In Part One of Mortgage Payoff 101, I explained our family’s goal of paying off our second mortgage within the next 12 months.

In this second part of the series, I’d like to address one of the principles that has helped us to make this goal a very real possibility – evaluating monthly charges.

I discovered we needed to look at every monthly expense. When I did so, I found easy cuts. Although $20-30 doesn’t seem like much, calculating the cumulative expense over twelve months gives a more honest account. A double-digit expense in a month easily turns into triple digits in a year.

Cable/satellite TV
We had pay-TV at two places (house and cabin). When we quit both, it was a nice bump in the budget, even after purchasing roof antennas. Although I was nervous about this change- expecting Disney withdrawal — our family never missed it. Here’s the article I wrote last year, as we learned to quit cable. Easily a savings of $50 per month ($600 per year).

Unused cell phone minutes
Every family has different needs, but if you research your statements, you’ll be able to determine how many minutes your family actually uses. Although nobody wants to accidentally go over on minutes, paying an extra $10-20 per month for minutes you don’t need is foolish – and adds up to hundreds over the course of a year.

We’re also considering canceling our second line after the AT&T contract is up the end of October. My husband’s reception is poor on the way to work, anyway. That additional line costs us $30 per month – $360 per year. And we may try to negotiate with our current provider or another one – who knows what kind of a deal I could get if I play my cards right.

Similarly, our savings was in not purchasing a third phone contract. We decided that at whatever point our children “need” a phone, they’ll pay the extra charge themselves, out of their own allowance. Even inexpensive add-on contracts that cost only an extra $10 per month turn into an additional $120 on your annual budget.

Network connection on my Blackberry
In the past, I considered the ability to access email on my phone an absolute necessity, but after I started bringing my laptop (with wireless Internet) on trips, I discovered I didn’t need that access on my phone. I cut the network access and discovered I appreciate the fact I’m no longer distracted by the constant buzzing on my cell phone. Savings – $30 per month ($360 per year).

Voicemail and other hard-line extras
Sometimes the bundled services are a better deal, but often they’re not. I chose to skip the $7 additional package on our phone service, required in order to have Voicemail. Although it seems like a miniscule savings, it does add up to $84 in a year. Most people call my cell anyway, and this way I don’t have so many phone calls to return. If we feel the need to record messages in the future, we’ll get an answering machine.

Scrutinize your credit card statements
I discovered (and canceled) a recurring $15.99 charge on our business credit card, six months after it started. Apparently I’d signed up for a free one-month trial at stamps.com, and they’d begun charging me thereafter, even though I’d decided to never use the service.

Refinance Your Mortgage
When the rates were really low last winter, we refinanced at a cool 4.5%. I don’t know that we’ll ever see those rates again, but if you do the math and you can recoup the refinance charges within a year (because of the lower payments), it can be worth it. We also took a leap and went to a 15 year mortgage, when we’d amortized at 30 years previously. Although our monthly charge went up by $400, we thought our budget could handle it. Over the course of the mortgage, we could save $75,000.

Direct Deposit into Savings
I also started to automatically direct $300 from my paycheck into savings. Initially this was just an arbitrary amount that I hoped we could save – knowing I would still have access to it if necessary. As it turns out, it was reasonable if I treated it like just another monthly expense. And it kept us from re-spending what we’d just saved in the cuts mentioned above.

Just these considerations alone save us more than $1,500 per year. Small monthly savings seem much more significant when you add them up over the course of 12 months. This savings alone was the equivalent to more than 2 second-mortgage payments.

See you next week for part three in this series – the credit card bill.

MORTGAGE PAYOFF 101 SERIES:
Getting Started
Monthly Charges
The Credit Card
Sell Your Stuff
Lessons Learned