Little by little, we are reaching our goals of reaching financial peace. I'm very excited to share that we are completely finishes step 3, and have just over 5 months of expenses saved up in case of an emergency. I am also excited to share that we have started looking into our next options and have decided a good course of action.
With Steve working on some side jobs, our income has seen a bit of a facelift. It's nothing that will really make a difference yet, but it helps!
We thought about investing, and starting up my RRSPs again, and even looked into RESPs. At this point in time though, we've decided that we want to be moving to a bigger house within the next year. In order to do that comfortably, we are going to hold off on investments and focus on paying down our mortgage so we have a bigger down payment.
We even considered keeping this house as a rental property and buying another one to live in, but I don't think we are ready to take on that kind of risk yet. If the renters don't pay, or if we can't find renters, we are really in trouble!! Also, we still owe enough on this house that if the housing market really crashed, we could still be in a situation where we owe as much or more than the house is worth. If we turn our focus from the Emergency Fund and start piling that money into our mortgage, I think we can have it down considerably in a few months. Then when we go to sell, we can easily come up with a good down payment and feel good that we are saving a bunch of interest.
I have to admit, the idea of keeping this house as a rental property sounds good, and I know probably 95% of investment advisers out there would say that you want to keep a mortgage on your investment properties, because you can write off the mortgage payments on your taxes. Those payments offset the income that you earn through the rental property, and the theory is that you save piles of money. I just can't agree with that. I'd rather pay the government all that tax on the extra income, than pay all that interest each month and STILL owe a whole bunch on the rental property.
It would be much safer to have a rental property paid off, or very close to paid off, before I take the risk of having it trashed, empty, or simply not earning income.
Anyways, the outcome of all those discussions have let to one thing. We are going to focus on lowering our mortgage as much as we can, and once we find a new place, we'll be in a better position. We are looking for a place hopefully near my parents, and a house that we can take from being ugly to being a dream home.
We do know what we are getting in to, as we did that already once with this house! When we moved in, it really didn't look like much. After much hard work, paint, and soap, it wasn't too bad. Then when we tore out the basement and totally started from scratch down there, it was much better. Rebuilding the fence last year, and adding a deck this year, really helped the place to look much better too. I planted some bushes and shrubs in the front this past summer, in hopes of making the front part of the house look much more inviting and cared for.
There are a few things left to do here before we sell, little things that will bring up the value of the home, if only because it makes people feel better and have a better impression of the place. The last major project should be completed in February, and that is to renovate the kitchen. We want to replace the cabinets and the flooring in the kitchen, and possibly the counter-tops. If we can get by with replacing only the cabinets and not the counters, I'd prefer to do that. The counter-tops are still in fine condition and look nice. Once we do that, this house will be in great condition to sell.
I'm very excited to see our hard work pay off, but a little sad to think that the work will start all over again with the new house. Perhaps it won't be so bad though... but if it is, there's money to be made!!
So that's the update on our own journey to Financial Peace. One step at a time, we keep on keeping on.
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