If you need a more structured approach, consider this: most of us pay our mortgage bills once a month. But most of us get paid every two weeks. If you set aside half your mortgage money every pay period, you will end up with an extra month's payment by the end of the year. Send that money in to pay down your principal and over the years you'll get way ahead on your mortgage.
Because prepaying is such a great benefit, some companies try to cash in. These companies offer "mortgage savings plans" for a price. The company collects your extra money every two weeks and sets it aside for you. This method certainly provides a dose of discipline, but it comes at a price. Mortgage savings plans typically start at about $500 to set up and $2.50 for each withdrawal. If you experience hard times, you still have to pay, and if you don't pay you could face late fees. To make matters worse, the company holding your mortgage money makes interest on it. Wouldn't you rather earn that interest yourself?
Here's a statistic that makes me want to scream: 20 percent of people don't bother to contribute money to their 401k retirement plan, according to the 401k Council of America. Ack! If you're one of them, you're losing out. You're losing the chance to set aside money tax-free for the future. (I know, that's a little esoteric because you don't actually see the money.)
You're also losing out on the "free money" of a company 401k match. If your employer offered you a raise for doing the exact same job you do now, would you turn it down? No way. But that's what it's like when people fail to contribute enough to get the maximum company match. The most common match is 50 cents of every dollar you contribute up to 6 percent of your salary. Not all companies offer a match, so if yours is generous enough to do so, I say greedily grab every cent!
True, the stock market is sort of, how shall we say, convulsing right now, but if you are young and years from retirement, there is no bad time to start investing for your future. Many stocks are at new lows, so perhaps your timing will be good as they climb up once again. (One tip: many employers make their match with shares of their own company stock. If that is the case, you'll want to put the rest of your 401k money in other investments to diversify.) And now, to come full circle, one last nugget of info for you. If you're still market-shy, most 401ks give you the option to put your money into a "GIC" or Guaranteed Investment Contract, which is basically a safe 401k savings account.