with an extra $5 per month, then increase it.  Look how the family below benefits by making payments.

There are countless ways to invest your money.  I’m very partial to making your most important investment your mortgage, and paying it off.  Here is a list of 10 reasons to pay off your mortgage early.  But this isn’t just another fluff list.  This is mathematically backed by the Homes in Order How To Pay Off Mortgage Early Calculator. 

Saving money is good.  But saving money and investing it is great.  And it’s a lot of fun.  With no further ado, here is the list.

1.  You will save a lot of interest.  If the typical homeowner at today’s mortgage rates were to add just $100 extra to their mortgage payment every month, they would save over $30,000 in interest.  Wow.

Calc Today Interest

2.  You will save years of payments.  If the typical homeowner were to add just $100 extra to their mortgage payment every month, they would save over 4 years of mortgage payments.

Calc Today Years

3.  You will save a lot of money – Interest + Principal.  Not only do you save interest (#1) and payments (#2), every time you pay an extra $100 to your mortgage payment, that is $100 of equity.  It is just like putting money in the bank.  That adds up!  So, if the typical homeowner at today’s rates were to add just $100 extra to their mortgage payment every month, they would save a lot of money.

Calc Today Total

4.  It’s easy.  You just add $100 (or whatever you can afford) to your monthly payment.  What if you can only spare $5?  Easy.  Add $5 to your monthly payment!  You pick your pace.

5.  It’s secure.  You’ve already invested in your home.  Now you’re just reducing the loan liability.  You don’t have to worry about giving your money to someone, or what the market is going to do.  Your rate is already committed.

6.  It’s investing.  Are you investing your money anywhere else?  Homes in Order will show you how just a dollar here and two dollars there will really add up.  Paying off your mortgage is a fantastic investment.  There are a lot of investment opportunities out there, but I challenge you to find something better.

7.  Power equity deposits.  Every month you make mortgage payments, but perhaps only 10% or 20% of the payment goes to principal.  Whatever you add over and beyond your required payment goes 100% to principal.  Whether you pay $5 extra or $500 extra, that portion is 100% principal.  That is your money.  That is your equity.

1. 30-year Mortgage

8.  It’s cheap.  You don’t have to pay a financial advisor.  You don’t have to pay your accountant, your real estate agent, your insurance guy, or anyone else.  Just add the payment.  This is easy investing.  Safe investing.  It’s your house.

9.  The HELOC.  Let’s say you paid your house off.  Now what?  Well, you own a house!  Get a HELOC and you can borrow from your house.  WARNING!  This is getting into debt — but by the time you pay your house off, you’ll know that you don’t want to be in debt.  But when you have access to your equity, get ready to really start investing in real estate.

10.  Peace of mind.  Just knowing that you have a roof over your head and nobody coming to kick you out of your house is reason enough.

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