May Mortgage Update: And what to do with DH’s salary next year

Last month (April):

Balance: $106,607.65
Years left: 9.166666667
P = $781.78, I =$432.62, Escrow = 726.93

This month (May):

Balance: $105,256.57
Years left: 9
P = $787.09, I =$427.32, Escrow = 621.66

Look, our prepayment has gone up (by the amount escrow went down)!

One month’s savings:  $2.63.

We talked and we talked.

Last year, unsure of DH’s tenure chances, we decided to put as much as we could in his retirement accounts, under the assumption that we could cut his retirement savings later more easily. Additionally, putting money in his 457 plan meant we could tap that without penalty as an emergency fund if he leaves state employment (which he is now likely to do).

However, I have a feeling it will be difficult for us to actually pull the trigger to tap that 457 when DH leaves state employment (something that has a high probability as tenure is unlikely). Especially if we stick around here for another year before moving to part or parts unknown. More likely we’ll just roll it over to a Vanguard IRA.

I also ran some numbers, and happily found out that with our insane retirement-putting-away, we’ve made up for all those low-wage years in graduate school. We’re doing pretty well (especially with the stock market recovery!) So we can ease up so long as I keep putting in regular amounts. Not that we’re at a point yet where we could retire early if we could just tap those accounts, but we’re where we should be if we’d been at these salaries the whole time and putting away regular amounts rather than just the IRA limit. Putting more in wouldn’t be overkill by any means, but easing down isn’t a foolish decision either.

So for the next year, DH would like to not put money in the 457, but instead put it towards the mortgage. The thought is that if we stay long-term it won’t hurt to have the mortgage paid down rather than a huge amount in savings, and if we leave, we would need that money for a downpayment someplace more expensive. And we’re not going to buy a new house until this one has sold. If we’re willing and able to take a small loss on the house, then it should sell quickly.

I think we’re still going to contribute the extra amounts to our 403(b)s, at least for the next year. (And we’ll have to start a 529 for the second kid! Also there will be extra child care costs.)

So that will be another 15K, give or take, towards the mortgage next year. Our monthly pre-payment will go up probably by 1000/month (because I like round numbers). If I get any of the grants we’ve applied for, that will be another 10K in summer money that might as well go towards the mortgage. If I get a raise (with promotion– no COL increases here!)… well, that’s going to go directly to new child care costs and, if there’s any leftover, to bulk up the emergency fund rather than anything else.

Then the year after that will probably be the “put the money towards cash” year. Unless DH decides to not work that last year, in which case it will be a “cut expenses and cut contributions to #1′s 403(b)” year so we can fix up the house for sale.

So that’s the longish-term planning we’ve got for dealing with dropping to one salary within a 2 year time-frame. There are some benefits with academic employment. And I sure am glad we made most of our fixed cost decisions when we didn’t know he was going to have a job in the first place– it’s a lot easier to deal with a mortgage that you bought with the assumption of one salary than a mortgage that takes two.

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