Matt & Liz

Matt & Liz refinanced their home and put themselves in a position of financial safety.

Setup

  • Two incomes
  • One 18-month-old
  • Two ROTH IRAs
  • One growing liquid account for emergencies
  • Two mortgages

Implement

  • Home increased in value $80k
  • Refinanced from a 100% Interest-Only to a 90% Option ARM and pulled out $34k
  • Invested cash out:
    • $8k went into EACH of their ROTH IRAs to max out 2006 and 2007 (refinance was completed before April 15)
    • $15k went into another investment account, $8000 of which is earmakred for daugher’s collage
    • Remaining went into a liquid emergency fund earning ~7%
  • Lowered monthly mortgage payment by ~$200

Result: Safety

  • ONE WEEK after refinance was completed Matt lost his job.
  • Bright side:
    • Lower monthly payment
    • No mortgage payment first month after a refi
    • Full emergency funds
    • Investments “taken care of” for the year
  • Without tightening the budget, Matt & Liz could survive off of their emergency funds for at least six-months.