I recently received an email from a visitor to my Money Management Solutions website who wants to learn how to pay off her mortgage quickly without having to attend expensive seminars or buy expensive software to do this trick.

I realized that this was a question a lot of people might have, especially during this current economic crisis. I decided to share my answer here for that reason.

Brenda asked Sandra Simmons:

Is there some sort of “mortgage accelerator” program where your mortgage gets paid off in a fraction of the usual 30 years time? I want to learn how I can do this myself for my mortgages. — Brenda B.

Answer:

Brenda: You can do this yourself by making extra principal payments each month.

Example if your mortgage payment is $2,000:

 If, when you make the payment for 8/1, you include an extra payment for the principal due 9/1 of $302 then you don’t ever have to pay the interest of $1,698 that was due 9/1.

Your next payment due, which you will pay on 9/1, is actually the 10/1 payment.

Then on 9/1, when you make the 10/1 payment, if you also pay the principal payment from the 11/1 payment, then you save that interest. If you do this you will cut your mortgage payoff time in half.

Write on your payment coupon “Extra Principal Payment $302” so there is no question of where you are directing the funds, and keep a copy of the coupon and the check for your records.

If you want to accelerate it even faster, say cut it by 2/3rds, if on 8/1 you make the payment and include the principal amounts for the payments due 9/1 and 10/1, then you don’t pay the interest on the 9/1/and 10/1 payments.

Then on 9/1 when you make the next payment you would pay the payment for 11/1.

Ask your mortgage lender for an amortization statement of your loan so you can actually see the correct principal and interest amounts broken down for each payment. They may not want to give you one so you can’t do this as they lose interest income, but you have a right to have it. Even if you have to pay them for it, it is worth it. Typically they charge $25 – $75 for an amortization statement.

Sandra Simmons is the President of Money Management Solutions, Inc. She specializes in helping business owners and individuals manage their money to achieve financial freedom. Claim your FREE Debt Reduction Solutions Guide.

I find I cannot withhold my comments any longer on this topic of budgeting software. I see too many articles that pretend to be about budgeting software when the author knows nothing about what the word budget actually means. I don’t like it when incorrect information is served up to the public.

Here are some examples of what I find offensive:

A recent article posted on the internet states that “Budgeting software is a computer program that creates a profit or loss plan from data entered into the software. Some of the data to be entered may include earnings and expenditures.” Sorry, but that is NOT budgeting software, that is accounting software.

The correct definition of the word BUDGET is: the amount of money it takes for the organization or household to function, and to attain its goals.

Here’s the good news: living on a budget does not mean you have to cut back on the quality of the things you buy or deny yourself anything fun. What it does mean, is that you have to figure out how to make enough money to afford the things you want, now and in the future, and to keep your spending within the limits of your income.

Therefore, a correct budget is partially a computation of what you have spent in the past and partially a calculation of how much money you will need for specific items in the future to achieve your financial goals. Budgeting is a useless activity unless you use it to do income planning and spending planning. Accounting software does not do that for you. It only records what happened in the past and cannot help you predict the future or plan future actions.

That same article states, “There are many different types of budgeting software…” I challenge the author of that article to name three or four budgeting software products on the market that are not, in fact, accounting software. I can name one; Money Management Solutions, and it is NOT accounting software, it is what its name implies, money management software.

And yet another useless statement pretending to be good information is this one from that article, “Any sort of budgeting software can be used to keep track of a personal budget…” Well, it is a useless activity to keep track of a budget, unless you add the useful steps of using the information to plan your financial future and manage your money in a way that guarantees you will achieve your financial goals. Just keeping track of what you spent is a waste of time, unless you use it as part of the whole money management equation of planning the steps to take to reach those goals.

And finally this statement which has nothing to do with budgeting software, and everything to do with accounting software, and so becomes a misrepresentation of the facts to the reader, “Money management software is some of the most comprehensive software on the market today. Products such as Quicken and Microsoft Money will keep track of individual account information with various types of accounts such as checking, savings, and investments. These programs can also track credit card spending and alert you when you have overspent on your monthly budget.”

In fact, Money Management Software is PLANNING software which is used to plan and execute the actions you can take to reach your financial goals. Therefore, you won’t need an alert that you overspent your budget; you’ll know BEFORE you are going to overspend and make the necessary adjustments so that doesn’t happen. Accounting software, like Quicken and Microsoft Money, is RECORDING software and can only tell you what happened in the past.

Making financial decisions for the future based only on what happened with your money in the past is a dangerous activity. For example, if you read an article in Money Magazine that is raving about some stock that had double digit increases over the past 5 years, and you bought that investment based only on the record of past performance, you could lose your money the next day.

What should you do BEFORE you make that investment decision? You should do your own research into the stock and make an investment decision based on YOUR belief that the future plans of that company will continue to deliver double digit increases.

Bottom line, don’t believe everything you read about budgeting software that is really accounting software. Accounting software serves its purpose to record what happened so we can file our tax returns. I use it myself. If we ever get the FairTax passed and we don’t have to file tax returns any more, I’ll still use my Money Management Software because it is my planning tool to make sure I stay on the road to achieving Financial Freedom.

While the media is spinning story after story about the Presidential Campaigns, and Obama and McCain are chanting “Change, Change, Change,” I am asking “How, How, How are you going to do that?”

First, and most obvious, there is no power vested in the power of the President to enact law. That power is fully invested in the power of the Congress according to our Constitution. Let me repeat that. The Constitution does not empower the President to make law.

Executive Orders issued by the President that bind the entire nation are illicit because, as noted above, “All legislative powers” are possessed by Congress. An Executive Order that binds only the employees of the federal government (such as granting a holiday) is proper because the President should be considered to be the holder of power much like that possessed by the CEO of a company. But the entire nation is not in the employ of the President.

What power does the elected President have? The President does have a role in lawmaking with his possession of a veto. He can veto a measure approved by Congress (which can be overturned by a two-thirds vote in each house of Congress), or simply allow it to become law by doing nothing within 10 days, “Sundays excepted.”

Both candidates are saying they are going to cut income taxes, balance the budget deficit, straighten out the US economy, stop the wasteful spending, rehabilitate the Social Security system or provide affordable healthcare and health insurance to every citizen but, what they aren’t telling us is how they are going to get Congress to do that.

Second, it is an obvious mistake to think that cutting taxes will fix the government’s economy and allow the budget deficit to get handled. Any ordinary individual knows that in order to pay off debt, more income is needed. If enough income were made in the first place, of course, there would be no need to take on debt. Debt is simply a function of spending money you don’t have.

Since the government produces no income of their own and they just take it from us taxpayers, then if they take less income from us, they will have to borrow more money to fund all of their projects and that means a BIGGER budget deficit.

Smart money management requires working both ends; consistently raising gross income while cutting unnecessary spending to live within your budget. In all the years I have been around, I have never seen the US government demonstrate their ability to do this simple money management survival action.

What is the price of attaining financial freedom? It really is very simple. Make a ton of money, spend less than you make, don’t contract for any debt you cannot immediately pay with cash, and set money aside for the future survival of the organization.

Wednesday, September 17th, is Constitution Day – a day specifically designated by an act of Congress when Americans are supposed to honor the remarkable document that created our system of government. The date was chosen because the Constitution was approved at the original Constitutional Convention on September 17, 1787. How well do you know your Constitution? How well do Mr. Obama and Mr. McCain know our Constitution? Perhaps we should ask them about this by insisting they tell us HOW they intend to make all of these new changes which require new laws be passed.

There is only one thing that separates you from the people who have the money you wish you had. It is not talent, skill, the things you own or the connections you have. It is the MINDSET.

What do I mean about mindset? The way you use money immediately tells me if you are a Gratification Groupie or a Genius. Here is how I define those terms.

Gratification Groupie – Overspending is a habit and money runs through your hands as fast as it arrives buying ‘stuff’ that you want but do not actually need. You think it is important to impress others with the material things you own. You follow the crowd and do what they do – shop, shop, shop, spend, spend, spend. You may give the appearance of having money, but you are drowning in debt that you cannot pay off. You look for ways to spend money, and spend time thinking about things you want to buy instead of taking action to get out of debt and invest in your long-term financial survival. You are constantly worried about money.

Genius – Paying yourself first by investing a portion of every dime that comes in the door for your long-term financial security is your top priority. You spend the rest in ways that can help you produce more income for your financial survival. You set money aside over time to buy the things you need, and you pay cash. Credit cards are seldom used, and are paid off as soon as the statement arrives. You do not use your money to buy things to impress others or win popularity. You are never worried about money.

What separates millionaires from normal people? Not much. The only real difference is what they do with money when it comes in.

You see, It is not how much money you make, it is what you do with it that determines your financial condition. There is a simple science to managing your finances the right way. Very rich people know this science.

If you really want to convert from being a Gratification Groupie to a wealthy Genius and get on the road to winning your financial freedom, here is the formula the Genius uses to manage the money when they receive it:

1 – Put a minimum of 10% into a retirement savings plan for long-term financial survival. Increase this percentage over time.

2 – Pay cash for everything, starting today. Stop buying on credit.

3 – Use a minimum of 15% of your income to pay off debt and past due bills.

4 – Pay your current bills for necessary operating expenses like rent, utilities, and telephone.

5 – Make your spending decisions based on NEED rather than WANT. Buy the things you need that contribute to your ability to produce more income. Buy used instead of new. Most items lose 25% to 80% of their value the instant you pay for them.

 Loading …

Sandra Simmons, President of Money Management Solutions, Inc. specializes in helping people manage their money to achieve financial freedom. Claim your FREE Debt Reduction Solutions Guide

© 2008 Sandra S. Simmons. All Rights Reserved.