Last month (May):
Balance: $105,151.30
Years left: 9
P = $787.09, I =$427.32, Escrow = 621.66
This month (June):
Balance: $103,689.18
Years left: 8.833333333
P = $792.41, I =$421.99, Escrow = 621.66
One month’s savings from prepayment: $2.62
Whew. We have 3 months money in savings plus 2 months emergency fund plus school tuition. Disaster (in which we would have to live off our pantry without fancy cheese supplements) averted.
Saving was harder this year because we had to do it all nine paid months instead of just the second half of the year. Putting extra money in the 457 retirement plan meant that DH’s take-home pay was cut dramatically. So no big mortgage prepayments during the first half of the school year.
I always freak out a little bit with regards to the summer money. It’s hard not getting paid for three months! This is our last paycheck for the academic year and we won’t get paid again until October. The paychecks are smaller too because they take all the money for benefits and things like parking out of our last paycheck.
I mentally pretend the June paycheck isn’t coming. That the May one is the last for the year. That means June 1st (really May 31st because of direct deposit) is a pleasant surprise and it turns out that we will really still have an emergency fund come September, even if an emergency happens.
Do you ever pretend to yourself that incoming paychecks aren’t really coming? If you’re on a 9 month contract, how do you handle the summer?
June 1, 2012 at 6:12 am
We always plan for no bonuses even though we both get them. I’ve always done this and it really helped get my savings underway- especially in the job I had after college where 50 percent of my pay came from my bonus.
Now it’s a much smaller percent but we still stick that money straight into savings and live month to month as if we won’t get a bonus.
Three months with no paycheck would be much harder to manage. Sound like you are all set.
June 1, 2012 at 6:34 am
I’m so fortunate to be paid year-round but Mike is on contract from September through April. We treat his pay as bonuses and use it to pay down the mortgage or pay for major home repairs (thank you, new front door!).
By the time his pay starts up again in October, we’ve already covered a lot of big items from the budget like back-to-school expenses or our auto and home insurance which come due in August and September., That way we can keep on setting aside his pay for the other priorities!
June 1, 2012 at 6:52 am
That’s pretty awesome. If we were at a point where I could treat DH’s paychecks like bonuses, I wouldn’t be so worried about the future without them!
June 1, 2012 at 6:44 am
I put money aside from each of my nine paychecks and stash it in my kid’s savings account, not my own. Mine gets used for emergencies and home repair, so that way I’ve got a clear sense of what’s been saved for summer… Last year I worked summer school, so those paychecks were pretty awesome on top of what had already been saved!
June 1, 2012 at 6:56 am
Maybe I’m missing some information about your situation, but if you get paid 9 out of 12 months, why can’t you just live each month including savings etc, on 3/4 of your salary and then just act as if you are getting a pay cheque 12 out of 12 months?
The nature of my job means that my income is quite variable month to month but because I know ahead of time where the highs and lows are and the annual average, it doesn’t really bother me. I’ve never pretended a paycheque isn’t coming but, like NoTrustFund said, I never count on bonuses even if I “know” one is coming.
June 1, 2012 at 7:02 am
Yes, that’s basically what we do, but not down to a science. And because we don’t spend/put away 100% of our take-home pay, some years we’re done before others and can decide where to direct surplus (usually mortgage, sometimes silly things like laser hair treatments that I never finish because I get knocked up) and sometimes we have bigger expenses than expected. But basically our monthly expenses are about the same every month give or take, and we have to have 4 months saved up in cash savings before summer starts. I’m apparently risk averse so I feel more comfortable with that last paycheck as more of a bonus. (Especially since it is smaller than the other 8 because it gets expenses taken out.)
This method allows a bit more flexibility for life happening than a rigid budget would. We can adjust on a monthly basis.
June 1, 2012 at 7:49 am
I’ve worked at 3 different academic institutions in 2 states, 2 private 1 public, and never had one that didn’t provide pay on a 12-month cycle despite being on a 9-month salary. It seems like this is in their interest as well as ~90% (+) of employees, as they get to hang onto our money before doling it out belatedly over the summer, though I guess for years that start in July when work doesn’t “start” until late August (because of course faculty are lying around eating bonbons in the summer, and everyone knows teaching requires no prep time, that’s debatable (the SLAC I worked for started new faculty pay and benefits in September but then rolled it over 12 months which, as I pointed out to them before I left, made it difficult to come there but easy to leave …).
So this has never been an issue for me. I’m pretty sure my CU (which is a public employees’ CU and serves a LOT of teachers) has a special savings account that offers marginally higher interest (you know, .76% rather than .75%) for those who want to set aside the relevant fraction during the school year and then access it during the summer. Not having used it I’m not sure how rigid that set up is, i.e., does it have to be a % they define or can you set it, and how easy is it to access the money outside of summer months?
June 1, 2012 at 7:53 am
Our uni does allow us to take the 12 month instead of the 9 month, but there’s some disadvantages to that which I forget (I think they charge extra or something… there’s definitely paperwork involved). Also I always like having money sooner rather than later.
Our CU doesn’t offer that kind of service. They do have a Christmas club, but at lower rather than higher interest rates than their usual. (Though zero and close to zero are such similar numbers these days…)
June 1, 2012 at 8:07 am
my university lets us get paid over 12 months, which I choose. that helps!
June 1, 2012 at 9:17 am
I’m about to find out how I handle the nine-month payment schedule. My last paycheck from Ghosttown U. came in on May 15, and I won’t see my first from Cute-as-a-Button U. until the end of August. I had thoughts of picking up some kind of retail part-time job this summer to have a little positive cash flow, but the reality is that I need all the time I can get just to write, prepare my classes, and plan my next house-move. I was pretty careful about my spending after 2011 ended, so I have enough savings to live on (if a bit simply) through the unpaid months.
I’m also going to try to replicate this scenario closely next year: I’ll be earning a lot more at CBU than I did at Ghosttown U., but I don’t expect to spend much more there than I did here. It would be lovely to establish a pattern of frugality that would lead to successively larger sums of savings.
June 1, 2012 at 9:21 am
We spent more like graduate students (other than, you know, downpayment for the house and the purchase of a w/d and water heaters… but not furniture) when we first got real jobs and it meant we had a really nice surplus that allowed us a lot more opportunities during a sabbatical year than we would have otherwise. I could say yes to opportunities without knowing about payment because I knew we had a cushion. Savings really do buy freedom.
June 1, 2012 at 10:24 am
9-month contracts are one reason I chose not to go into academe. Yech.
I am paid every 2 weeks, which means I get two “extra” paychecks a year. I do not pretend these are a bonus. :-) I have a flexible spending plan written up for the whole year – each pay date, estimated net, expenses that MUST be paid with that paycheck.
Since I am currently at the point of almost debt-free and beginning to sock away serious savings, I have very little money anxiety. My biggest worry? That DH will decide, ten years down the line, that he really must have a Harley. Unless he changes his ways, he will not have saved up for it. And ten years down the line, I don’t want to be financing anything but a residence.
June 1, 2012 at 10:50 am
When I was working in schools I was on a 9-month schedule. I always got a summer job whether that be summer school or something else in the community. When I go back, I’m going to opt to do the 12-month thing.
June 1, 2012 at 11:49 am
Unfortunately we’re still actually working during those 3 months… that’s when there’s more time for research.
June 1, 2012 at 11:16 am
We can opt to get paid over 12 months, but it’s 12 *equal* payments, and as a result, the summer pay is less than the academic year pay, which makes things rather complicated (well, for me). So, after one year of doing it that way, I said, “Screw this, I’m saving it myself and then at least earning some tiny amount of dividends from my savings account.” When I do the math and save it myself, I manage to more or less have income that’s the same year-round.
I don’t pretend any paychecks aren’t coming, *but* since we get paid every two weeks instead of 1st of the month, and get 19 paychecks during the academic year, one of those paychecks always goes straight to savings for the summer (and then the rest I save with a monthly lump sum).
June 1, 2012 at 11:18 am
Er, *not* 12 equal payments, that is. Funny how one small word can change the meaning of what you wrote! ;)
June 1, 2012 at 11:37 am
Our last paycheck for the year is also smaller, and it’s difficult to figure out how much smaller it’s going to be because the benefits costs change each year.
June 1, 2012 at 11:58 am
Since the kids’ dad quit his job, I pretend no child support checks will come. Some times I’m write, some times I’m wrong, but I’m always ready.
June 1, 2012 at 12:02 pm
That’s important. And that sucks. :(
June 1, 2012 at 2:44 pm
I just saw I wrote write instead of right. Holy hell it’s been a week
June 1, 2012 at 3:51 pm
*patpatpat*
Fruits basket this weekend?
June 2, 2012 at 10:58 am
I would imagine that I would plan like you do if I knew for sure I would be employed again within x months. I never do, so I over-save / over-accumulate cash and stocks. What I do for my insurance and travel costs that hit in the summer though is have a separate “high” (1% – ha!) interest savings account that I make sure has about $5k in it by the end of June. Won’t be spending it on travel this summer though. :-(
A strange thing I do is pre-pay / over-pay my utilities when I’m working. That’s really quite illogical to do.
June 2, 2012 at 11:08 am
We’re probably (hopefully!) going to over-accumulate cash for DH’s upcoming career change. Ideally I’d like to be at a point where he doesn’t need to bring in any income at all and we can continue to live a certain way. But we’re not there yet.
June 2, 2012 at 1:33 pm
I can’t recall – does he know what he wants to do? That’s a wonderful goal and “investment” ! He’s a lucky man.
June 2, 2012 at 1:39 pm
He does not know. It’s hard because I really like my job here, but there’s nothing for him outside the university and there’s not really anything for me in the SF bay area where the bulk of his industry of expertise is. (Though we do have a ton of friends living in the SF bay area already.) If I knew he’d find a job that he liked in the SF bay area that paid at least 120K to start, I’d move in a heartbeat (well, in a couple of years). But we really don’t know if he’d be happier doing that or doing random consulting staying here. And staying here is a lot less risky, but with possibly less upside.
But the more we save, the more risks we’ll be able to take.
June 2, 2012 at 7:51 pm
My uni paid grad students on a 9 month schedule for quite some time, but switched to 12 month a bit before I got there. In order to do it though, there were shenanigans where we were hired as “lecturers” for the summer months (funny especially because there was almost no teaching, it being a med school). My job title kept changing without any actual change in duties.
Anyway, at some point we got a smallish raise and the dean asked the GSA if we’d rather get appointed as a grade-X for 12 months or a grade Y for 11. We’d end up with like $50 more in our pockets if we did the later (I think because of taxes as much as anything else), but everyone else voted against it. I was *extremely* annoyed, and saw it as people voting against their own self-interest. Now that I’ve read at least a bit about the psychology of things, and seen how people (including sometimes myself!) can’t always save by default, it makes a lot more sense.
June 2, 2012 at 8:03 pm
I was only paid 3x/year in grad school. That’s why I learned about CDs!