Last month (May):
Years left: 6.333
P =$893.52, I = $320.89, Escrow = 613.58
This month (June):
Years left: 6.25
P =$899.71, I = $314.69, Escrow = 613.58
One month’s prepayment savings: $2.66
I’m getting summer money so we’re still pre-paying the mortgage at our regular rate. That will probably stop in September or October. We’ll see.
For the past year or two we’ve been trying to decide how to deal with a 40% drop in income when it comes [DH resigned his TT job], and what to do with any surplus before said drop came. As of last month we still hadn’t decided. We kept tantalizing readers with the idea we’d decided, but then I’d run the numbers again and we’d change our minds again.
We’re also not doing the best job of keeping our spending below my regular (sans summer money) income. And that’s mainly because I’m not convinced that we’re really going to be in a situation in which we need to do that. I keep wanting to smooth my consumption based on my expected lifetime income, probably because I took far too many macroeconomics classes in school.
These big expenditures are primarily things involving the children– I want them to have educational and cultural opportunities and I want us to have time to do work. And that can be done on my income alone, but not without making other cuts that we could make, but those cuts tend to add stresses and decrease joy. And we could make those cuts and we’d adjust and so on (we both certainly grew up with much less), but if we don’t need to, then it seems like a lot of unnecessary stress to no real end.
Before the recent stock market surge, we were doing just fine for retirement. We now have enough money stocked away in our retirement accounts that any number of early retirement blogs would be demanding that DH quit his job (and me mine, though they might let me keep it for the little lady’s mental health and uh, her group health insurance) if he hadn’t already… although the majority of this wealth is locked away in retirement accounts and untouchable for a few decades.
The point being, if we spend more than we earn even a couple years in a row we’re still doing far better than the majority of the US population. I should probably thank my ERE father for the training to create this bounty.
So, when I was trying to decide how much extra money we’d have at the end of the summer, and how much we’d have to save for next summer, I thought, well, why just put big lumps away? Why not play it by ear each month and stop doing the extra saving once you run out of money? If DH brings in extra income, or you finally get your spending down, then you won’t have to go through all the additional hassle of trying to figure out where to put the extra money each time you have it.
So… previously we said were going to stop prepaying the mortgage, stop contributing to DH’s work retirement funds, stop contributing to my extra 403(b), stop funding our Roths, stop contributing to the 529 plans and so on.
DH’s retirement funds are still going away with his job. And we’re going to only prepay the mortgage enough to get the check up to 2000/month rather than 2500/month.
But I’m going to let the 529 and the 403(b) keep auto-deducting until we run out of extra money. After taxes we will make a separate decision about the IRAs. This new plan is essentially splitting our money across the 529 plans and extra retirement saving while leaving an additional cushion in case of emergencies or other opportunities.
So rather than putting away big lump sums, I’ll let our extra money just sort of dribble away into various tax-preferred savings vehicles. This has the advantage that if the bucket starts getting to empty I can shore up the leak.
If we weren’t doing so well with retirement savings, I’d prefer the lump sum approach because it would force us to cut our spending. But since we’re doing just fine on that front, it seems silly to not enjoy food or to keep DC1 from going to the ballet with hir aunt etc. just to leave the kids an inheritance they (hopefully) won’t need later.
So… what do you think? Are you disappointed that I’m not putting big lump sums into the mortgage or retirement? Is the possibility of spending more than we earn a bad thing?