Last month (January):
Years left: 12
P = 673.28, I =541.12, Escrow = 591.95
This month (February):
Years left: 11.83333333
P = $688.59 , I =$525.82, Escrow = 591.95
Saving for the long unpaid summer has begun. Target goal: 4 months expenses. That’s 3 months unpaid plus 1 month emergency funding. If there are no beyond-normal emergencies, we should end up actually having almost 5 months expenses in the bank by the time we get our last paychecks for the school year. However, we decided that even if we exceed 4 months we’ll still keep that money in savings… just in case. Additional funds, however, will go to the mortgage or to savings on a case-by-case basis.
I talked with DH about how much we needed. This is the first year with no summer income scheduled (unless a grant proposal gets funded!) and the first year that we’re funneling extra money into something that is not so easily accessible (we used to have high interest savings accounts!). Our first thought was to save up 4 months of modal expenditure (3 months unpaid + one month emergency) and then funnel any extra back into the mortgage, but then we remembered that there are some annual expenses (like private school tuition) that come in September before our October 1 paychecks.
In an emergency we could sell stocks but we would rather do that by choice instead of having to do it. We could also cut expenditures dramatically– if we tried, we could cut our expenditures to almost half of what they are, but we’d be eating a lot of beans and oatmeal and not going anywhere (well, except the office, since working from home requires a lot of a/c), which would make for a very sad summer. We could also undrip index dividends in our taxable accounts, but that also seems silly.
Right now we have 2 months expenditures in savings partly because we spent less than usual a couple months in a row, partly because some expenditures we’d been planning (like trees) haven’t been paid yet. By the end of the year we’ll also be owed back $5000 from our flexible savings account for daycare (2K so far). And of course there are taxes, which is always a big mystery until we do them. We got money back last year but we’d been doing a lot more prepayment each quarter than we were this year. I’m guessing that we’ll be getting back less and paying a larger chunk in estimated taxes this year.
Of course, we don’t have to do all or nothing with the mortgage prepayment. I always round up to the nearest 00, and I figure I can round to the nearest 500 too. $3000 extra is a lot of money to send to the mortgage each month. However, $500 is pretty manageable… so even during the unpaid months we’re going to try to prepay about $693.65. Possibly more if we get positive rather than negative income shocks.
So, to summarize our end decision: $693.65/month additional for a payment of $2500/month. We will put in quarterly single stock non-drip dividends if/when they come and will decide on a case-by-case basis with other income shocks.
AFTER we get paid on Oct 1st, if there’s money leftover we’ll put the lump sum into the mortgage. So we’re losing some money in interest by paying potential extra cash in October rather than in February, but it also buys peace of mind. How much are we losing only prepaying $693.65 in Feb instead of $3193.65, assuming we still have that $3193.65 to prepay in October? Well… something like $35 in interest, give or take. I think we’re willing to pay $35 for peace of mind and still being able to eat in restaurants in September.
Hm, now that that’s decided, I really need to request that daycare FSA reimbursement!
(Of course, I also kind of feel like the stock market is settling down and wonder if maybe I should be plowing money back into it rather than into the mortgage… but maybe I’ll discuss that in a future month. Or maybe the world will just continue into economic unrest because of government overhauls in developing countries.)