Last Month (November):
Years left: 14.25
P = 618.61, I = 595.80, Escrow = 591.95
Another month with another extranormally large lump sum payment. We will not be able to do this again unless we do additional consulting or win prizes etc. The maximum extra payment would be 3K, and that’s only before February (when we have to start saving for the unfunded summer) and assuming the stars align.
This Month (December)
Years left: 12.5
P = 673.28, I = 541.12, Escrow = 591.95
One month savings (difference between predicted interest for next month vs. actual interest): $52.23 (this is on top of the savings from last month, I’m just looking at the marginal change for this month’s extra payment)
This brings me to my worry. Am I paying down too much? Will I end up paying down too much?
That GRS amortization spreadsheet is addicting. It is so tempting to cut into the emergency fund– we’ll just refill it next month or the month after. Why not drain it now?
Because we can’t be fired without a year’s notice, we keep exactly one month expenses in emergency fund during the school year and 4-5 months in the summer, give or take. In a true emergency I have some taxable stocks that could be liquidated, but I prefer not to do that because it’s such a tax hassle and because I like letting things float in the market just on general principal. These taxable stocks also balance my portfolio with things I can’t get in my work retirement account.
The problem with putting extra money in the mortgage pre-payment is that it’s not accessible. It’s not like stocks which can be sold (even at a loss) or even CDs or bonds that can be broken. In theory, a home equity loan could be gotten, but… when bad things happen sometimes you can’t get that loan precisely because bad things are happening.
What if DH leaves his job? What if we need money for moving expenses? What if we want to take an unpaid sabbatical? Or unpaid leave for a second child? These things take time to save up for.
Summer also takes time to save up for. Currently I have no summer money coming– I’ve been taking my grants as research assistance instead because time is so valuable. But maybe I should start getting more income instead of time. It’s hard to say.
The worry is that I’m going to cut the emergency fund too close in order to pay down the mortgage and thus make us feel artificially poor (or have to liquidate stocks I don’t want to liquidate) and we’ll have to cut back heavily next August and September.
One of the things I like about spending less than we earn is that it provides the freedom not to worry about all of the above. But when you start pushing on a goal that isn’t easy to reach (like paying off the mortgage, or getting to financial independence for at least one spouse), all of a sudden you have to start worrying about these things again. And I’m not sure I like that. Balance is really difficult and maybe I should stay inside the comfort region, or maybe I should push out of it so that the comfort region is even larger later. It is very difficult to say.
We could cut our expenditures dramatically over the summer if we had to (without reneging on any of our fixed obligations), but that would make us unhappy. I don’t really want to live on split peas and meatless chili again. But we also don’t want to overspend if there’s an emergency. Where’s the line?
Anyhow, come February we have to start saving for the unpaid summer months so the mortgage payment updates will get a lot less interesting.
How do you balance pre-payment/debt payment with the need for cash? If you’re debt-free except mortgage, do you keep yourself feeling artificially poor on purpose?