Strategy Setting-Up Mortgage Overpayment Goal?
I've been thinking for awhile on how this would be best to set-up and figured I'd run it by all you wonderful budgeters!
Ultimately, I'm looking for the best way of setting a goal towards mortgage overpayments on a yearly basis. Something like - Apply $XX,XXX additional towards mortgage by EOY. With my budget, it's highly variable due to bonuses, stocks vesting, etc... so it's not as easy as making it a recurring monthly cost. The other variable that I can't think around is that I don't want to wait until the EOY to then apply the amount towards the overpayment, I'd like to do this through the year to help continue to lower long term interests.
How would you set something up for this?
I would solve your bigger issue first -- the variable income. Target your budget at the average level of income. When you make more, stash the extra in a Deferred Income category. When you make less, pull from the DI category to make up the shortage from the average. Normalizing income allows for a more consistent budgeting process with only a single set of priorities. (This is simply the income equivalent to the True Expense concept that you've no doubt seen work well.)
As for the overpayment, just increase what you budget to the mortgage category and make the larger payments as you go. Obviously, reduce something else so the total budgeted (ignoring the DI budget entry) is at the average level.
I have an Extra Mortgage category under my Savings Goals, whereas the regular mortgage payment is under Necessary Expenses. The idea being that I have to pay the regular part no matter what but the rest is a type of "savings". I have regular income and am a month ahead so I have a monthly goal in the Extra Mortgage category.
When I get extra money (3 paycheck months, my sporadic salary- husband's covers the monthly budget, etc) I typically put a third in there, a third in Income Replacement and a third in an Emergency Fund. Since my Available balance therefore is larger than the budgeted amount I can increase my payment without it increasing my budget.